What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-05-31 compared with 2022-06-06 · 363 added, 399 removed, 736 unchanged (51% of the section changed)

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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;

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

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

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

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

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

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

Recent Developments

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.

NGL Energy Holdings LLC serves as our general partner (“GP”).

At March 31, 2023, our operations included three segments as discussed below.

Water Solutions

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

Our activities in this segment are underpinned

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

We operate in a number of the most prolific crude oil and natural gas producing areas 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.

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

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

With a system that handled approximately 849.5 million barrels of produced water across its areas of operation during the year ended March 31, 2023, 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.

Recently, our disposal volumes have been positively impacted by the increase in the level of crude oil production, particularly in the Permian and DJ Basins, due to increasing or stable crude oil prices.

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

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

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

Our Water Solutions segment generated operating income of $198.9 million during the year ended March 31, 2023, compared to operating income of $94.9 million during the year ended March 31, 2022.

Crude Oil Logistics

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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).

Our Crude Oil Logistics segment generated operating income of $81.5 million during the year ended March 31, 2023, compared to operating income of $45.0 million during the year ended March 31, 2022.

Liquids Logistics

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These operations are conducted through our 25 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 also provide services for marine exports of butane through our facility located in Chesapeake, Virginia, and we own a propane pipeline system in Michigan.

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

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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.

Our Liquids Logistics segment generated operating income of $66.6 million during the year ended March 31, 2023, compared to an operating loss of $8.4 million during the year ended March 31, 2022.

The operating loss generated during the year ended March 31, 2022 included a net loss of $60.1 million related to the sale of Sawtooth Caverns, LLC (“Sawtooth”) (see Note 17 to our consolidated financial statements included in this Annual Report on Form 10-K (“Annual Report”)) and a net loss of $11.8 million related to the sale of another terminal.

Other Developments

Global Pandemic, Ukraine War and Market Update

Since March 2020, and throughout the last two years, global markets and commodity prices have been extremely volatile due to the impacts from the COVID-19 pandemic, with further impacts on volatility caused by the war in Ukraine that began in February 2022.

While we have seen continued recovery in commodity prices since the beginning of the pandemic, there is still an element of volatility that we expect to continue at least for the near-term and possibly longer, due to the uncertainty of the pandemic, the war in Ukraine and the result of any economic recession or depression that has occurred or may occur in the future.

This volatility could negatively impact future prices for oil, natural gas, petroleum products and industrial products.

In addition, if we see a continuation or acceleration of fiscal year 2023’s inflationary conditions, rising interest rates, supply chain disruptions and tight labor markets, then we may also see higher costs of operating our assets and executing on our capital projects in fiscal year 2024.

During fiscal year 2023, the Russia-Ukraine conflict may have amplified inflation and supply chain constraints that were already constraining and complicating the rebound of the global economy.

In an effort to curb inflation, the U.S.

Federal Reserve raised interest rates during fiscal year 2023 and most recently on May 3, 2023.

Federal Reserve may implement additional increases in fiscal year 2024, which will increase the cost of our ABL Facility (as defined herein).

On the other hand, our ability to pass along rate increases reflecting changes in producer and/or consumer price indices to our customers, under our contracts, should help to counterbalance the impact of inflation on our costs.

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

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 the affected areas, the diverse locations of our disposal facilities, and the connectivity of our system, our ability to dispose of produced water has not been materially impacted by these actions.

Consolidated Results of Operations

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Other income (expense), net 28,748 2,254 (36,503)

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

Income (loss) from continuing operations before income taxes 52,763 (183,130) (640,809)

Income tax (expense) benefit (271) (971) 3,391

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

Income (loss) from continuing operations 52,492 (184,101) (637,418)

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

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

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)

Net income (loss) 52,492 (184,101) (639,187)

Net income attributable to noncontrolling interests (1,106) (655) (632)

Net income (loss) attributable to NGL Energy Partners LP $ 51,386 $ (184,756) $ (639,819)

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.

Repurchases of Senior Unsecured Notes

During the three months ended March 31, 2023, we repurchased or redeemed all $301.9 million of our outstanding 7.5% senior unsecured notes due 2023 (“2023 Notes”) and we repurchased $11.0 million of the 7.5% senior unsecured notes due 2026 (“2026 Notes”) (see Note 7 to our consolidated financial statements included in this Annual Report).

Acquisitions and Dispositions

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

On March 30, 2023, we sold our marine assets and on March 31, 2023, we sold certain saltwater disposal assets in the Midland Basin (see Note 17 to our consolidated financial statements included in this Annual Report).

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).

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

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

We generally 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.”

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Total expenses 498,114 450,015 48,099

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

Segment operating income $ 198,924 $ 94,851 $ 104,073

Produced water processed (barrels per day)

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Operating expenses for produced water processed ($/barrel) (2) $ 0.25 $ 0.27 $ (0.02)

(1) During the three months ended March 31, 2023, approximately 33,480 barrels of skim oil were stored and will be sold during fiscal year 2024.

(2) Total produced water barrels processed during the years ended March 31, 2023 and 2022 were 849,477,938 and 656,240,083, 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.

In addition, there was an increase in payments made by certain producers for committed volumes not delivered.

Service fees for produced water processed ($/barrel) also benefited from these deficiency payments.

These were 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

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

The increase was due primarily to higher volumes of skim oil barrels sold due to an increase in produced water volumes processed as well as higher realized crude oil prices received from the sale of skim oil barrels.

Additionally, an increase in the number of wells completed in our area of operations during the period with increased flowback activity resulted in higher skim oil volumes per barrel of produced water processed.

Recycled Water Revenues.

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

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

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, partially offset by lower pricing for 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.

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

The decrease was due primarily to lower sales of brackish non-potable water related to the termination of a joint marketing agreement as well as our customers transitioning from brackish non-potable water to recycled water, partially offset by reimbursements from construction projects in the current period.

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.

The decrease was due primarily to lower purchases of brackish non-potable water from third-parties to meet customer needs due to the termination of a joint marketing agreement.

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, 2023, we had $4.5 million of net unrealized gains on derivatives and $8.8 million of net realized losses on derivatives.

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.

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.

Utility, royalty and chemical expenses, which are three of our largest variable expenses, were not impacted by the rise in inflation due to negotiated long-term utility contracts with fixed rates, royalty contracts with no escalation clauses and a fixed chemical expense per barrel with our chemical provider.

The increase was also due to higher incentive compensation expense, higher severance taxes due to the increase in revenue from recovered crude oil and higher repairs and maintenance expense due to timing of repairs and the operation of temporary booster stations.

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.

The decrease was due primarily to certain long-term assets being fully amortized or impaired during the years ended March 31, 2022 and 2023.

This decrease was 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);

• 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, 2023, we recorded a net loss of $26.3 million primarily related to the sale of certain assets and a net loss of $21.8 million to write down the value of an inactive saltwater disposal facility and damaged equipment at another saltwater disposal facility, as well as the abandonment of certain capital projects and the retirement of certain assets.

We also recorded a loss of $0.5 million related to the termination of a joint marketing agreement.

In addition, we recorded a gain of $2.1 million from an insurance recovery for a saltwater disposal facility damaged in a prior period.

In addition, we recorded a gain of $4.3 million on the sale of certain land and a landfill permit.

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, 2023, there was an increase in expense for the valuation of our contingent consideration liabilities related to royalty agreements acquired as part of certain business combinations due primarily to higher expected production from new customers, resulting in an increase to the expected future royalty payment.

During the year ended March 31, 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.

Crude Oil Logistics

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Cost of sales-excluding impact of derivatives 2,274,089 2,271,973 2,116

Derivative loss 92,027 49,314 42,713

Derivative (gain) loss (14,565) 92,027 (106,592)

Operating expenses 50,154 54,606 (4,452)

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Depreciation and amortization expense 46,577 48,489 (1,912)

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

Loss (gain) on disposal or impairment of assets, net 31,086 (3,101) 34,187

Total expenses 2,391,888 2,471,531 (79,643)

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

Segment operating income $ 81,524 $ 45,033 $ 36,491

Crude oil sold (barrels) 25,497 31,091 (5,594)

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(2) Information is presented as of March 31, 2023 and March 31, 2022, respectively.

The decrease in crude oil inventory was due primarily to capitalizing additional crude oil barrels as linefill as a result of increased requirements.

(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.

The decrease was due primarily to a reduction in sales volumes primarily due to lower production in the DJ Basin and increased buy/sell transactions during the year ended March 31, 2023.

Buy/sell transactions are transactions in which we 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 netted for these transactions.

The decrease was partially offset by an increase in crude oil prices during the year ended March 31, 2023, compared to the year ended March 31, 2022.

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.

The increase was primarily due to an increase in charter days and day rates within our marine transportation business as demand increased.

On March 30, 2023, we sold our marine assets (see Note 17 to our consolidated financial statements included in this Annual Report).

During the year ended March 31, 2023, physical volumes on the Grand Mesa Pipeline averaged approximately 76,000 barrels per day, compared to approximately 78,000 barrels per day for the year ended March 31, 2022.

Both contracted and non-contracted volumes decreased as overall production in the DJ Basin declined in part due to producer permitting issues.

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.

The increase was due primarily to an increase in crude oil prices during the year ended March 31, 2023, compared to the year ended March 31, 2022 which was offset by a decrease in sales volumes.

Derivative (Gain) Loss.

Our cost of sales during the year ended March 31, 2023 included $35.5 million of net realized losses on derivatives, driven by increasing crude oil prices, and $50.1 million of net unrealized gains on derivatives.

The amounts for the year ended March 31, 2023 included net realized losses of $13.1 million and net unrealized gains of $23.8 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, 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 net unrealized gains of $45.0 million associated with derivative instruments related to our hedge of the CMA Differential Roll.

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.

The decrease was primarily due to the sale of higher priced inventory into a market in which prices were declining for most of the year.

In the prior year, lower priced inventory was sold into a market in which prices were rising for most of the year.

In addition, we incurred increased freight costs during the current period.

This decrease in product margin was offset by higher contracted rates with certain producers as well as increased differentials on certain other sales contracts during the first nine months of the current year.

Crude oil product margin calculations do not include gains and losses from derivatives that may offset the movement in the physical margin.

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.

The decrease was primarily related to the sale of the trucking business during the year ended March 31, 2022, and lower lease expense during the current period due to the completion of the renegotiation of certain leases.

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 .

The decrease was due primarily to the sale of our trucking assets during the year ended March 31, 2022.

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

During the year ended March 31, 2023, we recorded an impairment of $23.1 million related to an underperforming crude oil terminal and a loss of $8.0 million on the sale of our marine assets.

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).

Liquids Logistics

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Cost of sales-excluding impact of derivatives 1,103,786 1,313,765 (209,979)

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

Derivative loss (gain) 11,642 (20,519) 32,161

Product margin 45,701 32,695 13,006

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Cost of sales-excluding impact of derivatives 776,845 794,180 (17,335)

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

Derivative (gain) loss (22,976) 18,690 (41,666)

Product margin 19,764 50,478 (30,714)

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Cost of sales-excluding impact of derivatives 970,176 748,392 221,784

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

Derivative loss 24,483 15,812 8,671

Product margin 31,074 26,921 4,153

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Total expenses 82,611 153,594 (70,983)

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

Segment operating income (loss) $ 66,624 $ (8,441) $ 75,065

Year Ended March 31,

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Propane inventory (gallons) (2) 48,379 37,719 10,660

Propane storage capacity leased to third parties (gallons) (2)(3) — 53,947 (53,947)

Butane sold (gallons) 539,658 588,032 (48,374)

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Cost per butane sold ($/gallon) (3) $ 1.440 $ 1.351 $ 0.089

Butane product margin ($/gallon) (4) $ 0.117 $ 0.074 $ 0.043

Butane product (loss) margin ($/gallon) (3) $ (0.006) $ 0.117 $ (0.123)

Butane inventory (gallons) (2) 17,409 19,825 (2,416)

Butane storage capacity leased to third parties (gallons) (2)(3) — 56,700 (56,700)

Other products sold (gallons) 391,723 376,906 14,817

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Other products inventory (gallons) (2) 12,893 18,614 (5,721)

(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.

(1) Revenue includes $1.3 million of intersegment sales during the year ended March 31, 2022 that is eliminated in our consolidated statement of operations.

(2) Information is presented as of March 31, 2023 and March 31, 2022, 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.

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

Refined 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 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.

This was partially offset by a decrease in volumes primarily related to tighter supply in certain markets.

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.

Our Refined Products product margin during the year ended March 31, 2023 included realized losses of $1.3 million and the year ended March 31, 2022 included realized losses of $2.9 million.

Refined Products product margins, excluding the impact of derivatives, for the year ended March 31, 2023 increased from the year ended March 31, 2022 due to higher demand in several markets that were experiencing tighter supply as well as being well positioned from a supply and inventory perspective during the continued period of extreme volatility in commodity prices.

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

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.

The decreases in revenues and cost of sales, excluding the impact of derivatives, were due primarily to lower propane prices and a decline in volumes.

Propane prices have declined along with the decline in global energy prices as a result of the increase in interest rates to curb inflation and the overall concerns in the economy about a potential recession, as well as due to an increase in the days of domestic supply available, combined with lower demand due to the warmer heating season.

Sales volumes decreased due to the decommissioning of a critical underground storage facility in the Midwest in April 2022, which were offset by an increase in sales volumes in the state of Michigan due to the completion of the Ambassador Pipeline.

Propane Derivative Loss (Gain).

Our wholesale propane cost of sales included $6.9 million of net unrealized losses on derivatives and $4.7 million of net realized losses on derivatives during the year ended March 31, 2023.

During the year ended March 31, 2022, our cost of wholesale propane sales included $2.0 million of net unrealized gains on derivatives and

$18.5 million of net realized gains on derivatives.

Propane product margins, excluding the impact of derivatives, increased as we replaced our inventory in a lower price environment and we realized the margin associated with our forward fixed-priced sales contracts and lower inventory costs due to the decreasing prices throughout the year ended March 31, 2023.

During the year ended March 31, 2022, we experienced the opposite situation and were replacing our inventory when prices were rising.

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.

The decreases in revenues and cost of sales, excluding the impact of derivatives, were due to lower volumes due to weaker spot demand for the product, especially exports, and lower prices.

The softening of export economics continued throughout the year, which led to lower domestic prices as less product was being moved abroad.

Butane Derivative (Gain) Loss.

Our cost of butane sales during the year ended March 31, 2023 included $3.9 million of net unrealized gains on derivatives and $19.1 million of net realized gains on derivatives.

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

Butane product margins, excluding the impact of derivatives, declined during the year ended March 31, 2023, as compared to the year ended March 31, 2022, due to the declining prices, lower export demand and increased freight charges due to higher fuel surcharges.

In addition, we were also negatively impacted by lower location differentials as the product we contracted to purchase in the beginning of the season was continuing to compete with product purchased in the discounted market.

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.

The increases in revenues and cost of sales, excluding the impact of derivatives, were due to an increased supply of biodiesel to sell during the current year compared to the prior year period due to favorable supply contracts entered into in the prior year.

The increase was also related to the increase in asphalt revenues due to increased supply.

Other Products Derivatives Loss.

Our derivatives of other products included $24.6 million of net realized losses on derivatives and $0.1 million unrealized gains on derivatives during the year ended March 31, 2023.

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

Other product sales product margins, excluding the impact of derivatives, during the year ended March 31, 2023 increased due to an increase in 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.

Service Revenues and Cost of Sales.

This revenue includes storage, terminaling and transportation services income.

The decrease during the year ended March 31, 2023 was due to the disposition of Sawtooth in June 2021 as well as less throughput in certain of our propane and butane terminals.

Cost of sales increased due to higher chemical costs at our natural gas liquids 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.

The decrease was primarily related to lower incentive compensation due to lower operating results.

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.

The decrease was primarily due to the disposition of Sawtooth in June 2021 as well as lower amortization expense due to certain intangible assets being fully amortized as of March 31, 2023.

Loss on Disposal or Impairment of Assets, Net.

During the year ended March 31, 2023, we recorded a net loss of $10.1 million due to the impairment of several underperforming natural gas liquids terminals.

In addition, during the year ended March 31, 2023, we recorded a net loss of $0.2 million related to the sale and retirement of other assets.

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

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

Corporate and Other

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(in thousands)

Other revenues:

Revenues $ — $ 1,255 $ (1,255)

Cost of sales

Loss — (561) 561

Derivative loss $ 1,181 $ — $ 1,181

General and administrative expenses 50,978 41,491 9,487

Depreciation and amortization expense 6,662 6,959 (297)

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

Gain on disposal or impairment of assets, net (912) (50) (862)

Total expenses 56,728 48,400 8,328

Operating loss $ (57,909) $ (48,400) $ (9,509)

Cost of Sales - Derivative Loss.

Amount for the year ended March 31, 2023 represents an unrealized loss on crude oil options entered into to protect our liquidity position and leverage from a significant increase in commodity prices that drive our working capital demands, as we experienced in the prior fiscal year.

These positions will expire between April 2023 and November 2023.

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).

The increase during the year ended March 31, 2023 was due to increased incentive compensation expense compared to the prior year and an increase in equity-based compensation primarily due to a reversal of an incentive compensation accrual during the year ended March 31, 2022.

Depreciation and Amortization Expense.

Depreciation and amortization expense during the year ended March 31, 2023 was consistent with the year ended March 31, 2022.

Gain on Disposal or Impairment of Assets, Net.

During the year ended March 31, 2023, we sold an airplane for a gain of $1.3 million, which was partially offset by a loss recorded to write-off the remaining amount of a loan receivable, due July 31, 2023, that was prepaid by the debtor (as discussed further in Note 2 to our consolidated financial statements included in this Annual Report) and an impairment loss recorded on the sublease of a building we were no longer using.

Equity in Earnings of Unconsolidated Entities

Equity in earnings of unconsolidated entities was $4.1 million during the year ended March 31, 2023, compared to $1.4 million during the year ended March 31, 2022.

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.

The increase of $2.7 million during the year ended March 31, 2023 was due primarily to higher earnings from certain membership interests related to specific land and water services operations and a lower loss from our interest in an aircraft company.

Interest Expense

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Senior unsecured notes 76,288 87,766 (11,478)

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

Revolving credit facility 17,111 10,077 7,034

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

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

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

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

Gain (Loss) on Early Extinguishment of Liabilities, Net

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

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

Other indebtedness 11,559 3,087 8,472

Total debt interest expense 258,708 254,680 4,028

Amortization of debt issuance costs 16,737 16,960 (223)

Total interest expense $ 275,445 $ 271,640 $ 3,805

The debt interest expense increased $4.0 million during the year ended March 31, 2023 due primarily to a settlement of a claim for the failure to pay interest on royalty payments, as discussed further in Note 8 to our consolidated financial statements included in this Annual Report and an increase in our revolving credit facility interest rates in the current year.

increases in the current year were offset by lower interest expense resulting from repurchases of a portion of our Senior Unsecured Notes (as defined herein).

Gain on Early Extinguishment of Liabilities, Net

Gain on early extinguishment of liabilities, net was $6.2 million during the year ended March 31, 2023, compared to $1.8 million during the year ended March 31, 2022.

During the years ended March 31, 2023 and 2022, the net gain (inclusive of debt issuance costs written off) primarily relates to the early extinguishment of a portion of the outstanding Senior Unsecured Notes.

In addition, we paid a prepayment premium of $1.6 million and wrote off debt issuance costs of less than $0.1 million related to the payoff of an outstanding equipment loan.

For the year ended March 31, 2022, the net gain was 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.

Other Income, Net

Other income, net was $28.7 million during the year ended March 31, 2023, compared to other income, net of $2.3 million during the year ended March 31, 2022.

The increase in other income, net of $26.4 million during the year ended March 31, 2023 was due primarily to the settlement of a dispute associated with commercial activities not occurring in the current reporting periods.

See Note 17 to our consolidated financial statements included in this Annual Report for a further discussion.

Income Tax Expense

Income tax expense was $0.3 million during the year ended March 31, 2023, compared to income tax expense of $1.0 million during the year ended March 31, 2022.

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

Noncontrolling Interests

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Noncontrolling interest income was $1.1 million during the year ended March 31, 2023, compared to $0.7 million during the year ended March 31, 2022.

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.

The increase of $0.4 million during the year ended March 31, 2023 was due primarily to higher income from certain water solutions operations during the year ended March 31, 2023 and a loss of $0.2 million from the operations of Sawtooth during the year ended March 31, 2022, partially offset by lower income from certain recycling operations during the year ended March 31, 2023.

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

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

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

Year Ended March 31,

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

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

Derivative loss 7,640 7,065 575

Operating expenses 175,022 142,371 32,651

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

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

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

Produced water processed (barrels per day)

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

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

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

Water Disposal Service Fee Revenues.

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

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

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

Recovered Crude Oil Revenues.

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

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

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

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.

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).

Derivative Loss.

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, 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.

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

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

Operating and General and Administrative Expenses .

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

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

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

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

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.

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

Loss on Disposal or Impairment of Assets, Net.

In addition, we recorded a gain of $4.3 million on the sale of certain land and a landfill permit.

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

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

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

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

• 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.

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

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

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

Derivative loss 92,027 49,314 42,713

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

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

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

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

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

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

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

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

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Crude Oil Sales Revenues.

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

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

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

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

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

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

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

Crude Oil Transportation and Other Revenues.

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

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

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

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

The decline was primarily due to the court approved rejection of the Extraction Oil & Gas, Inc.

(“Extraction”) transportation agreement (as part of their bankruptcy) as well as decreased production in the DJ Basin.

Cost of Sales-Excluding Impact of Derivatives.

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

Derivative Loss (Gain) .

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

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

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

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

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

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

Derivative Loss.

The amounts for the year ended March 31, 2022 includes net realized losses of $83.5 million and net unrealized gains of $45.0

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

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

Crude Oil Product Margin .

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

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

Operating and General and Administrative Expenses .

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

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

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

Depreciation and Amortization Expense.

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

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

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

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

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

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

Liquids Logistics

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

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

Derivative loss 2,907 930 1,977

Product margin 20,263 14,664 5,599

2 unchanged sentences

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

Derivative loss 10,994 3,536 7,458

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

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

2 unchanged sentences

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

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

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

Product margin 50,478 26,110 24,368

2 unchanged sentences

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

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

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

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

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Total expenses 153,594 96,314 57,280

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

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

Year Ended March 31,

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

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

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

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

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

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

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

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

Refined Products Derivative Loss (Gain).

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

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

Refined 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 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 product margin during the year ended March 31, 2022 included realized losses of $2.9 million and the year ended March 31, 2021 included realized losses 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, excluding the impact of derivatives, for the year ended March 31, 2022 increased from the year ended March 31, 2021 primarily due to supply being short during the three months ended December 31, 2021, as a result of extended refinery downtime in certain markets in which we compete, and being well positioned during the extreme volatility surrounding global events occurring in the three months ended March 31, 2022.

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

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

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

Propane Derivative Loss .

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

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

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

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

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

This was partially offset by lower propane volumes sold driven by reduced demand due to warmer than normal autumn temperatures, which resulted in

lower product demand for crop drying, unusually warm weather during the early winter months and reduced volumes due to the loss of two producer services agreements.

Propane Derivative (Gain) Loss .

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

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

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

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

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

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

Butane Derivative Loss (Gain) .

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

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

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

The increases in revenues and cost of sales, excluding the impact of derivatives, 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, excluding the impact of derivatives, were higher during year ended March 31, 2022 than during the year ended March 31, 2021 due primarily to a tight supply market, driven by an increase in demand for exports and an increase in blending demand, which are driving favorable sales differentials.

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

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

Other Products Derivative Gain .

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

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

Other Products Derivatives Loss (Gain) .

Our derivatives of other products included $15.8 million of net realized losses on derivatives and there was 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, excluding the impact of derivatives, 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.

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

Service Revenues.

This revenue includes storage, terminaling and transportation services income.

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

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

Operating and General and Administrative Expenses.

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

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

Depreciation and Amortization Expense.

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

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

Loss on Disposal or Impairment of Assets, Net.

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

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

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

Corporate and Other

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Loss — (561) 561

Operating expenses — 318 (318)

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

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

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

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

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

1 unchanged sentence

General and Administrative Expenses .

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

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

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

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

Loss on Disposal or Impairment of Assets, Net.

During the year ended March 31, 2021, we recorded a net loss of $11.0 million, which was primarily due to the write-off of a loan receivable 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.

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

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

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

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

Equity in Earnings of Unconsolidated Entities

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 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.

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

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(in thousands)

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

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

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

Senior secured notes 24,344 — 24,344

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

Total debt interest expense 254,680 185,379 69,301

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

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).

(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.

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

The debt interest expense increased $69.3 million during the year ended March 31, 2022 due primarily 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.

Gain (Loss) on Early Extinguishment of Liabilities, Net

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 (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.

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 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 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.

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.

Non-GAAP Financial Measures

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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 also include in Adjusted EBITDA certain inventory valuation adjustments related to 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”), 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 income (loss), income (loss) from continuing operations before income taxes, cash flows from operating activities, or any other measure of financial performance calculated in accordance with GAAP, as those items are used to measure operating performance, liquidity or the ability to service debt obligations.

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

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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.

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.

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.

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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:

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

Year Ended March 31,

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(in thousands)

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

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)

Net income (loss) $ 52,492 $ (184,101) $ (639,187)

Net income attributable to noncontrolling interests (1,106) (655) (632)

Net income (loss) attributable to NGL Energy Partners LP 51,386 (184,756) (639,819)

Interest expense 275,505 271,689 198,823

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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.

(2) Amounts represent the difference between the market value of the inventory at the balance sheet date and its cost.

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

(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.

(3) Amounts represent expenses we incurred related to legal and advisory costs associated with acquisitions.

(4) Amounts 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.

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

(6) Amounts represent non-cash operating expenses related to our Grand Mesa Pipeline, unrealized gains/losses on marketable securities and accretion expense for asset retirement obligations.

Also, the amount for the year ended March 31, 2023 includes the write off of an asset acquired in a prior period acquisition.

(7) Amount includes the operations of TPSL, Gas Blending and Mid-Con.

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

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(in thousands)

Reconciliation to consolidated statements of operations:

Depreciation and amortization per EBITDA table $ 273,544 $ 287,943 $ 314,476

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Depreciation and amortization attributable to noncontrolling interests 1,134 1,826 3,814

Depreciation and amortization attributable to discontinued operations — — (2,460)

Depreciation and amortization per consolidated statements of operations $ 273,621 $ 288,720 $ 317,227

Reconciliation to consolidated statements of cash flows:

Depreciation and amortization per EBITDA table $ 273,544 $ 287,943 $ 314,476

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Depreciation and amortization attributable to noncontrolling interests 1,134 1,826 3,814

Depreciation and amortization attributable to discontinued operations — — (2,460)

Depreciation and amortization per consolidated statements of cash flows $ 290,879 $ 306,208 $ 331,200

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Interest expense per EBITDA table $ 275,505 $ 271,689 $ 198,823

Interest expense attributable to noncontrolling interests 16 47 —

Interest expense attributable to unconsolidated entities (60) (65) (71)

Interest expense attributable to discontinued operations — — (111)

Interest expense attributable to noncontrolling interests — 16 47

Interest expense per consolidated statements of operations $ 275,445 $ 271,640 $ 198,799

The following table summarizes additional amounts attributable to discontinued operations in the EBITDA table above for the periods indicated:

Year Ended March 31,

(in thousands)

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

The following table summarizes additional amounts attributable to discontinued operations in the EBITDA table above for the year ended March 31, 2021 (in thousands):

Income tax benefit $ (53)

Inventory valuation adjustment $ 27

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Logistics Liquids Logistics Corporate

Other Consolidated

and Other Consolidated

(in thousands)

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Amortization recorded to cost of sales — — 274 — 274

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

Net unrealized (gains) losses on derivatives (4,464) (50,104) 2,951 1,179 (50,438)

CMA Differential Roll net losses (gains) — 3,547 — — 3,547

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Acquisition expense 29 — — 89 118

Other income, net 718 353 711 472 2,254

Other income (expense), net 70 330 (1,665) 30,013 28,748

Adjusted EBITDA attributable to unconsolidated entities 4,759 — 27 176 4,962

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Logistics Liquids Logistics Corporate

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

and Other Consolidated

(in thousands)

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

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

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

1 unchanged sentence

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

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

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

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

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

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

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

Acquisition expense 4 — — 63 67

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

Other income, net 718 353 711 472 2,254

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

1 unchanged sentence

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

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

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

Other 921 9,064 (65) — 9,920

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

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

2 unchanged sentences

Logistics Liquids Logistics Corporate

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

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

(in thousands)

2 unchanged sentences

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

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

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

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

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

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

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

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

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

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

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

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

1 unchanged sentence

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

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

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

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Liquidity, Sources of Capital and Capital Resource Activities

Our principal sources of liquidity and capital resource requirements are the cash flows from our operations, borrowings under our 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.

Our principal sources of liquidity and capital resource requirements are cash flows from our operations, borrowings under our ABL Facility, issuing long-term notes, common and/or preferred units, loans from financial institutions, asset securitizations or the sale of assets.

We expect our primary cash outflows to be related to 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.

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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.

As of March 31, 2023, our total leverage ratio was 4.56 to 1.00.

The cash savings from the suspension of the distributions have accelerated the deleveraging of our balance sheet, increased our liquidity and should continue to 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.

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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.

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.

In addition, our working capital borrowing needs vary with changes in commodity prices.

A significant increase in commodity prices could drive up our working capital demands and limit our ability to continue to delever our balance sheet and restrict our financial flexibility.

To protect our liquidity and leverage, we entered into hedges that mitigate this exposure during the time of our fiscal year when we are building inventory.

Cash Management

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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.

Our principal sources of short-term liquidity consist of cash flows from our operations and borrowings under our ABL Facility, which we believe will provide liquidity to operate our business, manage our working capital requirements and repay current maturities.

The ABL Facility commitments are $600.0 million which includes a sub-limit for letters of credit of $250.0 million.

At March 31, 2023, $138.0 million had been borrowed under the ABL Facility and we had letters of credit outstanding of approximately $152.0 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.

As of March 31, 2023, our current assets exceeded our current liabilities by approximately $182.3 million.

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.

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

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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”).

The senior unsecured notes include the 6.125% senior unsecured notes due 2025 (“2025 Notes”), which mature on March 1, 2025 and the 2026 Notes, which mature on April 15, 2026 (collectively, the “Senior Unsecured Notes”).

During the year ended March 31, 2023, we repurchased $272.3 million of the 2023 Notes and $12.5 million of the 2026 Notes at a cumulative cash cost of $275.9 million (excluding payments of accrued interest).

On February 23, 2023, we called the remaining 2023 Notes for redemption.

The aggregate outstanding principal amount was $203.4 million.

On March 30, 2023, registered holders of the 2023 Notes received a redemption payment equal to 100% of the principal amount of the 2023 Notes, plus all accrued and unpaid interest as of the redemption date.

As of March 1, 2023, we have the right to redeem all or a portion of the outstanding 2025 Notes at 100% of the principal amount plus accrued and unpaid interest.

As of April 15, 2024, we will have the right to redeem all or a portion of the outstanding 2026 Notes at 100% of the principal amount plus accrued and unpaid interest.

Other Long-term Debt

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

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

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

The equipment loan was paid off on March 30, 2023 when we sold our marine assets (see Note 17 to our consolidated financial statements included in this Annual Report).

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

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2021 $ 90,920 $ 28,787 $ (901) $ 963

(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.

(1) Amount for the year ended March 31, 2021 includes $18.2 million of transactions classified as acquisitions of assets.

(2) Amounts relate to contributions made to unconsolidated entities.

Capital expenditures for the year ending March 31, 2024 are expected to be $125 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.

The board of directors of our GP 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.

The board of directors of our GP 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.

Our contractual obligations primarily consist of purchase commitments, outstanding debt principal and interest obligations, 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.

As of March 31, 2023, our purchase

commitments totaled $7.7 billion, with $5.4 billion due within one year.

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

Debt Principal and Interest Obligations

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

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

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

As of March 31, 2023, our aggregate principal amount of outstanding debt was $2.9 billion, with nothing due within one year.

Our interest obligation on the debt was $588.6 million, with $213.0 million due within one year, based on our outstanding balances and interest rates as of March 31, 2023.

Operating Lease Obligations

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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.

As of March 31, 2023, our future minimum throughput payments were $53.6 million, with $26.9 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.

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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.

As of March 31, 2023, our asset retirement obligations were $35.2 million, of which we expect to settle $0.3 million during the next fiscal 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.

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

As of March 31, 2023, our commitment obligations were $22.1 million, with $10.3 million due within one year.

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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

through February or March.

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.

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 increase in net cash provided by operating activities during the year ended March 31, 2023 was due primarily to fluctuations in working capital, particularly accounts receivable, inventory and accounts payable, during the year ended March 31, 2023 and increased earnings from operations.

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 provided by investing activities was $64.2 million during the year ended March 31, 2023, compared to net cash used in investing activities of $212.4 million during the year ended March 31, 2022.

The decrease in net cash used in investing activities was due primarily to:

• a $206.5 million decrease in payments to settle derivatives;

• a $75.6 million increase in proceeds received from the sale of certain assets and businesses primarily related to the sale of our marine assets and certain saltwater disposal assets in March 2023 and the sale of our interest in Sawtooth in June 2021 (see Note 2, Note 4 and Note 17 to our consolidated financial statements included in this Annual Report).

These decreases in net cash used in investing activities were partially offset by an increase in capital expenditures from $142.4 million (includes payment of amounts accrued as of March 31, 2021) during the year ended March 31, 2022 to $147.8 million (includes payment of amounts accrued as of March 31, 2022) during the year ended March 31, 2023 due primarily to the timing of the expenditures in our Water Solutions segment.

Net cash used in investing activities was $212.4 million during the year ended March 31, 2022, compared to net cash used in investing activities of $221.5 million during the year ended March 31, 2021.

The decrease in net cash used in investing activities was due primarily to:

• net proceeds (gross cash proceeds less the amount of cash sold, excluding accrued expenses) of $63.5 million from the sale of our interest in Sawtooth in June 2021 (see Note 17 to our consolidated financial statements included in this Annual Report);

• a decrease in capital expenditures from $186.8 million (includes payment of amounts accrued as of March 31, 2020) during the year ended March 31, 2021 to $142.4 million (includes payment of amounts accrued as of March 31, 2021) during the year ended March 31, 2022 due primarily to fewer expansion projects in our Water Solutions segment;

• proceeds of $18.5 million from certain asset sales during the year ended March 31, 2022 (see Note 4 to our consolidated financial statements included in this Annual Report).

These decreases in net cash used in investing activities were partially offset by:

• a $71.7 million increase in payments to settle derivatives;

• total proceeds of $43.2 million from the sale of certain permits, land and a saltwater disposal facility to a third-party during the year ended March 31, 2021 (see Note 17 to our consolidated financial statements included in this Annual Report).

Net cash used in investing activities was $221.5 million during the year ended March 31, 2021, compared to net cash used in investing activities of $1.7 billion during the year ended March 31, 2020.

The decrease in net cash used in investing activities was due primarily to:

• a $1.3 billion in cash paid for acquisitions and investments in unconsolidated entities during the year ended March 31, 2020;

• a decrease in capital expenditures from $555.7 million (includes payment of amounts accrued as of March 31, 2019) during the year ended March 31, 2020 to $186.8 million (includes payment of amounts accrued as of March 31, 2020) during the year ended March 31, 2021 due primarily to expansion projects in our Delaware Basin system in the Water Solutions segment during the year ended March 31, 2020.

• a $36.2 million increase in proceeds received from the sale of certain assets and businesses primarily related to the sale of our interest in Sawtooth in June 2021 and the sale of certain permits, land and a saltwater disposal facility to a third-party during the year ended March 31, 2021 (see Note 4 and Note 17 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.

Financing Activities-Continuing Operations.

Net cash used in financing activities was $507.8 million during the year ended March 31, 2023, compared to net cash provided by financing activities of $5.6 million during the year ended March 31, 2022.

The increase in net cash used in financing activities was due primarily to:

• an increase of $396.1 million paid in cash to repurchase a portion of our Senior Unsecured Notes and redeem the remaining outstanding 2023 Notes during the year ended March 31, 2023;

• a decrease of $90.0 million in borrowings on the revolving credit facility (net of repayments) during the year ended March 31, 2023;

• payments on other long-term debt of $43.3 million on the outstanding balance on our equipment loan and a prepayment premium as we sold our marine assets in March 2023 (see Note 17 to our consolidated financial statements included in this Annual Report).

These increases in net cash used in financing activities were partially offset by:

• a decrease of $9.6 million in debt issuance costs for the revolving credit facility during the year ended March 31, 2023;

• a decrease of $5.0 million in payments on other long-term debt as the Sawtooth credit agreement was paid off and terminated prior to us selling our ownership interest in Sawtooth in June 2021.

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.

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• the repayment and termination of our $250.0 million term credit agreement in February 2021;

• a decrease of $144.6 million in distributions paid to our general partners and common unitholders, preferred unitholders and noncontrolling interest owners during the year ended March 31, 2022 due primarily to the reduction and subsequent suspension of the quarterly common unit and preferred unit distributions;

• $93.4 million in contingent consideration payments during the year ended March 31, 2021 due to installment payments related to the Mesquite acquisition;

• a decrease of $144.6 million in distributions paid to our GP and common unitholders, preferred unitholders and noncontrolling interest owners during the year ended March 31, 2022 due primarily to the reduction and subsequent suspension of the quarterly common unit and preferred unit distributions;

• $93.4 million in contingent consideration payments during the year ended March 31, 2021 due to installment payments related to the Mesquite Disposals Unlimited, LLC acquisition;

• a make-whole fee of $55.6 million related to the termination of our term credit agreement in February 2021;

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• 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;

• 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;

• 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

Supplemental Guarantor Information

NGL Energy Partners LP (parent) and NGL Energy Finance Corp.

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The guarantees are senior unsecured obligations of each Guarantor Subsidiary and rank equally in right of payment with other existing and future senior indebtedness of such Guarantor Subsidiary, and senior in right of payment to all existing and future subordinated indebtedness of such Guarantor Subsidiary.

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 guarantee of our Senior Unsecured Notes by each Guarantor Subsidiary is subject to certain automatic customary releases, including in connection with the sale, disposition or transfer of all of the capital stock, or of all or substantially all of the assets, of such Guarantor Subsidiary to one or more persons that are not us or a restricted subsidiary, the exercise of legal defeasance or covenant defeasance options, the satisfaction and discharge of the indentures governing our Senior Unsecured Notes, the designation of such Guarantor Subsidiary as a non-guarantor restricted subsidiary or as an unrestricted subsidiary in accordance with the indentures governing our Senior Unsecured Notes, the release of such Guarantor Subsidiary from its guarantee under our revolving credit facility, the liquidation or dissolution of such Guarantor Subsidiary or upon the consolidation, merger or transfer of all assets of the Guarantor Subsidiary to us or another Guarantor Subsidiary in which the Guarantor Subsidiary dissolves or ceases to exist (collectively, the “Releases”).

The obligations of each Guarantor Subsidiary under its note guarantee are limited as necessary to prevent such note guarantee from constituting a fraudulent conveyance under applicable law.

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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)

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.

As permitted under Rule 13-01(a)(4)(vi) of Regulation S-K, we have excluded summarized financial information for the Partnership because the assets, liabilities, and results of operations of NGL Energy Partners LP (parent), NGL Energy Finance Corp.

and the Guarantor Subsidiaries are not materially different than the corresponding amounts in our consolidated financial statements, and we believe that such summarized financial information would be repetitive and would not provide incremental value to investors.

Environmental Legislation

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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.

During the year ended March 31, 2021, we recorded a goodwill impairment of $237.8 million.

We did not record a goodwill impairment during the years ended March 31, 2023 and 2022.

See Note 5 to our consolidated financial statements included in this Annual Report for a further discussion of our goodwill impairment assessment.

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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.

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.

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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.

When we cease to use an acquired trade name, we test the trade name for impairment using the relief from royalty method and we begin amortizing the trade name over its estimated useful life as a defensive asset.

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.

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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

These estimates and assumptions are very subjective and can vary over time.

Our consolidated balance sheet at March 31, 2023 includes a liability of $35.2 million related to asset retirement obligations, which is reported within other noncurrent liabilities.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis