NGL Energy Partners LP 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview We are a Delaware limited partnership (“we,” “us,” “our,” or the “Partnership”) formed in September 2010. NGL Energy Holdings LLC serves as our general partner. 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; and • Our interest in Sawtooth Caverns, LLC (“Sawtooth”) during the year ended March 31, 2022. 51 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 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 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 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 52 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 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). 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 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. James, Louisiana, and Magellan East Houston. We attempt to reduce our exposure to price fluctuations by using back-to-back physical contracts whenever possible. When back-to-back physical contracts are not optimal, we enter into financially settled derivative contracts as economic hedges of our physical inventory, physical sales and physical purchase contracts. We use our transportation assets to move crude oil from the wellhead to the highest value market. 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 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 Year Ended March 31, Low High At Period End 2022 $ 58.65 $ 123.70 $ 100.28 2021 (1) $ (37.63) $ 66.09 $ 59.16 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, 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 operating income of $45.0 million during the year ended March 31, 2022. 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 Oil & Gas, Inc. (“Extraction”) bankruptcy (see Note 17 to our consolidated financial statements included in this Annual Report). 53 Liquids Logistics 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. We also enter into financially settled derivative contracts as economic hedges of our physical inventory, physical sales and physical purchase contracts. 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 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. Weather conditions and gasoline blending can have a significant impact on the demand for propane and butane, and sales volumes and prices are typically higher during the colder months of the year. Consequently, our revenues, operating profits, and operating cash flows are typically lower in the first and second quarters of our fiscal year. The following table summarizes the range of low and high propane spot prices per gallon at Conway, Kansas, and Mt. Belvieu, Texas, two of our main pricing hubs, for the periods indicated and the prices at period end: Conway, Kansas Mt. Belvieu, Texas Propane Spot Price Per Gallon Propane Spot Price Per Gallon Year Ended March 31, Low High At Period End Low High At Period End 2022 $ 0.67 $ 1.64 $ 1.37 $ 0.72 $ 1.63 $ 1.39 2021 $ 0.23 $ 1.53 $ 0.86 $ 0.25 $ 1.07 $ 0.92 2020 $ 0.18 $ 0.60 $ 0.25 $ 0.19 $ 0.68 $ 0.28 The following table summarizes the range of low and high butane spot prices per gallon at Mt. Belvieu, Texas for the periods indicated and the prices at period end: Butane Spot Price Per Gallon Year Ended March 31, Low High At Period End 2022 $ 0.78 $ 2.01 $ 1.71 2021 $ 0.28 $ 1.16 $ 0.98 2020 $ 0.19 $ 0.80 $ 0.29 The following table summarizes the range of low and high Gulf Coast gasoline spot prices per barrel using NYMEX gasoline prompt-month futures for the periods indicated and the prices at period end: Gasoline Spot Price Per Gallon Year Ended March 31, Low High At Period End 2022 $ 81.95 $ 154.67 $ 133.96 2021 $ 21.43 $ 90.30 $ 82.04 2020 $ 17.30 $ 89.55 $ 24.07 The following table summarizes the range of low and high diesel spot prices per barrel using NYMEX ULSD prompt-month futures for the periods indicated and the prices at period end: Diesel Spot Price Per Gallon Year Ended March 31, Low High At Period End 2022 $ 74.44 $ 186.37 $ 155.03 2021 $ 25.64 $ 82.64 $ 74.39 2020 $ 40.08 $ 89.17 $ 42.51 54 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 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 The following table summarizes our consolidated statements of operations for the periods indicated: Year Ended March 31, 2022 2021 2020 (in thousands) Revenues $ 7,947,915 $ 5,227,023 $ 7,584,000 Cost of sales 7,139,312 4,493,822 6,604,383 Operating expenses 285,535 254,562 332,993 General and administrative expense 63,546 70,468 113,664 Depreciation and amortization 288,720 317,227 265,312 Loss on disposal or impairment of assets, net 94,254 475,436 261,786 Revaluation of liabilities (6,495) 6,261 9,194 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) 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 (expense) benefit (971) 3,391 (345) Loss from continuing operations (184,101) (637,418) (180,545) Loss from discontinued operations, net of tax — (1,769) (218,235) Net loss (184,101) (639,187) (398,780) Less: Net (income) loss attributable to noncontrolling interests (655) (632) 1,773 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 acquisitions, dispositions and other transactions. Acquisitions and Dispositions 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. 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 Seasonality impacts our Liquids Logistics segment. 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. We generally 55 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 Water Solutions The following table summarizes the operating results of our Water Solutions segment for the periods indicated. Year Ended March 31, 2022 2021 Change (in thousands, except per barrel and per day amounts) Revenues: Water disposal service fees $ 397,128 $ 308,511 $ 88,617 Sale of recovered crude oil 77,203 28,599 48,604 Recycled water 11,343 3,015 8,328 Other revenues 59,192 30,861 28,331 Total revenues 544,866 370,986 173,880 Expenses: Cost of sales-excluding impact of derivatives 26,340 2,557 23,783 Derivative loss 7,640 7,065 575 Operating expenses 175,022 142,371 32,651 General and administrative expenses 7,352 6,403 949 Depreciation and amortization expense 214,558 222,107 (7,549) Loss on disposal or impairment of assets, net 25,598 76,942 (51,344) Revaluation of liabilities (6,495) 6,261 (12,756) Total expenses 450,015 463,706 (13,691) Segment operating income (loss) $ 94,851 $ (92,720) $ 187,571 Produced water processed (barrels per day) Delaware Basin 1,531,830 1,148,582 383,248 Eagle Ford Basin 99,298 78,397 20,901 DJ Basin 142,611 111,016 31,595 Other Basins 24,179 26,596 (2,417) Total 1,797,918 1,364,591 433,327 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 Service fees for produced water processed ($/barrel) (1) $ 0.61 $ 0.62 $ (0.01) Recovered crude oil for produced water processed ($/barrel) (1) $ 0.12 $ 0.06 $ 0.06 Operating expenses for produced water processed ($/barrel) (1) $ 0.27 $ 0.29 $ (0.02) (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 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 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 56 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 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 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 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: • 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); and • 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). 57 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. Crude Oil Logistics The following table summarizes the operating results of our Crude Oil Logistics segment for the periods indicated: Year Ended March 31, 2022 2021 Change (in thousands, except per barrel amounts) Revenues: Crude oil sales $ 2,432,393 $ 1,574,699 $ 857,694 Crude oil transportation and other 84,171 153,588 (69,417) Total revenues (1) 2,516,564 1,728,287 788,277 Expenses: Cost of sales-excluding impact of derivatives 2,271,973 1,473,330 798,643 Derivative loss 92,027 49,314 42,713 Operating expenses 54,606 56,918 (2,312) General and administrative expenses 7,537 8,038 (501) Depreciation and amortization expense 48,489 60,874 (12,385) (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 income (loss) $ 45,033 $ (304,330) $ 349,363 Crude oil sold (barrels) 31,091 38,349 (7,258) Crude oil transported on owned pipelines (barrels) 28,410 32,797 (4,387) Crude oil storage capacity - owned and leased (barrels) (2) 5,232 5,239 (7) Crude oil storage capacity leased to third parties (barrels) (2) 1,501 1,501 — Crude oil inventory (barrels) (2) 1,339 1,201 138 Crude oil sold ($/barrel) $ 78.235 $ 41.062 $ 37.173 Cost per crude oil sold ($/barrel) (3) $ 73.075 $ 38.419 $ 34.656 Crude oil product margin ($/barrel) (3) $ 5.160 $ 2.643 $ 2.517 (1) Revenues include $11.1 million and $6.7 million of intersegment sales during the years ended March 31, 2022 and 2021, respectively, that are eliminated in our consolidated statements of operations. (2) Information is presented as of March 31, 2022 and March 31, 2021, respectively. (3) Cost and product margin per barrel excludes the impact of derivatives. Crude Oil Sales Revenues. 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, 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. 58 Cost of Sales-Excluding Impact of Derivatives. 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 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 . 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 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). 59 Liquids Logistics The following table summarizes the operating results of our Liquids Logistics segment for the periods indicated: Year Ended March 31, 2022 2021 Change (in thousands, except per gallon amounts) Refined products sales: Revenues-excluding impact of derivatives (1) $ 1,899,898 $ 1,124,087 $ 775,811 Cost of sales-excluding impact of derivatives 1,876,728 1,108,493 768,235 Derivative loss 2,907 930 1,977 Product margin 20,263 14,664 5,599 Propane sales: Revenues (1) 1,325,941 1,027,582 298,359 Cost of sales-excluding impact of derivatives 1,313,765 949,402 364,363 Derivative (gain) loss (20,519) 10,994 (31,513) Product margin 32,695 67,186 (34,491) Butane sales: Revenues (1) 863,348 517,857 345,491 Cost of sales-excluding impact of derivatives 794,180 469,394 324,786 Derivative loss 18,690 22,353 (3,663) Product margin 50,478 26,110 24,368 Other product sales: Revenues-excluding impact of derivatives (1) 791,125 446,744 344,381 Cost of sales-excluding impact of derivatives 748,392 424,191 324,201 Derivative loss (gain) 15,812 (7,078) 22,890 Product margin 26,921 29,631 (2,710) Service revenues: Revenues (1) 16,200 33,915 (17,715) Cost of sales 1,404 4,751 (3,347) Product margin 14,796 29,164 (14,368) Expenses: Operating expenses 55,907 55,273 634 General and administrative expenses 7,166 8,507 (1,341) Depreciation and amortization expense 18,714 29,184 (10,470) Loss on disposal or impairment of assets, net 71,807 3,350 68,457 Total expenses 153,594 96,314 57,280 Segment operating (loss) income $ (8,441) $ 70,441 $ (78,882) 60 Year Ended March 31, 2022 2021 Change (in thousands, except per gallon amounts) Natural gas liquids and refined products storage capacity - owned and leased (gallons) (2)(3) 156,219 427,975 (271,756) Refined products sold (gallons) 776,797 834,717 (57,920) Refined products sold ($/gallon) $ 2.446 $ 1.347 $ 1.099 Cost per refined products sold ($/gallon) (4) $ 2.416 $ 1.328 $ 1.088 Refined products product margin ($/gallon) (4) $ 0.030 $ 0.019 $ 0.011 Refined products inventory (gallons) (2) 1,090 1,223 (133) Propane sold (gallons) 1,034,706 1,364,224 (329,518) Propane sold ($/gallon) $ 1.281 $ 0.753 $ 0.528 Cost per propane sold ($/gallon) (4) $ 1.270 $ 0.696 $ 0.574 Propane product margin ($/gallon) (4) $ 0.011 $ 0.057 $ (0.046) Propane inventory (gallons) (2) 37,719 51,026 (13,307) Propane storage capacity leased to third parties (gallons) (2)(3) — 53,947 (53,947) Butane sold (gallons) 588,032 655,256 (67,224) Butane sold ($/gallon) $ 1.468 $ 0.790 $ 0.678 Cost per butane sold ($/gallon) (4) $ 1.351 $ 0.716 $ 0.635 Butane product margin ($/gallon) (4) $ 0.117 $ 0.074 $ 0.043 Butane inventory (gallons) (2) 19,825 20,066 (241) Butane storage capacity leased to third parties (gallons) (2)(3) — 56,700 (56,700) Other products sold (gallons) 376,906 471,245 (94,339) Other products sold ($/gallon) $ 2.099 $ 0.948 $ 1.151 Cost per other products sold ($/gallon) (4) $ 1.986 $ 0.900 $ 1.086 Other products product margin ($/gallon) (4) $ 0.113 $ 0.048 $ 0.065 Other products inventory (gallons) (2) 18,614 19,195 (581) (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) 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 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 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 61 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 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 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, 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. 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. 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, 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. 62 Corporate and Other The operating loss within “Corporate and Other” includes the following components for the periods indicated: Year Ended March 31, 2022 2021 Change (in thousands) Other revenues: Revenues $ — $ 1,255 $ (1,255) Cost of sales — 1,816 (1,816) Loss — (561) 561 Expenses: General and administrative expenses 41,491 47,520 (6,029) Depreciation and amortization expense 6,959 5,062 1,897 (Gain) loss on disposal or impairment of assets, net (50) 11,001 (11,051) Total expenses 48,400 63,583 (15,183) Operating loss $ (48,400) $ (64,144) $ 15,744 General and Administrative Expenses . 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. 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 17 to our consolidated financial statements included in this Annual Report). Equity in Earnings of Unconsolidated Entities 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 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). 63 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. 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. Noncontrolling Interests Noncontrolling interests represent the portion of certain consolidated subsidiaries that are owned by third parties. 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. 64 Segment Operating Results for the Years Ended March 31, 2021 and 2020 Water Solutions 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, 2021 2020 Change (in thousands, except per barrel and per day amounts) Revenues: Water disposal service fees $ 308,511 $ 305,124 $ 3,387 Sale of recovered crude oil 28,599 59,445 (30,846) Recycled water 3,015 705 2,310 Other revenues 30,861 56,785 (25,924) Total revenues 370,986 422,059 (51,073) Expenses: Cost of sales-excluding impact of derivatives 2,557 5,511 (2,954) Derivative loss (gain) 7,065 (39,381) 46,446 Operating expenses 142,371 192,987 (50,616) General and administrative expenses 6,403 7,939 (1,536) Depreciation and amortization expense 222,107 163,588 58,519 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 $ (92,720) $ (173,064) $ 80,344 Produced water processed (barrels per day) Delaware Basin (1) 1,148,582 1,170,158 (21,576) Eagle Ford Basin 78,397 246,784 (168,387) DJ Basin 111,016 164,936 (53,920) Other Basins 26,596 61,091 (34,495) Total 1,364,591 1,642,969 (278,378) 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) Service fees for produced water processed ($/barrel) (2) $ 0.62 $ 0.63 $ (0.01) Recovered crude oil for produced water processed ($/barrel) (2) $ 0.06 $ 0.12 $ (0.06) Operating expenses for produced water processed ($/barrel) (2) $ 0.29 $ 0.40 $ (0.11) (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. (2) Total produced water barrels processed during the years ended March 31, 2021 and 2020 were 498,075,843 and 485,115,941, 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. 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 65 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 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. 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. 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. 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); and • 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); • 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 17 to our consolidated financial statements included in this Annual Report); and • 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, 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. 66 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. 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 The following table summarizes the operating results of our Crude Oil Logistics segment for the periods indicated: Year Ended March 31, 2021 2020 Change (in thousands, except per barrel amounts) Revenues: Crude oil sales $ 1,574,699 $ 2,383,812 $ (809,113) Crude oil transportation and other 153,588 184,129 (30,541) Total revenues (1) 1,728,287 2,567,941 (839,654) Expenses: Cost of sales-excluding impact of derivatives 1,473,330 2,347,863 (874,533) Derivative loss (gain) 49,314 (35,736) 85,050 Operating expenses 56,918 61,708 (4,790) General and administrative expenses 8,038 6,723 1,315 Depreciation and amortization expense 60,874 70,759 (9,885) 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 (loss) income $ (304,330) $ 117,768 $ (422,098) Crude oil sold (barrels) 38,349 42,799 (4,450) Crude oil transported on owned pipelines (barrels) 32,797 45,884 (13,087) Crude oil storage capacity - owned and leased (barrels) (2) 5,239 5,362 (123) Crude oil storage capacity leased to third parties (barrels) (2) 1,501 2,062 (561) Crude oil inventory (barrels) (2) 1,201 1,111 90 Crude oil sold ($/barrel) $ 41.062 $ 55.698 $ (14.636) Cost per crude oil sold ($/barrel) (3) $ 38.419 $ 54.858 $ (16.439) Crude oil product margin ($/barrel) (3) $ 2.643 $ 0.840 $ 1.803 (1) Revenues include $6.7 million and $18.2 million of intersegment sales during the years ended March 31, 2021 and 2020, respectively, that are eliminated in our consolidated statements of operations. (2) Information is presented as of March 31, 2021 and March 31, 2020, respectively. (3) Cost and product margin per barrel excludes the impact of derivatives. 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. 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 67 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 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 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. 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. 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 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. 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. 68 Liquids Logistics The following table summarizes the operating results of our Liquids Logistics segment for the periods indicated: Year Ended March 31, 2021 2020 Change (in thousands, except per gallon amounts) Refined products sales: Revenues-excluding impact of derivatives (1)(2) $ 1,124,087 $ 2,394,663 $ (1,270,576) Cost of sales-excluding impact of derivatives (3) 1,108,493 2,367,850 (1,259,357) Derivative loss (gain) 930 (3,225) 4,155 Product margin 14,664 30,038 (15,374) Propane sales: Revenues (1) 1,027,582 846,756 180,826 Cost of sales-excluding impact of derivatives 949,402 766,521 182,881 Derivative loss 10,994 3,536 7,458 Product margin 67,186 76,699 (9,513) Butane sales: Revenues (1) 517,857 564,016 (46,159) Cost of sales-excluding impact of derivatives 469,394 486,777 (17,383) Derivative loss (gain) 22,353 (8,288) 30,641 Product margin 26,110 85,527 (59,417) Other product sales: Revenues-excluding impact of derivatives (1) 446,744 775,458 (328,714) Cost of sales-excluding impact of derivatives 424,191 732,967 (308,776) Derivative gain (7,078) (2,846) (4,232) Product margin 29,631 45,337 (15,706) Service revenues: Revenues (1) 33,915 40,216 (6,301) Cost of sales 4,751 9,207 (4,456) Product margin 29,164 31,009 (1,845) Expenses: Operating expenses 55,273 77,980 (22,707) General and administrative expenses 8,507 12,644 (4,137) Depreciation and amortization expense 29,184 27,930 1,254 Loss on disposal or impairment of assets, net 3,350 7,645 (4,295) Total expenses 96,314 126,199 (29,885) Segment operating income $ 70,441 $ 142,411 $ (71,970) 69 Year Ended March 31, 2021 2020 Change (in thousands, except per gallon amounts) Natural gas liquids and refined products storage capacity - owned and leased (gallons) (4) 427,975 400,301 27,674 Refined products sold (gallons) 834,717 1,272,546 (437,829) Refined products sold ($/gallon) $ 1.347 $ 1.890 $ (0.543) Cost per refined products sold ($/gallon) (5) $ 1.328 $ 1.861 $ (0.533) Refined products product margin ($/gallon) (5) $ 0.019 $ 0.029 $ (0.010) Refined products inventory (gallons) (4) 1,223 2,391 (1,168) Propane sold (gallons) 1,364,224 1,478,759 (114,535) Propane sold ($/gallon) $ 0.753 $ 0.573 $ 0.180 Cost per propane sold ($/gallon) (5) $ 0.696 $ 0.518 $ 0.178 Propane product margin ($/gallon) (5) $ 0.057 $ 0.055 $ 0.002 Propane inventory (gallons) (4) 51,026 57,221 (6,195) Propane storage capacity leased to third parties (gallons) (4) 53,947 46,066 7,881 Butane sold (gallons) 655,256 814,528 (159,272) Butane sold ($/gallon) $ 0.790 $ 0.692 $ 0.098 Cost per butane sold ($/gallon) (5) $ 0.716 $ 0.598 $ 0.118 Butane product margin ($/gallon) (5) $ 0.074 $ 0.094 $ (0.020) Butane inventory (gallons) (4) 20,066 24,808 (4,742) Butane storage capacity leased to third parties (gallons) (4) 56,700 33,894 22,806 Other products sold (gallons) 471,245 602,872 (131,627) Other products sold ($/gallon) $ 0.948 $ 1.286 $ (0.338) Cost per other products sold ($/gallon) (5) $ 0.900 $ 1.216 $ (0.316) Other products product margin ($/gallon) (5) $ 0.048 $ 0.070 $ (0.022) Other products inventory (gallons) (4) 19,195 26,126 (6,931) (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 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. (4) Information is presented as of March 31, 2021 and March 31, 2020, respectively. (5) 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. 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. 70 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. 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. 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 $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 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 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 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, 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. 71 Corporate and Other The operating loss within “Corporate and Other” includes the following components for the periods indicated: Year Ended March 31, 2021 2020 Change (in thousands) Other revenues: Revenues $ 1,255 $ 1,038 $ 217 Cost of sales 1,816 1,774 42 Loss (561) (736) 175 Expenses: Operating expenses — 318 (318) General and administrative expenses 47,520 86,358 (38,838) Depreciation and amortization expense 5,062 3,035 2,027 Loss on disposal or impairment of assets, net 11,001 — 11,001 Total expenses 63,583 89,711 (26,128) Operating loss $ (64,144) $ (90,447) $ 26,303 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 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 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. 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. Interest Expense The following table summarizes the components of our consolidated interest expense for the periods indicated: Year Ended March 31, 2021 2020 Change (in thousands) 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 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). 72 (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. 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. 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. 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. Noncontrolling Interests 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 In addition to financial results reported in accordance with accounting principles generally accepted in the United States (“GAAP”), we have provided the non-GAAP financial measures of EBITDA and Adjusted EBITDA. These non-GAAP financial measures are not intended to be a substitute for those reported in accordance with GAAP. These measures may be different from non-GAAP financial measures used by other entities, even when similar terms are used to identify such measures. We define EBITDA as net income (loss) attributable to NGL Energy Partners LP, plus interest expense, income tax expense (benefit), and depreciation and amortization expense. We define Adjusted EBITDA as EBITDA excluding net unrealized gains and losses on derivatives, lower of cost or net realizable value adjustments, gains and losses on disposal or impairment of assets, gains and losses on early extinguishment of liabilities, equity-based compensation expense, acquisition expense, revaluation of liabilities, certain legal settlements and other. 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, 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. Further, EBITDA and Adjusted EBITDA, as we define them, may not be comparable to EBITDA, Adjusted EBITDA, or similarly titled measures used by other entities. 73 Other than for the TPSL, Mid-Con, and Gas Blending businesses, which are included in discontinued operations, and certain businesses within our Liquids Logistics segment, for purposes of our Adjusted EBITDA calculation, we make a distinction between realized and unrealized gains and losses on derivatives. During the period when a derivative contract is open, we record changes in the fair value of the derivative as an unrealized gain or loss. When a derivative contract matures or is settled, we reverse the previously recorded unrealized gain or loss and record a realized gain or loss. We do not draw such a distinction between realized and unrealized gains and losses on derivatives of the TPSL, Mid-Con, and Gas Blending businesses, which are included in discontinued operations, and certain businesses within our Liquids Logistics segment. The primary hedging strategy of these businesses is to hedge against the risk of declines in the value of inventory over the course of the contract cycle, and many of the hedges cover extended periods of time. The “inventory valuation adjustment” row in the reconciliation table reflects the difference between the market value of the inventory of these businesses 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. 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. 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, 2022 2021 2020 (in thousands) Net loss $ (184,101) $ (639,187) $ (398,780) Less: Net (income) loss attributable to noncontrolling interests (655) (632) 1,773 Net loss attributable to NGL Energy Partners LP (184,756) (639,819) (397,007) Interest expense 271,689 198,823 181,357 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 (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 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 Acquisition expense (4) 67 1,711 19,722 Revaluation of liabilities (5) (6,495) 6,261 9,194 Class D Preferred Unitholder consent fee (6) — 40,000 — Other (7) 9,909 11,135 15,788 Adjusted EBITDA $ 542,516 $ 447,651 $ 547,187 Adjusted EBITDA - Discontinued Operations (8) $ — $ (621) $ (42,270) 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. See “Non-GAAP Financial Measures” section above for a further discussion. 74 (3) Equity-based compensation expense in the table above may differ from equity-based compensation expense reported in Note 9 to our consolidated financial statements included in this Annual Report. 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. (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, 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). (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 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: Year Ended March 31, 2022 2021 2020 (in thousands) Reconciliation to consolidated statements of operations: Depreciation and amortization per EBITDA table $ 287,943 $ 314,476 $ 265,147 Intangible asset amortization recorded to cost of sales (281) (307) (349) Depreciation and amortization of unconsolidated entities (768) (756) (561) Depreciation and amortization attributable to noncontrolling interests 1,826 3,814 3,535 Depreciation and amortization attributable to discontinued operations — — (2,460) Depreciation and amortization per consolidated statements of operations $ 288,720 $ 317,227 $ 265,312 Reconciliation to consolidated statements of cash flows: Depreciation and amortization per EBITDA table $ 287,943 $ 314,476 $ 265,147 Amortization of debt issuance costs recorded to interest expense 16,960 13,419 10,901 Amortization of royalty expense recorded to operating expense 247 247 286 Depreciation and amortization of unconsolidated entities (768) (756) (561) Depreciation and amortization attributable to noncontrolling interests 1,826 3,814 3,535 Depreciation and amortization attributable to discontinued operations — — (2,460) Depreciation and amortization per consolidated statements of cash flows $ 306,208 $ 331,200 $ 276,848 The following table reconciles interest expense per the EBITDA table above to interest expense reported in our consolidated statements of operations for the periods indicated: Year Ended March 31, 2022 2021 2020 (in thousands) Interest expense per EBITDA table $ 271,689 $ 198,823 $ 181,357 Interest expense attributable to noncontrolling interests 16 47 — Interest expense attributable to unconsolidated entities (65) (71) (62) Interest expense attributable to discontinued operations — — (111) Interest expense per consolidated statements of operations $ 271,640 $ 198,799 $ 181,184 75 The following table summarizes additional amounts attributable to discontinued operations in the EBITDA table above for the periods indicated: Year Ended March 31, 2021 2020 (in thousands) Income tax (benefit) expense $ (53) $ 20 Inventory valuation adjustment $ 27 $ (27,526) Lower of cost or net realizable value adjustments $ (27) $ (991) 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. Year Ended March 31, 2022 Water Solutions Crude Oil Logistics Liquids Logistics Corporate and Other Consolidated (in thousands) 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 Amortization recorded to cost of sales — — 281 — 281 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 (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, net 718 353 711 472 2,254 Adjusted EBITDA attributable to unconsolidated entities 2,363 — 14 (145) 2,232 Adjusted EBITDA attributable to noncontrolling interest (2,212) — (528) — (2,740) Revaluation of liabilities (6,495) — — — (6,495) Other 921 9,064 (65) — 9,920 Adjusted EBITDA $ 341,958 $ 146,147 $ 96,564 $ (42,153) $ 542,516 76 Year Ended March 31, 2021 Water Solutions Crude Oil Logistics Liquids Logistics Corporate and Other Continuing Operations Discontinued Operations (TPSL, Mid-Con, Gas Blending) Consolidated (in thousands) Operating (loss) income $ (92,720) $ (304,330) $ 70,441 $ (64,144) $ (390,753) $ — $ (390,753) Depreciation and amortization 222,107 60,874 29,184 5,062 317,227 — 317,227 Amortization recorded to cost of sales — — 307 — 307 — 307 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 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 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 Adjusted EBITDA attributable to noncontrolling interest (1,647) — (2,887) — (4,534) — (4,534) 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) Other 2,751 8,317 100 — 11,168 — 11,168 Discontinued operations — — — — — (621) (621) Adjusted EBITDA $ 241,506 $ 144,543 $ 101,780 $ (39,557) $ 448,272 $ (621) $ 447,651 77 Year Ended March 31, 2020 Water Solutions Crude Oil Logistics Liquids Logistics Corporate and Other Continuing Operations Discontinued Operations (TPSL, Mid-Con, Gas Blending) Consolidated (in thousands) 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) 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 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 Acquisition expense 4,079 — — 15,643 19,722 — 19,722 Other (expense) income, net (448) 717 21 1,394 1,684 — 1,684 Adjusted EBITDA attributable to unconsolidated entities 2,152 — 24 (263) 1,913 — 1,913 Adjusted EBITDA attributable to noncontrolling interest (1,210) — (1,842) — (3,052) — (3,052) Revaluation of liabilities 9,194 — — — 9,194 — 9,194 Intersegment transactions (1) — — 2,099 — 2,099 — 2,099 Other 2,607 12,965 214 — 15,786 — 15,786 Discontinued operations — — — — — (42,270) (42,270) Adjusted EBITDA $ 232,322 $ 219,219 $ 182,044 $ (44,128) $ 589,457 $ (42,270) $ 547,187 (1) Amount reflects the transactions with TPSL, Mid-Con and Gas Blending that are eliminated in consolidation. Liquidity, Sources of Capital and Capital Resource Activities General 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 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. 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. Our borrowing needs vary during the year due in part to the seasonal nature of certain businesses within our Liquids Logistics segment. Our greatest working capital borrowing needs generally occur during the period of June through December, when we are building our natural gas liquids inventories in anticipation of the butane blending and heating seasons. Our working capital borrowing needs generally decline during the period of January through March, when the cash inflows from our Liquids Logistics segment are the greatest. 78 Cash Management We manage cash by utilizing a centralized cash management program that concentrates the cash assets of our operating subsidiaries in joint accounts for the purposes of providing financial flexibility and lowering the cost of borrowing, transaction costs and bank fees. Our centralized cash management program provides that funds in excess of the daily needs of our operating subsidiaries are concentrated, consolidated or otherwise made available for use by other entities within our consolidated group. All of our wholly-owned operating subsidiaries participate in this program. Under the cash management program, depending on whether a participating subsidiary has short-term cash surpluses or cash requirements, we provide cash to the subsidiary or the subsidiary provides cash to us. Short-Term Liquidity 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. For additional information related to our ABL Facility, see Note 7 to our consolidated financial statements included in this Annual Report. Long-Term Financing In addition to our principal sources of short-term liquidity discussed above, we expect to fund our longer-term financing requirements by issuing long-term notes, common units and/or preferred units, loans from financial institutions, asset securitizations or the sale of assets. Senior Secured Notes 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 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 2023 Notes, 6.125% Senior Unsecured Notes Due 2025 and 7.5% Senior Unsecured Notes Due 2026 (“2026 Notes”) (collectively, the “Senior Unsecured Notes”). Repurchases 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). 79 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 linefill and has been prepared on the accrual basis), acquisitions and other investments for the periods indicated. Capital Expenditures Other Year Ended March 31, Expansion (1) Maintenance Acquisitions Investments (2) (in thousands) 2022 $ 75,554 $ 59,468 $ — $ 350 2021 $ 90,920 $ 28,787 $ (901) $ 963 2020 $ 571,154 $ 61,353 $ 1,268,474 $ 21,218 (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. 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, 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. 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. 80 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. Cash Flows The following table summarizes the sources (uses) of our cash flows from continuing operations for the periods indicated: Year Ended March 31, Cash Flows Provided by (Used in): 2022 2021 2020 (in thousands) Operating activities, before changes in operating assets and liabilities $ 342,362 $ 295,301 $ 342,736 Changes in operating assets and liabilities (136,516) 10,462 39,690 Operating activities-continuing operations $ 205,846 $ 305,763 $ 382,426 Investing activities-continuing operations $ (212,408) $ (221,493) $ (1,737,620) Financing activities-continuing operations $ 5,555 $ (100,376) $ 978,833 Operating Activities-Continuing Operations. 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 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 81 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. 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; and • 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; and • 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: • a $1.3 billion in cash paid for acquisitions and investments in unconsolidated entities during the year ended March 31, 2020; and • 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. 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; 82 • $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; and • 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; and • 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. The decrease in net cash provided by financing activities was due primarily to: • 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 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; • $115.8 million paid in cash to repurchase a portion of our Senior Unsecured Notes during the year ended March 31, 2021; • a make-whole fee of $55.6 million related to the termination of our term credit agreement in February 2021; and • an increase 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. These decreases in net cash provided by 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; • $265.1 million in payments for the redemption of the 10.75% Class A Convertible Preferred Units during the year ended March 31, 2020; and • 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. Guarantor Summarized Financial Information NGL Energy Partners LP (parent) and NGL Energy Finance Corp. are co-issuers of the Senior Unsecured Notes (see Note 7 to our consolidated financial statements included in this Annual Report). Certain of our wholly owned subsidiaries (“Guarantor Subsidiaries”) have, jointly and severally, fully and unconditionally guaranteed the Senior Unsecured Notes. 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 83 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. We are not restricted from making investments in the Guarantor Subsidiaries and there are no significant restrictions on the ability of the Guarantor Subsidiaries to make distributions to NGL Energy Partners LP (parent). None of the assets of the Guarantor Subsidiaries (other than the investments in non-guarantor subsidiaries) are restricted net assets pursuant to Rule 4-08(e)(3) of Regulation S-X under the Securities Act of 1933, as amended. The rights of holders of our Senior Unsecured Notes against the Guarantor Subsidiaries may be limited under the U.S. Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law. The following is the summarized financial information for NGL Energy Partners LP (parent) and the Guarantor Subsidiaries on a combined basis after elimination of intercompany transactions, which includes related receivable and payable balances, and the investment in and equity earnings from the non-guarantor subsidiaries. This summarized financial information is provided in accordance with the reporting requirements of Rule 13-01 under Securities and Exchange Commission Regulation S-X. Balance sheet information: NGL Energy Partners LP (Parent) and Guarantor Subsidiaries March 31, 2022 (in thousands) ASSETS: Current assets $ 1,544,169 Noncurrent assets (1)(2) $ 4,496,111 LIABILITIES AND EQUITY (3): Current liabilities $ 1,276,612 Noncurrent liabilities $ 3,524,560 Class D Preferred Units $ 551,097 (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. (3) There are no noncontrolling interests held at the co-issuers or Guarantor Subsidiaries. Statement of operations information: NGL Energy Partners LP (Parent) and Guarantor Subsidiaries Twelve Months Ended March 31, 2022 (in thousands) Revenues $ 7,945,689 Operating income $ 80,096 Loss from continuing operations $ (188,236) Net loss (1) $ (188,236) Loss from continuing operations allocated to common unitholders $ (292,765) (1) There are no noncontrolling interests held at the co-issuers or Guarantor Subsidiaries. 84 Environmental Legislation See Part I, Item 1–“Business–Government Regulation–Greenhouse Gas Regulation” for a discussion of proposed environmental legislation and regulations that, if enacted, could result in increased compliance and operating costs. However, at this time we cannot predict the structure or outcome of any future legislation or regulations or the eventual cost we could incur in compliance. Recent Accounting Pronouncements 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 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 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. Impairment of Goodwill 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 value, we calculate the fair value of the reporting unit. Otherwise, further testing is not required. 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. 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. 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. 85 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. See Item 7A. 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. 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 86 over time. 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. In addition to the obligations described above, we may be obligated to remove facilities or perform other remediation upon retirement of certain other assets. However, the fair value of the asset retirement obligation cannot currently be reasonably estimated because the settlement dates are indeterminable. We will record an asset retirement obligation for these assets in the periods in which settlement dates are reasonably determinable. Acquisitions 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. Estimating fair values can be complex and subject to significant business judgment. We must also identify and include in the allocation all acquired tangible and intangible assets that meet certain criteria, including assets that were not previously recorded by the acquired entity. The estimates most commonly involve property, plant and equipment and intangible assets, including those with indefinite lives. 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. Pursuant to GAAP, an entity is allowed a reasonable period of time (not to exceed one year) to obtain the information necessary to identify and measure the fair value of the assets acquired and liabilities assumed in a business combination. Inventories Our inventories consist of crude oil, natural gas liquids, diesel, ethanol and biodiesel. Our inventories are valued at the lower of cost or net realizable value, with cost determined using either the weighted-average cost or the first in, first out (FIFO) methods, including the cost of transportation and storage, and with net realizable value defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. In performing this analysis, we consider fixed-price forward commitments. 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. 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. The net realizable values of these commodities change on a daily basis as supply and demand conditions change. 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.