What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-06-06 compared with 2021-06-03 · 448 added, 510 removed, 687 unchanged (58% of the section changed)

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NGL Energy Holdings LLC serves as our general partner.

Over the past several years, we have undertaken a number of important strategic actions in an effort to leverage the Partnership’s core areas of competitive strength and focus on generating stable, growing and predictable cash flows, while improving our credit profile.

These steps included sale of the following:

• Our Retail Propane segment;

• NGL Water Solutions Bakken, LLC;

• Our South Pecos water disposal business;

• TransMontaigne Product Services, LLC (“TPSL”);

• Our refined products business in the mid-continent region of the United States (“Mid-Con”);

• Our gas blending business in the southeastern and eastern regions of the United States (“Gas Blending”).

We also acquired strategic water infrastructure assets including Mesquite Disposals Unlimited, LLC (“Mesquite”) and the equity interests of Hillstone Environmental Partners, LLC (“Hillstone”) as well as DCP Midstream LP’s natural gas liquids business.

For a further discussion of the dispositions and acquisitions transactions, see Part I, Item 1–“Business–Overview” and Note 4 , Note 18 and Note 19 to our consolidated financial statements included in this Annual Report on Form 10-K (“Annual Report”).

The sale of our former Retail Propane segment and the sale of TPSL, Mid-Con and Gas Blending, within our former Refined Products and Renewables segment, all represented strategic shifts in our operations and will have a significant effect on our operations and financial results going forward.

Accordingly, the results of operations and cash flows related to our former Retail Propane segment, TPSL, Mid-Con and Gas Blending have been classified as discontinued operations for all periods presented.

Over the past three years, we made a number of important strategic actions in an effort to leverage the Partnership’s core areas of competitive strength and focus on generating stable, growing and predictable cash flows, while improving our credit profile.

These steps included the sale of the following:

• Certain refined products businesses including TransMontaigne Product Services, LLC (“TPSL”), our refined products business in the mid-continent region of the United States (“Mid-Con”) and our gas blending business in the southeastern and eastern regions of the United States (“Gas Blending”) during the year ended March 31, 2020;

• Our interest in Sawtooth Caverns, LLC (“Sawtooth”) during the year ended March 31, 2022.

In addition, in our Water Solutions segment we acquired strategic water infrastructure assets including Mesquite Disposals Unlimited, LLC (“Mesquite”) and the equity interests of Hillstone Environmental Partners, LLC (“Hillstone”) during the year ended March 31, 2020, while in our Liquids Logistics segment we acquired an approximately 225-mile propane pipeline in Michigan (the “Ambassador Pipeline”) during the year ended March 31, 2021.

For more information regarding our dispositions and acquisitions transactions and the impact to our operations, see Note 17 and Note 18 to our consolidated financial statements included in this Annual Report on Form 10-K (“Annual Report”).

The sale of TPSL, Mid-Con and Gas Blending represented strategic shifts in our operations and will have a significant effect on our operations and financial results going forward.

Accordingly, the results of operations and cash flows related to TPSL, Mid-Con and Gas Blending have been classified as discontinued operations for the years ended March 31, 2021 and 2020.

See Note 18 to our consolidated financial statements included in this Annual Report for a further discussion of these transactions.

Recent Developments

Debt Refinancing

On February 4, 2021, we closed on a private offering of $2.05 billion of 7.5% senior secured notes due 2026 (“2026 Senior Secured Notes”) and a new credit agreement (the “New Credit Agreement”) which consists of a $500.0 million asset-based revolving credit facility (“ABL Facility”).

We used the net proceeds from the issuance of the 2026 Senior Secured Notes (along with borrowings under the ABL Facility) to (i) repay all outstanding borrowings under and terminate our existing revolving credit facility, (ii) repay all outstanding borrowings under and terminate our term credit agreement and (iii) pay fees and expenses in connection therewith as well as fees and expenses in connection with the issuance of the 2026 Senior Secured Notes and entering into the ABL Facility.

As part of this refinancing, we also agreed to certain restricted payment provision under the 2026 Senior Secured Notes and ABL Facility, one of which is the suspension of the quarterly common unit distributions, beginning with the quarter ended December 31, 2020, and all preferred unit distributions, beginning with the quarter ended March 31, 2021.

The cash savings from the suspension of the distributions should accelerate the deleveraging of our balance sheet and increase our liquidity, which should create more financial flexibility going forward.

Due to refinancing our old floating-rate debt with new fixed-rate debt at a higher interest rate, our interest expense is expected to increase going forward when compared to prior periods, as we work on deleveraging our balance sheet.

See Note 8 to our consolidated financial statements included in this Annual Report and “–Liquidity, Sources of Capital and Capital Resource Activities” for a discussion of these transactions.

Repurchases of Senior Unsecured Notes

During the three months ended March 31, 2022, we repurchased $23.8 million of the 7.5% Senior Unsecured Notes Due 2023 (“2023 Notes”).

Global Pandemic

Late in the fourth quarter of our 2020 fiscal year, the energy industry experienced historic events that led to a simultaneous demand and supply shock.

Saudi Arabia and Russia increased production of crude oil as the two countries competed for market share.

As a result, the global supply of crude oil significantly exceeded demand and led to a collapse in global crude oil prices.

In addition, the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic and recommended containment and mitigation measures worldwide, which contributed to a massive economic slowdown and decreased demand for crude oil.

This period of unprecedented restrictions on travel and economic activity significantly reduced demand for refined products.

The reduction in refined products demand, lower crude oil prices and limited storage capacity combined to put significant downward pressure on domestic crude oil and natural gas producers as they assess their future

drilling and production plans.

All three of our segments were negatively impacted by the lower commodity price environment and reduced demand.

Also, commodity price declines have had an adverse impact on many participants in the energy markets, and the inherent risk of customer or counterparty nonperformance is higher when commodity prices are low or decline.

In June 2020, Extraction Oil & Gas, Inc.

(“Extraction”), who is a significant shipper on our crude oil pipeline, filed a petition for bankruptcy under Chapter 11 of the bankruptcy code and in their filing requested that the court authorize it to reject its transportation contracts, for which we filed an objection.

On November 2, 2020, the bankruptcy court issued a bench ruling granting Extraction’s motion to reject the transportation contracts effective as of June 14, 2020.

We disputed the rejection motion and appealed the bankruptcy court’s approval of the rejection of the transportation contracts.

On December 21, 2020, we announced a global settlement agreement with Extraction, as it relates to Extraction’s emergence from bankruptcy, which occurred on January 21, 2021.

Among other consideration, the global settlement agreement provided for the following:

(i) a new long-term supply agreement, which includes a significant acreage dedication in the DJ Basin, and retains Extraction’s crude oil volumes for shipping on our Grand Mesa Pipeline;

(ii) a new rate structure under the supply agreement, which is based on calendar month average New York Mercantile Exchange (“NYMEX”) prices with an agreed upon differential plus an increase in the rate when those NYMEX prices exceed $50.00 per barrel;

and (iii) the receipt of $35.0 million from Extraction as a liquidated payment for our unsecured claims, which was received on January 21, 2021.

See Note 18 to our consolidated financial statements included in this Annual Report for a further discussion.

While some global and regional economies are beginning to reopen, the potential future limitations and impact of COVID-19 on our business are still unknown at this time and although we tend to experience less demand for certain of our services and products when commodity prices decrease significantly over extended periods of time, and given the uncertain timing of a return of refined product demand to historical levels, the extent of the impact these events will have on our results of operations is unclear.

Crude oil prices have increased but future drilling and production plans are continually being assessed.

Global Pandemic and Ukraine War

The COVID-19 pandemic, including the outbreak of several variants, has caused continued volatility in commodity prices due to, among other things, reduced industrial activity and travel demand, varying worldwide restrictions and the timing of closing and re-opening of economies throughout the last two years.

The unprecedented restrictions on travel and economic activity during the early stages of the COVID-19 pandemic significantly reduced demand for refined products.

The lingering impact of the COVID-19 pandemic continues to ripple through the United States economy, most notably in the form of rising inflation and supply chain issues.

Additionally, the Russian invasion of Ukraine beginning in February 2022 and the ongoing war has caused additional volatility in commodity prices on worldwide supply constraints and has seemed to have only amplified inflation and supply chain constraints in the United States.

While we have seen continued recovery in commodity prices since the beginning of the pandemic, primarily due to economies re-opening over time and the reduction in oil and natural gas supply resulting from the war in Ukraine, there is still an element of volatility that we expect to continue due to the uncertainty of the COVID-19 pandemic and the war in Ukraine.

This volatility could negatively impact commodity prices or rising inflation could impact demand for refined products.

Given the uncertain timing of a return of refined product demand to historical levels, the extent these events will have an impact on our results of operations is unclear.

Seismic Activity

The subsurface injection of produced water for disposal has been associated with recent induced seismic events in Texas and New Mexico.

While these events have been relatively low magnitude, industry and relevant state regulators are, nevertheless, taking proactive measures to attempt to prevent similar induced seismic events.

More specifically, we are engaged in various collaborative industry efforts with other disposal operators and relevant state regulatory agencies, working to collect and review data, enhance understanding of regional fault systems, and ultimately develop and implement appropriate longer-term mitigation strategies.

As part of this effort, we have implemented reductions in injected volumes at certain facilities, and where appropriate have temporarily shut in facilities.

To date, due to the capacity of our integrated system in affected areas, the diverse locations of our disposal facilities, and the connectivity of our system, we have not been negatively impacted by these actions.

Water Solutions

Our Water Solutions segment transports, treats, recycles and disposes of produced and flowback water generated from oil and natural gas production.

We also sell produced water for reuse and brackish non-potable water to our producer customers to be used in their crude oil exploration and production activities.

Our Water Solutions segment transports, treats, recycles and disposes of produced and flowback water generated from crude oil and natural gas production.

We also sell produced water for reuse and recycle and brackish non-potable water to our producer customers to be used in their crude oil exploration and production activities.

As part of processing water, we aggregate and sell recovered crude oil, also known as skim oil.

We also dispose of solids such as tank bottoms, drilling fluids and drilling muds and perform other ancillary services such as truck and frac tank washouts.

Our activities in this segment are underpinned by long-term, fixed fee contracts and acreage dedications, some of which contain minimum volume commitments, with leading oil and gas companies including large, investment grade producer customers.

We operate in a number of the most prolific crude oil and natural gas producing areas including the Delaware Basin in New Mexico and Texas, the Midland Basin in Texas, the DJ Basin in Colorado and the Eagle Ford Basin in Texas.

Our activities in this segment are underpinned

by long-term, fixed fee contracts and acreage dedications, some of which contain minimum volume commitments with leading oil and gas companies including large, investment grade producer customers.

We operate in a number of the most prolific crude oil and natural gas producing areas in the United States including the Delaware Basin in New Mexico and Texas, the Midland Basin in Texas, the DJ Basin in Colorado and the Eagle Ford Basin in Texas.

With a system that handled approximately 656.2 million barrels of produced water across its areas of operation during the year ended March 31, 2022, we believe that we are the largest independent produced water transportation and disposal company in the United States.

The opportunity to generate revenue in our Water Solutions business is driven in large part by the level of crude oil production in the areas where are facilities are located.

The opportunity to generate revenue in our Water Solutions business is driven in large part by the level of crude oil production in the areas where our facilities are located.

Prior to the pandemic, we saw the level of crude oil production increase, particularly in the Permian and DJ Basins, due to increasing or stable crude oil prices, which positively impacted our disposal volumes.

Lower crude oil prices provide producers with less incentive to drill and complete new wells, which results in lower production and negatively impacts our disposal volumes.

Our Water Solutions segment generated operating income of $94.9 million during the year ended March 31, 2022.

Our Water Solutions segment generated an operating loss of $92.7 million during the year ended March 31, 2021, which included an impairment charge of $84.3 million to write down the value of an asset group due to a decline in producer activity, resulting in lower disposal volumes, and to write down the value of certain inactive or underutilized saltwater disposal facilities (see Note 4 and Note 6 to our consolidated financial statements included in this Annual Report).

Our Water Solutions segment generated an operating loss of $173.1 million during the year ended March 31, 2020, which included a goodwill impairment charge of $250.0 million (see Note 6 to our consolidated financial statements included in this Annual Report).

Crude Oil Logistics

Our Crude Oil Logistics segment purchases crude oil from producers and marketers and transports it to refineries or for resale at pipeline injection stations, storage terminals, barge loading facilities, rail facilities, refineries, and other trade hubs,

and provides storage, terminaling and transportation services through its owned assets.

Our activities in this segment are supported by certain long-term, fixed rate contracts which include minimum volume commitments on our pipelines.

Our activities in this segment are supported by certain long-term, fixed rate contracts which include minimum volume commitments on our owned and leased pipelines.

Most of our contracts to purchase or sell crude oil are at floating prices that are indexed to published rates in active markets such as Cushing, Oklahoma, St.

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Spreads between crude oil prices in different markets can fluctuate, which may expand or limit our opportunity to generate margins by transporting crude oil to different markets.

The following table summarizes the range of low and high crude oil spot prices per barrel of NYMEX West Texas Intermediate Crude Oil at Cushing, Oklahoma for the periods indicated and the prices at period end:

The following table summarizes the range of low and high crude oil spot prices per barrel of New York Mercantile Exchange (“NYMEX”) West Texas Intermediate Crude Oil at Cushing, Oklahoma for the periods indicated and the prices at period end:

Crude Oil Spot Price Per Barrel

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2020 $ 20.09 $ 66.30 $ 20.48

(1) On April 20, 2020, crude oil prices collapsed due to low demand as a result of the COVID-19 lockdowns and a lack of available storage.

Prior to the substantial decline in crude oil prices, the crude oil markets were in backwardation, a condition in which forward crude oil prices are lower than spot prices.

As a result of the decline in prices, the crude oil markets were in contango, from April 2020 to February 2021, a condition in which forward crude oil prices are greater than spot prices.

Starting in March 2021, we are now in backwardation.

Our Crude Oil Logistics business benefits when the market is in contango, as increasing prices result in inventory holding gains during the time between when we purchase inventory and when we sell it.

In addition, we are able to better utilize our storage assets when contango markets justify storing barrels.

(1) On April 20, 2020, crude oil prices collapsed due to low demand as a result of the COVID-19 lockdowns, the price war between Russia and Saudi Arabia and a lack of available storage.

We believe volatility in commodity prices will continue into the near term, our ability to adjust to and manage this volatility may impact our financial results.

Our Crude Oil Logistics segment generated an operating loss of $304.3 million during the year ended March 31, 2021, which included impairment charges of $383.6 million related to the Extraction bankruptcy.

Our Crude Oil Logistics segment generated operating income of $45.0 million during the year ended March 31, 2022.

(“Extraction”) bankruptcy (see Note 17 to our consolidated financial statements included in this Annual Report).

Liquids Logistics

Our Liquids Logistics segment (formerly named Liquids and Refined Products) conducts supply operations for natural gas liquids, refined petroleum products and biodiesel to a broad range of commercial, retail and industrial customers across the United States and Canada.

These operations are conducted through our 28 company-owned terminals, third-party storage and terminal facilities, common carrier pipelines and a fleet of leased railcars.

We also provide marine exports of butane through our facility located in Chesapeake, Virginia.

Our Liquids Logistics segment conducts supply operations for natural gas liquids, refined petroleum products and biodiesel to a broad range of commercial, retail and industrial customers across the United States and Canada.

These operations are conducted through our 24 owned terminals, third-party storage and terminal facilities, nine common carrier pipelines and a fleet of leased railcars.

We also provide services for marine exports of butane through our facility located in Chesapeake, Virginia, and expect to commence operations on our propane pipeline in Michigan in June 2022.

We attempt to reduce our exposure to price fluctuations by using back-to-back physical contracts and pre-sale agreements that allow us to lock in a margin on a percentage of our winter volumes.

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Our wholesale liquids business is a “cost-plus” business that can be affected by both price fluctuations and volume variations.

We establish our selling price based on a pass-through of our product supply, transportation, handling, storage, and capital costs plus an acceptable margin.

We establish our selling price based on a pass-through of our product supply, transportation, handling, storage, and capital costs plus a margin.

Also, we conduct just-in-time sales for gasoline and diesel at a national network of terminals owned by third parties via rack spot sales that do not involve continuing contractual obligations to purchase or deliver product.

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We believe volatility in commodity prices will continue, and our ability to adjust to and manage this volatility may impact our financial results.

Our Liquids Logistics segment generated operating income of $70.4 million and $142.4 million during the years ended March 31, 2021 and March 31, 2020, respectively.

Our Liquids Logistics segment generated an operating loss of $8.4 million during the year ended March 31, 2022, which included a net loss of $60.1 million related to the sale of Sawtooth (see Note 17 to our consolidated financial statements included in this Annual Report) and a net loss of $11.8 million related to the sale of another terminal.

Our Liquids Logistics segment generated operating income of $70.4 million during the year ended March 31, 2021.

Consolidated Results of Operations

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Revaluation of liabilities (6,495) 6,261 9,194

Operating (loss) income (390,753) (3,332) 126,728

Operating income (loss) 83,043 (390,753) (3,332)

Equity in earnings of unconsolidated entities 1,400 1,938 1,291

Interest expense (271,640) (198,799) (181,184)

(Loss) gain on early extinguishment of liabilities, net (16,692) 1,341 (12,340)

Other (expense) income, net (36,503) 1,684 (30,418)

Gain (loss) on early extinguishment of liabilities, net 1,813 (16,692) 1,341

Other income (expense), net 2,254 (36,503) 1,684

Loss from continuing operations before income taxes (183,130) (640,809) (180,200)

Income tax benefit (expense) 3,391 (345) (1,233)

Income tax (expense) benefit (971) 3,391 (345)

Loss from continuing operations (184,101) (637,418) (180,545)

(Loss) income from discontinued operations, net of tax (1,769) (218,235) 418,850

Net (loss) income (639,187) (398,780) 339,395

Loss from discontinued operations, net of tax — (1,769) (218,235)

Net loss (184,101) (639,187) (398,780)

Net (income) loss attributable to noncontrolling interests (655) (632) 1,773

Net loss attributable to redeemable noncontrolling interests — — 446

Net (loss) income attributable to NGL Energy Partners LP $ (639,819) $ (397,007) $ 360,047

Net loss attributable to NGL Energy Partners LP $ (184,756) $ (639,819) $ (397,007)

Items Impacting the Comparability of Our Financial Results

Our current and future results of operations may not be comparable to our historical results of operations for the periods presented due to business combinations, disposals and other transactions.

Our current and future results of operations may not be comparable to our historical results of operations for the periods presented due to acquisitions, dispositions and other transactions.

Acquisitions and Dispositions

In March 2021, we acquired the Ambassador pipeline, an approximately 225-mile natural gas liquids pipeline, which runs from the Kalkaska gas plant in Kalkaska County, Michigan to a termination point near Marysville in St.

Clair County, Michigan (see Note 4 to our consolidated financial statements included in this Annual Report).

During the year ended March 31, 2021, we sold certain permits, land and a saltwater disposal facility to a third-party (see Note 18 to our consolidated financial statements included in this Annual Report).

We also completed numerous acquisitions and dispositions during the years ended March 31, 2020 and 2019.

We completed several acquisitions and dispositions during the years ended March 31, 2022 and 2021.

These transactions impact the comparability of our results of operations between our current and prior fiscal years.

During the year ended March 31, 2020, we completed the following acquisitions:

• On July 2, 2019, we acquired all of assets of Mesquite (including 34 saltwater disposal wells and approximately 175 miles of pipelines);

• On October 31, 2019, we acquired all of the equity interests of Hillstone (including 19 saltwater disposal wells);

• On November 7, 2019, we acquired the exclusive rights to use certain land in Lea County, New Mexico for produced and treated water operations from one entity, certain membership interests in another entity and other assets;

• During the year ended March 31, 2020, we acquired one saltwater disposal facility (including three saltwater disposal wells) in Eddy County, New Mexico;

• During the year ended March 31, 2020, we acquired land and two saltwater disposal wells in Pecos County, Texas.

During the year ended March 31, 2020, we completed the following dispositions which have been classified as discontinued operations (see “Overview” above):

• On September 30, 2019, we completed the sale of TPSL to Trajectory Acquisition Company, LLC;

• On January 3, 2020, we completed the sale of our Mid-Con refined products business to a third-party;

• On March 30, 2020, we completed the sale of our Gas Blending business to another third-party.

During the year ended March 31, 2019, we completed the following dispositions:

• On February 28, 2019, we completed the sale of our South Pecos water disposal business to a subsidiary of WaterBridge Resources LLC;

• On November 30, 2018, we completed the sale of NGL Water Solutions Bakken, LLC to an affiliate of Tallgrass Energy, LP;

• On July 10, 2018, we completed the sale of virtually all of our remaining Retail Propane segment to Superior Plus Corp.

and, finally, on August 14, 2018, we sold our interest in Victory Propane, LLC.

On June 18, 2021, we sold our approximately 71.5% interest in Sawtooth to a group of buyers (see Note 17 to our consolidated financial statements included in this Annual Report).

In March 2021, we acquired the Ambassador Pipeline, an approximately 225-mile propane pipeline, which runs from the Kalkaska gas plant in Kalkaska County, Michigan to a termination point near Marysville in St.

Clair County, Michigan.

During the year ended March 31, 2021, we sold certain permits, land and a saltwater disposal facility to a third-party (see Note 17 to our consolidated financial statements included in this Annual Report).

Seasonality impacts our Liquids Logistics segment.

Consequently, for our Liquids Logistics business, revenues, operating profits and operating cash flows are generated mostly in the third and fourth quarters of our fiscal year.

We borrow under the revolving credit facility to supplement our operating cash flows during the periods in which we are building inventory.

Consequently, for our Liquids Logistics segment, revenues, operating profits and operating cash flows are generated mostly in the third and fourth quarters of our fiscal year.

borrow under the revolving credit facility to supplement our operating cash flows during the periods in which we are building inventory.

See “–Liquidity, Sources of Capital and Capital Resource Activities–Cash Flows.”

Subsequent Events

See Note 19 to our consolidated financial statements included in this Annual Report for a discussion of transactions that occurred subsequent to March 31, 2022.

Segment Operating Results for the Years Ended March 31, 2022 and 2021

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The following table summarizes the operating results of our Water Solutions segment for the periods indicated.

As previously reported, on July 2, 2019, we acquired all of the assets of Mesquite and on October 31, 2019, we acquired all of the equity interests of Hillstone, thus the fiscal year 2020 results only include a partial year of operations related to these transactions.

Year Ended March 31,

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Sale of recovered crude oil 77,203 28,599 48,604

Other service revenues 33,876 58,538 (24,662)

Recycled water 11,343 3,015 8,328

Other revenues 59,192 30,861 28,331

Total revenues 544,866 370,986 173,880

Cost of sales-excluding impact of derivatives 26,340 2,557 23,783

Derivative loss (gain) 7,065 (39,381) 46,446

Derivative loss 7,640 7,065 575

Operating expenses 175,022 142,371 32,651

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Total expenses 450,015 463,706 (13,691)

Segment operating loss $ (92,720) $ (173,064) $ 80,344

Segment operating income (loss) $ 94,851 $ (92,720) $ 187,571

Produced water processed (barrels per day)

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Total 1,797,918 1,364,591 433,327

Solids processed (barrels per day) 1,324 5,697 (4,373)

Recycled water (barrels per day) 93,487 43,503 49,984

Total (barrels per day) 1,891,405 1,408,094 483,311

Skim oil sold (barrels per day) 2,864 1,957 907

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Operating expenses for produced water processed ($/barrel) (1) $ 0.27 $ 0.29 $ (0.02)

(1) During the year ended March 31, 2020, barrels per day of produced water processed by the assets acquired in the Mesquite and Hillstone transactions are calculated by the number of days in which we owned the assets.

(1) Total produced water barrels processed during the years ended March 31, 2022 and 2021 were 656,240,083 and 498,075,843, respectively.

Water Disposal Service Fee Revenues.

The increase was due primarily to an increase in the volume of produced water processed primarily driven by our acquisitions of Mesquite and Hillstone as well as new produced water volumes received upon the completion and commencement of the Partnership’s Poker Lake pipeline.

The pipeline was successfully completed in October 2020 with a capacity of over 400,000 barrels per day and connects into our integrated Delaware Basin produced water pipeline infrastructure network.

These increases were partially offset by a decrease in the volume of other produced water processed resulting from lower crude oil prices, development activity and production volumes.

The increase was due to an increase in produced water volumes processed as a result of increased crude oil production driven by higher crude oil prices and completion activity, primarily in the Delaware Basin.

This was partially offset by lower service fees received per barrel due to increased volumes from customers with long-term acreage dedications or minimum volume commitments with lower contracted fees.

Recovered Crude Oil Revenues.

The decrease was due primarily to a reduction in the number of producing wells completed in our area of operations, a decrease in the percentage of skim oil volumes recovered per produced water barrel processed and lower crude oil prices.

The lower percentage of skim oil volumes recovered was due primarily to an increase in produced water transported through pipelines (which contains less oil per barrel of produced water), and the addition of contract structures that allow producers to keep the skim oil recovered from produced water.

Other Service Revenues.

Other service revenues primarily include solids disposal revenues, water pipeline revenues, land surface use revenues, brackish non-potable water revenues and resale water revenues.

The decrease was due primarily to reduced customer development activity and needs for these services resulting from the decline in crude oil prices.

These decreases were partially offset by the sale of water to customers for use in their operations.

The increase was due primarily to higher volumes of skim oil sold due to increased produced water processed as well as higher crude oil prices realized.

Additionally, an increase in the number of wells completed

in our area of operations during the period with increased flowback activity resulted in higher skim oil volumes per barrel of produced water processed.

Recycled Water Revenues.

Revenue from recycled water includes the sale of produced water and recycled water for use in our customers’ completion activities.

The increase was due primarily to increasing demand for water to be used in completions, driven by an increase in drilling and completion activity primarily in the Delaware Basin, and our customers transition from brackish non-potable water to recycled water.

Other Revenues.

Other revenues primarily include brackish non-potable water revenues, water pipeline revenues, land surface use revenues and solids disposal revenues.

The increase was due primarily to higher sales of brackish non-potable water and pipeline revenues, driven by an increase in drilling and completion activity primarily in the Delaware Basin as well as our increased capacity to meet demand for these services, and higher land surface use fees and sales of caliche due to increased producer activity.

Cost of Sales-Excluding Impact of Derivatives .

The decrease was due primarily to lower purchasing and transportation costs related to our brackish non-potable water and crude oil sales .

Derivative Loss (Gain) .

We enter into derivatives in our Water Solutions segment to protect against the risk of a decline in the market price of the crude oil we expect to recover when processing the produced water and selling the skim oil.

Our cost of sales during the year ended March 31, 2021 included $24.5 million of net unrealized losses on derivatives and $17.4 million of net realized gains on derivatives.

Our cost of sales during the year ended March 31, 2020 included $29.9 million of net unrealized gains on derivatives and $9.5 million of net realized gains on derivatives.

In June 2019, we settled derivative contracts that had scheduled settlement dates from April through December 2020 and recorded a gain of $1.9 million on those derivatives.

The increase was due primarily to costs related to the transfer of brackish non-potable water and recycled water to the purchaser as well as increased purchases of brackish non-potable water from third-parties to meet customer needs.

Derivative Loss .

We enter into derivatives in our Water Solutions segment to protect against the risk of a decline in the market price of the crude oil we expect to recover when processing produced water and selling recovered skim oil.

During the year ended March 31, 2022, we had $11.7 million of net unrealized losses on derivatives and $4.0 million of net realized gains on derivatives.

During the year ended March 31, 2021, we had $24.5 million of net unrealized losses on derivatives and $17.4 million of net realized gains on derivatives.

At March 31, 2022, we had approximately 3,000 barrels per day hedged for the next six months at an average price of $87.65 per barrel.

Operating and General and Administrative Expenses .

The decrease was due primarily to the deployment of automation and subsequent reduction in employee headcount, reduced equipment rental (including generators) and associated diesel fuel and repairs and lower maintenance expense.

In addition, acquisition expenses were lower by $4.1 million as we did not close on any acquisitions during the year ended March 31, 2021.

The increase was due primarily to higher utility, royalty and chemical expenses as a result of the increase in produced water volumes processed.

Utility and royalty expenses, which are two of our biggest variable expenses, were not impacted by the rise in inflation due to negotiating long-term utility contracts with fixed rates and royalty contracts with no escalation clauses.

Severance taxes also increased due to the increase in revenue from recovered crude oil.

Going forward, the Partnership expects to see slight decreases in its operating expenses per barrel of produced water processed due to continued focus on cost maintenance and reductions and an increase in overall disposal volumes.

Depreciation and Amortization Expense .

The increase was due primarily to Mesquite and Hillstone acquisitions completed in the prior year and newly developed facilities and infrastructure.

The decrease was due primarily to an impairment charge recorded during the three months ended March 31, 2021 to write down the value of an intangible asset which resulted in lower amortization expense during the year ended March 31, 2022 as well as certain other long-term assets being fully amortized or impaired during the years ended March 31, 2021 and 2022.

These decreases were partially offset by the depreciation of newly developed facilities and infrastructure.

Loss on Disposal or Impairment of Assets, Net .

During the year ended March 31, 2022, we recorded a net loss of $29.8 million primarily related to the write-down of an inactive saltwater disposal facility and damaged equipment and wells at other facilities, abandonment of certain capital projects and the sale of certain other miscellaneous assets and a gain of $4.3 million on the sale of certain land and a landfill permit.

During the year ended March 31, 2021, we recorded:

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• a gain of $14.0 million related to the sale of certain permits, land and a saltwater disposal facility (see Note 17 to our consolidated financial statements included in this Annual Report).

During the year ended March 31, 2020, we recorded:

• a goodwill impairment charge of $250.0 million related to the current macroeconomic conditions including the collapse of oil prices driven by both the decrease in demand caused by the COVID-19 pandemic and excess supply, as well as changing market conditions and expected lower crude oil production in certain regions, resulting in expected decreases in future cash flows for certain of our assets (see Note 6 to our consolidated financial statements included in this Annual Report);

• an impairment charge of $13.5 million related to certain inactive saltwater disposal facilities;

• a net loss of $9.2 million on the disposals of certain other assets;

• a gain of $14.5 million for the sale of certain water permits (see Note 18 to our consolidated financial statements included in this Annual Report);

• a gain of $1.0 million for cash received related to a loan receivable that was previously written off.

Revaluation of Liabilities.

During the year ended March 31, 2022, there was a decrease in expense for the valuation of our contingent consideration liabilities related to royalty agreements acquired as part of certain business combinations due primarily to lower expected production from new customers, resulting in a decrease to the expected future royalty payment.

During the year ended March 31, 2021, there was an increase in expense for the valuation of our contingent consideration liabilities related to royalty agreements acquired as part of certain business combinations due primarily to higher expected production from new customers, resulting in an increase to the expected future royalty payment.

During the year ended March 31, 2020, a portion of the revaluation of liabilities represented the change in the valuation of our contingent consideration liability issued by us as part of a business combination.

Under the agreement, we were required to make additional payments to the seller based on the volume of produced water processed by the assets acquired.

During the year ended March 31, 2020, the thresholds for the volume of produced water processed were surpassed, thus triggering our obligation to pay the seller.

See Note 2 to our consolidated financial statements included in this Annual Report for a further discussion of the contingent consideration liability.

During the year ended March 31, 2020, there was a reduction in expense for the valuation of our contingent consideration liabilities related to royalty agreements acquired as part of certain business combinations due primarily to lower expected production from new customers and an increase in facilities due to acquisitions, resulting in a decrease to the expected future royalty payment.

Crude Oil Logistics

7 unchanged sentences

Cost of sales-excluding impact of derivatives 2,271,973 1,473,330 798,643

Derivative loss (gain) 49,314 (35,736) 85,050

Derivative loss 92,027 49,314 42,713

Operating expenses 54,606 56,918 (2,312)

1 unchanged sentence

Depreciation and amortization expense 48,489 60,874 (12,385)

Loss (gain) on disposal or impairment of assets, net 384,143 (1,144) 385,287

(Gain) loss on disposal or impairment of assets, net (3,101) 384,143 (387,244)

Total expenses 2,471,531 2,032,617 438,914

Segment operating (loss) income $ (304,330) $ 117,768 $ (422,098)

Segment operating income (loss) $ 45,033 $ (304,330) $ 349,363

Crude oil sold (barrels) 31,091 38,349 (7,258)

10 unchanged sentences

Crude Oil Sales Revenues.

The decrease was due primarily to a decrease in crude oil prices and sales volumes during the year ended March 31, 2021, compared to the year ended March 31, 2020.

The volumes decreased due to changes in the method of delivery to the market in the Permian region, as a significant amount of production switched to long haul pipeline owned and controlled by others.

The increase was due primarily to an increase in crude oil prices during the year ended March 31, 2022, compared to the year ended March 31, 2021.

This was offset by a reduction in sales volumes, primarily due to lower production in the DJ Basin.

In addition, volumes also declined due to an increase in buy/sell transactions during the year ended March 31, 2022, compared to the year ended March 31, 2021.

These are transactions in which we transact to purchase product from a counterparty and sell the same volumes of product to the same counterparty at a different location or time.

The revenues, cost of sales and volumes are all netted for these transactions.

Crude Oil Transportation and Other Revenues.

The decrease was primarily due to our Grand Mesa Pipeline, which decreased revenues by $32.8 million during the year ended March 31, 2021, compared to the year ended March 31, 2020.

During the year ended March 31, 2021, financial volumes on the Grand Mesa Pipeline averaged approximately 94,000 barrels per day, compared to 131,000 barrels per day for the year ended March 31, 2020 (volume amounts are from both internal and

external parties) primarily due to the court approved rejection of the Extraction transportation agreement (see Note 18 to our consolidated financial statements included in this Annual Report).

The decrease was primarily due to our Grand Mesa Pipeline, as revenues from third-parties decreased by $72.6 million during the year ended March 31, 2022, compared to the year ended March 31, 2021.

During the year ended March 31, 2022, physical volumes on the Grand Mesa Pipeline averaged approximately 78,000 barrels per day, compared to approximately 90,000 barrels per day for the year ended March 31, 2021 (volume amounts are from both internal and external parties).

The decline was primarily due to the court approved rejection of the Extraction transportation agreement (as part of their bankruptcy) as well as decreased production in the DJ Basin.

Cost of Sales-Excluding Impact of Derivatives.

The decrease was due to a decrease in crude oil prices and reduced volumes during the year ended March 31, 2021, compared to the year ended March 31, 2020.

Derivative Loss (Gain) .

Our cost of sales during the year ended March 31, 2021 included $25.9 million of net realized losses on derivatives and $23.4 million of net unrealized losses on derivatives.

The losses are due to a very volatile pricing market during the year ended March 31, 2021.

Our cost of sales during the year ended March 31, 2020 included $24.4 million of net realized gains on derivatives and $11.3 million of net unrealized gains on derivatives.

In March 2020, we closed and realized derivative contracts that had scheduled settlement dates from May 2020 through June 2020, which accounted for $16.7 million of the realized gains for the prior year.

The increase was due primarily to an increase in crude oil prices during the year ended March 31, 2022, compared to the year ended March 31, 2021.

The increase was partially offset by a reduction in volumes, as discussed above in “ Crude Oil Sales Revenues .”

Derivative Loss.

Our cost of sales during the year ended March 31, 2022 included $115.7 million of net realized losses on derivatives, driven by increasing crude oil prices, partially offset by $23.7 million of net unrealized gains on derivatives.

The amounts for the year ended March 31, 2022 includes net realized losses of $83.5 million and unrealized gains of $45.0 million associated with derivative instruments related to our hedge of the CMA Differential Roll, defined and discussed below under “Non-GAAP Financial Measures.” Our cost of sales during the year ended March 31, 2021 included $25.9 million of net realized losses on derivatives and $23.4 million of net unrealized losses on derivatives.

Gains and losses from derivative activity should be offset by margin generated by the sale of the physical product.

Crude Oil Product Margin .

The increase was due to inventory purchased during the three months ended June 30, 2020 at lower prices and held for sale during the three months ended September 30, 2020 and the three months ended December 31, 2020 when prices recovered.

The increase was primarily due to higher crude oil prices as certain contracted rates with producers increased due to higher crude oil prices.

Operating and General and Administrative Expenses .

Expenses decreased compared to the prior year due to a decrease of utilities, as lower volumes were being shipped on the Grand Mesa Pipeline and other cost cutting measures which were partially offset by the write off of a $5.7 million receivable from Extraction (see Note 18 to our consolidated financial statements included in this Annual Report).

The decrease was primarily related to the write off of a receivable related to deficiency volumes from Extraction of $5.7 million during the year ended March 31, 2021.

The decrease was offset by an increase in utility expenses due to Grand Mesa increased utility rates, as well as increased business insurance due to policy rate increases for the year ended March 31, 2022.

Depreciation and Amortization Expense.

The decrease was due to the retirement of certain assets and other assets being fully depreciated or amortized during the year ended March 31, 2020.

Loss (Gain) on Disposal or Impairment of Assets, Net .

The decrease was due primarily to the reduction of amortization expense due to the impairment of certain intangible assets at the end of the prior year.

This was offset by an increase in depreciation expense due to reducing the estimated useful lives of our railcars.

(Gain) Loss on Disposal or Impairment of Assets, Net .

During the year ended March 31, 2022, we recorded a gain of $5.5 million on the sale of our trucking assets and a loss of $2.2 million due to damage caused by Hurricane Ida to one of our Gulf Coast terminals.

During the year ended March 31, 2021, we recorded a net loss of $145.8 million for the impairment of an intangible asset, related to a rejected transportation agreement with Extraction (see Note 17 to our consolidated financial statements included in this Annual Report) and a net loss of $237.8 million for the impairment of goodwill (see Note 5 to our consolidated financial statements included in this Annual Report).

During the year ended March 31, 2020, we recorded a net gain of $1.1 million related to the disposal of certain assets.

Liquids Logistics

6 unchanged sentences

Cost of sales-excluding impact of derivatives 1,876,728 1,108,493 768,235

Derivative loss (gain) 930 (3,225) 4,155

Derivative loss 2,907 930 1,977

Product margin 20,263 14,664 5,599

2 unchanged sentences

Cost of sales-excluding impact of derivatives 1,313,765 949,402 364,363

Derivative loss 10,994 3,536 7,458

Derivative (gain) loss (20,519) 10,994 (31,513)

Product margin 32,695 67,186 (34,491)

2 unchanged sentences

Cost of sales-excluding impact of derivatives 794,180 469,394 324,786

Derivative loss (gain) 22,353 (8,288) 30,641

Derivative loss 18,690 22,353 (3,663)

Product margin 50,478 26,110 24,368

2 unchanged sentences

Cost of sales-excluding impact of derivatives 748,392 424,191 324,201

Derivative gain (7,078) (2,846) (4,232)

Derivative loss (gain) 15,812 (7,078) 22,890

Product margin 26,921 29,631 (2,710)

8 unchanged sentences

Total expenses 153,594 96,314 57,280

Segment operating income $ 70,441 $ 142,411 $ (71,970)

Segment operating (loss) income $ (8,441) $ 70,441 $ (78,882)

Year Ended March 31,

25 unchanged sentences

(1) Revenues include $1.3 million and $6.1 million of intersegment sales during the years ended March 31, 2022 and 2021, respectively, that are eliminated in our consolidated statements of operations.

(2) Revenues include $10.3 million of intersegment sales during the year ended March 31, 2020 between certain businesses within the Liquids Logistics segment and TPSL, Mid-Con and Gas Blending that are eliminated in our consolidated statement of operations.

(3) Cost of sales include $8.2 million of intersegment cost of sales during the year ended March 31, 2020 between certain businesses within the Liquids Logistics segment and TPSL, Mid-Con and Gas Blending that are eliminated in our consolidated statement of operations.

(2) Information is presented as of March 31, 2022 and March 31, 2021, respectively.

(3) Decrease from March 31, 2021 relates to the sale of Sawtooth on June 18, 2021 (see Note 17 to our consolidated financial statements included in this Annual Report).

(4) Cost and product margin per gallon excludes the impact of derivatives.

Refined Products Revenues and Cost of Sales-Excluding Impact of Derivatives.

The decreases in revenues and cost of sales, excluding the impact of derivatives, were due to a decrease in refined products prices and volumes due to the sizable reduction in demand for both gasoline and diesel products due to the COVID -19 pandemic.

There was also a large decrease in volumes due to the elimination of our sales in the Northeast and Southeast due to our non-compete clause with the purchaser of our TPSL business.

Refined Products Derivative Loss (Gain).

Our margin during the year ended March 31, 2021 included a loss of $0.9 million from our risk management activities due primarily to NYMEX future prices increasing on our short future positions.

Our margin during the year ended March 31, 2020 included a gain of $3.2 million from our risk management activities due primarily to unrealized gains on our open forward physical positions and decreases in NYMEX futures prices on our short future positions.

The increases in revenues and cost of sales, excluding the impact of derivatives, were due to an increase in refined products prices.

This was offset by a reduction in volumes sold due to tighter supply in the market.

In certain markets in which we compete, allocation of product from suppliers was reduced due to lower demand as a result of the COVID-19 pandemic.

We are continuing to work to increase those allocations as demand for refined products increases.

Refined Products Derivative Loss.

Our refined products margin during the year ended March 31, 2022 included a realized loss of $2.9 million and the year ended March 31, 2021 included a realized loss of $0.9 million from our risk management activities due primarily to NYMEX future prices increasing on our short future positions.

Refined Products product margins per gallon of refined products sold for the year ended March 31, 2022 increased from the year ended March 31, 2021 primarily due to supply being short during the three months ended December 31, 2021, as a result of extended refinery downtime in certain markets in which we compete, and being well positioned during the extreme volatility surrounding global events occurring in the three months ended March 31, 2022.

Propane Sales and Cost of Sales-Excluding Impact of Derivatives.

The increases in revenues and cost of sales-excluding impact of derivatives were due to increased commodity prices in the fourth quarter of the year ended March 31, 2021, as a result of winter storm Uri in February 2021.

These increases were partially offset by lower volumes as a result of lower commercial and industrial demand due to the COVID-19 pandemic.

Propane Derivative Loss .

Our cost of wholesale propane sales included $3.3 million of net unrealized gains on derivatives and $14.3 million of net realized losses on derivatives during the year ended March 31, 2021.

During the year ended March 31, 2020, our cost of wholesale propane sales included $1.5 million of net unrealized losses on derivatives and $2.0 million of net realized losses on derivatives.

Propane product margins per gallon of propane sold were higher during the year ended March 31, 2021 than during the year ended March 31, 2020 due primarily to inventory values aligning with reduced commodity prices at index markets as well as the extreme cold weather in February 2021.

The increases in revenues and cost of sales were due to higher commodity prices.

The increase in propane prices was the result of lower domestic inventories and a strong export market due to the increase in international prices.

This was partially offset by lower propane volumes sold driven by reduced

demand due to warmer than normal autumn temperatures, which resulted in lower product demand for crop drying, unusually warm weather during the early winter months and reduced volumes due to the loss of two producer services agreements.

Propane Derivative (Gain) Loss.

Our wholesale propane cost of sales included $2.0 million of net unrealized gains on derivatives and $18.5 million of net realized gains on derivatives during the year ended March 31, 2022.

During the year ended March 31, 2021, our cost of wholesale propane sales included $3.3 million of net unrealized gains on derivatives and $14.3 million of net realized losses on derivatives.

Propane product margins, excluding the impact of derivatives, decreased as a result of lower demand due to the warmer than normal winter season, along with increased competition in a number of markets where NGL purchases and sells propane.

Midwestern demand was down year-over-year due to lower product demand for crop drying and warmer fall and winter weather.

Our margin was also impacted by lower product allocation from certain suppliers and lower storage utilization due to decreased demand and the backwardated market structure.

Butane Sales and Cost of Sales-Excluding Impact of Derivatives.

The decreases in revenues and cost of sales-excluding impact of derivatives in butane were due primarily to lower product demand which decreased due to lower gasoline blending volumes and decreased export sales related to the COVID-19 pandemic.

Butane Derivative Loss (Gain) .

Our cost of butane sales during the year ended March 31, 2021 included $3.2 million of net unrealized losses on derivatives and $19.1 million of net realized losses on derivatives.

Our cost of butane sales included $0.5 million of net unrealized losses on derivatives and $8.8 million of net realized gains on derivatives during the year ended March 31, 2020.

Butane product margins per gallon of butane sold were lower during the year ended March 31, 2021 than during the year ended March 31, 2020 due primarily to the weaker domestic market demand due to COVID-19.

The increases in revenues and cost of sales were due primarily to higher commodity prices.

This was partially offset by a volume decrease due to a tight supply market as a result of decreased refinery runs and an increase in demand for exports.

Butane Derivative Loss.

Our cost of butane sales during the year ended March 31, 2022 included $1.0 million of net unrealized gains on derivatives and $19.7 million of net realized losses on derivatives.

Our cost of butane sales included $3.2 million of net unrealized losses on derivatives and $19.1 million of net realized losses on derivatives during the year ended March 31, 2021.

Butane product margins per gallon of butane sold were higher during year ended March 31, 2022 than during the year ended March 31, 2021 due primarily to a tight supply market, driven by an increase in demand for exports and an increase in blending demand, which are driving favorable sales differentials.

Other Products Sales and Cost of Sales-Excluding Impact of Derivatives.

The decreases in revenues and cost of sales - excluding the impact of derivatives, were due to lower commodity prices and lower demand due to the lockdowns related to the COVID-19 pandemic.

Other Products Derivative Gain .

Our cost of sales of other products during the year ended March 31, 2021 included $0.5 million of net unrealized gains on derivatives and $17.5 million of net realized gains on derivatives.

Our cost of sales of other products included $0.6 million of net unrealized losses on derivatives and $3.4 million of net realized gains on derivatives during the year ended March 31, 2020.

Other product sales product margins during the year ended March 31, 2021 decreased primarily due to softer product demand during the COVID-19 pandemic and associated economic slowdown.

In addition, the margin for the year ended March 31, 2020, included a biodiesel tax credit of $13.8 million.

The impact of the biodiesel tax credit for the year March 31, 2021 was approximately $0.4 million.

The increases in revenues and cost of sales, excluding the impact of derivatives, were due to higher commodity prices and increased demand for biodiesel.

This was partially offset by reduced natural gasoline volumes during the year ended March 31, 2022 as more production was being shipped via pipelines, reducing the availability for product to be shipped by railcars.

Other Products Derivatives Loss (Gain).

Our derivatives of other products included $15.8 million of net realized losses on derivatives and there are no unrealized gains or losses on derivatives during the year ended March 31, 2022.

Our derivatives of other products during the year ended March 31, 2021 included $0.5 million of net unrealized gains on derivatives and $6.6 million of net realized gains on derivatives.

Other product sales product margins during the year ended March 31, 2022 increased due to an increase in demand for biodiesel and biodiesel renewable identification number market prices, as well as securing favorable biodiesel supply contracts in the Midwest and transporting the product for sale in more favorable markets.

The increase was partially offset by a decline in margin for other natural gas liquids, as favorable supply contracts in the prior year and increased demand in certain markets during the prior year drove favorable sale differentials.

Less volatility in the market, for both supply and demand, led to tighter margins for these products during the current period.

Service Revenues.

This revenue includes storage, terminaling and transportation services income.

The decrease during the year ended March 31, 2021 was primarily to weaker demand as producers shut-in and curtailed production.

The decrease during the year ended March 31, 2022 was due to the disposition of Sawtooth in June 2021 as well as less throughput in certain of our propane and butane terminals.

Operating and General and Administrative Expenses.

Expenses decreased for the year ended March 31, 2021 due to lower volumes and services rendered as well as reduced costs with lower incentive compensation and restricted travel due to COVID-19.

The decrease was primarily due to the disposition of Sawtooth in June 2021 which was partially offset by increased travel as we came out of the pandemic.

Depreciation and Amortization Expense.

Expense for the year ended March 31, 2021 was higher due to the acceleration of depreciation expense prior to the sale of a terminal facility.

The decrease was primarily due to the disposition of Sawtooth and lower amortization expense due to certain intangible assets being fully amortized as of September 30, 2021.

Loss on Disposal or Impairment of Assets, Net.

During the year ended March 31, 2021, we recorded an impairment loss of approximately $3.3 million to the write down in value of a terminal we have ceased operating.

During the year ended March 31, 2020, we recorded an impairment of $7.7 million due to adjusting the cost basis of pipeline line fill to the market price of propane as of March 31, 2020.

During the year ended March 31, 2022, we recorded a net loss of $60.1 million related to the sale of Sawtooth (see Note 17 to our consolidated financial statements included in this Annual Report) and a net loss of $11.8 million related to the sale of another terminal during the three months ended September 30, 2021.

During the year ended March 31, 2021, we recorded an impairment loss of approximately $3.3 million due to the write down in value of a terminal we have ceased operating.

Corporate and Other

7 unchanged sentences

Loss — (561) 561

Operating expenses — 318 (318)

General and administrative expenses 41,491 47,520 (6,029)

Depreciation and amortization expense 6,959 5,062 1,897

Loss on disposal or impairment of assets, net 11,001 — 11,001

(Gain) loss on disposal or impairment of assets, net (50) 11,001 (11,051)

Total expenses 48,400 63,583 (15,183)

1 unchanged sentence

General and Administrative Expenses .

The decrease during the year ended March 31, 2021 was due primarily to lower equity-based compensation expense and acquisition expenses.

During the year ended March 31, 2021, equity-based compensation expense was $6.7 million, compared to $26.5 million during the year ended March 31, 2020.

During the year ended March 31, 2021, acquisition expenses were $1.7 million, compared to $15.6 million during the year ended March 31, 2020.

The driver behind the decrease in acquisition expenses was primarily due to expenses incurred in connection with our acquisitions of both Mesquite and Hillstone in the year ended March 31, 2020.

Loss on Disposal or Impairment of Assets, Net.

During the year ended March 31, 2021, we recorded a net loss of $11.0 million, which was primarily due to the write-off of a loan receivable related to the construction of a facility (see Note 18 to our consolidated financial statements included in this Annual Report for further discussion) and a loss from the write-off of installment payments made in connection with an option agreement to invest in a third party.

The decrease during the year ended March 31, 2022 was due primarily to lower compensation and legal expenses, offset by increased consulting fees.

Compensation expense decreased due to lower equity-based compensation, partially offset by increased incentive compensation during the current year.

Legal expense decreased due to certain claims being settled, in particular our claims related to the bankruptcy of Extraction.

(Gain) Loss on Disposal or Impairment of Assets, Net.

Equity in Earnings of Unconsolidated Entities

The increase of $0.6 million during the year ended March 31, 2021 was due primarily to higher earnings from certain membership interests acquired in November 2019 related to specific land and water services operations, partially offset by a higher loss from our interest in an aircraft company during the year ended March 31, 2021.

Equity in earnings of unconsolidated entities was $1.4 million during the year ended March 31, 2022, compared to $1.9 million during the year ended March 31, 2021.

The decrease of $0.5 million during the year ended March 31, 2022 was due primarily to lower earnings from certain membership interests related to specific land and water services operations.

Interest Expense

Interest expense includes interest charged on the revolving credit facilities, term loan credit facility, senior secured notes and senior unsecured notes, as well as amortization of debt issuance costs, letter of credit fees, interest on equipment financing notes, and accretion of interest on non-interest bearing debt obligations.

The increase of $17.6 million during the year ended March 31, 2021 was due to the issuance of the 2026 Senior Secured Notes, our entering into the bridge term loan facility in connection with the Mesquite acquisition in July 2019, which was replaced in June 2020 by the term credit agreement at a higher interest rate and increased debt issuance costs.

These increases were offset by repurchases of a portion of our senior unsecured notes to mature in 2023, 2025 and 2026.

The following table summarizes the components of our consolidated interest expense for the periods indicated:

Year Ended March 31,

2022 2021 Change

(in thousands)

Senior secured notes $ 153,750 $ 24,344 $ 129,406

Senior unsecured notes 87,766 96,711 (8,945)

Amortization of debt issuance costs 16,960 13,420 3,540

Revolving credit facility 10,077 46,500 (36,423)

Other 3,087 17,824 (14,737)

Total $ 271,640 $ 198,799 $ 72,841

The increase of $72.8 million during the year ended March 31, 2022 was primarily due to the issuance of the 7.5% senior secured notes due 2026 (“2026 Senior Secured Notes”) which resulted in us paying a higher interest rate on certain refinanced indebtedness.

This increase was partially offset by the termination of the term credit agreement as well as the repurchases of a portion of our senior unsecured notes to mature in 2023 and 2026 (see Note 7 to our consolidated financial statements included in this Annual Report).

Gain (Loss) on Early Extinguishment of Liabilities, Net

Gain on early extinguishment of liabilities, net was $1.8 million during the year ended March 31, 2022, compared to a loss on early extinguishment of liabilities, net of $16.7 million during the year ended March 31, 2021.

During the years ended March 31, 2022 and 2021, the net gain (loss) (inclusive of debt issuance costs written off) primarily relates to the early extinguishment of a portion of the outstanding senior unsecured notes, partially offset by a loss on the early extinguishment of the Sawtooth credit agreement.

See Note 7 to our consolidated financial statements included in this Annual Report for a further discussion.

(Loss) Gain on Early Extinguishment of Liabilities, Net

During the years ended March 31, 2021 and 2020, the net (loss) gain (inclusive of debt issuance costs written off) relates to the early extinguishment of a portion of the outstanding senior unsecured notes.

Other Income (Expense), Net

Other income, net was $2.3 million during the year ended March 31, 2022, compared to other expense, net of $36.5 million during the year ended March 31, 2021.

The decrease in other expense, net of $38.8 million during the year ended March 31, 2022 was due primarily to a $40.0 million fee paid to the holders of the 9.00% Class D Preferred Units (“Class D Preferred Units”) during the year ended March 31, 2021 to obtain their consent in order to complete the issuance of the 2026 Senior Secured Notes and the $500.0 million asset-based revolving credit facility (“ABL Facility”) (see Note 12 to our consolidated financial statements included in this Annual Report), partially offset by proceeds received from a litigation settlement during the year ended March 31, 2021.

Income Tax (Expense) Benefit

Income tax expense was $1.0 million during the year ended March 31, 2022, compared to an income tax benefit of $3.4 million during the year ended March 31, 2021.

See Note 2 to our consolidated financial statements included in this Annual Report for a further discussion.

Other (Expense) Income, Net

The increase in other (expense) income, net of $38.2 million during the year ended March 31, 2021 was due primarily to a $40.0 million fee paid to the holders of the Class D Preferred Units to obtain their consent in order to complete the issuance of the 2026 Senior Secured Notes and the ABL Facility (see Note 13 to our consolidated financial statements included in this Annual Report), partially offset by proceeds received from a litigation settlement during the year ended March 31, 2021.

Income Tax Benefit (Expense)

Income tax benefit was $3.4 million during the year ended March 31, 2021, compared to income tax expense of $0.3 million during the year ended March 31, 2020.

The increase in the income tax benefit during the year ended March 31, 2021 was primarily due to a full year of Hillstone operations during the year ended March 31, 2021 compared to five months of Hillstone operations during the year ended March 31, 2020.

See Note 2 to our consolidated financial statements included in this Annual Report for a further discussion of our income tax status.

Noncontrolling Interests

Noncontrolling interests represent the portion of certain consolidated subsidiaries that are owned by third parties.

The increase in noncontrolling interest income of $2.4 million during the year ended March 31, 2021 was due primarily to a lower loss from operations from certain water operations, income from operations from the Sawtooth Caverns, LLC (“Sawtooth”) joint venture and higher income from operations of certain assets we acquired in Mesquite acquisition in July 2019.

Noncontrolling interest income was $0.7 million during the year ended March 31, 2022, compared to $0.6 million during the year ended March 31, 2021.

The increase of less than $0.1 million during the year ended March 31, 2022 was due primarily to higher income from certain recycling operations, partially offset by a higher loss from operations of the Sawtooth joint venture primarily due to the sale of Sawtooth in June 2021 and lower income from certain water solutions operations.

Segment Operating Results for the Years Ended March 31, 2021 and 2020

7 unchanged sentences

Sale of recovered crude oil 28,599 59,445 (30,846)

Other service revenues 58,538 39,627 18,911

Recycled water 3,015 705 2,310

Other revenues 30,861 56,785 (25,924)

Total revenues 370,986 422,059 (51,073)

Cost of sales-excluding impact of derivatives 2,557 5,511 (2,954)

Derivative gain (39,381) (13,455) (25,926)

Derivative loss (gain) 7,065 (39,381) 46,446

Operating expenses 142,371 192,987 (50,616)

1 unchanged sentence

Depreciation and amortization expense 222,107 163,588 58,519

Loss (gain) on disposal or impairment of assets, net 255,285 (138,204) 393,489

Loss on disposal or impairment of assets, net 76,942 255,285 (178,343)

Revaluation of liabilities 6,261 9,194 (2,933)

Total expenses 463,706 595,123 (131,417)

Segment operating (loss) income $ (173,064) $ 210,525 $ (383,589)

Segment operating loss $ (92,720) $ (173,064) $ 80,344

Produced water processed (barrels per day)

4 unchanged sentences

Total 1,364,591 1,642,969 (278,378)

Solids processed (barrels per day) 5,697 6,957 (1,260)

Recycled water (barrels per day) 43,503 14,992 28,511

Total (barrels per day) 1,408,094 1,657,961 (249,867)

Skim oil sold (barrels per day) 1,957 3,397 (1,440)

5 unchanged sentences

Water Disposal Service Fee Revenues.

The increase was due primarily to an increase in the price we are receiving to dispose of a barrel of water and an increase in the volume of produced water processed at acquired (primarily Mesquite and Hillstone) and newly developed facilities, partially offset by produced water volume reductions as a result of the sale of our Bakken and South Pecos water disposal businesses during the fiscal year ended March 31, 2019.

The pipeline was successfully completed in October 2020 with a capacity of over 400,000 barrels per day and connects into our integrated Delaware Basin produced water pipeline infrastructure network.

These increases were partially offset by a decrease in the volume of other produced water processed resulting from lower crude oil prices, development activity and production volumes.

Recovered Crude Oil Revenues.

The decrease was due primarily to a decrease in the percentage of skim oil volumes recovered per produced water barrel processed, lower crude oil prices and lower skim oil volumes as a result of the sale of our Bakken and South Pecos water disposal businesses.

This decrease was partially offset by skim oil volumes recovered from assets acquired in the Mesquite and Hillstone acquisitions.

Other Service Revenues.

Other service revenues primarily include solids disposal revenues, water pipeline revenues, land surface use revenues and brackish non-potable water revenues.

The increase was due primarily to an increase in land surface use revenues and brackish non-potable water revenues in our New Mexico operations which began during the three months ended September 30, 2018 as well as brackish non-potable water revenues due to acquisitions and a new short-term agreement whereby we purchased brackish non-potable water and resold to a third party.

These increases were partially offset by lower water pipeline revenues and volumes due to certain operators recycling rather than disposing of the produced water and lower production activity from certain operators.

In addition, solids disposal revenues and volumes were lower due to closure of a facility from April to October due to the working over of the well and reduced operations at another facility.

The lower percentage of skim oil volumes recovered was due primarily to an increase in

produced water transported through pipelines (which contains less oil per barrel of produced water), and the addition of contract structures that allow producers to keep the skim oil recovered from produced water.

Recycled Water Revenues.

The increase was due primarily to the timing of our customers completions driven by an increase in drilling and completion activity primarily in the Delaware Basin.

Other Revenues.

The decrease was due primarily to reduced customer development activity and needs for these services resulting from the decline in crude oil prices.

Cost of Sales-Excluding Impact of Derivatives .

The increase was due primarily to a new short-term agreement whereby we purchased brackish non-potable water and resold to a third party as well as operational changes in the Eagle Ford Basin during the three months ended September 30, 2019 .

Derivative Gain.

Our cost of sales during the year ended March 31, 2020 included $29.9 million of net unrealized gains on derivatives and $9.5 million of net realized gains on derivatives.

The decrease was due primarily to lower purchasing and transportation costs related to our brackish non-potable water and crude oil sales .

Derivative Loss (Gain).

During the year ended March 31, 2021, we had $24.5 million of net unrealized losses on derivatives and $17.4 million of net realized gains on derivatives.

During the year ended March 31, 2020, we had $29.9 million of net unrealized gains on derivatives and $9.5 million of net realized gains on derivatives.

In June 2019, we settled derivative contracts that had scheduled settlement dates from April through December 2020 and recorded a gain of $1.9 million on those derivatives.

Our cost of sales during the year ended March 31, 2019 included $15.5 million of net unrealized gains on derivatives and $2.1 million of net realized losses on derivatives.

Operating and General and Administrative Expenses .

The increase was due primarily to the increase in the number of water disposal facilities and wells that we own and operate, both through acquisitions and development of new facilities, partially offset by the sale of our Bakken and South Pecos water disposal businesses during the fiscal year ended March 31, 2019.

Also contributing to the increase were acquisition expenses of $4.1 million related to the Hillstone acquisition during the year ended March 31, 2020.

During the year ended March 31, 2019, we incurred acquisition expenses of $3.5 million related to one of our ranch acquisitions.

In addition, acquisition expenses were lower by $4.1 million as we did not close on any acquisitions during the year ended March 31, 2021.

Depreciation and Amortization Expense .

The increase was due primarily to acquisitions and newly developed facilities, partially offset by the sale of our Bakken and South Pecos water disposal businesses during the year ended March 31, 2019.

Loss (Gain) on Disposal or Impairment of Assets, Net.

The increase was due primarily to Mesquite and Hillstone acquisitions completed in the prior year and newly developed facilities and infrastructure.

Loss on Disposal or Impairment of Assets, Net.

During the year ended March 31, 2021, we recorded:

• an impairment charge of $72.4 million to write down the value of an asset group and certain intangible assets due to a decline in producer activity, resulting in lower disposal volumes (see Note 4 and Note 6 to our consolidated financial statements included in this Annual Report);

• an impairment charge of $11.9 million to write down the value of certain inactive or underutilized saltwater disposal facilities (see Note 4 to our consolidated financial statements included in this Annual Report);

• a net loss of $6.7 million related to write-down or write off of certain assets, including facilities damaged by lightning strikes and abandoned projects, and the sale of certain other miscellaneous assets (see Note 4 to our consolidated financial statements included in this Annual Report);

• a gain of $14.0 million related to the sale of certain permits, land and a saltwater disposal facility (see Note 17 to our consolidated financial statements included in this Annual Report).

During the year ended March 31, 2020, we recorded:

• a goodwill impairment charge of $250.0 million related to the current macroeconomic conditions including the collapse of oil prices driven by both the decrease in demand caused by the COVID-19 pandemic and excess supply, as well as changing market conditions and expected lower crude oil production in certain regions, resulting in expected decreases in future cash flows for certain of our assets (see Note 5 to our consolidated financial statements included in this Annual Report);

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• a net loss of $9.2 million on the disposals of certain other assets;

• a gain of $14.5 million for the sale of certain water permits;

• a gain of $14.5 million for the sale of certain water permits (see Note 17 to our consolidated financial statements included in this Annual Report);

• a gain of $1.0 million for cash received related to a loan receivable that was previously written off.

During the year ended March 31, 2019, we completed the sales of our South Pecos and Bakken water disposal businesses and recorded gains on disposal of $107.9 million and $33.4 million, respectively (see Note 18 to our consolidated financial statements included in this Annual Report for a further discussion of both transactions).

In addition, we recorded a net loss of $3.1 million on the disposals of certain other assets during the year ended March 31, 2019.

Revaluation of Liabilities.

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During the year ended March 31, 2020, the thresholds for the volume of produced water processed were surpassed, thus triggering our obligation to pay the seller.

See Note 2 to our consolidated financial statements included in this Annual Report for a further discussion of the contingent consideration liability.

During the years ended March 31, 2020 and 2019, there was a reduction in expense for the valuation of our contingent consideration liabilities related to royalty agreements acquired as part of certain business combinations due primarily to lower

expected production from new customers and an increase in facilities due to acquisitions, resulting in a decrease to the expected future royalty payment.

Crude Oil Logistics

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Cost of sales-excluding impact of derivatives 1,473,330 2,347,863 (874,533)

Derivative gain (35,736) (1,085) (34,651)

Derivative loss (gain) 49,314 (35,736) 85,050

Operating expenses 56,918 61,708 (4,790)

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Depreciation and amortization expense 60,874 70,759 (9,885)

(Gain) loss on disposal or impairment of assets, net (1,144) 107,424 (108,568)

Loss (gain) on disposal or impairment of assets, net 384,143 (1,144) 385,287

Total expenses 2,032,617 2,450,173 (417,556)

Segment operating income (loss) $ 117,768 $ (7,379) $ 125,147

Segment operating (loss) income $ (304,330) $ 117,768 $ (422,098)

Crude oil sold (barrels) 38,349 42,799 (4,450)

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Crude Oil Transportation and Other Revenues.

The increase was partially due to our Grand Mesa Pipeline, which increased revenues by $7.3 million during the year ended March 31, 2020, compared to the year ended March 31, 2019, primarily due to increased production growth in the DJ Basin.

During the year ended March 31, 2020, approximately 45.9 million barrels of crude were transported on the Grand Mesa Pipeline, which averaged approximately 131,000 financial barrels per day.

In addition, we signed a new crude marketing contract in July 2019 which increased revenues by $7.7 million in the current year when compared to the prior year.

This was partially offset by a reduction in railcar sublease revenue.

Also, crude transportation increased $5.8 million due to increased marine transportation activity.

The decrease was primarily due to our Grand Mesa Pipeline, which decreased revenues by $32.8 million during the year ended March 31, 2021, compared to the year ended March 31, 2020.

external parties) primarily due to the court approved rejection of the Extraction transportation agreement (see Note 17 to our consolidated financial statements included in this Annual Report).

Cost of Sales-Excluding Impact of Derivatives.

The decrease was due primarily to a decrease in crude oil prices and volumes during the year ended March 31, 2020, compared to the year ended March 31, 2019.

Derivative Gain .

The decrease was due to a decrease in crude oil prices and reduced volumes during the year ended March 31, 2021, compared to the year ended March 31, 2020.

Derivative Loss (Gain) .

Our cost of sales during the year ended March 31, 2021 included $25.9 million of net realized losses on derivatives and $23.4 million of net unrealized losses on derivatives.

The losses are due to a very volatile pricing market during the year ended March 31, 2021.

Our cost of sales during the year ended March 31, 2020 included $24.4 million of net realized gains on derivatives and $11.3 million of net unrealized gains on derivatives.

In March 2020, we closed and realized derivative contracts that had scheduled settlement dates from May through June 2020 which accounted for $16.7 million of the realized

Our cost of sales during the year ended March 31, 2019 included $0.6 million of net realized losses on derivatives and $1.7 million of net unrealized gains on derivatives.

In March 2020, we closed realized derivative contracts that had scheduled settlement dates from May 2020 through June 2020, which accounted for $16.7 million of the realized gains for the prior year.

Crude Oil Product Margin.

Operating and General and Administrative Expenses .

The increase was due primarily to utilities related to the higher volumes transported on the Grand Mesa Pipeline.

Expenses decreased compared to the prior year due to a decrease of utilities, as lower volumes were being shipped on the Grand Mesa Pipeline and other cost cutting measures which were partially offset by the write off of a $5.7 million receivable from Extraction (see Note 17 to our consolidated financial statements included in this Annual Report).

Depreciation and Amortization Expense.

The decrease was due to the retirement of certain assets and other assets being fully depreciated or amortized during the year ended March 31, 2020.

(Gain) Loss on Disposal or Impairment of Assets, Net .

Loss (Gain) on Disposal or Impairment of Assets, Net .

During the year ended March 31, 2021, we recorded a net loss of $145.8 million for the impairment of an intangible asset, related to a rejected transportation agreement with Extraction (see Note 17 to our consolidated financial statements included in this Annual Report), and a net loss of $237.8 million for the impairment of goodwill (see Note 5 to our consolidated financial statements included in this Annual Report).

During the year ended March 31, 2020, we recorded a net gain of $1.1 million related to the disposal of certain assets.

During the year ended March 31, 2019, we recorded a net loss of $107.4 million, which included a loss of $105.0 million on our transaction with a third party in which they agreed to be fully responsible for our future minimum volume commitment in exchange for $67.7 million of deficiency credits on a contract with a crude oil pipeline operator and $35.3 million in cash (see Note 13 to our consolidated financial statements included in this Annual Report).

The loss also includes additional costs related to this transaction of $2.0 million.

In addition, we recorded a loss of $1.3 million related to the sale of two terminals during the year ended March 31, 2019.

Liquids Logistics

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Cost of sales-excluding impact of derivatives (3) 1,108,493 2,367,850 (1,259,357)

Derivative (gain) loss (3,225) 791 (4,016)

Derivative loss (gain) 930 (3,225) 4,155

Product margin 14,664 30,038 (15,374)

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Cost of sales-excluding impact of derivatives 469,394 486,777 (17,383)

Derivative gain (8,288) (1,264) (7,024)

Derivative loss (gain) 22,353 (8,288) 30,641

Product margin 26,110 85,527 (59,417)

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(1) Revenues include $6.1 million and $5.0 million of intersegment sales during the years ended March 31, 2021 and 2020, respectively, that are eliminated in our consolidated statements of operations.

(2) Revenues include $10.3 million and $64.8 million of intersegment sales during the years ended March 31, 2020 and 2019, respectively, between certain businesses within the Liquids Logistics segment and TPSL, Mid-Con and Gas Blending that are eliminated in our consolidated statements of operations.

(3) Cost of sales include $8.2 million and $62.9 million of intersegment cost of sales during the years ended March 31, 2020 and 2019, respectively, between certain businesses within the Liquids Logistics segment and TPSL, Mid-Con and Gas Blending that are eliminated in our consolidated statements of operations.

(4) Information is presented as of March 31, 2021 and March 31, 2020, respectively.

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Refined Products Revenues and Cost of Sales-Excluding Impact of Derivatives.

The decreases in revenues and cost of sales-excluding impact of derivatives were due to a decrease in refined products prices, offset by increased volumes.

The decrease in prices was due primarily to supply and demand for refined fuels at our wholesale locations.

The increased volumes were due primarily to the continued demand for motor fuels.

Refined Products Derivative (Gain) Loss.

There was also a large decrease in volumes due to the elimination of our sales in the Northeast and Southeast due to our non-compete clause with the purchaser of our TPSL business.

Refined Products Derivative Loss (Gain).

Our margin during the year ended March 31, 2021 included a loss of $0.9 million from our risk management activities due primarily to NYMEX future prices increasing on our short future positions.

Our margin during the year ended March 31, 2019 included a loss of $0.8 million from our risk management activities due primarily to NYMEX futures prices increasing on our short future positions.

Propane Sales and Cost of Sales-Excluding Impact of Derivatives.

The decreases in revenues and cost of sales-excluding impact of derivatives were due primarily to lower commodity prices which was partially offset by an increase in volumes sold.

These increases were partially offset by lower volumes as a result of lower commercial and industrial demand due to the COVID-19 pandemic.

Propane Derivative Loss .

Our cost of wholesale propane sales included $1.5 million of net unrealized losses on derivatives and $2.0 million of net realized losses on derivatives during the year ended March 31, 2020.

Our cost of wholesale propane sales included $3.3 million of net unrealized gains on derivatives and $14.3 million of net realized losses on derivatives during the year ended March 31, 2021.

During the year ended March 31, 2020, our cost of wholesale propane sales included $1.5 million of net unrealized losses on derivatives and $2.0 million of net realized losses on derivatives.

Propane product margins per gallon of propane sold were higher during the year ended March 31, 2020 than during the year ended March 31, 2019.

Propane product margins increased due to inventory values aligning with reduced commodity prices at index markets.

Meanwhile, regional spot prices saw significant increases in the fall due to supply constraints and strong crop drying demand.

Butane Sales and Cost of Sales-Excluding Impact of Derivatives.

The decreases in revenues and cost of sales-excluding impact of derivatives were due primarily to lower commodity prices.

Volumes increased due to strong demand from domestic and international markets.

Butane Derivative Gain .

Our cost of butane sales during the year ended March 31, 2020 included $0.5 million of net unrealized losses on derivatives and $8.8 million of net realized gains on derivatives.

Our cost of butane sales included $1.5 million of net unrealized gains on derivatives and $0.3 million of net realized losses on derivatives during the year ended March 31, 2019.

Butane product margins per gallon of butane sold were higher during the year ended March 31, 2020 than during the year ended March 31, 2019 due primarily to stronger domestic markets and international demand.

Butane Derivative Loss (Gain) .

Our cost of butane sales during the year ended March 31, 2021 included $3.2 million of net unrealized losses on derivatives and $19.1 million of net realized losses on derivatives.

Our cost of butane sales included $0.5 million of net unrealized losses on derivatives and $8.8 million of net realized gains on derivatives during the year ended March 31, 2020.

Other Products Sales and Cost of Sales-Excluding Impact of Derivatives.

The decreases in revenues and cost of sales- excluding the impact of derivatives, were due to lower commodity prices, which were partially offset by an increase in renewable prices.

The increase in prices was due primarily to the sale of more ethanol renewable identification numbers during the year ended March 31, 2020, compared to the year ended March 31, 2019.

The decreases in revenues and cost of sales - excluding the impact of derivatives, were due to lower commodity prices and lower demand due to the lockdowns related to the COVID-19 pandemic.

Other Products Derivative Gain .

Our cost of sales of other products during the year ended March 31, 2020 included $0.6 million of net unrealized losses on derivatives and $3.4 million of net realized gains on derivatives.

Our cost of sales of other products included less than $0.1 million of net unrealized gains on derivatives and $1.6 million of net realized gains on derivatives during the year ended March 31, 2019.

Other product sales product margins during the year ended March 31, 2020 increased primarily due to the impact of the biodiesel tax credit being reinstated in December 2019 for calendar years 2018 and 2019.

The total amount of the biodiesel tax credit we recorded as a credit to cost of sales in continuing operations was $13.8 million.

The biodiesel tax credit that was reinstated in December 2019 is effective from January 1, 2018 through December 31, 2022.

Our cost of sales of other products during the year ended March 31, 2021 included $0.5 million of net unrealized gains on derivatives and $6.6 million of net realized gains on derivatives.

Our cost of sales of other products included $0.6 million of net unrealized losses on derivatives and $3.4 million of net realized gains on derivatives during the year ended March 31, 2020.

Other product sales product margins during the year ended March 31, 2021 decreased primarily due to softer product demand during the COVID-19 pandemic and associated economic slowdown.

In addition, the margin for the year ended March 31, 2020, included a biodiesel tax credit of $13.8 million.

The impact of the biodiesel tax credit for the year March 31, 2021 was approximately $0.4 million.

Service Revenues.

This revenue includes storage, terminaling and transportation services income.

The increase during the year ended March 31, 2020 was primarily related to the addition of new terminals in the northeast from the March 2019 acquisition.

The decrease during the year ended March 31, 2021 was primarily to weaker demand as producers shut-in and curtailed production.

Operating and General and Administrative Expenses.

Expenses were higher due to the addition of the new terminals in the northeast from the March 2019 acquisition.

Also, the increase was due to lower environmental expense during the year ended March 31, 2019, as a result of an insurance recovery we received related to a historical environmental indemnification agreement.

Expenses decreased for the year ended March 31, 2021 due to lower volumes and services rendered as well as reduced costs with lower incentive compensation and restricted travel due to COVID-19.

Depreciation and Amortization Expense.

Expense for the year was higher due to the addition of the new terminals in the northeast from the March 2019 acquisition.

Expense for the year ended March 31, 2021 was higher due to the acceleration of depreciation expense prior to the sale of a terminal facility.

Loss on Disposal or Impairment of Assets, Net.

During the year ended March 31, 2020, we recorded an impairment of $7.7 million due to adjusting the cost basis of pipeline line fill to the market price of propane as of March 31, 2020.

During the year ended March 31, 2019, we recorded a goodwill impairment charge of $66.2 million within our natural gas liquids salt cavern storage reporting unit due to the decreased demand for natural gas liquid storage and resulting decline in revenues and earnings as compared to actual and projected results of prior and future periods (see Note 6 to our consolidated financial statements included in this Annual Report).

Also, during the year ended March 31, 2019, we recorded a gain of $3.0 million on the sale of our approximately 20% interest in E Energy Adams, LLC (see Note 18 to our consolidated financial statements included in this Annual Report).

During the year ended March 31, 2021, we recorded an impairment loss of approximately $3.3 million to the write down in value of a terminal we have ceased operating.

During the year ended March 31, 2020, we recorded an impairment of $7.7 million due to adjusting the cost basis of pipeline linefill to the market price of propane as of March 31, 2020.

Corporate and Other

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General and Administrative Expenses.

The increase during the year ended March 31, 2020 was due primarily to higher acquisition expenses.

The decrease during the year ended March 31, 2021 was due primarily to lower equity-based compensation expense and acquisition expenses.

During the year ended March 31, 2021, equity-based compensation expense was $6.7 million, compared to $26.5 million during the year ended March 31, 2020.

During the year ended March 31, 2021, acquisition expenses were $1.7 million, compared to $15.6 million during the year ended March 31, 2020.

The driver behind the increase in acquisition expenses was primarily due to expenses incurred in connection with our acquisitions of both Mesquite and Hillstone.

In addition, incentive compensation expense for the year ended March 31, 2020 was $7.1 million, compared to $2.3 million during the year ended March 31, 2019.

These increases were partially offset by a decrease in equity-based compensation expense.

The largest driver behind the decrease in equity-based compensation expense was the cancellation of our performance awards during the year ended March 31, 2019.

This resulted in a $5.0 million decrease in expense in comparing the year ended March 31, 2020 to the year ended March 31, 2019.

The driver behind the decrease in acquisition expenses was primarily due to expenses incurred in connection with our acquisitions of both Mesquite and Hillstone in the year ended March 31, 2020.

Loss on Disposal or Impairment of Assets, Net.

During the year ended March 31, 2019, we sold our 50% interest in Victory Propane, LLC and as consideration we received a promissory note from Victory Propane, LLC.

We discounted the promissory note to its net present value and recorded a loss of $0.9 million (see Note 13 to our consolidated financial statements included in this Annual Report).

During the year ended March 31, 2021, we recorded a net loss of $11.0 million, which was primarily due to the write-off of a loan receivable made to a third party for the construction of a natural gas liquids loading/unloading facility (see Note 17 to our consolidated financial statements included in this Annual Report ) and a loss from the write-off of installment payments made in connection with an option agreement to invest in a third party.

Equity in Earnings of Unconsolidated Entities

The decrease of $1.2 million during the year ended March 31, 2020 was due primarily to lower earnings from our 50% interest in a water services company that we acquired in August 2018, a loss from our 50% interest in an aircraft company during the year ended March 31, 2020, the sale of our investment in an unincorporated joint venture on February 28, 2019 related to the sale of our South Pecos water disposal business and the sale of our investment in E Energy Adams, LLC on May 3, 2018, partially offset by the acquisition of certain membership interests in November 2019 related to specific land and water services operations.

Equity in earnings of unconsolidated entities was $1.9 million during the year ended March 31, 2021, compared to $1.3 million during the year ended March 31, 2020.

Interest Expense

Interest expense includes interest charged on the revolving credit facilities, term loan credit facility and senior unsecured notes, as well as amortization of debt issuance costs, letter of credit fees, interest on equipment financing notes, and accretion of interest on non-interest bearing debt obligations.

The increase of $16.5 million during the year ended March 31, 2020 was due to the issuance of the 2026 Notes, our entering into the term credit agreement in connection with the Mesquite acquisition and higher than average outstanding balances on our Revolving Credit Facility.

These increases were offset by the redemption of our senior unsecured notes that were scheduled to mature in 2019 and 2021 during our prior fiscal year.

See Note 8 to our consolidated financial statements included in this Annual Report for a further discussion.

Gain (Loss) on Early Extinguishment of Liabilities, Net

During the year ended March 31, 2020, the net gain (inclusive of debt issuance costs written off) relates to the early extinguishment of a portion of the outstanding 6.125% Senior Unsecured Notes Due 2025 (“2025 Notes”).

During the year ended March 31, 2019, the net loss (inclusive of debt issuance costs written off) relates to the early extinguishment of a portion of the outstanding senior unsecured notes and the redemption of the 5.125% Senior Unsecured Notes Due 2019 (“2019 Notes”) and 6.875% Senior Unsecured Notes Due 2021 (“2021 Notes”).

See Note 8 to our consolidated financial statements included in this Annual Report for a further discussion.

Other Income (Expense), Net

The following table summarizes the components of other income (expense), net for the periods indicated:

The following table summarizes the components of our consolidated interest expense for the periods indicated:

Year Ended March 31,

2021 2020 Change

(in thousands)

Interest income (1) $ 1,517 $ 4,726

Gavilon legal matter settlement (2) — (34,788)

Senior unsecured notes $ 96,711 $ 102,289 $ (5,578)

Revolving credit facility 46,500 57,470 (10,970)

Senior secured notes 24,344 — 24,344

Amortization of debt issuance costs 13,420 10,901 2,519

Other 17,824 10,524 7,300

Other income (expense), net $ 1,684 $ (30,418)

(1) Relates primarily to a loan receivable associated with our interest in the construction of a natural gas liquids loading/unloading facility that is utilized by a third party.

The third party filed for Chapter 11 bankruptcy protection during the three months ended September 30, 2019 (see Note 18 to our consolidated financial statements included in this Annual Report for a further discussion).

Also includes a loan receivable with a former related party (see Note 2 to our consolidated financial statements included in this Annual Report for a further discussion).

(2) Represents the accrual for the estimated cost of the settlement of the Gavilon legal matter (see Note 9 to our consolidated financial statements included in this Annual Report for a further discussion).

(3) During the year ended March 31, 2019, this relates primarily to unrealized losses on marketable securities.

Income Tax Expense

Income tax expense was $0.3 million during the year ended March 31, 2020, compared to income tax expense of $1.2 million during the year ended March 31, 2019.

See Note 2 to our consolidated financial statements included in this Annual Report for a further discussion of our income tax status.

Total $ 198,799 $ 181,184 $ 17,615

The increase of $17.6 million during the year ended March 31, 2021 was due to the issuance of the 2026 Senior Secured Notes.

This increase was offset by repurchases of a portion of our senior unsecured notes to mature in 2023, 2025 and 2026 (see Note 7 to our consolidated financial statements included in this Annual Report).

(Loss) Gain on Early Extinguishment of Liabilities, Net

Loss on early extinguishment of liabilities, net was $16.7 million during the year ended March 31, 2021, compared to a gain on early extinguishment of liabilities, net of $1.3 million during the year ended March 31, 2020.

See Note 7 to our consolidated financial statements included in this Annual Report for a further discussion.

Other (Expense) Income, Net

Other expense, net was $36.5 million during the year ended March 31, 2021, compared to other income, net of $1.7 million during the year ended March 31, 2020.

The increase in other expense, net of $38.2 million during the year ended March 31, 2021 was due primarily to a $40.0 million fee paid to the holders of the Class D Preferred Units to obtain their consent in order to complete the issuance of the 2026 Senior Secured Notes and the ABL Facility (see Note 12 to our consolidated financial statements included in this Annual Report), partially offset by proceeds received from a litigation settlement during the year ended March 31, 2021.

Income Tax Benefit (Expense)

Income tax benefit was $3.4 million during the year ended March 31, 2021, compared to income tax expense of $0.3 million during the year ended March 31, 2020.

See Note 2 to our consolidated financial statements included in this Annual Report for a further discussion.

Noncontrolling Interests

The decrease in the noncontrolling interest loss of $18.9 million during the year ended March 31, 2020 was due primarily to a smaller loss from operations of the Sawtooth joint venture during the year ended March 31, 2020.

Noncontrolling interest income was $0.6 million during the year ended March 31, 2021, compared to a noncontrolling interest loss of $1.8 million during the year ended March 31, 2020.

The increase in noncontrolling interest income of $2.4 million during the year ended March 31, 2021 was due primarily to a lower loss from operations from certain water operations, income from operations from the Sawtooth joint venture and higher income from operations of certain assets we acquired in Mesquite acquisition in July 2019.

Non-GAAP Financial Measures

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We also include in Adjusted EBITDA certain inventory valuation adjustments related to the TPSL, Mid-Con, and Gas Blending businesses, which are included in discontinued operations, and certain refined products businesses within our Liquids Logistics segment, as discussed below.

EBITDA and Adjusted EBITDA should not be considered alternatives to net (loss) income, loss from continuing operations before income taxes, cash flows from operating activities, or any other measure of financial performance calculated in accordance with GAAP, as those items are used to measure operating performance, liquidity or the ability to service debt obligations.

We believe that

EBITDA provides additional information to investors for evaluating our ability to make quarterly distributions to our unitholders and is presented solely as a supplemental measure.

EBITDA and Adjusted EBITDA should not be considered alternatives to net loss, loss from continuing operations before income taxes, cash flows from operating activities, or any other measure of financial performance calculated in accordance with GAAP, as those items are used to measure operating performance, liquidity or the ability to service debt obligations.

We believe that EBITDA provides additional information to investors for evaluating our ability to make quarterly distributions to our unitholders and is presented solely as a supplemental measure.

We believe that Adjusted EBITDA provides additional information to investors for evaluating our financial performance without regard to our financing methods, capital structure and historical cost basis.

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We include this in Adjusted EBITDA because the unrealized gains and losses associated with derivative contracts associated with the inventory of this segment, which are intended primarily to hedge inventory holding risk and are included in net income, also affect Adjusted EBITDA.

The following table reconciles net (loss) income to EBITDA and Adjusted EBITDA for the periods indicated:

In our Crude Oil Logistics segment, we purchase certain crude oil barrels using the West Texas Intermediate (“WTI”) calendar month average (“CMA”) price and sell the crude oil barrels using the WTI CMA price plus the Argus CMA Differential Roll Component (“CMA Differential Roll”) per our contracts.

To eliminate the volatility of the CMA Differential Roll, we entered into derivative instrument positions in January 2021 to secure a margin of approximately $0.20 per barrel on 1.5 million barrels per month from May 2021 through December 2023.

Due to the nature of these positions, the cash flow and earnings recognized on a GAAP basis will differ from period to period depending on the current crude oil price and future estimated crude oil price which are valued utilizing third-party market quoted prices.

We are recognizing in Adjusted EBITDA the gains and losses from the derivative instrument positions entered into in January 2021 to properly align with the physical margin we are hedging each month through the term of this transaction.

This representation aligns with management’s evaluation of the transaction.

The following table reconciles net loss to EBITDA and Adjusted EBITDA for the periods indicated:

Year Ended March 31,

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(in thousands)

Net (loss) income $ (639,187) $ (398,780) $ 339,395

Net loss $ (184,101) $ (639,187) $ (398,780)

Net (income) loss attributable to noncontrolling interests (655) (632) 1,773

Net loss attributable to redeemable noncontrolling interests — — 446

Net (loss) income attributable to NGL Energy Partners LP (639,819) (397,007) 360,047

Net loss attributable to NGL Energy Partners LP (184,756) (639,819) (397,007)

Interest expense 271,689 198,823 181,357

Income tax (benefit) expense (3,444) 365 2,222

Income tax expense (benefit) 971 (3,444) 365

Depreciation and amortization 287,943 314,476 265,147

EBITDA 375,847 (129,964) 49,862

Net unrealized losses (gains) on derivatives 47,366 (38,557) (17,296)

Net unrealized (gains) losses on derivatives (14,977) 47,366 (38,557)

CMA Differential Roll net losses (gains) (1) 67,738 — —

Inventory valuation adjustment (2) 8,409 1,224 (29,676)

Lower of cost or net realizable value adjustments 10,862 (30,102) 31,202

Loss (gain) on disposal or impairment of assets, net 476,601 464,483 (393,554)

Loss (gain) on early extinguishment of liabilities, net 16,692 (1,341) 12,340

Loss on disposal or impairment of assets, net 94,059 476,601 464,483

(Gain) loss on early extinguishment of liabilities, net (1,851) 16,692 (1,341)

Equity-based compensation expense (3) (1,052) 6,727 26,510

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Class D Preferred Unitholder consent fee (6) — 40,000 —

Gavilon legal matter settlement (6) — — 34,788

Other (7) 9,909 11,135 15,788

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Adjusted EBITDA - Continuing Operations $ 542,516 $ 448,272 $ 589,457

(1) Adjustment to align, within Adjusted EBITDA, the net gains and losses of the Partnership’s CMA Differential Roll derivative instruments positions with the physical margin being hedged.

See “Non-GAAP Financial Measures” section above for a further discussion.

(2) Amount reflects the difference between the market value of the inventory at the balance sheet date and its cost, adjusted for the impact of seasonal market movements related to our base inventory and the related hedge.

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Amounts reported in the table above include expense accruals for bonuses expected to be paid in common units, whereas the amounts reported in Note 9 to our consolidated financial statements only include expenses associated with equity-based awards that have been formally granted.

(3) Amounts represent expenses we incurred related to legal and advisory costs associated with acquisitions, including Mesquite and Hillstone, along with amounts accrued related to the LCT Capital, LLC legal matter (see Note 9 to our consolidated financial statements included in this Annual Report).

(4) Amounts represent expenses we incurred related to legal and advisory costs associated with acquisitions, including Mesquite and Hillstone.

(5) Amounts for the years ended March 31, 2022 and 2021 represent the non-cash valuation adjustment of contingent consideration liabilities, offset by the cash payments, related to royalty agreements acquired as part of acquisitions in our Water Solutions segment.

Amount for the year ended March 31, 2020 represents the non-cash valuation adjustment of our contingent consideration liability issued by us as part of our acquisition of Mesquite (see Note 2 to our consolidated financial statements included in this Annual Report), partially offset by the non-cash valuation adjustment of contingent consideration liabilities, offset by the cash payments, related to royalty agreements acquired as part of acquisitions in our Water Solutions segment.

Amount for the year ended March 31, 2020 represents the non-cash valuation adjustment of our contingent consideration liability issued by us as part of our acquisition of Mesquite, partially offset by the non-cash valuation adjustment of contingent consideration liabilities, offset by the cash payments, related to royalty agreements acquired as part of acquisitions in our Water Solutions segment.

(6) Represents the fee paid to the holders of the Class D Preferred Units to obtain their consent in order to complete the issuance of the 2026 Senior Secured Notes and the ABL Facility (see Note 12 to our consolidated financial statements included in this Annual Report).

(6) Represents the accrual for the estimated cost of the settlement of the Gavilon legal matter (see Note 9 to our consolidated financial statements included in this Annual Report).

We have excluded this amount from Adjusted EBITDA as it relates to transactions that occurred prior to our acquisition of Gavilon LLC in December 2013.

(7) Amounts for the years ended March 31, 2022, 2021 and 2020 represent non-cash operating expenses related to our Grand Mesa Pipeline, unrealized losses on marketable securities and accretion expense for asset retirement obligations.

(8) Amounts include the operations of TPSL, Gas Blending, Mid-Con and our former Retail Propane segment.

(8) Amounts include the operations of TPSL, Gas Blending and Mid-Con.

The following tables reconcile depreciation and amortization amounts per the EBITDA table above to depreciation and amortization amounts reported in our consolidated statements of operations and consolidated statements of cash flows for the periods indicated:

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Year Ended March 31,

2021 2020 2019

(in thousands)

Income tax (benefit) expense $ (53) $ 20

Net unrealized losses on derivatives $ — $ — $ 78

Inventory valuation adjustment $ 27 $ (27,526)

Lower of cost or net realizable value adjustments $ (27) $ (991)

Loss (gain) on disposal or impairment of assets, net $ 1,174 $ 203,990 $ (408,964)

Loss on disposal or impairment of assets, net $ 1,174 $ 203,990

The following tables reconcile operating income (loss) to Adjusted EBITDA by segment for the periods indicated.

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Logistics Liquids Logistics Corporate

Other Continuing Operations Discontinued Operations (TPSL, Mid-Con, Gas Blending) Consolidated

Other Consolidated

(in thousands)

Operating (loss) income $ (92,720) $ (304,330) $ 70,441 $ (64,144) $ (390,753) $ — $ (390,753)

Operating income (loss) $ 94,851 $ 45,033 $ (8,441) $ (48,400) $ 83,043

Depreciation and amortization 214,558 48,489 18,714 6,959 288,720

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Net unrealized losses (gains) on derivatives 11,652 (23,664) (2,965) — (14,977)

CMA Differential Roll net losses (gains) — 67,738 — — 67,738

Inventory valuation adjustment — — 8,409 — 8,409

Lower of cost or net realizable value adjustments — 2,235 8,627 — 10,862

Loss on disposal or impairment of assets, net 76,942 384,143 3,350 11,001 475,436 — 475,436

Loss (gain) on disposal or impairment of assets, net 25,598 (3,101) 71,807 (50) 94,254

Equity-based compensation expense — — — (1,052) (1,052)

Acquisition expense 4 — — 63 67

Other income (expense), net 266 1,565 1,301 (39,635) (36,503) — (36,503)

Other income, net 718 353 711 472 2,254

Adjusted EBITDA attributable to unconsolidated entities 2,363 — 14 (145) 2,232

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Revaluation of liabilities (6,495) — — — (6,495)

Class D Preferred Unitholder consent fee — — — 40,000 40,000 — 40,000

Intersegment transactions (1)

— — (27) — (27) — (27)

Other 921 9,064 (65) — 9,920

Discontinued operations — — — — — (621) (621)

Adjusted EBITDA $ 341,958 $ 146,147 $ 96,564 $ (42,153) $ 542,516

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Amortization recorded to cost of sales — — 307 — 307 — 307

Net unrealized (gains) losses on derivatives (29,861) (11,315) 2,619 — (38,557) — (38,557)

Net unrealized losses (gains) on derivatives 24,500 23,432 (566) — 47,366 — 47,366

Inventory valuation adjustment — — 1,197 — 1,197 — 1,197

Lower of cost or net realizable value adjustments — (29,458) (617) — (30,075) — (30,075)

Loss (gain) on disposal or impairment of assets, net 255,285 (1,144) 7,645 — 261,786 — 261,786

Loss on disposal or impairment of assets, net 76,942 384,143 3,350 11,001 475,436 — 475,436

Equity-based compensation expense — — — 6,727 6,727 — 6,727

Acquisition expense 27 — — 1,684 1,711 — 1,711

Other (expense) income, net (448) 717 21 1,394 1,684 — 1,684

Other income (expense), net 266 1,565 1,301 (39,635) (36,503) — (36,503)

Adjusted EBITDA attributable to unconsolidated entities 3,019 — (3) (252) 2,764 — 2,764

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Revaluation of liabilities 6,261 — — — 6,261 — 6,261

Class D Preferred Unitholder consent fee — — — 40,000 40,000 — 40,000

Intersegment transactions (1) — — (27) — (27) — (27)

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Year Ended March 31, 2020

Discontinued Operations

Solutions Crude Oil

Logistics Liquids Logistics Corporate

Other Continuing Operations TPSL, Mid-Con, Gas Blending Retail Propane Consolidated

Other Continuing Operations Discontinued Operations (TPSL, Mid-Con, Gas Blending) Consolidated

(in thousands)

Operating income (loss) $ 210,525 $ (7,379) $ 9,288 $ (85,706) $ 126,728 $ — $ — $ 126,728

Operating (loss) income $ (173,064) $ 117,768 $ 142,411 $ (90,447) $ (3,332) $ — $ (3,332)

Depreciation and amortization 163,588 70,759 27,930 3,035 265,312 — 265,312

Amortization recorded to cost of sales — — 349 — 349 — 349

Net unrealized gains on derivatives (15,521) (1,725) (129) — (17,375) — — (17,375)

Net unrealized (gains) losses on derivatives (29,861) (11,315) 2,619 — (38,557) — (38,557)

Inventory valuation adjustment — — (2,150) — (2,150) — (2,150)

Lower of cost or net realizable value adjustments — 29,469 2,724 — 32,193 — 32,193

(Gain) loss on disposal or impairment of assets, net (138,204) 107,424 64,187 889 34,296 — — 34,296

Loss (gain) on disposal or impairment of assets, net 255,285 (1,144) 7,645 — 261,786 — 261,786

Equity-based compensation expense — — — 26,510 26,510 — 26,510

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Revaluation of liabilities 9,194 — — — 9,194 — 9,194

Gavilon legal matter settlement — — — 34,788 34,788 — — 34,788

Intersegment transactions (1) — — 2,099 — 2,099 — 2,099

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Liquidity, Sources of Capital and Capital Resource Activities

Our principal sources of liquidity and capital resource requirements are the cash flows from our operations, borrowings under our revolving credit facilities, debt issuances and the issuance of common and preferred units.

We expect our primary cash outflows to be related to capital expenditures, interest and repayment of debt maturities.

Our principal sources of liquidity and capital resource requirements are the cash flows from our operations, borrowings under our ABL Facility, debt issuances and the issuance of common and preferred units.

We expect our primary cash outflows to be related to purchases of inventory, capital expenditures, interest and repayment of debt maturities.

On February 4, 2021, we closed on our $2.05 billion 2026 Senior Secured Notes offering and entered into a $500.0 million ABL Facility.

See Note 7 to our consolidated financial statements included in this Annual Report for a further discussion of these transactions and a description of the 2026 Senior Secured Notes and ABL Facility.

These transactions extended the maturity of our debt and provided us with improved liquidity.

In conjunction with the transaction, we agreed to certain restricted payment provisions, one of which requires us to temporarily suspend the quarterly common unit distribution beginning with the quarter ended December 31, 2020, as well as distributions on all of our preferred units, beginning with the quarter ended March 31, 2021, until our total leverage ratio (as defined in the indenture for the 2026 Senior Secured Notes) falls below 4.75 to 1.00.

In conjunction with the transaction, we agreed to certain restricted payment provisions, one of which requires us to temporarily suspend the quarterly common unit distribution which began with the quarter ended December 31, 2020, as well as distributions on all of our preferred units, which began with the quarter ended March 31, 2021, until our total leverage ratio (as defined in the indenture for the 2026 Senior Secured Notes) falls below 4.75 to 1.00.

The cash savings from the suspension of the distributions should accelerate the deleveraging of our balance sheet and increase our liquidity and should create more financial flexibility going forward.

See Note 8 to our consolidated financial statements included in this Annual Report for a further discussion of these transactions and a description of the 2026 Senior Secured Notes and ABL Facility.

We believe that our anticipated cash flows from operations and the borrowing capacity under the ABL Facility will be sufficient to meet our liquidity needs.

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Short-Term Liquidity

On February 4, 2021, we closed on the $500.0 million ABL Facility, which will provide liquidity to operate our business and manage our working capital requirements.

On February 4, 2021, we closed on the $500.0 million ABL Facility, which provides liquidity to operate our business and manage our working capital requirements.

The ABL Facility is scheduled to mature at the earliest of (a) February 4, 2026 or (b) 91 days prior to the earliest maturity date in respect to any of our indebtedness in an aggregate principal amount of $50.0 million or greater, if such indebtedness is outstanding at such time, subject to certain exceptions.

We currently anticipate to have minimal needs for acquisitions or expansion projects and expect to fund these items through cash flows from operations, acquisition specific financing transactions or borrowings under the ABL Facility.

At March 31, 2022, $116.0 million had been borrowed under the ABL Facility and we had letters of credit outstanding of approximately $155.1 million.

On April 13, 2022, we amended the ABL Facility to increase the commitments to $600.0 million under the accordion feature within the ABL Facility.

As part of the amendment, we agreed to reduce the commitments back to $500.0 million on or before March 31, 2023.

In addition, the sub-limit for letters of credit was increased to $250.0 million.

The increase in the commitments was to support working capital needs through the existing higher commodity price environment.

As of March 31, 2022, our current assets exceeded our current liabilities by approximately $269.1 million.

We expect to generate positive cash flows from operations and utilize cash flows to repay existing indebtedness, fund capital expenditures and operate our business as we deleverage our balance sheet.

For additional information related to the ABL Facility, see Note 8 to our consolidated financial statements included in this Annual Report.

For additional information related to our ABL Facility, see Note 7 to our consolidated financial statements included in this Annual Report.

Long-Term Financing

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On February 4, 2021, we issued $2.05 billion of 2026 Senior Secured Notes in a private placement.

The 2026 Senior Secured Notes bear interest, which is payable on February 1 and August 1 of each year, beginning on August 1, 2021.

The 2026 Senior Secured Notes bear interest at 7.50%, which is payable on February 1 and August 1 of each year, beginning on August 1, 2021.

The 2026 Senior Secured Notes mature on February 1, 2026.

Senior Unsecured Notes

The senior unsecured notes include the 7.5% Senior Unsecured Notes Due 2023 (“2023 Notes”), 2025 Notes and 2026 Notes (collectively, the “Senior Unsecured Notes”).

Debt Repurchases

During the year ended March 31, 2021, we repurchased $52.1 million of the 2023 Notes, $7.3 million of the 2025 Notes and $111.6 million of the 2026 Notes at a cumulative cash cost of $115.8 million (excluding payment of accrued interest).

Equipment Loan

On October 29, 2020, we entered into an equipment loan for $45.0 million with Stonebriar Commercial Finance LLC which bears interest at a rate of 8.6% and is secured by certain of our barges and towboats.

The senior unsecured notes include the 2023 Notes, 6.125% Senior Unsecured Notes Due 2025 and 7.5% Senior Unsecured Notes Due 2026 (“2026 Notes”) (collectively, the “Senior Unsecured Notes”).

During the year ended March 31, 2022, we repurchased $79.5 million of the 2023 Notes and $6.0 million of the 2026 Notes at a cumulative cash cost of $83.2 million (excluding payments of accrued interest).

Other Long-term Debt

The Sawtooth credit agreement was paid off and terminated prior to us selling our ownership interest in Sawtooth on June 18, 2021 (see Note 17 to our consolidated financial statements included in this Annual Report).

On October 29, 2020, we entered into an equipment loan for $45.0 million which bears interest at a rate of 8.6% and is secured by certain of our barges and towboats.

Under this agreement, we are required to make monthly payments of $0.5 million (principal and interest) and a balloon payment of $23.9 million when this loan matures on November 1, 2027.

For additional information related to our long-term debt, see Note 7 to our consolidated financial statements included in this Annual Report.

Capital Expenditures, Acquisitions and Other Investments

The following table summarizes expansion and maintenance capital expenditures (which excludes additions for tank bottoms and line fill and has been prepared on the accrual basis), acquisitions and other investments for the periods indicated.

Amounts in the table below include capital expenditures and acquisitions related to TPSL and our former Retail Propane segment.

There are no capital expenditures or acquisitions related to Mid-Con and Gas Blending.

The following table summarizes expansion and maintenance capital expenditures (which excludes additions for tank bottoms and linefill and has been prepared on the accrual basis), acquisitions and other investments for the periods indicated.

Capital Expenditures Other

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2020 $ 571,154 $ 61,353 $ 1,268,474 $ 21,218

(1) Amounts for the years ended March 31, 2021, 2020 and 2019 include $18.2 million, $49.1 million and $63.6 million, respectively, of transactions classified as acquisitions of assets.

Amount for the year ended March 31, 2019 includes $0.4 million related to our former Retail Propane segment and less than $0.1 million related to TPSL.

There were no amounts related to TPSL for the year ended March 31, 2020.

(2) Amount for the year ended March 31, 2019 includes $3.8 million related to our former Retail Propane segment.

There were no amounts related to TPSL for the years ended March 31, 2020 or 2019.

(3) Amount for the year ended March 31, 2019 includes $31.9 million related to our former Retail Propane segment and $16.3 million related to TPSL.

There were no amounts related to TPSL for the year ended March 31, 2020.

(1) Amounts for the years ended March 31, 2021 and 2020 include $18.2 million and $49.1 million, respectively, of transactions classified as acquisitions of assets.

(2) Amounts for the years ended March 31, 2022, 2021 and 2020 primarily related to contributions made to unconsolidated entities and the purchase of membership interests in a water services and land company in November 2019.

There were no amounts for the years ended March 31, 2020 or 2019 related to TPSL.

There were no amounts for the year ended March 31, 2019 related to our former Retail Propane segment.

The decrease in capital spending during the year ended March 31, 2021, was due to us largely completing the build out of our Delaware Basin produced water system during the years ended March 31, 2020 and 2019.

Capital expenditures for the year ending March 31, 2022 are expected to be between $100 million and $125 million, with about one-half allocated to maintenance capital expenditures and one-half allocated to growth capital expenditures.

Capital expenditures for the year ending March 31, 2023 are expected to be approximately $100 million.

Distributions Declared

The board of directors of our general partner decided to temporarily suspend all distributions in order to deleverage our balance sheet until we meet the 4.75 to 1.00 total leverage ratio set forth within the indenture of the 2026 Senior Secured Notes.

This resulted in the suspension of the quarterly common unit distributions, beginning with the quarter ended December 31, 2020, and all preferred unit distributions, beginning with the quarter ended March 31, 2021.

This resulted in the suspension of the quarterly common unit distributions, which began with the quarter ended December 31, 2020, and all preferred unit distributions, which began with the quarter ended March 31, 2021.

The board of directors of our general partner expects to evaluate the reinstatement of the common unit and all preferred unit distributions in due course, taking into account a number of important factors, including our leverage, liquidity, the sustainability of cash flows, upcoming debt maturities, capital expenditures and the overall performance of our businesses.

See further discussion of our cash distribution policy in Part II, Item 5–“Market for Registrant’s Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities” included in this Annual Report.

For a further discussion of our distributions made during the current fiscal year, see Note 10 to our consolidated financial statements included in this Annual Report.

Contractual Obligations

Our contractual obligations primarily consist of purchase commitments, outstanding debt principal and interest obligations, operating lease obligations, pipeline commitments, asset retirement obligations and other commitments.

Purchase Commitments

Our fixed-price and index-price commodity purchase commitments result from contracts we have entered into for which we expect the parties to physically settle and deliver the inventory in future periods.

As of March 31, 2022, our purchase commitments totaled $10.1 billion, with $5.5 billion due within one year.

See Note 8 to our consolidated financial statements included in this Annual Report for information regarding our commodity purchase commitments and timing of our expected purchase commitments payments.

Debt Principal and Interest Obligations

As of March 31, 2022, our aggregate principal amount of outstanding debt was $3.4 billion, with $2.4 million due within one year.

Our obligation for interest on the debt totaled $903.3 million, with $246.3 million due within one year, based on our outstanding balances and interest rates as of March 31, 2022.

See Note 7 to our consolidated financial statements included in this Annual Report for information regarding our outstanding debt principal and interest obligations and timing of our expected payments.

Operating Lease Obligations

As of March 31, 2022, our undiscounted operating lease obligation was $145.9 million, with $46.6 million due within one year.

See Note 15 to our consolidated financial statements included in this Annual Report for information regarding our lease obligations and timing of our expected lease payments.

Pipeline Commitments

Our pipeline commitments are noncancelable agreements with crude oil pipeline operators, which guarantee us minimum monthly shipping capacity on their pipelines.

As of March 31, 2022, our future minimum throughput payments totaled $101.6 million, with $35.3 million due within one year.

See Note 8 to our consolidated financial statements included in this Annual Report for information regarding our pipeline commitments and timing of our expected pipeline commitments payments.

Asset Retirement Obligations

We have contractual and regulatory obligations at certain facilities for which we have to perform remediation, dismantlement or removal activities when the assets are retired.

As of March 31, 2022, our asset retirement obligations were $29.9 million, of which we expect to settle $0.2 million during the next year.

See Note 8 to our consolidated financial statements included in this Annual Report for information regarding our asset retirement obligations and timing of our expected asset retirement obligations payments.

Other Commitments

We have noncancelable agreements for product storage, railcar spurs, real estate and subsidy payments.

As of March 31, 2022, our commitment obligations were $31.4 million, with $12.1 million due within one year.

See Note 8 to our consolidated financial statements included in this Annual Report for information regarding our other commitments and timing of our expected commitment payments.

The following table summarizes the sources (uses) of our cash flows from continuing operations for the periods indicated:

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Operating Activities-Continuing Operations.

The seasonality of our Liquids Logistics business has a significant effect on our cash flows from operating activities.

The seasonality of our Liquids Logistics segment has a significant effect on our cash flows from operating activities.

Increases in natural gas liquids prices typically reduce our operating cash flows due to higher cash requirements to fund increases in inventories, and decreases in natural gas liquids prices typically increase our operating cash flows due to lower cash requirements to fund increases in inventories.

In our Liquids Logistics business, we typically experience operating losses or lower operating income during our first and second quarters, or the six months ending September 30, as a result of lower volumes of natural gas liquids sales and when we are building our inventory levels for the upcoming butane blending and heating seasons, which generally begin in late fall, under normal demand conditions, and run through February or March.

In our Liquids Logistics segment, we typically experience operating losses or lower operating income during our first and second quarters, or the six months ending September 30, as a result of lower volumes of natural gas liquids sales and when we are building our inventory levels for the upcoming butane blending and heating seasons, which generally begin in late fall, under normal demand conditions, and run

through February or March.

We borrow under the revolving credit facility to supplement our operating cash flows during the periods in which we are building inventory.

Our operations, and as a result our cash flows, are also impacted by positive and negative movements in commodity prices, which cause fluctuations in the value of inventory, accounts receivable and payables, due to increases and decreases in revenues and cost of sales.

The decrease in net cash provided by operating activities during the year ended March 31, 2022 was due primarily to fluctuations in the value of accounts receivable and accounts payable, increased inventory valuations and higher interest expense during the year ended March 31, 2022.

The decrease in net cash provided by operating activities during the year ended March 31, 2021 was due primarily to fluctuations in the value of accounts receivable, inventories and accounts payable during the year ended March 31, 2021.

The increase in net cash provided by operating activities during the year ended March 31, 2020 was due primarily to fluctuations in the value of accounts receivable and accounts payable during the year ended March 31, 2020.

Investing Activities-Continuing Operations .

Net cash used in investing activities was $212.4 million during the year ended March 31, 2022, compared to net cash used in investing activities of $221.5 million during the year ended March 31, 2021.

The decrease in net cash used in investing activities was due primarily to:

• net proceeds (gross cash proceeds less the amount of cash sold, excluding accrued expenses) of $63.5 million from the sale of our interest in Sawtooth in June 2021 (see Note 17 to our consolidated financial statements included in this Annual Report);

• a decrease in capital expenditures from $186.8 million (includes payment of amounts accrued as of March 31, 2020) during the year ended March 31, 2021 to $142.4 million (includes payment of amounts accrued as of March 31, 2021) during the year ended March 31, 2022 due primarily to fewer expansion projects in our Water Solutions segment;

• proceeds of $18.5 million from certain asset sales during the year ended March 31, 2022 (see Note 4 to our consolidated financial statements included in this Annual Report).

These decreases in net cash used in investing activities were partially offset by:

• a $71.7 million increase in payments to settle derivatives;

• total proceeds of $43.2 million from the sale of certain permits, land and a saltwater disposal facility to a third-party during the year ended March 31, 2021 (see Note 17 to our consolidated financial statements included in this Annual Report).

Net cash used in investing activities was $221.5 million during the year ended March 31, 2021, compared to net cash used in investing activities of $1.7 billion during the year ended March 31, 2020.

The decrease in net cash used in investing activities was due primarily to:

• $1.3 billion in cash paid for acquisitions and investments in unconsolidated entities during the year ended March 31, 2020;

• a decrease in capital expenditures from $555.7 million (includes payment of amounts accrued as of March 31, 2019) during the year ended March 31, 2020 to $186.8 million (includes payment of amounts accrued as of March 31, 2020) during the year ended March 31, 2021 due primarily to expansion projects in our Delaware Basin system in our Water Solutions segment during the year ended March 31, 2020.

• a $1.3 billion in cash paid for acquisitions and investments in unconsolidated entities during the year ended March 31, 2020;

• a decrease in capital expenditures from $555.7 million (includes payment of amounts accrued as of March 31, 2019) during the year ended March 31, 2020 to $186.8 million (includes payment of amounts accrued as of March 31, 2020) during the year ended March 31, 2021 due primarily to expansion projects in our Delaware Basin system in the Water Solutions segment during the year ended March 31, 2020.

These decreases in net cash used in investing activities were partially offset by a $167.1 million increase in payments to settle derivatives.

Net cash used in investing activities was $1.7 billion during the year ended March 31, 2020, compared to net cash used in investing activities of $404.5 million during the year ended March 31, 2019.

The increase in net cash used in investing activities was due primarily to:

• a $988.7 million increase in cash paid for acquisitions, primarily for Mesquite and Hillstone, and investments in unconsolidated entities during the year ended March 31, 2020;

• $335.8 million in proceeds from the sales of our Bakken and South Pecos water disposal businesses and our approximately 20% interest in E Energy Adams, LLC during the year ended March 31, 2019;

• an increase in capital expenditures from $455.6 million (includes payment of amounts accrued as of March 31, 2018) during the year ended March 31, 2019 to $555.7 million (includes payment of amounts accrued as of March 31, 2019) during the year ended March 31, 2020 due primarily to expansion projects in our Delaware Basin system in the Water Solutions segment.

These increases in net cash used in investing activities were partially offset by a $96.9 million increase in cash flows to settle derivatives.

Financing Activities-Continuing Operations.

Net cash provided by financing activities was $5.6 million during the year ended March 31, 2022, compared to net cash used in financing activities of $100.4 million during the year ended March 31, 2021.

The decrease in net cash used in financing activities was due primarily to:

• an increase of $1.6 billion in borrowings on the revolving credit facilities (net of repayments) during the year ended March 31, 2022;

• the repayment and termination of our $250.0 million term credit agreement in February 2021;

• a decrease of $144.6 million in distributions paid to our general partners and common unitholders, preferred unitholders and noncontrolling interest owners during the year ended March 31, 2022 due primarily to the reduction and subsequent suspension of the quarterly common unit and preferred unit distributions;

• $93.4 million in contingent consideration payments during the year ended March 31, 2021 due to installment payments related to the Mesquite acquisition;

• a make-whole fee of $55.6 million related to the termination of our term credit agreement in February 2021;

• a decrease of $50.6 million in debt issuance costs related to the termination of our term credit agreement and the issuance of the 2026 Senior Secured Notes in February 2021;

• a decrease of $32.6 million paid in cash to repurchase a portion of our Senior Unsecured Notes during the year ended March 31, 2022.

These decreases in net cash used in financing activities were partially offset by:

• $2.05 billion in proceeds from the issuance of the 2026 Senior Secured Notes during the year ended March 31, 2021;

• proceeds of $45.0 million for an equipment loan that is secured by certain of our barges and towboats during the year ended March 31, 2021.

Net cash used in financing activities was $100.4 million during the year ended March 31, 2021, compared to net cash provided by financing activities of $978.8 million during the year ended March 31, 2020.

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• a decrease of $1.8 billion in borrowings on the revolving credit facilities (net of repayments) during the year ended March 31, 2021;

• $622.4 million in net proceeds from the issuance of the 9.625% Class C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class C Preferred Units”) and the 9.00% Class D Preferred Units (“Class D Preferred Units”) during the year ended March 31, 2020;

• $622.4 million in net proceeds from the issuance of the 9.625% Class C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class C Preferred Units”) and the Class D Preferred Units during the year ended March 31, 2020;

• $450.0 million in proceeds from the issuance of the 2026 Notes during the year ended March 31, 2020;

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• a decrease of $99.3 million in distributions paid to our general partners and common unitholders, preferred unitholders and noncontrolling interest owners during the year ended March 31, 2021 due primarily to the reduction and subsequent suspension of the quarterly common unit and preferred unit distributions.

Net cash provided by financing activities was $978.8 million during the year ended March 31, 2020, compared to net cash used in financing activities of $793.9 million during the year ended March 31, 2019.

The increase in net cash provided by financing activities was due primarily to:

• repurchases of $737.1 million of our Senior Unsecured Notes during the year ended March 31, 2019;

• $622.4 million in net proceeds from the issuance of the Class C Preferred Units and Class D Preferred Units during the year ended March 31, 2020;

• $450.0 million in proceeds from the issuance of the 2026 Notes during the year ended March 31, 2020;

• $250.0 million in proceeds from the term credit agreement during the year ended March 31, 2020;

• an increase of $97.5 million in borrowings on the revolving credit facility (net of repayments) during the year ended March 31, 2020.

These increases in net cash provided by financing activities were partially offset by:

• $265.1 million in payments for the redemption of the 10.75% Class A Convertible Preferred Units during the year ended March 31, 2020;

• $100.0 million in contingent consideration payments as part of the Mesquite acquisition during the year ended March 31, 2020.

Guarantor Summarized Financial Information

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The guarantees are senior unsecured obligations of each Guarantor Subsidiary and rank equally in right of payment with other existing and future senior indebtedness of such Guarantor Subsidiary, and senior in right of payment to all existing and future subordinated indebtedness of such Guarantor Subsidiary.

The guarantee of our Senior Unsecured Notes by each Guarantor Subsidiary is subject to certain automatic customary releases, including in connection with the sale, disposition or transfer of all of the capital stock, or of all or substantially all of the assets, of such Guarantor Subsidiary to one or more persons that are not us or a restricted subsidiary, the exercise of legal defeasance or covenant defeasance options, the satisfaction and discharge of the indentures governing our Senior Unsecured Notes, the designation of such Guarantor Subsidiary as a non-guarantor restricted subsidiary or as an unrestricted subsidiary in accordance with the indentures governing our Senior Unsecured Notes, the release of such Guarantor Subsidiary from its guarantee under our revolving credit facility, the liquidation or dissolution of such Guarantor Subsidiary or upon the consolidation, merger or transfer of all assets of the Guarantor Subsidiary to us or another Guarantor Subsidiary in which the Guarantor Subsidiary dissolves or ceases to exist (collectively, the “Releases”).

discharge of the indentures governing our Senior Unsecured Notes, the designation of such Guarantor Subsidiary as a non-guarantor restricted subsidiary or as an unrestricted subsidiary in accordance with the indentures governing our Senior Unsecured Notes, the release of such Guarantor Subsidiary from its guarantee under our revolving credit facility, the liquidation or dissolution of such Guarantor Subsidiary or upon the consolidation, merger or transfer of all assets of the Guarantor Subsidiary to us or another Guarantor Subsidiary in which the Guarantor Subsidiary dissolves or ceases to exist (collectively, the “Releases”).

The obligations of each Guarantor Subsidiary under its note guarantee are limited as necessary to prevent such note guarantee from constituting a fraudulent conveyance under applicable law.

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Class D Preferred Units $ 551,097

(1) Excludes $50.9 million of net intercompany receivables due to NGL Energy Partners LP (parent) and the Guarantor Subsidiaries from the non-guarantor subsidiaries.

(1) Excludes $3.3 million of net intercompany payables due from NGL Energy Partners LP (parent) and the Guarantor Subsidiaries to the non-guarantor subsidiaries.

(2) Includes $1.9 billion of goodwill and intangible assets.

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Revenues $ 7,945,689

Operating loss $ (390,210)

Operating income $ 80,096

Loss from continuing operations $ (188,236)

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(1) There are no noncontrolling interests held at the co-issuers or Guarantor Subsidiaries.

Contractual Obligations

The following table summarizes our contractual obligations at March 31, 2021 for our fiscal years ending thereafter:

Years Ending March 31,

Total 2022 2023 2024 2025 2026 Thereafter

(in thousands)

Principal payments on long-term debt:

2026 Senior Secured Notes $ 2,050,000 $ — $ — $ — $ — $ 2,050,000 $ —

ABL Facility 4,000 — — — — 4,000 —

Senior Unsecured Notes 1,273,673 — — 555,251 380,020 — 338,402

Other long-term debt 49,095 2,184 7,585 2,816 3,068 3,343 30,099

Interest payments on long-term debt:

2026 Senior Secured Notes 767,896 152,896 153,750 153,750 153,750 153,750 —

ABL Facility (1) 1,018 210 210 210 210 178 —

Senior Unsecured Notes 357,627 90,300 90,300 90,300 48,656 25,380 12,691

Other long-term debt 20,049 3,528 3,582 3,273 3,021 2,746 3,899

Letters of credit 155,966 — — — — 155,966 —

Future minimum commitment payments under noncancelable agreements (2) 156,549 45,388 39,882 39,978 30,971 55 275

Future minimum lease payments under noncancelable operating leases 195,385 53,842 41,395 26,589 15,349 7,406 50,804

Fixed-price commodity purchase commitments:

Crude oil 93,285 93,285 — — — — —

Natural gas liquids 13,524 12,705 819 — — — —

Index-price commodity purchase commitments (3):

Crude oil (4) 9,060,532 3,038,806 1,835,567 1,715,198 1,532,174 938,787 —

Natural gas liquids 851,739 848,891 2,848 — — — —

Total contractual obligations $ 15,050,338 $ 4,342,035 $ 2,175,938 $ 2,587,365 $ 2,167,219 $ 3,341,611 $ 436,170

(1) The estimated interest payments on the ABL Facility are based on principal and letters of credit outstanding at March 31, 2021.

See Note 8 to our consolidated financial statements included in this Annual Report for additional information on the ABL Facility.

(2) We have noncancelable agreements with crude oil pipeline operators, which guarantee us minimum monthly shipping capacity on the pipelines.

As a result, we are required to pay the minimum shipping fees if actual shipments are less than our allotted capacity.

Under certain agreements we have the ability to recover minimum shipping fees previously paid if our shipping volumes exceed the minimum monthly shipping commitment during each month remaining under the agreement, with some contracts containing provisions that allow us to continue shipping up to six months after the maturity date of the contract in order to recapture previously paid minimum shipping delinquency fees.

We also have noncancelable agreements for product storage, railcar spurs and real estate.

See Note 9 to our consolidated financial statements included in this Annual Report for further detail of the commitments.

(3) Index prices are based on a forward price curve at March 31, 2021.

A theoretical change of $0.10 per gallon of natural gas liquids in the underlying commodity price at March 31, 2021 would result in a change of $110.0 million in the value of our index-price natural gas liquids purchase commitments.

A theoretical change of $1.00 per barrel of crude oil in the underlying commodity price at March 31, 2021 would result in a change of $177.0 million in the value of our index-price crude oil purchase commitments.

See Note 9 to our consolidated financial statements included in this Annual Report for further detail of the commitments.

(4) Our crude oil index-price purchase commitments exceed our crude oil index-price sales commitments (see Note 9 to our consolidated financial statements included in this Annual Report) due primarily to our long-term purchase commitments for crude oil that we purchase and ship on the Grand Mesa Pipeline.

As these purchase commitments are deliver-or-pay contracts, whereby our counterparty is required to pay us for any volumes not delivered, we have not entered into corresponding long-term sales contracts for volumes we may not receive.

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements other than the letters of credit discussed in Note 8 to our consolidated financial statements included in this Annual Report and the short-term leases discussed in Note 16 to our consolidated financial statements included in this Annual Report.

Environmental Legislation

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For a discussion of recent accounting pronouncements that are applicable to us, see Note 2 to our consolidated financial statements included in this Annual Report.

Critical Accounting Policies

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with GAAP requires the selection and application of appropriate accounting principles to the relevant facts and circumstances of our operations and the use of estimates made by management.

We have identified the following accounting policies that are most important to the portrayal of our consolidated financial position and results of operations.

We have identified the following more critical judgment areas in the application of our accounting policies that are most important to the portrayal of our consolidated financial position and results of operations.

The application of these accounting policies, which requires subjective or complex judgments regarding estimates and projected outcomes of future events, and changes in these accounting policies, could have a material effect on our consolidated financial statements.

Revenue Recognition

Effective April 1, 2018, we recognize revenue for services and products under revenue contracts as our obligations to either perform services or deliver or sell products under the contracts are satisfied.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer.

A contract’s transaction price is allocated to each distinct performance obligation in the contract and is recognized as revenue when, or as, the performance obligation is satisfied.

Our revenue contracts in scope under ASC 606 primarily have a single performance obligation.

The evaluation of when performance obligations have been satisfied and the transaction price that is allocated to our performance obligations requires significant judgment and assumptions, including our evaluation of the timing of when control of the underlying good or service has transferred to our customers and the relative stand-alone selling price of goods and services provided to customers under contracts with multiple performance obligations.

Actual results can vary from those judgments and assumptions.

See Note 15 to our consolidated financial statements included in this Annual Report for a further discussion of our revenue recognition policies.

Derivative Financial Instruments

We record all derivative financial instrument contracts at fair value in our consolidated balance sheets except for certain physical contracts that qualify for the normal purchase and normal sale election.

Under this accounting policy election, we do not record the physical contracts at fair value at each balance sheet date;

instead, we record the purchase or sale at the contracted value once the delivery occurs.

We have not designated any financial instruments as hedges for accounting purposes.

All changes in the fair value of our physical contracts that do not qualify as normal purchases and normal sales and settlements (whether cash transactions or non-cash mark-to-market adjustments) are reported either within revenue (for sales contracts) or cost of sales (for purchase contracts) in our consolidated statements of operations, regardless of whether the contract is physically or financially settled.

We utilize various commodity derivative financial instrument contracts to attempt to reduce our exposure to price fluctuations.

We do not enter into such contracts for trading purposes.

Changes in assets and liabilities from commodity derivative financial instruments result primarily from changes in market prices, newly originated transactions, and the timing of settlements and are reported within cost of sales on the consolidated statements of operations, along with related settlements.

We attempt to balance our contractual portfolio in terms of notional amounts and timing of performance and delivery obligations.

However, net unbalanced positions can exist or are established based on our assessment of anticipated market movements.

Inherent in the resulting contractual portfolio are certain business risks, including commodity price risk and credit risk.

Commodity price risk is the risk that the market value of crude oil, natural gas liquids, or refined and renewables products will change, either favorably or unfavorably, in response to changing market conditions.

Credit risk is the risk of loss from nonperformance by suppliers, customers or financial counterparties to a contract.

Procedures and limits for managing commodity price risks and credit risks are specified in our market risk policy and credit policy, respectively.

Open commodity positions and market price changes are monitored daily and are reported to senior management and to marketing operations personnel.

Credit risk is monitored daily and exposure is minimized through customer deposits, restrictions on product liftings, letters of credit, and entering into master netting agreements that allow for offsetting counterparty receivable and payable balances for certain transactions.

Impairment of Long-Lived Assets

We evaluate the carrying value of our long-lived assets (property, plant and equipment and amortizable intangible assets) for potential impairment when events and circumstances warrant such a review.

A long-lived asset group is considered impaired when the anticipated undiscounted future cash flows from the use and eventual disposition of the asset group is less than its carrying value.

We compare the carrying value of the long-lived asset to the estimated undiscounted future cash flows expected to be generated from that asset.

Estimates of future net cash flows include estimating future volumes, future margins or tariff rates, future operating costs and other estimates and assumptions consistent with our business plans.

If we determine that an asset’s unamortized cost may not be recoverable due to impairment, we may be required to reduce the carrying value and the subsequent useful life of the asset.

Any such write-down of the value and unfavorable change in the useful life of a long-lived asset would increase costs and expenses at that time.

See Note 5 and Note 7 to our consolidated financial statements included in this Annual Report) for a further discussion of our impairments of long-lived assets.

We evaluate our equity method investments for impairment when we believe the current fair value may be less than the carrying amount and record an impairment if we believe the decline in value is other than temporary.

Impairment of Goodwill

Goodwill is subject to at least an annual assessment for impairment.

We perform our annual assessment of impairment during the fourth quarter of our fiscal year, and more frequently if circumstances warrant.

For purposes of goodwill impairment testing, assets are grouped into “reporting units”.

A reporting unit is either an operating segment or a component of an operating segment, depending on how similar the components of the operating segment are to each other in terms of operational and economic characteristics.

The goodwill relating to each of our reporting units is tested for impairment annually as well as when an event or change in circumstances indicates an impairment may have occurred.

For each reporting unit, we perform a qualitative assessment of relevant events and circumstances about the likelihood of goodwill impairment.

If it is deemed more likely than not that the fair value of the reporting unit is less than its carrying amount, we calculate the fair value of the reporting unit.

If it is deemed more likely than not that the fair value of the reporting unit is less than its carrying value, we calculate the fair value of the reporting unit.

Otherwise, further testing is not required.

The qualitative assessment is based on reviewing the totality of several factors, including macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, other entity specific events (for example, changes in management) or other events such as selling or disposing of a reporting unit.

The qualitative assessment is based on reviewing several factors, including macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, other entity specific events (for example, changes in management) or other events such as selling or disposing of a reporting unit.

The determination of a reporting unit’s fair value is predicated on our assumptions regarding the future economic prospects of the reporting unit.

Such assumptions include (i) discrete financial forecasts for the assets contained within the reporting unit, which rely on management’s estimates of operating margins, (ii) long-term growth rates for cash flows beyond the discrete forecast period, (iii) appropriate discount rates and (iv) estimates of the cash flow multiples to apply in estimating the market value of our reporting units.

If the fair value of the reporting unit (including its inherent goodwill) is less than its carrying value, a charge to earnings may be required to reduce the carrying value of goodwill to its implied fair value.

An estimate of the sensitivity to changes in underlying assumptions of a fair value calculation is not practicable, given the numerous assumptions that can materially affect our estimates.

If the fair value of the reporting unit (including its inherent goodwill) is less than its carrying value, an impairment loss is recognized to the extent that the implied fair value of the goodwill of the reporting unit is less than its carrying value, limited to the total amount of goodwill for the reporting unit.

If future results are not consistent with our estimates, we could be exposed to future impairment losses that could be material to our results of operations.

We monitor the markets for our products and services, in addition to the overall market, to determine if a triggering event occurs that would indicate that the fair value of a reporting unit is less than its carrying value.

During the years ended March 31, 2021 and 2020, we recorded goodwill impairments of $237.8 million and $250.0 million, respectively.

We did not record a goodwill impairment during the year ended March 31, 2022.

See Note 5 to our consolidated financial statements included in this Annual Report for a further discussion of our goodwill impairment assessment.

Impairment of Long-Lived Assets

We evaluate the carrying value of our long-lived assets (property, plant and equipment and amortizable intangible assets) for potential impairment when events and circumstances warrant such a review.

A long-lived asset group is considered impaired when the anticipated undiscounted future cash flows from the use and eventual disposition of the asset group is less than its carrying value.

Individual assets are grouped at the lowest level for which the related identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

Estimates of future net cash flows include estimating future volumes, future margins or tariff rates, future operating costs and other estimates and assumptions consistent with our business plans as well as external factors such as industry and economic trends.

An estimate of the sensitivity to changes in underlying assumptions of a fair value calculation is not practicable, given the numerous assumptions that can materially affect our estimates.

If the carrying value is not recoverable, an impairment loss is measured as the excess of the asset’s carrying value over its estimated fair value.

If future results are not consistent with our estimates, we could be exposed to future impairment losses that could be material to our results of operations.

See Note 4 and Note 6 to our consolidated financial statements included in this Annual Report for a further discussion of our impairments of long-lived assets.

We evaluate our investments in unconsolidated entities for impairment whenever events or changes in circumstances indicate, in management’s judgment, that the fair value of such investment may have experienced a decline to less than its carrying value and the decline is other than temporary.

Depreciation and Amortization Methods and Estimated Useful Lives of Property, Plant and Equipment and Intangible Assets

Depreciation and amortization expense is the systematic write-off of the cost of our property, plant and equipment (net of residual or salvage value, if any) and the cost of our amortizable intangible assets to the results of operations for the quarterly and annual periods during which the assets are used.

We depreciate our property, plant and equipment and amortize the majority of our intangible assets using the straight-line method, which results in our recording depreciation and amortization expense evenly over the estimated life of the individual asset.

The estimate of depreciation and amortization expense requires us to make assumptions regarding the useful economic lives and residual values of our assets.

When we acquire and place our property, plant and equipment in service or acquire intangible assets, we develop assumptions about the useful economic lives and residual values of such assets that we believe to be reasonable;

however, circumstances may develop that could require us to change these assumptions in future periods, which would change our depreciation and amortization expense prospectively and have a material impact on our results of operations.

Examples of such circumstances include changes in laws and regulations that limit the estimated economic life of an asset, changes in technology that render an asset obsolete, changes in expected salvage values or changes in customer attrition rates.

See Note 2, Note 4 and Note 6 to our consolidated financial statements included in this Annual Report for a further discussion.

Derivative Financial Instruments

We record all derivative financial instrument contracts at fair value in our consolidated balance sheets except for normal purchase and normal sale transactions that are expected to result in physical delivery.

Changes in the fair value are recorded within revenue (for sales contracts) or cost of sales (for purchase contracts) in our consolidated statements of operations.

We determine the fair value of our exchange traded derivative financial instruments utilizing publicly available prices, and for non-exchange traded derivative financial instruments, we utilize pricing models for similar instruments including publicly available prices and forward curves generated from a compilation of data gathered from third parties.

Actual amounts could vary materially from estimated fair values due to changes in market prices.

In addition, changes in the methods or assumptions used to determine the fair value of our derivative financial instruments could have a material effect on our consolidated financial statements.

Quantitative and Qualitative Disclosures About Market Risk to see the impact of a 10% increase in the underlying commodity value and Note 2 and Note 10 to our consolidated financial statements included in this Annual Report for a further discussion of our derivative financial instruments.

Revenue Recognition

Our Water Solutions segment has certain long-term contracts with customers that include variable consideration that must be estimated at contract inception and re-assessed at each reporting period.

Total consideration for these arrangements is recognized as revenue over the applicable contract period and is based on our measure of satisfaction of our corresponding performance obligation, and the difference in timing of revenue recognition and billings results in contract assets and liabilities.

The estimated performance obligation over the life of a contract includes significant judgments by management including volume and forecasted production information.

Changes in these assumptions or a contract modification could have a material effect on the amount of variable consideration recognized as revenue.

See Note 14 to our consolidated financial statements included in this Annual Report for a further discussion of our revenue recognition policies.

Asset Retirement Obligations

We have contractual and regulatory obligations at certain facilities for which we have to perform remediation, dismantlement, or removal activities when the assets are retired.

Our largest asset retirement obligations involve the abandonment or removal of pipelines and saltwater and freshwater disposal wells.

We are required to recognize the fair value of a liability for an asset retirement obligation if a reasonable estimate of fair value can be made.

In order to determine the fair value of such a liability, we must make certain estimates and assumptions including, among other things, projected cash flows, the estimated timing of retirement, a credit-adjusted risk-free interest rate, and an assessment of market conditions, which could significantly impact the estimated fair value of the asset retirement obligation.

These estimates and assumptions are very subjective and can vary over time.

Most of these retirement obligations are many years, or decades, in the future and the contracts and regulations often have vague descriptions of what removal practices and criteria must be met when the removal event actually occurs.

These estimates and assumptions are very subjective and can vary

Our consolidated balance sheet at March 31, 2022 includes a liability of $29.9 million related to asset retirement obligations, which is reported within other noncurrent liabilities.

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We will record an asset retirement obligation for these assets in the periods in which settlement dates are reasonably determinable.

Depreciation and Amortization Methods and Estimated Useful Lives of Property, Plant and Equipment and Intangible Assets

The estimate of depreciation and amortization expense requires us to make assumptions regarding the useful economic lives and residual values of our assets.

however, circumstances may develop that could require us to change these assumptions in future periods, which would change our depreciation and amortization expense prospectively.

To determine if a transaction should be accounted for as a business combination or an acquisition of assets, we first calculate the relative fair values of the assets acquired.

If substantially all of the relative fair value is concentrated in a single asset or group of similar assets, or if not but the transaction does not include a significant process (does not meet the definition of a business), we record the transaction as an acquisition of assets.

For acquisitions of assets, the purchase price is allocated based on the relative fair values and goodwill is not recorded.

All other transactions are recorded as business combinations.

Fair values of assets acquired and liabilities assumed are based upon available information and may involve engaging an independent third party to perform an appraisal.

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The estimates also include the fair value of contracts including commodity purchase and sale agreements, storage contracts, and transportation contracts.

The judgments made in the determination of the estimated fair value assigned to the assets acquired, the liabilities assumed and any noncontrolling interest in the investee, as well as the estimated useful life of each asset and the duration of each liability, can materially impact the financial statements in periods after acquisition, such as through depreciation and amortization expense.

While we believe we have made reasonable assumptions to calculate the fair value, if future results are not consistent with our estimates, we could be exposed to future impairment losses that could be material to our results of operations.

For a business combination, the excess of the purchase price over the net fair value of acquired assets and assumed liabilities is recorded as goodwill, which is not amortized but instead is evaluated for impairment at least annually.

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At the end of each fiscal year, we also perform a “lower of cost or net realizable value” analysis;

if the cost basis of the inventories would not be recoverable based on the net realizable value at the

end of the year, we reduce the book value of the inventories to the recoverable amount.

if the cost basis of the inventories would not be recoverable based on the net realizable value at the end of the year, we reduce the book value of the inventories to the recoverable amount.

When performing this analysis during interim periods within a fiscal year, accounting standards do not require us to record a lower of cost or net realizable value write-down if we expect the net realizable value to recover by our fiscal year end.

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We are unable to control changes in the net realizable value of these commodities and are unable to determine whether write-downs will be required in future periods.

Equity-Based Compensation

Our general partner has granted certain restricted units to employees and directors, under a long-term incentive plan, which vest in tranches, subject to the continued service of the recipients through the vesting date (the “Service Awards”).

The awards may also vest upon a change of control, at the discretion of the board of directors of our general partner.

Service Awards are valued at the average of the high/low sales price as of the grant date less the present value of the expected distribution stream over the vesting period using a risk-free interest rate.

We record the expense for each Service Award on a straight-line basis over the requisite period for the entire award (that is, over the requisite service period of the last separately vesting portion of the award), ensuring that the amount of compensation cost recognized at any date at least equals the portion of the grant-date value of the award that is vested at that date.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis