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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): January 3, 2020

NGL ENERGY PARTNERS LP
(Exact name of registrant as specified in its charter)

Delaware
 
001-35172
 
27-3427920
(State or other jurisdiction of
incorporation or organization)
 
(Commission File Number)
 
(I.R.S. Employer
Identification No.)

6120 South Yale Avenue
Suite 805
Tulsa, Oklahoma 74136
(Address of principal executive offices) (Zip Code)

(918) 481-1119
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240-14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240-14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240-13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Trading Symbols
 
Name of Each Exchange on Which Registered
Common units representing Limited Partner Interests
 
NGL
 
New York Stock Exchange
Fixed-to-floating rate cumulative redeemable perpetual preferred units
 
NGL-PB
 
New York Stock Exchange
Fixed-to-floating rate cumulative redeemable perpetual preferred units
 
NGL-PC
 
New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
 


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   o






Item 8.01. 
  Other Matters.

On January 3, 2020, NGL Energy Partners LP (the “Partnership”) completed the disposition of its refined products business in the mid-continent region of the United States (“Mid-Con”). The business was sold to an undisclosed third-party whom purchased the inventory and open derivative positions of Mid-Con and assumed the Partnership’s obligations under certain system storage agreements. The Partnership retained all of the outstanding accounts receivable and accounts payable balances associated with this business that related to transactions prior to the closing date. To facilitate the assignment of the system storage agreements, the Partnership paid $6.3 million. Mid-Con previously comprised a portion of the Partnership’s Refined Products and Renewables segment.

Item 9.01.  
  Financial Statements and Exhibits.

(b) Pro Forma Financial Statements

The unaudited pro forma condensed consolidated balance sheet as of September 30, 2019, the unaudited pro forma condensed consolidated statements of operations for the six months ended September 30, 2019 and the years ended March 31, 2019, 2018 and 2017 of NGL Energy Partners LP and the related notes are filed as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.

The Partnership previously filed the historical and pro forma financial information required under Regulation S-X with respect to the acquisition of Hillstone Environmental Partners, LLC in a Form 8-K/A on November 18, 2019 and provided additional updated historical and pro forma financial information in a Form 8-K filed on December 26, 2019.

(d) Exhibits.
Exhibit No.
 
Description
 
 
 
99.1
 
101
 
Cover Page formatted as Inline XBRL.
104
 
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
NGL ENERGY PARTNERS LP
 
By:
NGL Energy Holdings LLC,
 
 
its general partner
Date: January 9, 2020
 
By:
/s/ Robert W. Karlovich III
 
 
 
Robert W. Karlovich III
 
 
 
Chief Financial Officer





Exhibit 99.1

NGL ENERGY PARTNERS LP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

Introduction

On January 3, 2020, NGL Energy Partners LP (“we,” “us,” “our” or “the Partnership”) completed the disposition of its refined products business in the mid-continent region of the United States (“Mid-Con”) to an undisclosed third-party whom purchased the inventory and open derivative positions of Mid-Con and assumed the Partnership’s obligations under certain system storage agreements. The Partnership retained all of the outstanding accounts receivable and accounts payable balances associated with this business that related to transactions prior to the closing date. To facilitate the assignment of the system storage agreements, the Partnership paid $6.3 million. Mid-Con previously comprised a portion of the Partnership’s Refined Products and Renewables segment.

On October 31, 2019, the Partnership closed its transaction to acquire all of the equity interests of Hillstone Environmental Partners, LLC (“Hillstone”) for approximately $642.5 million, subject to certain adjustments. To fund a portion of this acquisition, the Partnership issued 200,000 Class D Preferred Units and 8.5 million warrants to purchase common units for estimated net proceeds of $194.8 million. The remaining amount of the purchase price was paid using funds available under our revolving credit facility.

The unaudited pro forma condensed combined financial statements are presented for the Partnership and give effect to the acquisition of Hillstone and the sale of Mid-Con (as described above) and are based on the audited and unaudited financial statements of the Partnership and the audited and unaudited financial statements of Hillstone. These unaudited pro forma financial statements include all adjustments necessary to fairly present results for the periods and as of the dates presented. The following unaudited pro forma condensed consolidated balance sheet as of September 30, 2019 and the unaudited pro forma condensed consolidated statements of operations for the six months ended September 30, 2019 and the years ended March 31, 2019, 2018 and 2017 should be read in conjunction with the Partnership’s Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on November 1, 2019, the Partnership’s Current Report on Form 8-K/A filed with the SEC on November 18, 2019, the Partnership’s Current Report on Form 8-K filed with the SEC on November 22, 2019, the Partnership’s Current Report on Form 8-K filed with the SEC on December 26, 2019, the Partnership’s Quarterly Report on Form 10-Q for the three months ended September 30, 2019, filed with the SEC on November 8, 2019, the Partnership’s Annual Report on Form 10-K for the year ended March 31, 2019, filed with the SEC on May 30, 2019.

The following unaudited pro forma condensed combined balance sheet as of September 30, 2019 is presented to illustrate the estimated effects of the acquisition of Hillstone and the sale of Mid-Con, as if these transactions had occurred on September 30, 2019. The unaudited pro forma condensed combined balance sheet combines the Partnership’s unaudited consolidated balance sheet as of September 30, 2019 and Hillstone’s unaudited consolidated balance sheet as of September 30, 2019.

The following unaudited pro forma condensed combined statements of operations for the six months ended September 30, 2019 and for the years ended March 31, 2019, 2018 and 2017 are presented to illustrate the estimated effects of the acquisition of Hillstone as if this transaction had occurred on April 1, 2018 and the sale of Mid-Con as if it had occurred on April 1, 2016. The unaudited pro forma condensed combined statement of operations for the six months ended September 30, 2019 combined the Partnership’s unaudited consolidated statement of operations for the six months ended September 30, 2019 and Hillstone’s unaudited consolidated statement of operations for the six months ended September 30, 2019. The unaudited pro forma condensed combined statement of operations for the year ended March 31, 2019 combined the Partnership’s audited consolidated statement of operations for the year ended March 31, 2019 and Hillstone’s audited consolidated statement of operations for the year ended June 30, 2019. The unaudited pro forma condensed combined statements of operations for the six months ended September 30, 2019 and for the year ended March 31, 2019 both contain the results recorded within Hillstone’s unaudited statement of operations for the three months ended June 30, 2019.

The following unaudited pro forma condensed consolidated financial statements are based on certain assumptions and do not purport to be indicative of the results that actually would have been achieved if the transactions described above had occurred on the dates indicated. Moreover, the accompanying unaudited pro forma condensed consolidated financial statements do not project the Partnership’s results of operations for any future date or period.





NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of September 30, 2019
(U.S. Dollars in Thousands)
 
 
Historical NGL Energy Partners LP (As Reported)
 
Hillstone Environmental Partners, LLC
 
Pro Forma Adjustments
 
Pro Forma As Adjusted
 
Sale of Mid-Con
 
Pro Forma As Further Adjusted
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
CURRENT ASSETS:
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
21,154

 
$
34,757

 
$
447,900

(A)
$
105,996

 
$
43,507

(I)
$
105,996

 
 
 
 
 
 
194,810

(B)
 
 
(6,300
)
(J)
 
 
 
 
 
 
 
(592,625
)
(C)
 
 
(37,207
)
(K)
 
Accounts receivable-trade, net
 
987,875

 
9,950

 

 
997,825

 

 
997,825

Accounts receivable-affiliates
 
14,374

 
188

 
(188
)
(D)
14,374

 

 
14,374

Inventories
 
308,793

 
330

 
(330
)
(D)
308,793

 
(41,135
)
(L)
267,658

Prepaid expenses and other current assets
 
199,002

 
630

 
(630
)
(D)
149,127

 
(5,883
)
(L)
143,244

 
 
 
 
 
 
(49,875
)
(E)
 
 
 
 
 
Total current assets
 
1,531,198

 
45,855

 
(938
)
 
1,576,115

 
(47,018
)
 
1,529,097

PROPERTY, PLANT AND EQUIPMENT, net
 
2,485,880

 
155,128

 
(2,054
)
(F)
2,638,954

 

 
2,638,954

GOODWILL
 
1,176,042

 

 
107,066

(D)
1,283,108

 

 
1,283,108

INTANGIBLE ASSETS, net
 
1,194,581

 
930

 
401,240

(D)
1,596,751

 

 
1,596,751

INVESTMENTS IN UNCONSOLIDATED ENTITIES
 
1,445

 
786

 

 
2,231

 

 
2,231

OPERATING LEASE RIGHT-OF-USE ASSETS
 
203,122

 

 
3,340

(D)
206,462

 

 
206,462

OTHER NONCURRENT ASSETS
 
71,755

 
811

 

 
72,566

 
(46
)
(L)
72,520

Total assets
 
$
6,664,023

 
$
203,510

 
$
508,654

 
$
7,376,187

 
$
(47,064
)
 
$
7,329,123

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES:
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable-trade
 
$
842,064

 
$
8,542

 
$

 
$
850,606

 
$

 
850,606

Accounts payable-affiliates
 
24,542

 
115

 
(115
)
(D)
24,542

 

 
24,542

Accrued expenses and other payables
 
336,126

 
15,571

 
(2,060
)
(D)
349,637

 
(3,557
)
(L)
346,080

Advance payments received from customers
 
27,045

 

 

 
27,045

 

 
27,045

Current maturities of long-term debt
 
649

 

 

 
649

 

 
649

Operating lease obligations
 
68,084

 

 
454

(D)
68,538

 

 
68,538

Total current liabilities
 
1,298,510

 
24,228

 
(1,721
)
 
1,321,017

 
(3,557
)
 
1,317,460

LONG-TERM DEBT, net of debt issuance costs and current maturities
 
2,773,235

 
133,643

 
(133,643
)
(G)
3,221,135

 
(37,207
)
(K)
3,183,928

 
 
 
 
 
 
447,900

(A)
 
 
 
 
 
OPERATING LEASE OBLIGATIONS
 
132,132

 

 
2,886

(D)
135,018

 

 
135,018

OTHER NONCURRENT LIABILITIES
 
64,487

 
867

 
41,208

(D)
106,562

 

 
106,562

COMMITMENTS AND CONTINGENCIES
 
 
 
 
 
 
 
.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CLASS D PREFERRED UNITS
 
343,748

 
 
 
176,071

(B)
519,819

 

 
519,819

 
 
 
 
 
 
 
 
 
 
 
 
 
EQUITY:
 
 
 
 
 
 
 
 
 
 
 
 
General partner, representing a 0.1% interest
 
(51,014
)
 
 
 

 
(51,014
)
 
(6
)
(M)
(51,020
)
Limited partners, representing a 99.9% interest
 
1,697,015

 

 
18,739

(B)
1,715,754

 
(6,294
)
(M)
1,709,460

Members’ Equity - Hillstone Environmental Partners, LLC
 
 
 
42,786

 
(42,786
)
(H)

 

 

Class B preferred limited partners
 
305,488

 
 
 

 
305,488

 

 
305,488

Class C preferred limited partners
 
42,905

 
 
 
 
 
42,905

 

 
42,905

Accumulated other comprehensive loss
 
(264
)
 
 
 

 
(264
)
 

 
(264
)
Noncontrolling interests
 
57,781

 
1,986

 

 
59,767

 

 
59,767

Total equity
 
2,051,911

 
44,772

 
(24,047
)
 
2,072,636

 
(6,300
)
 
2,066,336

Total liabilities and equity
 
$
6,664,023

 
$
203,510

 
$
508,654

 
$
7,376,187

 
$
(47,064
)
 
$
7,329,123


See accompanying notes to the unaudited pro forma condensed consolidated financial statements.





NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the six months ended September 30, 2019
(U.S. dollars in thousands, except unit and per unit amounts)
 
 
Historical NGL Energy Partners LP (As Reported)
 
Hillstone Environmental Partners, LLC (N)
 
Pro Forma Adjustments
 
Pro Forma As Adjusted
 
Sale of Mid-Con
 
Pro Forma As Further Adjusted
 
 
 
 
 
 
 
 
 
 
 
 
 
REVENUES
 
$
9,455,761

 
$
42,421

 
$

 
$
9,498,182

 
$
(1,879,436
)
(U)
$
7,618,746

 
 
 
 
 
 
 
 
 
 
 
 
 
COST OF SALES
 
9,052,342

 

 

 
9,052,342

 
(1,882,400
)
(U)
7,169,942

 
 
 
 
 
 
 
 
 
 
 
 
 
OPERATING COSTS AND EXPENSES:
 
 
 
 
 
 
 
 
 
 
 
 
Operating
 
137,529

 
18,921

 

 
156,450

 
(366
)
(U)
156,084

General and administrative
 
64,250

 
13,394

 
(5,844
)
(P)
71,800

 

 
71,800

Depreciation and amortization
 
116,867

 
5,511

 
10,571

(Q)
132,949

 

 
132,949

Loss (gain) on disposal or impairment of assets, net
 
2,144

 
(85
)
 

 
2,059

 

 
2,059

Revaluation of liabilities
 

 
65

 

 
65

 

 
65

Operating Income
 
82,629

 
4,615

 
(4,727
)
 
82,517

 
3,330

 
85,847

 
 
 
 
 
 
 
 
 
 
 
 
 
OTHER INCOME (EXPENSE):
 
 
 
 
 
 
 
 
 
 
 
 
Equity in earnings of unconsolidated entities
 
(257
)
 
(87
)
 

 
(344
)
 

 
(344
)
Interest expense
 
(84,910
)
 
(6,339
)
 
6,339

(R)
(89,647
)
 
787

(V)
(88,860
)
 
 
 
 
 
 
(4,737
)
(R)
 
 
 
 
 
Other income, net
 
1,193

 

 

 
1,193

 

 
1,193

(Loss) Income From Continuing Operations Before Income Taxes
 
(1,345
)
 
(1,811
)
 
(3,125
)
 
(6,281
)
 
4,117

 
(2,164
)
 
 
 
 
 
 
 
 
 
 
 
 
 
INCOME TAX EXPENSE
 
(319
)
 

 

 
(319
)
 

 
(319
)
(Loss) Income From Continuing Operations
 
(1,664
)
 
(1,811
)
 
(3,125
)
 
(6,600
)
 
4,117

 
(2,483
)
LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
 
397

 
18

 

 
415

 

 
415

NET (LOSS) INCOME FROM CONTINUING OPERATIONS ATTRIBUTABLE TO NGL ENERGY PARTNERS LP
 
(1,267
)
 
(1,793
)
 
(3,125
)
 
(6,185
)
 
4,117

 
(2,068
)
LESS: DISTRIBUTIONS TO PREFERRED UNITHOLDERS
 
(146,523
)
 

 
(9,000
)
(S)
(155,523
)
 

 
(155,523
)
LESS: CONTINUING OPERATIONS NET LOSS (INCOME) ALLOCATED TO GENERAL PARTNER
 
76

 

 
14

(T)
90

 
(4
)
(W)
86

NET (LOSS) INCOME FROM CONTINUING OPERATIONS ALLOCATED TO COMMON UNITHOLDERS
 
$
(147,714
)
 
$
(1,793
)
 
$
(12,111
)
 
$
(161,618
)
 
$
4,113

 
$
(157,505
)
BASIC AND DILUTED LOSS FROM CONTINUING OPERATIONS PER COMMON UNIT
 
$
(1.17
)
 
 
 
 
 
$
(1.28
)
 
 
 
$
(1.25
)
BASIC AND DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING
 
126,435,870

 
 
 
 
 
126,435,870

 
 
 
126,435,870


See accompanying notes to the unaudited pro forma condensed consolidated financial statements.







NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the year ended March 31, 2019
(U.S. dollars in thousands, except unit and per unit amounts)
 
 
Historical NGL Energy Partners LP (As Reported)
 
Hillstone Environmental Partners, LLC (O)
 
Pro Forma Adjustments
 
Pro Forma As Adjusted
 
Sale of Mid-Con
 
Pro Forma As Further Adjusted
 
 
 
 
 
 
 
 
 
 
 
 
 
REVENUES
 
$
17,820,620

 
$
74,437

 
$

 
$
17,895,057

 
$
(3,151,744
)
(U)
$
14,743,313

 
 
 
 
 
 
 
 
 
 
 
 
 
COST OF SALES
 
17,162,275

 

 

 
17,162,275

 
(3,147,371
)
(U)
14,014,904

 
 
 
 
 
 
 
 
 
 
 
 
 
OPERATING COSTS AND EXPENSES:
 
 
 
 
 
 
 
 
 
 
 
 
Operating
 
233,313

 
42,357

 

 
275,670

 
(635
)
(U)
275,035

General and administrative
 
107,407

 
18,537

 
(2,912
)
(P)
123,032

 

 
123,032

Depreciation and amortization
 
211,973

 
7,590

 
24,574

(Q)
244,137

 

 
244,137

Loss on disposal or impairment of assets, net
 
34,296

 
11,137

 

 
45,433

 

 
45,433

Revaluation of liabilities
 
(5,373
)
 

 

 
(5,373
)
 

 
(5,373
)
Operating Income (Loss)
 
76,729

 
(5,184
)
 
(21,662
)
 
49,883

 
(3,738
)
 
46,145

 
 
 
 
 
 
 
 
 
 
 
 
 
OTHER INCOME (EXPENSE):
 
 
 
 
 
 
 
 
 
 
 
 
Equity in earnings of unconsolidated entities
 
2,533

 
37

 

 
2,570

 

 
2,570

Interest expense
 
(164,725
)
 
(9,741
)
 
9,741

(R)
(183,671
)
 
1,574

(V)
(182,097
)
 
 
 
 
 
 
(18,946
)
(R)
 
 
 
 


Loss on early extinguishment of liabilities, net
 
(12,340
)
 

 

 
(12,340
)
 

 
(12,340
)
Other expense, net
 
(30,414
)
 

 

 
(30,414
)
 
(6
)
(U)
(30,420
)
Loss From Continuing Operations Before Income Taxes
 
(128,217
)
 
(14,888
)
 
(30,867
)
 
(173,972
)
 
(2,170
)
 
(176,142
)
 
 
 
 
 
 
 
 
 
 
 
 
 
INCOME TAX EXPENSE
 
(1,233
)
 

 

 
(1,233
)
 

 
(1,233
)
Net Loss From Continuing Operations
 
(129,450
)
 
(14,888
)
 
(30,867
)
 
(175,205
)
 
(2,170
)
 
(177,375
)
LESS: CONTINUING OPERATIONS NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
 
20,206

 
32

 

 
20,238

 

 
20,238

NET LOSS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO NGL ENERGY PARTNERS LP
 
(109,244
)
 
(14,856
)
 
(30,867
)
 
(154,967
)
 
(2,170
)
 
(157,137
)
LESS: DISTRIBUTIONS TO PREFERRED UNITHOLDERS
 
(111,936
)
 

 
(18,000
)
(S)
(129,936
)
 

 
(129,936
)
LESS: CONTINUING OPERATIONS NET LOSS ALLOCATED TO GENERAL PARTNER
 
82

 

 
64

(T)
146

 
2

(W)
148

NET LOSS FROM CONTINUING OPERATIONS ALLOCATED TO COMMON UNITHOLDERS
 
$
(221,098
)
 
$
(14,856
)
 
$
(48,803
)
 
$
(284,757
)
 
$
(2,168
)
 
$
(286,925
)
BASIC AND DILUTED LOSS FROM CONTINUING OPERATIONS PER COMMON UNIT
 
$
(1.80
)
 
 
 
 
 
$
(2.31
)
 
 
 
$
(2.33
)
BASIC AND DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING
 
123,017,064

 
 
 
 
 
123,017,064

 
 
 
123,017,064


See accompanying notes to the unaudited pro forma condensed consolidated financial statements.






NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the year ended March 31, 2018
(U.S. dollars in thousands, except unit and per unit amounts)
 
Historical NGL Energy Partners LP (As Reported)
 
Sale of Mid-Con
 
Pro Forma As Adjusted
 
 
 
 
 
 
REVENUES
$
10,370,772

 
$
(2,918,191
)
(U)
$
7,452,581

 
 
 
 
 
 
COST OF SALES
9,702,869

 
(2,930,282
)
(U)
6,772,587

 
 
 
 
 
 
OPERATING COSTS AND EXPENSES:
 
 
 
 
 
Operating
194,096

 
(884
)
(U)
193,212

General and administrative
97,979

 

 
97,979

Depreciation and amortization
208,398

 

 
208,398

Gain on disposal or impairment of assets, net
(17,118
)
 

 
(17,118
)
Revaluation of liabilities
20,716

 

 
20,716

Operating Income
163,832

 
12,975

 
176,807

 
 
 
 
 
 
OTHER INCOME (EXPENSE):
 
 
 
 
 
Equity in earnings of unconsolidated entities
7,539

 

 
7,539

Interest expense
(199,150
)
 
1

(U)
(199,149
)
Loss on early extinguishment of liabilities, net
(23,201
)
 

 
(23,201
)
Other income, net
6,352

 

 
6,352

(Loss) Income From Continuing Operations Before Income Taxes
(44,628
)
 
12,976

 
(31,652
)
 
 
 
 
 
 
INCOME TAX EXPENSE
(1,353
)
 

 
(1,353
)
Net (Loss) Income From Continuing Operations
(45,981
)
 
12,976

 
(33,005
)
LESS: CONTINUING OPERATIONS NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS
(240
)
 

 
(240
)
NET (LOSS) INCOME FROM CONTINUING OPERATIONS ATTRIBUTABLE TO NGL ENERGY PARTNERS LP
(46,221
)
 
12,976

 
(33,245
)
LESS: DISTRIBUTIONS TO PREFERRED UNITHOLDERS
(59,697
)
 

 
(59,697
)
LESS: CONTINUING OPERATIONS NET INCOME ALLOCATED TO GENERAL PARTNER
(30
)
 
(13
)
(W)
(43
)
LESS: REPURCHASE OF WARRANTS
(349
)
 

 
(349
)
NET (LOSS) INCOME FROM CONTINUING OPERATIONS ALLOCATED TO COMMON UNITHOLDERS
$
(106,297
)
 
$
12,963

 
$
(93,334
)
BASIC AND DILUTED LOSS FROM CONTINUING OPERATIONS PER COMMON UNIT
$
(0.88
)
 
 
 
$
(0.77
)
BASIC AND DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING
120,991,340

 
 
 
120,991,340


See accompanying notes to the unaudited pro forma condensed consolidated financial statements.






NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the year ended March 31, 2017
(U.S. dollars in thousands, except unit and per unit amounts)
 
Historical NGL Energy Partners LP (As Reported)
 
Sale of Mid-Con
 
Pro Forma As Adjusted
 
 
 
 
 
 
REVENUES
$
7,477,522

 
$
(2,261,256
)
(U)
$
5,216,266

 
 
 
 
 
 
COST OF SALES
6,997,177

 
(2,255,148
)
(U)
4,742,029

 
 
 
 
 
 
OPERATING COSTS AND EXPENSES:
 
 
 
 
 
Operating
173,623

 
(577
)
(U)
173,046

General and administrative
100,839

 

 
100,839

Depreciation and amortization
179,613

 

 
179,613

Gain on disposal or impairment of assets, net
(208,982
)
 

 
(208,982
)
Revaluation of liabilities
6,717

 

 
6,717

Operating Income (Loss)
228,535

 
(5,531
)
 
223,004

 
 
 
 
 
 
OTHER INCOME (EXPENSE):
 
 
 
 
 
Equity in earnings of unconsolidated entities
3,830

 

 
3,830

Revaluation of investments
(14,365
)
 

 
(14,365
)
Interest expense
(149,601
)
 

 
(149,601
)
Gain on early extinguishment of liabilities, net
24,727

 

 
24,727

Other income, net
26,420

 

 
26,420

Income (Loss) From Continuing Operations Before Income Taxes
119,546

 
(5,531
)
 
114,015

 
 
 
 
 
 
INCOME TAX EXPENSE
(1,933
)
 

 
(1,933
)
Net Income (Loss) From Continuing Operations
117,613

 
(5,531
)
 
112,082

LESS: CONTINUING OPERATIONS NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS
(6,832
)
 

 
(6,832
)
NET INCOME (LOSS) FROM CONTINUING OPERATIONS ATTRIBUTABLE TO NGL ENERGY PARTNERS LP
110,781

 
(5,531
)
 
105,250

LESS: DISTRIBUTIONS TO PREFERRED UNITHOLDERS
(30,142
)
 

 
(30,142
)
LESS: CONTINUING OPERATIONS NET (INCOME) LOSS ALLOCATED TO GENERAL PARTNER
(205
)
 
5

(W)
(200
)
NET INCOME (LOSS) FROM CONTINUING OPERATIONS ALLOCATED TO COMMON UNITHOLDERS
$
80,434

 
$
(5,526
)
 
$
74,908

BASIC INCOME FROM CONTINUING OPERATIONS PER COMMON UNIT
$
0.74

 
 
 
$
0.69

DILUTED INCOME FROM CONTINUING OPERATIONS PER COMMON UNIT
$
0.72

 
 
 
$
0.67

BASIC WEIGHTED AVERAGE COMMON UNITS OUTSTANDING
108,091,486

 
 
 
108,091,486

DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING
111,850,621

 
 
 
111,850,621


See accompanying notes to the unaudited pro forma condensed consolidated financial statements.






NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements

Note 1 - Basis of Presentation

See “Introduction” for more information regarding the basis of presentation for these unaudited pro forma condensed consolidated financial statements.

Note 2 - Preliminary Purchase Price Allocation

The following presents the preliminary purchase price allocation for Hillstone based on a preliminary purchase price of $642.5 million in cash and preliminary estimates of fair value (in thousands):
Current assets
 
$
44,707

Property, plant and equipment
 
153,074

Intangible assets
 
402,170

Investments in unconsolidated entities
 
786

Operating lease right-of-use assets
 
3,340

Other noncurrent assets
 
811

Goodwill
 
107,066

Current liabilities
 
(22,053
)
Operating lease obligations
 
(3,340
)
Asset retirement obligations
 
(446
)
Other long-term liabilities
 
(867
)
Deferred tax liability
 
(40,762
)
Noncontrolling interests
 
(1,986
)
 
 
$
642,500


The purchase price and the allocation of the purchase price are preliminary. Items pending completion include the determination of the final purchase price, including any final closing adjustments and completion of independent appraisals of property, plant and equipment, intangible assets, investments in unconsolidated entities and noncontrolling interests and the valuations of the operating lease liabilities and right-of-use assets, the asset retirement obligations and the deferred tax liability.

Note 3 - Pro Forma Adjustments

The unaudited pro forma condensed consolidated financial statements reflect the impact of the following pro forma adjustments:

A.
Represents the amount borrowed under our revolving credit facility and used to pay a portion of the consideration for the acquisition of Hillstone.
B.
Represents the net cash proceeds from the issuance of $194.8 million Class D Preferred Units and warrants to purchase common units. The net proceeds were allocated between Class D Preferred Units and the warrants based on the preliminary fair value of the instruments.
C.
Represents the payment of the preliminary purchase price for the purchase of Hillstone.
D.
Represents the step up in basis for the assets acquired and liabilities assumed as a result of the difference in valuation between the purchase price allocated to the assets and liabilities and their book value on September 30, 2019 in accordance with the acquisition method of accounting.
E.
Amount reflects the reversal of the deposit paid to Hillstone.
F.
Reflects the reclassification from property, plant and equipment to intangible assets the rights-of-way to conform to the Partnership’s presentation of these amounts.
G.
Represents the repayment of Hillstone’s outstanding debt as of September 30, 2019.
H.
Represents the reversal of Hillstone’s equity book value.





I.
Represents the cash that would have been received for the sale of the inventory and open derivative positions as of September 30, 2019.
J.
Represents the payments made to facilitate the assignment of the system storage agreements.
K.
Represents the Partnership’s use of the net proceeds to repay a portion of the outstanding debt under its revolving credit facility as of September 30, 2019, which bears interest primarily based on a LIBOR rate plus the applicable margin.
L.
Represents the removal of the Mid-Con assets and liabilities sold from the balance sheet. The Partnership retained all of the outstanding accounts receivable and accounts payable balances associated with this business that related to transactions prior to the closing date. As of September 30, 2019, the outstanding accounts receivable and accounts payable balances were $98.3 million and $49.0 million, respectively.
M.
Represents the pro forma non-recurring loss on the sale that would have been recorded if the Partnership had completed the sale of Mid-Con on September 30, 2019.
N.
Amounts in this column represent Hillstone’s unaudited consolidated statement of operations for the six months ended September 30, 2019.
O.
Amounts in this column represent Hillstone’s audited consolidated statement of operations for the year ended June 30, 2019.
P.
Represents the reversal of transaction expenses incurred by Hillstone related to this transaction for the respective periods.
Q.
Represents the incremental increase in depreciation and amortization expense for the respective periods.
R.
Represents the incremental increase in interest expense due to the repayment of Hillstone’s outstanding debt and the elimination of the amortization of the related debt issuance costs and the interest expense incurred related to the borrowings under the Partnership’s revolving credit facility. The additional interest expense was calculated by using $447.9 million and an assumed rate of 4.23%, the interest rate on the Partnership's revolving credit facility as of September 30, 2019. A change of 0.125% in the assumed interest rate would result in an adjustment of interest expense, on an annual basis, of approximately $0.6 million.
S.
Represents the distributions paid on the Class D preferred units for the respective periods.
T.
Represents our general partner’s interest in Hillstone’s operations and the pro forma adjustments for the respective periods.
U.
Represents the pro forma effect of eliminating the results of operations of Mid-Con for the six months ended September 30, 2019 and the years ended March 31, 2019, 2018 and 2017 from the presentation of continuing operations.
V.
Represents the reduction in interest expense from the net repayment of outstanding borrowings under the revolving credit facility as a result of the sale of Mid-Con. As the pro forma statements of operations assume the transaction closed on April 1, 2016, the Partnership calculated the reduction by using $37.2 million and an assumed interest rate of 4.23%, the interest rate on the Partnership’s revolving credit facility as of September 30, 2019. A change of 0.125% in the assumed interest rate would result in an adjustment of interest expense, on an annual basis, of less than $0.1 million.
W.
Represents our general partner’s interest in the pro forma adjustments related to the sale of Mid-Con for the respective periods.

Note 4 - Earnings per Unit

Basic earnings per unit is computed by dividing the net income (loss) by the weighted average number of units outstanding during a period. To determine net income (loss) allocated to each class of ownership, the Partnership first allocates net income (loss) in accordance with the amount of distributions made for the quarter by each class of units, if any. The remaining net income is allocated to each class of units in proportion to the weighted average number of units of such class outstanding for a period, as compared to the weighted average number of units outstanding for all classes for the period, with the exception of net losses. Net losses are allocated only to the common units.






Note 5 - Intercompany Transactions

Intercompany transactions have been eliminated within the consolidation in accordance with generally accepted accounting principles. The following are the intercompany transactions that were eliminated from Mid-Con for the periods presented:
 
Six Months Ended September 30,
 
Years Ended March 31,
 
2019
 
2019
 
2018
 
2017
 
(in thousands)
 
 
 
 
 
 
 
 
Intercompany Revenue
$

 
$
6,816

 
$
8,371

 
$
1,273

 
 
 
 
 
 
 
 
Intercompany Cost of Sales
$

 
$
6,796

 
$
7,189

 
$