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

FORM 10-Q

(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 001-35172

NGL Energy Partners LP
(Exact Name of Registrant as Specified in Its Charter)
Delaware 27-3427920
(State or Other Jurisdiction of Incorporation or Organization) (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)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes ☒   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o Accelerated filer x
Non-accelerated filer o Smaller reporting company ☐
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.   ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes ☐   No ☒

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

At November 4, 2021, there were 129,593,939 common units issued and outstanding.

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Forward-Looking Statements

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains various forward-looking statements and information that are based on our beliefs and those of our general partner, as well as assumptions made by and information currently available to us. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. Certain words in this Quarterly Report such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “plan,” “project,” “will,” and similar expressions and statements regarding our plans and objectives for future operations, identify forward-looking statements. Although we and our general partner believe such forward-looking statements are reasonable, neither we nor our general partner can assure they will prove to be correct. Forward-looking statements are subject to a variety of risks, uncertainties and assumptions. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those expected. Among the key risk factors that may affect our consolidated financial position and results of operations are:

•changes in general economic conditions, including market and macroeconomic disruptions resulting from the ongoing COVID-19 pandemic and related governmental responses;
•the prices of crude oil, natural gas liquids, gasoline, diesel, biodiesel and energy prices generally;
•the general level of demand, and the availability of supply, for crude oil, natural gas liquids, gasoline, diesel, and biodiesel;
•the level of crude oil and natural gas drilling and production in areas where we have operations and facilities;
•the ability to obtain adequate supplies of products if an interruption in supply or transportation occurs and the availability of capacity to transport products to market areas;
•the effect of weather conditions on supply and demand for crude oil, natural gas liquids, gasoline, diesel, and biodiesel;
•the effect of natural disasters, earthquakes, hurricanes, tornados, lightning strikes, or other significant weather events;
•the availability of local, intrastate, and interstate transportation infrastructure with respect to our transportation services;
•the availability, price, and marketing of competing fuels;
•the effect of energy conservation efforts on product demand;
•energy efficiencies and technological trends;
•issuance of executive orders, changes in applicable laws, regulations and policies, including tax, environmental, transportation, and employment regulations, or new interpretations by regulatory agencies concerning such laws and regulations and the effect of such laws, regulations and policies (now existing or in the future) on our business operations;
•the effect of executive orders and legislative and regulatory actions on hydraulic fracturing, water disposal and transportation, and the treatment of flowback and produced water;
•hazards or operating risks related to transporting and distributing petroleum products that may not be fully covered by insurance;
•the maturity of the crude oil, natural gas liquids, and refined products industries and competition from other markets;
•loss of key personnel;
•the ability to renew contracts with key customers;
•the ability to maintain or increase the margins we realize for our services;
•the ability to renew leases for our leased equipment and storage facilities;
•the nonpayment, nonperformance or bankruptcy by our counterparties;
•the availability and cost of capital and our ability to access certain capital sources;
•a deterioration of the credit and capital markets;
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•the ability to successfully identify and complete accretive acquisitions and organic growth projects, and integrate acquired assets and businesses;
•the costs and effects of legal and administrative proceedings; and
•political pressure and influence of environmental groups upon policies and decisions related to the production, gathering, refining, processing, fractionation, transportation and sale of crude oil, refined products, natural gas, natural gas liquids, gasoline, diesel or biodiesel.

You should not put undue reliance on any forward-looking statements. All forward-looking statements speak only as of the date of this Quarterly Report. Except as may be required by state and federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements as a result of new information, future events, or otherwise. When considering forward-looking statements, please review the risks discussed under Part I, Item 1A–“Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2021.
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PART I - FINANCIAL INFORMATION

Item 1.    Financial Statements
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(in Thousands, except unit amounts)
September 30, 2021 March 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,531  $ 4,829 
Accounts receivable-trade, net of allowance for expected credit losses of $2,257 and $2,192, respectively
863,228  725,943 
Accounts receivable-affiliates 8,979  9,435 
Inventories 319,895  158,467 
Prepaid expenses and other current assets 140,434  109,164 
Total current assets 1,338,067  1,007,838 
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $844,605 and $776,279, respectively
2,524,287  2,706,853 
GOODWILL 744,439  744,439 
INTANGIBLE ASSETS, net of accumulated amortization of $532,901 and $517,518, respectively
1,170,468  1,262,613 
INVESTMENTS IN UNCONSOLIDATED ENTITIES 21,029  22,719 
OPERATING LEASE RIGHT-OF-USE ASSETS 133,868  152,146 
OTHER NONCURRENT ASSETS 49,634  50,733 
Total assets $ 5,981,792  $ 5,947,341 
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable-trade $ 819,094  $ 679,868 
Accounts payable-affiliates 97  119 
Accrued expenses and other payables 165,110  170,400 
Advance payments received from customers 18,651  11,163 
Current maturities of long-term debt 2,278  2,183 
Operating lease obligations 45,456  47,070 
Total current liabilities 1,050,686  910,803 
LONG-TERM DEBT, net of debt issuance costs of $49,214 and $55,555, respectively, and current maturities
3,419,352  3,319,030 
OPERATING LEASE OBLIGATIONS 87,388  103,637 
OTHER NONCURRENT LIABILITIES 110,909  114,615 
COMMITMENTS AND CONTINGENCIES (NOTE 7)
CLASS D 9.00% PREFERRED UNITS, 600,000 and 600,000 preferred units issued and outstanding, respectively
551,097  551,097 
EQUITY:
General partner, representing a 0.1% interest, 129,724 and 129,724 notional units, respectively
(52,375) (52,189)
Limited partners, representing a 99.9% interest, 129,593,939 and 129,593,939 common units issued and outstanding, respectively
448,501  582,784 
Class B preferred limited partners, 12,585,642 and 12,585,642 preferred units issued and outstanding, respectively
305,468  305,468 
Class C preferred limited partners, 1,800,000 and 1,800,000 preferred units issued and outstanding, respectively
42,891  42,891 
Accumulated other comprehensive loss (310) (266)
Noncontrolling interests 18,185  69,471 
Total equity 762,360  948,159 
Total liabilities and equity $ 5,981,792  $ 5,947,341 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(in Thousands, except unit and per unit amounts)
Three Months Ended September 30, Six Months Ended September 30,
2021 2020 2021 2020
REVENUES:
Water Solutions $ 136,210  $ 88,678  $ 266,436  $ 176,743 
Crude Oil Logistics 554,830  466,841  1,108,454  742,880 
Liquids Logistics 1,063,097  612,324  1,867,902  1,092,322 
Other —  315  —  628 
Total Revenues 1,754,137  1,168,158  3,242,792  2,012,573 
COST OF SALES:
Water Solutions 6,423  579  16,761  5,279 
Crude Oil Logistics 498,089  386,771  1,035,346  604,328 
Liquids Logistics 1,021,081  577,086  1,798,279  1,031,422 
Other —  454  —  908 
Total Cost of Sales 1,525,593  964,890  2,850,386  1,641,937 
OPERATING COSTS AND EXPENSES:
Operating 69,019  56,054  134,803  121,041 
General and administrative 11,450  17,475  27,224  34,633 
Depreciation and amortization 69,563  87,469  153,665  171,455 
Loss on disposal or impairment of assets, net 13,694  5,954  81,230  17,976 
Operating Income (Loss) 64,818  36,316  (4,516) 25,531 
OTHER INCOME (EXPENSE):    
Equity in earnings of unconsolidated entities 434  501  646  790 
Interest expense (68,495) (46,935) (135,625) (90,896)
Gain on early extinguishment of liabilities, net 1,071  13,747  1,122  33,102 
Other income, net 730  1,585  1,979  2,620 
(Loss) Income From Continuing Operations Before Income Taxes (1,442) 5,214  (136,394) (28,853)
INCOME TAX BENEFIT 235  774  685  1,075 
(Loss) Income From Continuing Operations (1,207) 5,988  (135,709) (27,778)
Loss From Discontinued Operations, net of Tax —  (153) —  (1,639)
Net (Loss) Income (1,207) 5,835  (135,709) (29,417)
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS (330) (168) (768) (219)
NET (LOSS) INCOME ATTRIBUTABLE TO NGL ENERGY PARTNERS LP $ (1,537) $ 5,667  $ (136,477) $ (29,636)
NET LOSS FROM CONTINUING OPERATIONS ALLOCATED TO COMMON UNITHOLDERS (NOTE 3) $ (27,236) $ (17,933) $ (187,128) $ (73,748)
NET LOSS FROM DISCONTINUED OPERATIONS ALLOCATED TO COMMON UNITHOLDERS (NOTE 3) $ —  $ (152) $ —  $ (1,637)
NET LOSS ALLOCATED TO COMMON UNITHOLDERS (NOTE 3) $ (27,236) $ (18,085) $ (187,128) $ (75,385)
BASIC LOSS PER COMMON UNIT
Loss From Continuing Operations $ (0.21) $ (0.14) $ (1.44) $ (0.57)
Loss From Discontinued Operations, net of Tax $ —  $ —  $ —  $ (0.01)
Net Loss $ (0.21) $ (0.14) $ (1.44) $ (0.58)
DILUTED LOSS PER COMMON UNIT
Loss From Continuing Operations $ (0.21) $ (0.14) $ (1.44) $ (0.57)
Loss From Discontinued Operations, net of Tax $ —  $ —  $ —  $ (0.01)
Net Loss $ (0.21) $ (0.14) $ (1.44) $ (0.58)
BASIC WEIGHTED AVERAGE COMMON UNITS OUTSTANDING 129,593,939  128,771,715  129,593,939  128,771,715 
DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING 129,593,939  128,771,715  129,593,939  128,771,715 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4

NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income
(in Thousands)
Three Months Ended September 30, Six Months Ended September 30,
2021 2020 2021 2020
Net (loss) income $ (1,207) $ 5,835  $ (135,709) $ (29,417)
Other comprehensive (loss) income (52) 34  (44) 78 
Comprehensive (loss) income $ (1,259) $ 5,869  $ (135,753) $ (29,339)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5

NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Condensed Consolidated Statement of Changes in Equity
Three Months and Six Months Ended September 30, 2021
(in Thousands, except unit amounts)
Limited Partners
Preferred Common Accumulated
Other
General
Partner 		Units Amount
Units 		Amount Comprehensive
Income (Loss) 		Noncontrolling
Interests 		Total
Equity
BALANCES AT MARCH 31, 2021 $ (52,189) 14,385,642  $ 348,359  129,593,939  $ 582,784  $ (266) $ 69,471  $ 948,159 
Distributions to noncontrolling interest owners —  —  —  —  —  —  (444) (444)
Sawtooth joint venture disposition (Note 15) —  —  —  —  —  —  (51,097) (51,097)
Equity issued pursuant to incentive compensation plan (Note 8) —  —  —  —  960  —  —  960 
Net (loss) income (159) —  —  —  (134,781) —  438  (134,502)
Other comprehensive income —  —  —  —  —  8  —  8 
BALANCES AT JUNE 30, 2021 (52,348) 14,385,642  348,359  129,593,939  448,963  (258) 18,368  763,084 
Distributions to noncontrolling interest owners —  —  —  —  —  —  (513) (513)
Equity issued pursuant to incentive compensation plan (Note 8) —  —  —  —  1,048  —  —  1,048 
Net (loss) income (27) —  —  —  (1,510) —  330  (1,207)
Other comprehensive loss —  —  —  —  —  (52) —  (52)
BALANCES AT SEPTEMBER 30, 2021 $ (52,375) 14,385,642  $ 348,359  129,593,939  $ 448,501  $ (310) $ 18,185  $ 762,360 


6

NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Condensed Consolidated Statement of Changes in Equity
Three Months and Six Months Ended September 30, 2020
(in Thousands, except unit amounts)
Limited Partners
Preferred Common Accumulated
Other
General
Partner 		Units Amount
Units 		Amount Comprehensive
Income (Loss) 		Noncontrolling
Interests 		Total
Equity
BALANCES AT MARCH 31, 2020 $ (51,390) 14,385,642  $ 348,359  128,771,715  $ 1,366,152  $ (385) $ 72,954  $ 1,735,690 
Distributions to general and common unit partners and preferred unitholders (26) —  —  —  (47,652) —  —  (47,678)
Distributions to noncontrolling interest owners —  —  —  —  —  —  (2,257) (2,257)
Equity issued pursuant to incentive compensation plan —  —  —  —  1,349  —  —  1,349 
Net (loss) income (57) —  —  —  (35,246) —  51  (35,252)
Other comprehensive income —  —  —  —  —  44  —  44 
Cumulative effect adjustment for adoption of ASU 2016-13 (1) —  —  —  (1,112) —  —  (1,113)
BALANCES AT JUNE 30, 2020 (51,474) 14,385,642  348,359  128,771,715  1,283,491  (341) 70,748  1,650,783 
Distributions to general and common unit partners and preferred unitholders (26) —  —  —  (47,808) —  —  (47,834)
Distributions to noncontrolling interest owners —  —  —  —  —  —  (598) (598)
Equity issued pursuant to incentive compensation plan —  —  —  —  1,308  —  —  1,308 
Net (loss) income (18) —  —  —  5,685  —  168  5,835 
Other comprehensive income —  —  —  —  —  34  —  34 
BALANCES AT SEPTEMBER 30, 2020 $ (51,518) 14,385,642  $ 348,359  128,771,715  $ 1,242,676  $ (307) $ 70,318  $ 1,609,528 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7

NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(in Thousands)
Six Months Ended September 30,
2021 2020
OPERATING ACTIVITIES:
Net loss $ (135,709) $ (29,417)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Loss from discontinued operations, net of tax —  1,639 
Depreciation and amortization, including amortization of debt issuance costs 162,424  178,506 
Gain on early extinguishment of liabilities, net (1,122) (33,102)
Non-cash equity-based compensation expense (1,793) 4,558 
Loss on disposal or impairment of assets, net 81,230  17,976 
Change in provision for expected credit losses 96  (259)
Net adjustments to fair value of commodity derivatives 40,680  30,562 
Equity in earnings of unconsolidated entities (646) (790)
Distributions of earnings from unconsolidated entities 2,009  2,994 
Lower of cost or net realizable value adjustments 3,614  418 
Other 721  941 
Changes in operating assets and liabilities, exclusive of acquisitions:
Accounts receivable-trade and affiliates (137,210) 124,801 
Inventories (175,910) (113,691)
Other current and noncurrent assets 24,631  41,762 
Accounts payable-trade and affiliates 139,688  (51,312)
Other current and noncurrent liabilities (10,548) (30,335)
Net cash (used in) provided by operating activities-continuing operations (7,845) 145,251 
Net cash used in operating activities-discontinued operations —  (1,591)
Net cash (used in) provided by operating activities (7,845) 143,660 
INVESTING ACTIVITIES:
Capital expenditures (77,808) (132,304)
Net settlements of commodity derivatives (65,688) (22,106)
Proceeds from sales of assets 4,551  1,099 
Proceeds from divestitures of businesses and investments, net 63,489  — 
Investments in unconsolidated entities (235) (607)
Distributions of capital from unconsolidated entities 562  370 
Net cash used in investing activities (75,129) (153,548)
FINANCING ACTIVITIES:
Proceeds from borrowings under revolving credit facilities 826,000  704,000 
Payments on revolving credit facilities (684,000) (471,500)
Issuance of term credit agreement —  250,000 
Repayment of term credit agreement —  (250,000)
Repayment and repurchase of senior unsecured notes (40,249) (54,499)
Payments on other long-term debt (6,169) (326)
Debt issuance costs (10,326) (9,947)
Distributions to general and common unit partners and preferred unitholders —  (81,698)
Distributions to noncontrolling interest owners (957) (2,855)
Payments to settle contingent consideration liabilities (623) (79,079)
Net cash provided by financing activities 83,676  4,096 
Net increase (decrease) in cash and cash equivalents 702  (5,792)
Cash and cash equivalents, beginning of period 4,829  22,704 
Cash and cash equivalents, end of period $ 5,531  $ 16,912 
Supplemental cash flow information:
Cash interest paid $ 126,076  $ 87,793 
Income taxes paid (net of income tax refunds) $ 1,410  $ 2,198 
Supplemental non-cash investing and financing activities:
Distributions declared but not paid to preferred unitholders $ —  $ 21,976 
Accrued capital expenditures $ 13,264  $ 10,969 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements

Note 1—Organization and Operations

NGL Energy Partners LP (“we,” “us,” “our,” or the “Partnership”) is a Delaware limited partnership. NGL Energy Holdings LLC serves as our general partner. At September 30, 2021, our operations included three segments:

•Our Water Solutions segment transports, treats, recycles and disposes of produced and flowback water generated from oil and natural gas production. We also sell produced water for reuse and brackish non-potable water to our producer customers to be used in their crude oil exploration and production activities. As part of processing water, we aggregate and sell recovered crude oil, also known as skim oil. We also dispose of solids such as tank bottoms, drilling fluids and drilling muds and perform other ancillary services such as truck and frac tank washouts. Our activities in this segment are underpinned by long-term, fixed fee contracts and acreage dedications, some of which contain minimum volume commitments, with leading oil and gas companies including large, investment grade producer customers.
•Our Crude Oil Logistics segment purchases crude oil from producers and marketers and transports it to refineries or for resale at pipeline injection stations, storage terminals, barge loading facilities, rail facilities, refineries, and other trade hubs, and provides storage, terminaling, and transportation services through its owned assets. Our activities in this segment are supported by certain long-term, fixed rate contracts which include minimum volume commitments on our pipelines.
•Our Liquids Logistics segment conducts supply operations for natural gas liquids, refined petroleum products and biodiesel to a broad range of commercial, retail and industrial customers across the United States and Canada. These operations are conducted through our 26 company-owned terminals, third-party storage and terminal facilities, common carrier pipelines and a fleet of leased railcars. We also provide marine exports of butane through our facility located in Chesapeake, Virginia.

Note 2—Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include our accounts and those of our controlled subsidiaries. Intercompany transactions and account balances have been eliminated in consolidation. Investments we do not control, but can exercise significant influence over, are accounted for using the equity method of accounting. We also own an undivided interest in a crude oil pipeline, and include our proportionate share of assets, liabilities, and expenses related to this pipeline in our unaudited condensed consolidated financial statements.

Our unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim consolidated financial information in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, the unaudited condensed consolidated financial statements exclude certain information and notes required by GAAP for complete annual consolidated financial statements. However, we believe that the disclosures made are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements include all adjustments that we consider necessary for a fair presentation of our consolidated financial position, results of operations and cash flows for the interim periods presented. Such adjustments consist only of normal recurring items, unless otherwise disclosed in this Quarterly Report. The unaudited condensed consolidated balance sheet at March 31, 2021 was derived from our audited consolidated financial statements for the fiscal year ended March 31, 2021 included in our Annual Report on Form 10-K (“Annual Report”) filed with the SEC on June 3, 2021.

These interim unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto included in our Annual Report. Due to the seasonal nature of certain of our operations and other factors, the results of operations for interim periods are not necessarily indicative of the results of operations to be expected for future periods or for the full fiscal year ending March 31, 2022.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amount of assets and liabilities reported at the date of the consolidated financial statements and the amount of revenues and expenses reported during the periods presented.

9
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Critical estimates we make in the preparation of our unaudited condensed consolidated financial statements include, among others, determining the fair value of assets and liabilities acquired in acquisitions, the fair value of derivative instruments, the collectibility of accounts receivable, the recoverability of inventories, useful lives and recoverability of property, plant and equipment and amortizable intangible assets, the impairment of long-lived assets and goodwill, the fair value of asset retirement obligations, the value of equity-based compensation, accruals for environmental matters and estimating certain revenues. Although we believe these estimates are reasonable, actual results could differ from those estimates.

Significant Accounting Policies

Our significant accounting policies are consistent with those disclosed in Note 2 of our audited consolidated financial statements included in our Annual Report.

Income Taxes

We qualify as a partnership for income tax purposes. As such, we generally do not pay United States federal income tax. Rather, each owner reports his or her share of our income or loss on his or her individual tax return. The aggregate difference in the basis of our net assets for financial and tax reporting purposes cannot be readily determined, as we do not have access to information regarding each partner’s basis in the Partnership.

We have a deferred tax liability of $44.1 million and $45.8 million at September 30, 2021 and March 31, 2021, respectively, as a result of acquiring corporations in connection with certain of our acquisitions, which is included within other noncurrent liabilities in our unaudited condensed consolidated balance sheets. The deferred tax liability is the tax effected cumulative temporary difference between the GAAP basis and tax basis of the acquired assets within the corporation. For GAAP purposes, certain of the acquired assets will be depreciated and amortized over time which will lower the GAAP basis. The deferred tax benefit recorded during the six months ended September 30, 2021 was $1.6 million with an effective tax rate of 23.1%. The deferred tax benefit recorded during the six months ended September 30, 2020 was $1.8 million with an effective tax rate of 23.8%.

We evaluate uncertain tax positions for recognition and measurement in the unaudited condensed consolidated financial statements. To recognize a tax position, we determine whether it is more likely than not that the tax position will be sustained upon examination, including resolution of any related appeals or litigation, based on the technical merits of the position. A tax position that meets the more likely than not threshold is measured to determine the amount of benefit to be recognized in the unaudited condensed consolidated financial statements. We had no material uncertain tax positions that required recognition in our unaudited condensed consolidated financial statements at September 30, 2021 or March 31, 2021.

Inventories

Our inventories are valued at the lower of cost or net realizable value, with cost determined using either the weighted-average cost or the first in, first out (FIFO) methods, including the cost of transportation and storage, and with net realizable value defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. In performing this analysis, we consider fixed-price forward commitments.

Inventories consist of the following at the dates indicated:
September 30, 2021 March 31, 2021
(in thousands)
Propane $ 111,648  $ 45,521 
Butane 88,163  19,189 
Crude oil 87,923  64,916 
Biodiesel 12,658  16,169 
Diesel 5,742  2,252 
Ethanol 2,802  3,056 
Other 10,959  7,364 
Total $ 319,895  $ 158,467 

10
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Investments in Unconsolidated Entities

Investments we do not control, but can exercise significant influence over, are accounted for using the equity method of accounting. Investments in partnerships and limited liability companies, unless our investment is considered to be minor, and investments in unincorporated joint ventures are also accounted for using the equity method of accounting.

Our investments in unconsolidated entities consist of the following at the dates indicated:
Entity Segment Ownership Interest September 30, 2021 March 31, 2021
(in thousands)
Water services and land company Water Solutions 50% $ 14,889  $ 15,832 
Water services and land company Water Solutions 50% 2,047  2,284 
Water services and land company Water Solutions 10% 2,897  3,254 
Aircraft company (1) Corporate and Other 50% 640  748 
Water services company Water Solutions 50% 414  424 
Natural gas liquids terminal company Liquids Logistics 50% 142  177 
Total $ 21,029  $ 22,719 
(1)    This is an investment with a related party.

Other Noncurrent Assets

Other noncurrent assets consist of the following at the dates indicated:
September 30, 2021 March 31, 2021
(in thousands)
Loan receivable (1) $ 3,053  $ 2,962 
Linefill (2) 28,065  28,110 
Minimum shipping fees - pipeline commitments (3) 11,035  13,171 
Other 7,481  6,490 
Total $ 49,634  $ 50,733 
(1)    Represents the noncurrent portion of a loan receivable, net of an allowance for an expected credit loss, with a former related party.
(2)    Represents minimum volumes of product we are required to leave on certain third-party owned pipelines under long-term shipment commitments. At September 30, 2021 and March 31, 2021, linefill consisted of 423,978 barrels of crude oil. Linefill held in pipelines we own is included within property, plant and equipment (see Note 4).
(3)    Represents the noncurrent portion of minimum shipping fees paid in excess of volumes shipped, or deficiency credits, for a contract with a crude oil pipeline operator. This amount can be recovered when volumes shipped exceed the minimum monthly volume commitment (see Note 7). As of September 30, 2021, the deficiency credit was $15.3 million, of which $4.3 million is recorded within prepaid expenses and other current assets in our unaudited condensed consolidated balance sheet.

Accrued Expenses and Other Payables

Accrued expenses and other payables consist of the following at the dates indicated:
September 30, 2021 March 31, 2021
(in thousands)
Accrued interest $ 57,311  $ 56,299 
Derivative liabilities 28,940  21,562 
Accrued compensation and benefits 24,659  41,456 
Excise and other tax liabilities 13,274  10,970 
Product exchange liabilities 13,237  1,188 
Other 27,689  38,925 
Total $ 165,110  $ 170,400 
11
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)


Reclassifications

We have reclassified certain prior period financial statement information to be consistent with the classification methods used in the current fiscal year. These reclassifications did not impact previously reported amounts of assets, liabilities, equity, net income or cash flows.

Recent Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” This ASU (i) simplifies an issuer’s accounting for convertible instruments by eliminating two of the three models in ASC 470-20 that require separate accounting for embedded conversion features, (ii) amends diluted earnings per share calculations for convertible instruments by requiring the use of the if-converted method and (iii) simplifies the settlement assessment entities are required to perform on contracts that can potentially settle in an entity’s own equity by removing certain requirements. This guidance is effective for interim and annual periods beginning after December 15, 2021, with early adoption permitted. We are currently evaluating the effect that this guidance will have on our financial position, results of operations and cash flows.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. This guidance is effective prospectively upon issuance through December 31, 2022 and may be applied from the beginning of an interim period that includes the issuance date of this ASU. We are currently evaluating the effect that this guidance will have on our financial position, results of operations and cash flows.

Note 3—Loss Per Common Unit

The following table presents our calculation of basic and diluted weighted average common units outstanding for the periods indicated:
Three Months Ended September 30, Six Months Ended September 30,
2021 2020 2021 2020
Weighted average common units outstanding during the period:
Common units - Basic 129,593,939  128,771,715  129,593,939  128,771,715 
Common units - Diluted 129,593,939  128,771,715  129,593,939  128,771,715 

For the three months and six months ended September 30, 2021 and 2020, all potential common units or convertible securities were considered antidilutive.

12
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Our loss per common unit is as follows for the periods indicated:
Three Months Ended September 30, Six Months Ended September 30,
2021 2020 2021 2020
(in thousands, except unit and per unit amounts)
(Loss) income from continuing operations $ (1,207) $ 5,988  $ (135,709) $ (27,778)
Less: Continuing operations income attributable to noncontrolling interests (330) (168) (768) (219)
Net (loss) income from continuing operations attributable to NGL Energy Partners LP (1,537) 5,820  (136,477) (27,997)
Less: Distributions to preferred unitholders (1) (25,726) (23,770) (50,837) (45,824)
Less: Continuing operations net loss allocated to general partner (2) 27  17  186  73 
Net loss from continuing operations allocated to common unitholders $ (27,236) $ (17,933) $ (187,128) $ (73,748)
Loss from discontinued operations, net of tax $ —  $ (153) $ —  $ (1,639)
Less: Discontinued operations loss allocated to general partner (2) —  1  —  2 
Net loss from discontinued operations allocated to common unitholders $ —  $ (152) $ —  $ (1,637)
Net loss allocated to common unitholders $ (27,236) $ (18,085) $ (187,128) $ (75,385)
Basic loss per common unit
Loss from continuing operations $ (0.21) $ (0.14) $ (1.44) $ (0.57)
Loss from discontinued operations, net of tax $ —  $ —  $ —  $ (0.01)
Net loss $ (0.21) $ (0.14) $ (1.44) $ (0.58)
Diluted loss per common unit
Loss from continuing operations $ (0.21) $ (0.14) $ (1.44) $ (0.57)
Loss from discontinued operations, net of tax $ —  $ —  $ —  $ (0.01)
Net loss $ (0.21) $ (0.14) $ (1.44) $ (0.58)
Basic weighted average common units outstanding 129,593,939  128,771,715  129,593,939  128,771,715 
Diluted weighted average common units outstanding 129,593,939  128,771,715  129,593,939  128,771,715 
(1)    Includes cumulative distributions for the three months and six months ended September 30, 2021, which were earned but not declared or paid (see Note 8 for a further discussion of the suspension of common unit and preferred unit distributions).
(2)    Net loss allocated to the general partner includes distributions to which it is entitled as the holder of incentive distribution rights.

13
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Note 4—Property, Plant and Equipment

Our property, plant and equipment consists of the following at the dates indicated:
Description Estimated
Useful Lives 		September 30, 2021 March 31, 2021
(in years) (in thousands)
Natural gas liquids terminal and storage assets 2 - 30 $ 165,267  $ 319,554 
Pipeline and related facilities 30 - 40 264,605  264,405 
Vehicles and railcars 3 - 25 125,960  126,088 
Water treatment facilities and equipment 3 - 30 2,044,610  1,930,437 
Crude oil tanks and related equipment 2 - 30 236,305  238,924 
Barges and towboats 5 - 30 137,603  137,386 
Information technology equipment 3 - 7 47,275  50,220 
Buildings and leasehold improvements 3 - 40 156,570  165,679 
Land   100,874  100,352 
Tank bottoms and linefill (1)   29,099  20,237 
Other 3 - 20 15,317  15,054 
Construction in progress 45,407  114,796 
3,368,892  3,483,132 
Accumulated depreciation (844,605) (776,279)
Net property, plant and equipment $ 2,524,287  $ 2,706,853 
(1)    Tank bottoms, which are product volumes required for the operation of storage tanks, are recorded at historical cost. We recover tank bottoms when the storage tanks are removed from service. Linefill, which represents our portion of the product volume required for the operation of the proportionate share of a pipeline we own, is recorded at historical cost.

The following table summarizes depreciation expense and capitalized interest expense for the periods indicated:
Three Months Ended September 30, Six Months Ended September 30,
2021 2020 2021 2020
(in thousands)
Depreciation expense $ 47,845  $ 53,290  $ 108,451  $ 100,013 
Capitalized interest expense $ 324  $ 445  $ 656  $ 2,113 

We record (gains) losses from the sales of property, plant and equipment and any write-downs in value due to impairment within loss on disposal or impairment of assets, net in our unaudited condensed consolidated statements of operations. The following table summarizes (gains) losses on the disposal or impairment of property, plant and equipment by segment for the periods indicated:
Three Months Ended September 30, Six Months Ended September 30,
2021 2020 2021 2020
(in thousands)
Water Solutions $ 1,296  $ 6,414  $ 8,785  $ 6,740 
Crude Oil Logistics (14) —  (56) 1,844 
Liquids Logistics 11,776  43  11,753  47 
Corporate and Other —  (2) —  (2)
Total $ 13,058  $ 6,455  $ 20,482  $ 8,629 

14
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Note 5—Intangible Assets

Our intangible assets consist of the following at the dates indicated:
September 30, 2021 March 31, 2021
Description Amortizable Lives Gross Carrying
Amount 		Accumulated
Amortization 		Net Gross Carrying
Amount 		Accumulated
Amortization 		Net
(in years) (in thousands)
Amortizable:
Customer relationships 3 - 25 $ 1,249,463  $ (456,015) $ 793,448  $ 1,318,638  $ (450,639) $ 867,999 
Customer commitments 25 192,000  (17,280) 174,720  192,000  (13,440) 178,560 
Pipeline capacity rights 30 7,799  (2,037) 5,762  7,799  (1,907) 5,892 
Rights-of-way and easements 1 - 45 91,361  (10,863) 80,498  90,703  (9,270) 81,433 
Water rights 13 - 30 100,369  (17,496) 82,873  100,369  (14,454) 85,915 
Executory contracts and other agreements 1 - 35 34,975  (20,920) 14,055  48,709  (21,300) 27,409 
Non-compete agreements 4 - 5 7,000  (5,639) 1,361  12,100  (6,102) 5,998 
Debt issuance costs (1)
5 20,147  (2,651) 17,496  9,558  (406) 9,152 
Total amortizable 1,703,114  (532,901) 1,170,213  1,779,876  (517,518) 1,262,358 
Non-amortizable:
Trade names 255  —  255  255  —  255 
Total $ 1,703,369  $ (532,901) $ 1,170,468  $ 1,780,131  $ (517,518) $ 1,262,613 
(1)    Includes debt issuance costs related to the ABL Facility (as defined herein) and the Sawtooth credit agreement (as defined herein). Debt issuance costs related to the fixed-rate notes are reported as a reduction of the carrying amount of long-term debt.

On June 18, 2021, the Sawtooth credit agreement was paid off and terminated prior to us selling our ownership interest in Sawtooth (see Note 15). We wrote off $0.1 million of debt issuance costs related to the Sawtooth credit agreement. The loss is reported within gain on early extinguishment of liabilities, net within our unaudited condensed consolidated statement of operations.

The weighted-average remaining amortization period for intangible assets is approximately 20.6 years.

Amortization expense is as follows for the periods indicated:
Three Months Ended September 30, Six Months Ended September 30,
Recorded In 2021 2020 2021 2020
(in thousands)
Depreciation and amortization $ 21,718  $ 34,179  $ 45,214  $ 71,442 
Cost of sales 71  76  144  153 
Interest expense 1,693  1,560  2,375  3,092 
Operating expenses 61  61  123  123 
Total $ 23,543  $ 35,876  $ 47,856  $ 74,810 

Expected amortization of our intangible assets is as follows (in thousands):
Fiscal Year Ending March 31,
2022 (six months) $ 41,625 
2023 80,725 
2024 74,385 
2025 66,942 
2026 64,229 
2027 60,186 
Thereafter 782,121 
Total $ 1,170,213 

15
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Note 6—Long-Term Debt

Our long-term debt consists of the following at the dates indicated:
September 30, 2021 March 31, 2021
Face
Amount 		Unamortized
Debt Issuance
Costs (1) 		Book
Value 		Face
Amount 		Unamortized
Debt Issuance
Costs (1) 		Book
Value
(in thousands)
Senior secured notes:
7.500% Notes due 2026 (“2026 Senior Secured Notes”)
$ 2,050,000  $ (39,708) $ 2,010,292  $ 2,050,000  $ (44,246) $ 2,005,754 
Asset-based revolving credit facility (“ABL Facility”) 146,000  —  146,000  4,000  —  4,000 
Senior unsecured notes:
7.500% Notes due 2023 (“2023 Notes”)
519,496  (2,690) 516,806  555,251  (3,564) 551,687 
6.125% Notes due 2025 (“2025 Notes”)
380,020  (2,876) 377,144  380,020  (3,297) 376,723 
7.500% Notes due 2026 (“2026 Notes”)
332,402  (3,875) 328,527  338,402  (4,378) 334,024 
Other long-term debt 42,926  (65) 42,861  49,095  (70) 49,025 
3,470,844  (49,214) 3,421,630  3,376,768  (55,555) 3,321,213 
Less: Current maturities 2,278  —  2,278  2,183  —  2,183 
Long-term debt $ 3,468,566  $ (49,214) $ 3,419,352  $ 3,374,585  $ (55,555) $ 3,319,030 
(1)    Debt issuance costs related to the ABL Facility and the Sawtooth credit agreement (included in other long-term debt) are reported within intangible assets, rather than as a reduction of the carrying amount of long-term debt.

2026 Senior Secured Notes

The 2026 Senior Secured Notes bear interest at 7.5%, which is payable on February 1 and August 1 of each year, which began on August 1, 2021. The 2026 Senior Secured Notes mature on February 1, 2026. The 2026 Senior Secured Notes were issued pursuant to an indenture dated February 4, 2021 (the “Indenture”).

The 2026 Senior Secured Notes are secured by first priority liens on substantially all of our assets other than our accounts receivable, inventory, pledged deposit accounts, cash and cash equivalents, renewable energy tax credits and related assets and second priority liens in our accounts receivable, inventory, pledged deposit accounts, cash and cash equivalents, renewable energy tax credits and related assets.

The Indenture contains covenants that, among other things, limit our ability to: pay distributions or make other restricted payments or repurchase stock; incur or guarantee additional indebtedness or issue disqualified stock or certain preferred stock; make certain investments; create or incur liens; sell assets; enter into restrictions affecting the ability of restricted subsidiaries to make distributions, make loans or advances or transfer assets to the guarantors (including the Partnership); enter into certain transactions with our affiliates; designate restricted subsidiaries as unrestricted subsidiaries; and merge, consolidate or transfer or sell all or substantially all of our assets. The Indenture specifically restricts our ability to pay distributions until our total leverage ratio (as defined in the Indenture) for the most recently ended four full fiscal quarters at the time of the distribution is not greater than 4.75 to 1.00. These covenants are subject to a number of important exceptions and qualifications.

Compliance

At September 30, 2021, we were in compliance with the covenants under the 2026 Senior Secured Notes indenture.

ABL Facility

The $500.0 million ABL Facility is subject to a borrowing base, which includes a sub-limit for letters of credit. The initial borrowing base was $500.0 million and the sub-limit for letters of credit is $200.0 million. The ABL Facility is secured by a lien on substantially all of our assets, including among other things, a first priority lien on our accounts receivable, inventory, pledged deposit accounts, cash and cash equivalents, renewable energy tax credits and related assets and a second priority lien on our all of our other assets. At September 30, 2021, we had letters of credit outstanding of approximately $152.2 million. The ABL Facility is scheduled to mature at the earliest of (a) February 4, 2026 or (b) 91 days prior to the earliest
16
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

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.

All borrowings under the ABL Facility bear interest, at our option, at either (i) an alternate base rate plus a margin of 2.00% per year or (ii) an adjusted LIBOR rate plus a margin of 3.00% per year. At September 30, 2021, the borrowings under the ABL Facility had a weighted average interest rate of 4.89%, calculated as the alternate base rate of 3.25% plus a margin of 2.00% on the alternate base rate borrowings and weighted average LIBOR rate of 0.50% plus a margin of 3.00% for the LIBOR borrowings. On September 30, 2021, the interest rate in effect on letters of credit was 3.00%.

The ABL Facility contains various affirmative and negative covenants, including financial reporting requirements and limitations on indebtedness, liens, mergers, consolidations, liquidations and dissolutions, sales of assets, distributions and other restricted payments, investments (including acquisitions) and transactions with affiliates. The ABL Facility contains, as the only financial covenant, a minimum Fixed Charge Coverage Ratio financial covenant that is tested based on the financial statements for the most recently ended fiscal quarter upon the occurrence and during the continuation of a Cash Dominion Event (as defined in the ABL Facility). At September 30, 2021, no Cash Dominion Event had occurred.

Compliance

At September 30, 2021, we were in compliance with the covenants under the ABL Facility.

Senior Unsecured Notes

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

Repurchases

The following table summarizes repurchases of Senior Unsecured Notes for the periods indicated:
Three Months Ended September 30, Six Months Ended September 30,
2021 2021
(in thousands)
2023 Notes
Notes repurchased $ 17,088  $ 35,755 
Cash paid (excluding payments of accrued interest) $ 16,536  $ 34,929 
Gain on early extinguishment of debt (1) $ 461  $ 627 
2026 Notes
Notes repurchased $ 6,000  $ 6,000 
Cash paid (excluding payments of accrued interest) $ 5,320  $ 5,320 
Gain on early extinguishment of debt (2) $ 610  $ 610 
(1)    Gain on early extinguishment of debt for the three months and six months ended September 30, 2021 is inclusive of the write-off of debt issuance costs of $0.1 million and $0.2 million, respectively. The gain is reported within gain on early extinguishment of liabilities, net within our unaudited condensed consolidated statements of operations.
(2)    Gain on early extinguishment of debt for the three months and six months ended September 30, 2021 is inclusive of the write-off of debt issuance costs of $0.1 million and $0.1 million, respectively. The gain is reported within gain on early extinguishment of liabilities, net within our unaudited condensed consolidated statements of operations.

Compliance

At September 30, 2021, we were in compliance with the covenants under all of the Senior Unsecured Notes indentures.

Other Long-term Debt

The Sawtooth Caverns, LLC (“Sawtooth”) credit agreement was paid off and terminated prior to us selling our ownership interest in Sawtooth on June 18, 2021 (see Note 15).

17
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

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. We have an aggregate principal balance of $42.9 million at September 30, 2021. The loan matures on November 1, 2027.

Debt Maturity Schedule

The scheduled maturities of our long-term debt are as follows at September 30, 2021:
Fiscal Year Ending March 31, 2026 Senior Secured Notes ABL Facility Senior Unsecured Notes Other
Long-Term
Debt 		Total
(in thousands)
2022 (six months) $ —  $ —  $ —  $ 1,013  $ 1,013 
2023 —  —  —  2,585  2,585 
2024 —  —  519,496  2,816  522,312 
2025 —  —  380,020  3,068  383,088 
2026 2,050,000  146,000  —  3,343  2,199,343 
2027 —  —  332,402  3,642  336,044 
Thereafter —  —  —  26,459  26,459 
Total $ 2,050,000  $ 146,000  $ 1,231,918  $ 42,926  $ 3,470,844 

Amortization of Debt Issuance Costs

Amortization expense for debt issuance costs related to long-term debt was $3.1 million and $1.7 million during the three months ended September 30, 2021 and 2020, respectively, and $6.1 million and $3.7 million during the six months ended September 30, 2021 and 2020, respectively.

Expected amortization of debt issuance costs is as follows (in thousands):

Fiscal Year Ending March 31,
2022 (six months) $ 6,076 
2023 12,152 
2024 11,618 
2025 10,795 
2026 8,521 
2027 46 
Thereafter 6 
Total $ 49,214 

Note 7—Commitments and Contingencies

Legal Contingencies

In August 2015, LCT Capital, LLC (“LCT”) filed a lawsuit against NGL Energy Holdings LLC (the “GP”) and the Partnership seeking payment for investment banking services relating to the purchase of TransMontaigne Inc. and related assets in July 2014. After pre-trial rulings, LCT was limited to pursuing claims of (i) quantum meruit (the value of the services rendered by LCT) and (ii) fraudulent misrepresentation against the defendants. Following a jury trial conducted in Delaware state court from July 23, 2018 through August 1, 2018, the jury returned a verdict consisting of an award of $4.0 million for quantum meruit and $29.0 million for fraudulent misrepresentation, subject to statutory interest. On December 5, 2019, in response to the defendants’ post-trial motion, the Court issued an Order overturning the jury’s damages award and ordering the case to be set for a damages-only trial. Both parties filed applications with the trial court asking the trial court to certify the December 5th Order for interlocutory, immediate review by the Appellate Court. On January 7, 2020, the Supreme Court of Delaware (“Supreme Court”) entered an Order accepting an interlocutory appeal of various issues relating to both the quantum meruit and fraudulent misrepresentation verdicts. The Supreme Court heard oral arguments of the parties on November 4, 2020, took the matters presented under advisement and on January 28, 2021, issued a ruling that (a) LCT is not entitled to “benefit-of-the-bargain” damages on its fraud claim; (b) LCT is not entitled to receive fraudulent misrepresentation damages separate from its quantum meruit damages; (c) the trial court abused its discretion when it ordered a new trial on damages relating to LCT’s claim of fraudulent misrepresentation; and (d) the trial court properly ordered a new trial on LCT’s claim of quantum meruit
18
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

damages. The date for a new trial, to be limited to the quantum meruit claim, has not yet been set by the trial court. Any allocation of the ultimate verdict award, if any, between the GP and the Partnership will be made by the board of directors of our general partner once all information is available to it and after the new trial, any post-trial and/or any appellate process has concluded and the verdict is final as a matter of law. As of September 30, 2021, we have accrued $2.5 million related to this matter.

We are party to various other claims, legal actions, and complaints arising in the ordinary course of business. In the opinion of our management, the ultimate resolution of these claims, legal actions, and complaints, after consideration of amounts accrued, insurance coverage, and other arrangements, is not expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows. However, the outcome of such matters is inherently uncertain, and estimates of our liabilities may change materially as circumstances develop.

Environmental Matters

At September 30, 2021, we have an environmental liability, measured on an undiscounted basis, of $1.5 million, which is recorded within accrued expenses and other payables in our unaudited condensed consolidated balance sheet. Our operations are subject to extensive federal, state, and local environmental laws and regulations. Although we believe our operations are in substantial compliance with applicable environmental laws and regulations, risks of additional costs and liabilities are inherent in our business, and there can be no assurance that we will not incur significant costs. Moreover, it is possible that other developments, such as increasingly stringent environmental laws, regulations and enforcement policies thereunder, and claims for damages to property or persons resulting from the operations, could result in substantial costs. Accordingly, we have adopted policies, practices, and procedures in the areas of pollution control, product safety, occupational health, and the handling, storage, use, and disposal of hazardous materials designed to prevent material environmental or other damage, and to limit the financial liability that could result from such events. However, some risk of environmental or other damage is inherent in our business.

Asset Retirement Obligations

We have contractual and regulatory obligations at certain facilities for which we have to perform remediation, dismantlement, or removal activities when the assets are retired. Our liability for asset retirement obligations is discounted to present value. To calculate the liability, we make estimates and assumptions about the retirement cost and the timing of retirement. Changes in our assumptions and estimates may occur as a result of the passage of time and the occurrence of future events. The following table summarizes changes in our asset retirement obligation, which is reported within other noncurrent liabilities in our unaudited condensed consolidated balance sheets (in thousands):
Balance at March 31, 2021 $ 28,079 
Liabilities incurred 1,848 
Liabilities associated with disposition of Sawtooth (see Note 15) (1,612)
Accretion expense 875 
Balance at September 30, 2021 $ 29,190 

In addition to the obligations described above, we may be obligated to remove facilities or perform other remediation upon retirement of certain other assets. However, the fair value of the asset retirement obligation cannot currently be reasonably estimated because the settlement dates are indeterminable. We will record an asset retirement obligation for these assets in the periods in which settlement dates are reasonably determinable.

19
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Other Commitments

We have noncancelable agreements for product storage, railcar spurs and real estate. The following table summarizes future minimum payments under these agreements at September 30, 2021 (in thousands):
Fiscal Year Ending March 31,
2022 (six months) $ 2,859 
2023 5,859 
2024 5,720 
2025 1,181 
2026 1,162 
2027 1,154 
Thereafter 5,386 
Total $ 23,321 

As part of the acquisition of Hillstone Environmental Partners, LLC, we assumed an obligation to pay a quarterly subsidy payment in the event that specified volumetric thresholds are not exceeded at a third-party facility. This agreement expires on December 31, 2022. For the three months and six months ended September 30, 2021, we recorded $0.6 million and $1.2 million, respectively, and for the three months and six months ended September 30, 2020, we recorded $0.7 million and $1.4 million, respectively, within operating expense in our unaudited condensed consolidated statements of operations. At September 30, 2021, the range of potential payments we could be obligated to make pursuant to the subsidy agreement could be from $0.0 million to $4.1 million.

Pipeline Capacity Agreements

We have noncancelable agreements with crude oil pipeline operators, which guarantee us minimum monthly shipping capacity on the pipelines. As a result, we are required to pay the minimum shipping fees if actual shipments are less than our allotted capacity. Under certain agreements we have the ability to recover minimum shipping fees previously paid if our shipping volumes exceed the minimum monthly shipping commitment during each month remaining under the agreement, with some contracts containing provisions that allow us to continue shipping up to six months after the maturity date of the contract in order to recapture previously paid minimum shipping delinquency fees. We currently have an asset recorded in prepaid expenses and other current assets and in other noncurrent assets in our unaudited condensed consolidated balance sheet for minimum shipping fees paid in both the current and previous periods that are expected to be recovered in future periods by exceeding the minimum monthly volumes (see Note 2).

The following table summarizes future minimum throughput payments under these agreements at September 30, 2021 (in thousands):
Fiscal Year Ending March 31,
2022 (six months) $ 17,609 
2023 35,314 
2024 35,410 
2025 30,897 
Total $ 119,230 

Sales and Purchase Contracts

We have entered into product sales and purchase contracts for which we expect the parties to physically settle and deliver the inventory in future periods.

20
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

At September 30, 2021, we had the following commodity purchase commitments (in thousands):
Crude Oil (1) Natural Gas Liquids
Value Volume
(in barrels) 		Value Volume
(in gallons)
Fixed-Price Commodity Purchase Commitments:
2022 (six months) $ 114,126  1,607  $ 16,624  21,046 
2023 —  —  3,546  4,788 
2024 —  —  1,946  2,772 
Total $ 114,126  1,607  $ 22,116  28,606 
Index-Price Commodity Purchase Commitments:
2022 (six months) $ 1,631,013  23,165  $ 1,031,514  740,186 
2023 2,071,352  32,176  31,186  30,080 
2024 1,720,969  28,920  15,855  25,200 
2025 1,193,320  21,170  —  — 
2026 537,657  10,409  —  — 
Total $ 7,154,311  115,840  $ 1,078,555  795,466 
(1)    Our crude oil index-price purchase commitments exceed our crude oil index-price sales commitments (presented below) due primarily to our long-term purchase commitments for crude oil that we purchase and ship on the Grand Mesa Pipeline. As these purchase commitments are deliver-or-pay contracts, whereby our counterparty is required to pay us for any volumes not delivered, we have not entered into corresponding long-term sales contracts for volumes we may not receive.

At September 30, 2021, we had the following commodity sale commitments (in thousands):
Crude Oil Natural Gas Liquids
Value Volume
(in barrels) 		Value Volume
(in gallons)
Fixed-Price Commodity Sale Commitments:
2022 (six months) $ 114,352  1,607  $ 186,391  164,404 
2023 —  —  15,692  18,366 
2024 —  —  3,064  4,169 
2025 —  —  38  40 
Total $ 114,352  1,607  $ 205,185  186,979 
Index-Price Commodity Sale Commitments:
2022 (six months) $ 1,309,659  17,599  $ 1,105,028  687,892 
2023 728,712  10,640  33,823  23,791 
2024 643,593  10,248  —  — 
2025 601,404  10,220  —  — 
2026 22,281  390  —  — 
Total $ 3,305,649  49,097  $ 1,138,851  711,683 

We account for the contracts shown in the tables above using the normal purchase and normal sale election. Under this accounting policy election, we do not record the physical contracts at fair value at each balance sheet date; instead, we record the purchase or sale at the contracted value once the delivery occurs. Contracts in the tables above may have offsetting derivative contracts (described in Note 9) or inventory positions (described in Note 2).

Certain other forward purchase and sale contracts do not qualify for the normal purchase and normal sale election. These contracts are recorded at fair value in our unaudited condensed consolidated balance sheet and are not included in the tables above. These contracts are included in the derivative disclosures in Note 9 and represent $51.6 million of our prepaid expenses and other current assets and $29.0 million of our accrued expenses and other payables at September 30, 2021.

21
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Note 8—Equity

Partnership Equity

The Partnership’s equity consists of a 0.1% general partner interest and a 99.9% limited partner interest, which consists of common units. Our general partner has the right, but not the obligation, to contribute a proportionate amount of capital to us to maintain its 0.1% general partner interest. Our general partner is not required to guarantee or pay any of our debts and obligations. As of September 30, 2021, we owned 8.69% of our general partner.

Common Unit Repurchase Program

On August 30, 2019, the board of directors of our general partner authorized a common unit repurchase program, under which we may repurchase up to $150.0 million of our outstanding common units through September 30, 2021, from time to time in the open market or in other privately negotiated transactions. We did not repurchase any units under this plan during the three months ended September 30, 2021 and this plan has expired.

Suspension of Common Unit and Preferred Unit Distributions

The board of directors of our general partner temporarily suspended all distributions (common unit distributions beginning with the quarter ended December 31, 2020 and preferred unit distributions beginning with the quarter ended March 31, 2021) in order to deleverage our balance sheet and meet the financial performance ratios set within the Indenture of the 2026 Senior Secured Notes, as discussed further in Note 6.

Class B Preferred Units

As of September 30, 2021, there were 12,585,642 of our 9.00% Class B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class B Preferred Units”) outstanding.

The current distribution rate for the Class B Preferred Units is 9.00% per year of the $25.00 liquidation preference per unit (equal to $2.25 per unit per year). For the quarter ended September 30, 2021, we did not declare or pay distributions to the holders of the Class B Preferred Units, thus the quarterly distribution for September 30, 2021 is $0.5625 and the cumulative distribution since suspension for each Class B Preferred Unit is $1.6875. In addition, the amount of cumulative but unpaid distributions shall continue to accumulate at the then applicable rate until all unpaid distributions have been paid in full. The total amount due as of September 30, 2021 is $21.7 million.

Class C Preferred Units

As of September 30, 2021, there were 1,800,000 of our 9.625% Class C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class C Preferred Units”) outstanding.

The current distribution rate for the Class C Preferred Units is 9.625% per year of the $25.00 liquidation preference per unit (equal to $2.41 per unit per year). For the quarter ended September 30, 2021, we did not declare or pay distributions to the holders of the Class C Preferred Units, thus the quarterly distribution for September 30, 2021 is $0.6016 and the cumulative distribution since suspension for each Class C Preferred Unit is $1.8047. In addition, the amount of cumulative but unpaid distributions shall continue to accumulate at the then applicable rate until all unpaid distributions have been paid in full. The total amount due as of September 30, 2021 is $3.3 million.

Class D Preferred Units

As of September 30, 2021, there were 600,000 preferred units (“Class D Preferred Units”) and warrants exercisable to purchase an aggregate of 25,500,000 common units outstanding.

The current distribution rate for the Class D Preferred Units is 9.00% per year per unit (equal to $90.00 per every $1,000 in unit value per year), plus an additional 1.5% rate increase due to us exceeding the adjusted total leverage ratio and due to a Class D distribution payment default, as defined within the amended and restated limited partnership agreement. For the quarter ended September 30, 2021, we did not declare or pay distributions to the holders of the Class D Preferred Units, thus the average quarterly distribution at September 30, 2021 is $27.32 and the average cumulative distribution since suspension for each Class D Preferred unit is $80.64. In addition, the amount of cumulative but unpaid distributions shall continue to
22
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

accumulate at the then applicable rate until all unpaid distributions have been paid in full. The total amount due as of September 30, 2021 is $49.6 million.

Equity-Based Incentive Compensation

Our general partner adopted a long-term incentive plan (“LTIP”), which allowed for the issuance of equity-based compensation. Our general partner granted certain restricted units to employees and directors, which vest in tranches, subject to the continued service of the recipients through the vesting date (the “Service Awards”). The awards may also vest upon a change of control, at the discretion of the board of directors of our general partner. No distributions accrue to or are paid on the Service Awards during the vesting period. The LTIP expired on May 10, 2021.

The following table summarizes the Service Award activity during the six months ended September 30, 2021:
Unvested Service Award units at March 31, 2021 446,975 
Units granted 3,294,750 
Units forfeited (261,125)
Unvested Service Award units at September 30, 2021 3,480,600 

The following table summarizes the scheduled vesting of our unvested Service Award units at September 30, 2021:
Fiscal Year Ending March 31,
2022 (six months) 1,176,975 
2023 1,535,625 
2024 768,000 
Total 3,480,600 

Service Awards are valued at the average of the high/low sales price as of the grant date less the present value of the expected distribution stream over the vesting period using a risk-free interest rate. The weighted-average grant price for the six months ended September 30, 2021 was $2.15 per Service Award. We record the expense for each Service Award on a straight-line basis over the requisite period for the entire award (that is, over the requisite service period of the last separately vesting portion of the award), ensuring that the amount of compensation cost recognized at any date at least equals the portion of the grant-date value of the award that is vested at that date.

During the three months ended September 30, 2021 and 2020, we recorded compensation expense related to Service Award units of $1.0 million and $1.3 million, respectively. During the six months ended September 30, 2021 and 2020, we recorded compensation expense related to Service Award units of $2.0 million and $2.7 million, respectively.

The following table summarizes the estimated future expense we expect to record on the unvested Service Award units at September 30, 2021 (in thousands):
Fiscal Year Ending March 31,
2022 (six months) $ 1,382 
2023 3,286 
2024 1,375 
Total $ 6,043 

As the LTIP expired on May 10, 2021, we have no common units available for grant and any current unvested Service Awards that are forfeited, canceled or expire will not be available for future grants.

Note 9—Fair Value of Financial Instruments

Our cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and other current assets and liabilities (excluding derivative instruments) are carried at amounts which reasonably approximate their fair values due to their short-term nature.

23
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Commodity Derivatives

The following table summarizes the estimated fair values of our commodity derivative assets and liabilities reported in our unaudited condensed consolidated balance sheets at the dates indicated:
September 30, 2021 March 31, 2021
Derivative
Assets 		Derivative
Liabilities 		Derivative
Assets 		Derivative
Liabilities
(in thousands)
Level 1 measurements $ 61,301  $ (35,321) $ 12,312  $ (17,857)
Level 2 measurements 51,637  (35,764) 37,520  (24,474)
112,938  (71,085) 49,832  (42,331)
Netting of counterparty contracts (1) (35,337) 35,337  (12,648) 12,648 
Net cash collateral (held) provided (7,949) 6,808  2,660  5,543 
Commodity derivatives $ 69,652  $ (28,940) $ 39,844  $ (24,140)
(1)    Relates to commodity derivative assets and liabilities that are expected to be net settled on an exchange or through a netting arrangement with the counterparty. Our physical contracts that do not qualify as normal purchase normal sale transactions are not subject to such netting arrangements.

The following table summarizes the accounts that include our commodity derivative assets and liabilities in our unaudited condensed consolidated balance sheets at the dates indicated:
September 30, 2021 March 31, 2021
(in thousands)
Prepaid expenses and other current assets $ 68,792  $ 39,844 
Other noncurrent assets 860  — 
Accrued expenses and other payables (28,940) (21,562)
Other noncurrent liabilities —  (2,578)
Net commodity derivative asset $ 40,712  $ 15,704 

24
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

The following table summarizes our open commodity derivative contract positions at the dates indicated. We do not account for these derivatives as hedges.
Contracts Settlement Period Net Long
(Short)
Notional Units
(in barrels) 		Fair Value
of
Net Assets
(Liabilities)
(in thousands)
At September 30, 2021:
Crude oil fixed-price (1) October 2021–December 2023 (1,152) $ 12,682 
Propane fixed-price (1) October 2021–December 2023 1,284  35,880 
Refined products fixed-price (1) October 2021–July 2022 (369) (6,081)
Butane fixed-price (1) October 2021–December 2022 (697) (17,445)
Other October 2021–December 2022 16,817 
41,853 
Net cash collateral held (1,141)
Net commodity derivative asset $ 40,712 
At March 31, 2021:
Crude oil fixed-price (1) April 2021–December 2023 (1,850) $ (5,414)
Propane fixed-price (1) April 2021–December 2023 (195) 2,188 
Refined products fixed-price (1) April 2021–January 2022 (503) 1,928 
Butane fixed-price (1) April 2021–March 2022 (753) (3,764)
Other April 2021–June 2022 12,563 
7,501 
Net cash collateral provided 8,203 
Net commodity derivative asset $ 15,704 
(1)    We may have fixed price physical purchases, including inventory, offset by floating price physical sales or floating price physical purchases offset by fixed price physical sales. These contracts are derivatives we have entered into as an economic hedge against the risk of mismatches between fixed and floating price physical obligations.

During the three months ended September 30, 2021 and 2020, we recorded a net gain of $16.0 million and a net loss of $3.2 million, respectively, from our commodity derivatives to revenues and cost of sales in our unaudited condensed consolidated statements of operations. During the six months ended September 30, 2021 and 2020, we recorded net losses of $40.7 million and $30.6 million, respectively, from our commodity derivatives to revenues and cost of sales in our unaudited condensed consolidated statements of operations. The amounts for the three months and six months ended September 30, 2020 do not include net gains and losses related to Mid-Con (as defined herein) and Gas Blending (as defined herein), as these amounts have been classified as discontinued operations within our unaudited condensed consolidated statements of operations (see Note 16).

Credit Risk

We have credit policies that we believe minimize our overall credit risk, including an evaluation of potential counterparties’ financial condition (including credit ratings), collateral requirements under certain circumstances, and the use of industry standard master netting agreements, which allow for offsetting counterparty receivable and payable balances for certain transactions. At September 30, 2021, our primary counterparties were retailers, resellers, energy marketers, producers, refiners, and dealers. This concentration of counterparties may impact our overall exposure to credit risk, either positively or negatively, as the counterparties may be similarly affected by changes in economic, regulatory or other conditions. If a counterparty does not perform on a contract, we may not realize amounts that have been recorded in our unaudited condensed consolidated balance sheets and recognized in our net income.

Interest Rate Risk

The ABL Facility is variable-rate debt with interest rates that are generally indexed to the Wall Street Journal prime rate or LIBOR interest rate (or successor rate). At September 30, 2021, we had $146.0 million of outstanding borrowings under the ABL Facility at a weighted average interest rate of 4.89%.

25
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Fair Value of Fixed-Rate Notes

The following table provides fair value estimates of our fixed-rate notes at September 30, 2021 (in thousands):
Senior Secured Notes:
2026 Senior Secured Notes $ 2,088,438 
Senior Unsecured Notes:
2023 Notes $ 503,478 
2025 Notes $ 336,001 
2026 Notes $ 295,838 

For the 2026 Senior Secured Notes and Senior Unsecured Notes, the fair value estimates were developed based on publicly traded quotes and would be classified as Level 2 in the fair value hierarchy.

Note 10—Segments

The following table summarizes revenues related to our segments for the periods indicated. Transactions between segments are recorded based on prices negotiated between the segments. The “Corporate and Other” category in the table below includes certain corporate expenses that are not allocated to the reportable segments.
Three Months Ended September 30, Six Months Ended September 30,
2021 2020 2021 2020
(in thousands)
Revenues:
Water Solutions:
Topic 606 revenues
Disposal service fees $ 101,892  $ 76,004  $ 200,189  $ 157,382 
Sale of recovered crude oil 17,182  8,386  30,983  9,754 
Sale of water 11,570  1,153  24,852  3,881 
Other service revenues 5,566  3,135  10,412  5,726 
Total Water Solutions revenues 136,210  88,678  266,436  176,743 
Crude Oil Logistics:
Topic 606 revenues
Crude oil sales 536,067  418,174  1,071,496  648,902 
Crude oil transportation and other 18,813  47,567  37,262  90,208 
Non-Topic 606 revenues 2,120  3,105  4,365  6,274 
Elimination of intersegment sales (2,170) (2,005) (4,669) (2,504)
Total Crude Oil Logistics revenues 554,830  466,841  1,108,454  742,880 
Liquids Logistics:
Topic 606 revenues
Refined products sales 444,268  288,781  837,377  499,328 
Propane sales 219,297  136,538  379,700  258,066 
Butane sales 167,337  89,920  285,877  145,117 
Other product sales 139,566  90,418  253,896  138,753 
Service revenues 3,065  6,683  8,488  13,025 
Non-Topic 606 revenues 89,581  797  103,888  39,514 
Elimination of intersegment sales (17) (813) (1,324) (1,481)
Total Liquids Logistics revenues 1,063,097  612,324  1,867,902  1,092,322 
Corporate and Other:
Non-Topic 606 revenues —  315  —  628 
Total Corporate and Other revenues —  315  —  628 
Total $ 1,754,137  $ 1,168,158  $ 3,242,792  $ 2,012,573 

26
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

The following tables summarize depreciation and amortization expense (including amortization expense recorded within interest expense, cost of sales and operating expenses in Note 5 and Note 6) and operating income (loss) by segment for the periods indicated.
Three Months Ended September 30, Six Months Ended September 30,
2021 2020 2021 2020
(in thousands)
Depreciation and Amortization:
Water Solutions $ 50,731  $ 62,282  $ 113,774  $ 120,477 
Crude Oil Logistics 12,454  17,232  24,863  34,027 
Liquids Logistics 4,758  7,102  11,803  15,335 
Corporate and Other 6,500  4,210  11,984  8,667 
Total $ 74,443  $ 90,826  $ 162,424  $ 178,506 
Operating Income (Loss):
Water Solutions $ 32,772  $ (13,277) $ 40,355  $ (29,324)
Crude Oil Logistics 28,231  48,239  16,650  71,559 
Liquids Logistics 11,461  14,338  (41,948) 18,900 
Corporate and Other (7,646) (12,984) (19,573) (35,604)
Total $ 64,818  $ 36,316  $ (4,516) $ 25,531 

The following table summarizes additions to property, plant and equipment and intangible assets by segment for the periods indicated. This information has been prepared on the accrual basis, and includes property, plant and equipment and intangible assets acquired in acquisitions.
Three Months Ended September 30, Six Months Ended September 30,
2021 2020 2021 2020
(in thousands)
Water Solutions $ 33,591  $ 12,260  $ 60,553  $ 32,962 
Crude Oil Logistics 1,008  3,098  1,471  8,770 
Liquids Logistics 2,516  3,188  6,060  4,720 
Corporate and Other 252  5,872  1,163  7,904 
Total $ 37,367  $ 24,418  $ 69,247  $ 54,356 

The following tables summarize long-lived assets (consisting of property, plant and equipment, intangible assets, operating lease right-of-use assets and goodwill) and total assets by segment at the dates indicated:
September 30, 2021 March 31, 2021
(in thousands)
Long-lived assets, net:
Water Solutions $ 3,043,245  $ 3,104,450 
Crude Oil Logistics 1,073,603  1,090,578 
Liquids Logistics (1) 403,552  626,221 
Corporate and Other 52,662  44,802 
Total $ 4,573,062  $ 4,866,051 
(1)    Includes $19.9 million and $20.9 million of non-US long-lived assets at September 30, 2021 and March 31, 2021, respectively.

September 30, 2021 March 31, 2021
(in thousands)
Total assets:
Water Solutions $ 3,185,155  $ 3,204,850 
Crude Oil Logistics 1,726,429  1,665,005 
Liquids Logistics (1) 1,002,668  1,003,370 
Corporate and Other 67,540  74,116 
Total $ 5,981,792  $ 5,947,341 
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NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(1)    Includes $63.0 million and $37.9 million of non-US total assets at September 30, 2021 and March 31, 2021, respectively.

Note 11—Transactions with Affiliates

The following table summarizes our related party transactions for the periods indicated:
Three Months Ended September 30, Six Months Ended September 30,
2021 2020 2021 2020
(in thousands)
Sales to entities affiliated with management $ —  $ 1,243  $ —  $ 2,123 
Purchases from entities affiliated with management $ 18  $ 224  $ 88  $ 291 
Purchases from equity method investees $ 350  $ 292  $ 541  $ 745 
Sales to WPX (1) $ 12,485  $ 22,241 
Purchases from WPX (1) $ 82,287  $ 116,060 
(1)    As previously reported, a member of the board of directors of our general partner was an executive officer of WPX Energy, Inc. (“WPX”) and has subsequently retired. Therefore, we are no longer classifying transactions with WPX as a related party. The prior year amounts relate to purchases and sales of crude oil with WPX as well as the treatment and disposal of produced water and solids received from WPX.

Accounts receivable from affiliates consist of the following at the dates indicated:
September 30, 2021 March 31, 2021
(in thousands)
NGL Energy Holdings LLC $ 8,775  $ 8,245 
Equity method investees 203  462 
Entities affiliated with management 1  728 
Total $ 8,979  $ 9,435 

Accounts payable to affiliates consist of the following at the dates indicated:
September 30, 2021 March 31, 2021
(in thousands)
Equity method investees $ 96  $ 107 
Entities affiliated with management 1  12 
Total $ 97  $ 119 

Other Related Party Transactions

Guarantee of Outstanding Loan for KAIR2014 LLC (“KAIR2014”)

In connection with the purchase of our 50% interest in KAIR2014, we executed a joint and several guarantee for the benefit of the lender for KAIR2014’s outstanding loan. The other owner of KAIR2014 is a party to a similar guarantee. This guarantee obligates us for the payment and performance of KAIR2014 with respect to the repayment of the loan. As of September 30, 2021, the outstanding balance of the loan is approximately $2.6 million and the loan matures in September 2023. As the guarantee is joint and several, we could be liable for the entire outstanding balance of the loan. The loan is collateralized by the airplane owned by KAIR2014 and in the event of a default, the lender could seek payment in full from us. As of September 30, 2021, no accrual has been recorded related to this guarantee.

Note 12—Revenue from Contracts with Customers

We recognize revenue for services and products under revenue contracts as our obligations to either perform services or deliver or sell products under the contracts are satisfied. Our revenue contracts in scope under ASC 606 primarily have a single performance obligation and we do not receive material amounts of non-cash consideration. Our costs to obtain or fulfill our revenue contracts were not material as of September 30, 2021.

The majority of our revenue agreements are within scope under ASC 606 and the remainder of our revenue comes from contracts that are accounted for as derivatives under ASC 815 or that contain nonmonetary exchanges or leases and are in scope under Topics 845 and 842, respectively. See Note 10 for a detail of disaggregated revenue. Revenue from contracts
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NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

accounted for as derivatives under ASC 815 within our Liquids Logistics segment includes $10.0 million of net losses related to changes in the mark-to-market value of these arrangements recorded during the six months ended September 30, 2021.

Remaining Performance Obligations

Most of our service contracts are such that we have the right to consideration from a customer in an amount that corresponds directly with the value to the customer of our performance completed to date. Therefore, we are utilizing the practical expedient in ASC 606-10-55-18 under which we recognize revenue in the amount to which we have the right to invoice. Applying this practical expedient, we are not required to disclose the transaction price allocated to remaining performance obligations under these agreements. The following table summarizes the amount and timing of revenue recognition for such contracts at September 30, 2021 (in thousands):
Fiscal Year Ending March 31,
2022 (six months) $ 63,962 
2023 103,596 
2024 85,147 
2025 62,441 
2026 17,215 
2027 3,702 
Thereafter 1,964 
Total $ 338,027 

Contract Assets and Liabilities

The following tables summarize the balances of our contract assets and liabilities at the dates indicated:
September 30, 2021 March 31, 2021
(in thousands)
Accounts receivable from contracts with customers $ 463,010  $ 436,682 
Contract liabilities balance at March 31, 2021 $ 10,896 
Payment received and deferred 30,591 
Payment recognized in revenue (14,864)
Disposition of Sawtooth (see Note 15) (8,234)
Contract liabilities balance at September 30, 2021 $ 18,389 

Note 13—Leases

Lessee Accounting

Our leasing activity primarily consists of product storage, office space, real estate, railcars, and equipment.

The following table summarizes the components of our lease expense for the periods indicated:
Three Months Ended September 30, Six Months Ended September 30,
2021 2020 2021 2020
(in thousands)
Operating lease expense $ 15,020  $ 17,953  $ 30,294  $ 36,230 
Variable lease expense 5,023  4,334  10,253  9,213 
Short-term lease expense 89  405  159  801 
Total $ 20,132  $ 22,692  $ 40,706  $ 46,244 
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NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)


The following table summarizes maturities of our operating lease obligations at September 30, 2021 (in thousands):
Fiscal Year Ending March 31,
2022 (six months) $ 26,546 
2023 44,809 
2024 28,814 
2025 16,701 
2026 8,419 
2027 4,596 
Thereafter 38,687 
Total lease payments 168,572 
Less imputed interest (35,728)
Total operating lease obligations $ 132,844 

The following table summarizes supplemental cash flow and non-cash information related to our operating leases for the periods indicated:
Six Months Ended September 30,
2021 2020
(in thousands)
Cash paid for amounts included in the measurement of operating lease obligations $ 30,267  $ 36,135 
Operating lease right-of-use assets obtained in exchange for operating lease obligations $ 10,386  $ 19,257 

Lessor Accounting and Subleases

Our lessor arrangements include storage and railcar contracts. We also, from time to time, sublease certain of our storage capacity and railcars to third parties. Fixed rental revenue is recognized on a straight-line basis over the lease term. During the three months ended September 30, 2021 and 2020, fixed rental revenue was $3.2 million, which includes $0.3 million of sublease revenue, and $4.2 million, which includes $0.7 million of sublease revenue, respectively. During the six months ended September 30, 2021 and 2020, fixed rental revenue was $6.5 million, which includes $0.7 million of sublease revenue, and $8.5 million, which includes $1.3 million of sublease revenue, respectively.

The following table summarizes future minimum lease payments receivable under various noncancelable operating lease agreements at September 30, 2021 (in thousands):
Fiscal Year Ending March 31,
2022 (six months) $ 5,791 
2023 9,632 
2024 4,820 
2025 691 
2026 415 
2027 415 
Thereafter 422 
Total $ 22,186 

Note 14—Allowance for Current Expected Credit Loss (CECL)

ASU 2016-13 requires that an allowance for expected credit losses be recognized for certain financial assets that reflects the current expected credit loss over the financial asset’s contractual life. The valuation allowance considers the risk of loss, even if remote, and considers past events, current conditions and reasonable and supportable forecasts.

We are exposed to credit losses primarily through sale of products and services and notes receivable from third-parties. A counterparty’s ability to pay is assessed through a credit process that considers the payment terms, the counterparty’s established credit rating or our assessment of the counterparty’s credit worthiness and other risks. We can require prepayment or collateral to mitigate credit risks.

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

We group our financial assets into pools of counterparties with similar risk characteristics for the purpose of determining the allowance for expected credit losses. Each reporting period, we assess whether a significant change in the risk of expected credit loss has occurred. Among the quantitative and qualitative factors considered in calculating our allowance for expected credit losses are historical financial data, including write-offs and allowances, current conditions, industry risk and current credit ratings. Financial assets will be written off in whole, or in part, when practical recovery efforts have been exhausted and no reasonable expectation of recovery exists. Subsequent recoveries of amounts previously written off are recorded as an increase to the allowance. We manage receivable pools using past due balances as a key credit quality indicator.

The following table summarizes changes in our allowance for expected credit losses:
Accounts Receivable - Trade Notes Receivable and Other
(in thousands)
Balance at March 31, 2021 $ 2,192  $ 458 
Change in provision for expected credit losses 96  — 
Write-offs charged against the provision (27) — 
Disposition of Sawtooth (see Note 15) (4) — 
Balance at September 30, 2021 $ 2,257  $ 458 

Note 15—Other Matters

Sale of Sawtooth

On June 18, 2021, we sold our approximately 71.5% interest in Sawtooth to a group of buyers for total consideration of $70.0 million less estimated expenses of approximately $2.1 million. We recorded a loss of $60.1 million within loss on disposal or impairment of assets, net in our unaudited condensed consolidated statement of operations for the six months ended September 30, 2021.

As this sale transaction did not represent a strategic shift that will have a major effect on our operations or financial results, operations related to this portion of our Liquids Logistics segment have not been classified as discontinued operations.

Note 16—Discontinued Operations

As previously disclosed, on September 30, 2019, we completed the sale of TransMontaigne Product Services, LLC (“TPSL”) to Trajectory Acquisition Company, LLC. On January 3, 2020, we completed the sale of our refined products business in the mid-continent region of the United States (“Mid-Con”) to a third-party. On March 30, 2020, we completed the sale of our gas blending business in the southeastern and eastern regions of the United States (“Gas Blending”) to another third-party. As the sale of each of these businesses represented strategic shifts, the results of operations and cash flows related to these businesses are classified as discontinued operations for the period presented.

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

The following table summarizes the results of operations from discontinued operations for the periods indicated:
Three Months Ended September 30, Six Months Ended September 30,
2020 2020
(in thousands)
Revenues $ —  $ 16,198 
Cost of sales 118  16,429 
Operating expenses 72  280 
Loss on disposal or impairment of assets, net (1) 116  1,181 
Operating loss from discontinued operations (306) (1,692)
Interest expense 100  — 
Loss from discontinued operations before taxes (206) (1,692)
Income tax benefit 53  53 
Loss from discontinued operations, net of tax $ (153) $ (1,639)
(1)    Amount for the three months ended September 30, 2020 includes a loss of $0.1 million on the sale of TPSL and amount for the six months ended September 30, 2020 includes a loss of $1.0 million on the sale of Gas Blending and a loss of $0.2 million on the sale of TPSL.

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of NGL Energy Partners LP’s (“we,” “us,” “our,” or the “Partnership”) financial condition and results of operations as of and for the three months and six months ended September 30, 2021. The discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q (“Quarterly Report”), as well as Part II, Item 7–“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2021 (“Annual Report”) filed with the Securities and Exchange Commission on June 3, 2021.

Overview

We are a Delaware limited partnership. NGL Energy Holdings LLC serves as our general partner. At September 30, 2021, our operations included three segments: Water Solutions, Crude Oil Logistics and Liquids Logistics. See Note 1 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion of these businesses.

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Consolidated Results of Operations

The following table summarizes our unaudited condensed consolidated statements of operations for the periods indicated:
Three Months Ended September 30, Six Months Ended September 30,
2021 2020 2021 2020
(in thousands)
Revenues $ 1,754,137  $ 1,168,158  $ 3,242,792  $ 2,012,573 
Cost of sales 1,525,593  964,890  2,850,386  1,641,937 
Operating expenses 69,019  56,054  134,803  121,041 
General and administrative expense 11,450  17,475  27,224  34,633 
Depreciation and amortization 69,563  87,469  153,665  171,455 
Loss on disposal or impairment of assets, net 13,694  5,954  81,230  17,976 
Operating income (loss) 64,818  36,316  (4,516) 25,531 
Equity in earnings of unconsolidated entities 434  501  646  790 
Interest expense (68,495) (46,935) (135,625) (90,896)
Gain on early extinguishment of liabilities, net 1,071  13,747  1,122  33,102 
Other income, net 730  1,585  1,979  2,620 
(Loss) income from continuing operations before income taxes (1,442) 5,214  (136,394) (28,853)
Income tax benefit 235  774  685  1,075 
(Loss) income from continuing operations (1,207) 5,988  (135,709) (27,778)
Loss from discontinued operations, net of tax —  (153) —  (1,639)
Net (loss) income (1,207) 5,835  (135,709) (29,417)
Less: Net income attributable to noncontrolling interests (330) (168) (768) (219)
Net (loss) income attributable to NGL Energy Partners LP $ (1,537) $ 5,667  $ (136,477) $ (29,636)

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, disposals and other transactions. Our results of operations for the three months and six months ended September 30, 2021 are not necessarily indicative of the results of operations to be expected for future periods or for the full fiscal year ending March 31, 2022.

Recent Developments

The global spread of COVID-19 caused a global pandemic and worldwide containment and mitigation measures contributed to a massive economic slowdown and decreased demand for crude oil and refined products. This period of unprecedented restrictions on travel and economic activity significantly reduced demand for refined products and all three of our segments were negatively impacted by the lower commodity price environment and reduced demand.

While many global and regional economies have reopened, the potential future limitations and impact of the ongoing COVID-19 pandemic, including emerging variants of the virus and renewed mitigation measures, on our business are still unknown at this time. 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. Crude oil prices have increased but future drilling and production plans are continually being assessed.

Acquisitions and Dispositions

We completed several acquisitions and dispositions during the six months ended September 30, 2021 and fiscal year ended March 31, 2021. These transactions impact the comparability of our results of operations between our current and prior fiscal years.

On June 18, 2021, we sold our approximately 71.5% interest in Sawtooth Caverns, LLC (“Sawtooth”) to a group of buyers (see Note 15 to our unaudited condensed consolidated financial statements included in this Quarterly Report).

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In March 2021, we acquired the Ambassador pipeline, an approximately 225-mile natural gas liquids pipeline, which runs from the Kalkaska gas plant in Kalkaska County, Michigan to a termination point near Marysville in St. Clair County, Michigan. In December 2020, we sold certain permits, land and a saltwater disposal facility to a third-party.

Repurchases of Senior Unsecured Notes

During the three months ended September 30, 2021, we repurchased $17.1 million of the 7.5% senior unsecured notes due 2023 (“2023 Notes”) and $6.0 million of the 7.5% senior unsecured notes due 2026 (“2026 Notes”).

Segment Operating Results for the Three Months Ended September 30, 2021 and 2020

Water Solutions

The following table summarizes the operating results of our Water Solutions segment for the periods indicated:
Three Months Ended September 30,
2021 2020 Change
(in thousands, except per barrel and per day amounts)
Revenues:
Water disposal service fees $ 98,457  $ 73,737  $ 24,720 
Sale of recovered crude oil 17,182  8,386  8,796 
Other revenues 20,571  6,555  14,016 
Total revenues 136,210  88,678  47,532 
Expenses:
Cost of sales-excluding impact of derivatives 6,983  257  6,726 
Derivative (gain) loss (560) 322  (882)
Operating expenses 42,465  31,387  11,078 
General and administrative expenses 1,918  1,546  372 
Depreciation and amortization expense 50,670  62,220  (11,550)
Loss on disposal or impairment of assets, net 1,962  6,223  (4,261)
Total expenses 103,438  101,955  1,483 
Segment operating income (loss) $ 32,772  $ (13,277) $ 46,049 
Produced water processed (barrels per day)
Delaware Basin 1,485,087  1,060,353  424,734 
Eagle Ford Basin 95,728  81,260  14,468 
DJ Basin 149,426  114,219  35,207 
Other Basins 30,142  26,264  3,878 
Total 1,760,383  1,282,096  478,287 
Solids processed (barrels per day) 927  863  64 
Skim oil sold (barrels per day) 2,821  2,611  210 
Service fees for produced water processed ($/barrel) (1) $ 0.60  $ 0.63  $ (0.03)
Recovered crude oil for produced water processed ($/barrel) (1) $ 0.11  $ 0.07  $ 0.04 
Operating expenses for produced water processed ($/barrel) (1) $ 0.26  $ 0.27  $ (0.01)
(1)    Total produced water barrels processed during the three months ended September 30, 2021 and 2020 were 161,955,202 and 117,952,824, respectively.

Water Disposal Service Fee Revenues. The increase was due to an increase in crude oil production driven by higher crude oil prices and completion activity, primarily in the Delaware Basin, partially offset by higher volumes in areas with lower fees.

Recovered Crude Oil Revenues. The increase was due primarily to higher crude oil prices and an increase in the number of wells completed in our area of operations during the period which increased flowback activity resulting in higher skim oil volumes per barrel of produced water processed. This increase was partially offset by the sale of crude oil during the three months ended September 30, 2020 that we had stored as of June 30, 2020 due to the lower crude oil prices.

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Other Revenues. Other revenues primarily include brackish non-potable water revenues, recycle water revenues, water pipeline revenues, resale water revenues, land surface use revenues and solids disposal revenues. The increase was due primarily to sales of brackish non-potable water, recycled water and raw produced water increasing during the current period, 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.

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.

Derivative (Gain) 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 the produced water and selling the skim oil. During the three months ended September 30, 2021 we had $1.5 million of net unrealized losses on derivatives and $2.1 million of net realized gains on derivatives. During the three months ended September 30, 2020 we had $4.1 million of net realized gains on derivatives and $4.4 million of net unrealized losses on derivatives.

Operating and General and Administrative Expenses. The increase was due primarily to an increase in produced water volumes processed. The Partnership continues to see a decrease in its operating expenses per barrel of produced water processed due to continued focus on cost reduction and an increase in overall disposal volumes.

Depreciation and Amortization Expense. The decrease was due primarily to an impairment charge recorded during the three months ended March 31, 2021 to write down the value of a customer relationship intangible asset which resulted in lower amortization expense during the three months ended September 30, 2021 as well as certain other long-term assets being fully amortized or impaired during the fiscal year ended March 31, 2021 and six months ended September 30, 2021. These decreases were partially offset by newly developed facilities and infrastructure.

Loss on Disposal or Impairment of Assets, Net. During the three months ended September 30, 2021, we recorded a net loss of $2.0 million primarily related to abandonment of certain capital projects and the sale of certain other miscellaneous assets. During the three months ended September 30, 2020, we recorded a net loss of $6.4 million primarily related to the write-down of equipment destroyed by lightning strikes and the abandonment of certain capital projects.

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Crude Oil Logistics

The following table summarizes the operating results of our Crude Oil Logistics segment for the periods indicated:
Three Months Ended September 30,
2021 2020 Change
(in thousands, except per barrel amounts)
Revenues:
Crude oil sales $ 536,067  $ 418,174  $ 117,893 
Crude oil transportation and other 20,933  50,672  (29,739)
Total revenues (1) 557,000  468,846  88,154 
Expenses:      
Cost of sales-excluding impact of derivatives 499,159  387,530  111,629 
Derivative loss 1,100  1,246  (146)
Operating expenses 14,196  12,941  1,255 
General and administrative expenses 1,874  1,968  (94)
Depreciation and amortization expense 12,454  17,232  (4,778)
Gain on disposal or impairment of assets, net (14) (310) 296 
Total expenses 528,769  420,607  108,162 
Segment operating income $ 28,231  $ 48,239  $ (20,008)
Crude oil sold (barrels) 7,518  10,178  (2,660)
Crude oil transported on owned pipelines (barrels) 7,337  9,992  (2,655)
Crude oil storage capacity - owned and leased (barrels) (2) 5,232  5,239  (7)
Crude oil storage capacity leased to third parties (barrels) (2) 1,501  2,062  (561)
Crude oil inventory (barrels) (2) 1,249  1,507  (258)
Crude oil sold ($/barrel) $ 71.304  $ 41.086  $ 30.218 
Cost per crude oil sold ($/barrel) (3) $ 66.395  $ 38.075  $ 28.320 
Crude oil product margin ($/barrel) (3) $ 4.909  $ 3.011  $ 1.898 
(1)    Revenues include $2.2 million and $2.0 million of intersegment sales during the three months ended September 30, 2021 and 2020, respectively, that are eliminated in our unaudited condensed consolidated statements of operations.
(2)    Information is presented as of September 30, 2021 and September 30, 2020, respectively.
(3)    Cost and product margin per barrel excludes the impact of derivatives.

Crude Oil Sales Revenues. The increase was due primarily to an increase in crude oil prices during the three months ended September 30, 2021, compared to the three months ended September 30, 2020. This was offset by the reduction in sale volumes, primarily due to lower production in the DJ Basin. We had an increase in buy/sell transactions during the quarter ended September 30, 2021, compared to the quarter ended September 30, 2020. 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 netted for these transactions.

Crude Oil Transportation and Other Revenues. The decrease was primarily due to our Grand Mesa Pipeline, as revenues from third-parties decreased by $28.9 million during the three months ended September 30, 2021, compared to the three months ended September 30, 2020. During the three months ended September 30, 2021, financial volumes on the Grand Mesa Pipeline averaged approximately 80,000 barrels per day, compared to approximately 123,000 barrels per day for the three months ended September 30, 2020 (volume amounts are from both internal and external parties) 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 increase was due primarily to an increase in crude oil prices during the three months ended September 30, 2021, compared to the three months ended September 30, 2020.

Derivative Loss. Our cost of sales during the three months ended September 30, 2021 included $8.3 million of net realized losses on derivatives, driven by the increase in crude oil prices offset by $7.2 million of net unrealized gains on derivatives. Our cost of sales during the three months ended September 30, 2020 included $4.6 million of net realized losses on derivatives and $3.3 million of net unrealized gains on derivatives.
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Crude Oil Product Margin. The increase was primarily due to higher crude oil prices as certain contracted rates with producers increased due to higher crude oil prices.

Operating and General and Administrative Expenses. The increase was primarily related to rising utility rates and increased insurance costs.

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 on Disposal or Impairment of Assets, Net. During the three months ended September 30, 2021, we recorded a net gain of less than $0.1 million due to the disposal of certain assets. During the three months ended September 30, 2020, we recorded a net gain of $0.3 million related to the disposal of certain assets.


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Liquids Logistics

The following table summarizes the operating results of our Liquids Logistics segment for the periods indicated:
Three Months Ended September 30,
2021 2020 Change
(in thousands, except per gallon amounts)
Refined products sales:
Revenues-excluding impact of derivatives (1) $ 444,294  $ 288,840  $ 155,454 
Cost of sales-excluding impact of derivatives 441,628  284,346  157,282 
Derivative loss (gain) 425  (40) 465 
Product margin 2,241  4,534  (2,293)
Propane sales:
Revenues (1) 220,053  137,164  82,889 
Cost of sales-excluding impact of derivatives 210,775  124,156  86,619 
Derivative gain (14,714) (1,665) (13,049)
Product margin 23,992  14,673  9,319 
Butane sales:
Revenues (1) 167,717  90,218  77,499 
Cost of sales-excluding impact of derivatives 153,747  83,012  70,735 
Derivative loss 13,829  5,464  8,365 
Product margin 141  1,742  (1,601)
 
Other product sales:
Revenues-excluding impact of derivatives (1) 207,522  85,778  121,744 
Cost of sales-excluding impact of derivatives 212,373  82,230  130,143 
Derivative gain (16,058) (2,168) (13,890)
Product margin 11,207  5,716  5,491 
Service revenues:
Revenues (1) 5,033  9,543  (4,510)
Cost of sales 598  970  (372)
Product margin 4,435  8,573  (4,138)
Expenses:
Operating expenses 12,358  11,726  632 
General and administrative expenses 1,765  2,105  (340)
Depreciation and amortization expense 4,686  7,026  (2,340)
Loss on disposal or impairment of assets, net 11,746  43  11,703 
Total expenses 30,555  20,900  9,655 
Segment operating income $ 11,461  $ 14,338  $ (2,877)
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Three Months Ended September 30,
2021 2020 Change
(in thousands, except per gallon amounts)
Natural gas liquids and refined products storage capacity - owned and leased (gallons) (2)(3) 169,087  427,004  (257,917)
Refined products sold (gallons) 196,932  220,243  (23,311)
Refined products sold ($/gallon) $ 2.256  $ 1.311  $ 0.945 
Cost per refined products sold ($/gallon) (4) $ 2.243  $ 1.291  $ 0.952 
Refined products product margin ($/gallon) (4) $ 0.013  $ 0.020  $ (0.007)
Refined products inventory (gallons) (2) 2,576  1,209  1,367 
Propane sold (gallons) 180,322  252,693  (72,371)
Propane sold ($/gallon) $ 1.220  $ 0.543  $ 0.677 
Cost per propane sold ($/gallon) (4) $ 1.169  $ 0.491  $ 0.678 
Propane product margin ($/gallon) (4) $ 0.051  $ 0.052  $ (0.001)
Propane inventory (gallons) (2) 98,429  116,462  (18,033)
Propane storage capacity leased to third parties (gallons) (2)(3) —  53,947  (53,947)
Butane sold (gallons) 124,881  143,392  (18,511)
Butane sold ($/gallon) $ 1.343  $ 0.629  $ 0.714 
Cost per butane sold ($/gallon) (4) $ 1.231  $ 0.579  $ 0.652 
Butane product margin ($/gallon) (4) $ 0.112  $ 0.050  $ 0.062 
Butane inventory (gallons) (2) 75,500  92,672  (17,172)
Butane storage capacity leased to third parties (gallons) (2)(3) —  56,700  (56,700)
Other products sold (gallons) 97,310  114,734  (17,424)
Other products sold ($/gallon) $ 2.133  $ 0.748  $ 1.385 
Cost per other products sold ($/gallon) (4) $ 2.182  $ 0.717  $ 1.465 
Other products product (loss) margin ($/gallon) (4) $ (0.049) $ 0.031  $ (0.080)
Other products inventory (gallons) (2) 17,465  18,671  (1,206)
(1)    Revenues include less than $0.1 million and $0.8 million of intersegment sales during the three months ended September 30, 2021 and 2020, respectively, that are eliminated in our unaudited condensed consolidated statements of operations.
(2)    Information is presented as of September 30, 2021 and September 30, 2020, respectively.
(3)    Decrease from March 31, 2021 relates to the sale of Sawtooth on June 18, 2021 (see Note 15 to our unaudited condensed consolidated financial statements included in this Quarterly Report).
(4)    Cost and product margin per gallon excludes the impact of derivatives.

Refined Products Revenues and Cost of Sales-Excluding Impact of Derivatives. Revenues and cost of sales, excluding the impact of derivatives, increased due to higher commodity prices, offset partially by a decrease in volumes due to the continued weakness in demand in certain geographical areas due to COVID-19 and tighter supply.

Refined Products Derivative Loss (Gain). Our refined products margin during the three months ended September 30, 2021 included a realized loss of $0.4 million and the three months ended September 30, 2020 included a realized gain of less than $0.1 million.

Refined Products product margins during the three months ended September 30, 2021 decreased due to lower product demand due to the lingering effects of COVID-19 lockdowns, as well as increased competition from refineries.

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 inventories and a strong export market due to the increase in international prices. This was partially offset by reduced volumes due to the loss of two producer services agreements, as well as backwardation in the propane market and deferred customer purchases in the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

Propane Derivative Gain. Our wholesale propane cost of sales included $21.8 million of net unrealized gains on derivatives and $7.1 million of net realized losses on derivatives during the three months ended September 30, 2021. During the three months ended September 30, 2020, our cost of wholesale propane sales included $2.0 million of net unrealized gains on
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derivatives and $0.4 million of net realized losses on derivatives.

Propane product margins, excluding the impact of derivatives, were consistent with the three months ended September 30, 2020.

Butane Sales and Cost of Sales-Excluding Impact of Derivatives. The increases in revenues and cost of sales were primarily due to an increase in commodity prices, which was the result of the strength in crude oil 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 three months ended September 30, 2021 included $9.0 million of net unrealized losses on derivatives and $4.8 million of net realized losses on derivatives. Our cost of butane sales included $5.5 million of net unrealized losses on derivatives and $0.1 million of net realized gains on derivatives during the three months ended September 30, 2020.

Butane product margins, excluding the impact of derivatives, increased due to a tight supply market, driven by an increase in demand for exports, which is driving favorable sales differentials.

Other Products Sales and Cost of Sales-Excluding Impact of Derivatives. The increases in revenues and cost of sales, excluding the impact of derivatives, were due to higher commodity prices. This was partially offset by reduced natural gasoline volumes during the three months ended September 30, 2021 due to less natural gas production available to the rail and barge markets.

Other Products Derivative Gain. Our derivatives of other products included $0.1 million of net unrealized gains and $16.0 million of net realized gains on derivatives during the three months ended September 30, 2021. Our derivatives of other products during the three months ended September 30, 2020 included $0.2 million of net unrealized gains on derivatives and $2.0 million of net realized gains on derivatives.

Other product sales product margins during the three months ended September 30, 2021 decreased due to lower biodiesel and biodiesel renewable identification numbers market prices and increased competition during the quarter.

Service Revenues. This revenue includes storage, terminaling and transportation services income. The decrease for the current quarter was due primarily to the disposition of Sawtooth in June 2021 as well as the loss of two producer service agreements.

Operating and General and Administrative Expenses. The increase was primarily due to higher compensation, travel and entertainment and bad debt expense, offset by the disposition of Sawtooth in June 2021.

Depreciation and Amortization Expense. The decrease was primarily due to the disposition of Sawtooth.

Loss on Disposal or Impairment of Assets, Net. During the three months ended September 30, 2021, we recorded a net loss of $11.7 million related to the sale of one of our terminals. During the three months ended September 30, 2020, we recorded a net loss of less than $0.1 million related to the sale/retirement of certain assets.

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Corporate and Other

The operating loss within “Corporate and Other” includes the following components for the periods indicated:
Three Months Ended September 30,
2021 2020 Change
(in thousands)
Other revenues:
Revenues $ —  $ 315  $ (315)
Cost of sales —  454  (454)
Loss —  (139) 139 
Expenses:
General and administrative expenses 5,893  11,856  (5,963)
Depreciation and amortization expense 1,753  991  762 
Gain on disposal or impairment of assets, net —  (2) 2 
Total expenses 7,646  12,845  (5,199)
Operating loss $ (7,646) $ (12,984) $ 5,338 

General and Administrative Expenses. The decrease during the three months ended September 30, 2021 was due primarily to lower compensation and legal expenses. Compensation expense decreased due to lower equity-based compensation and due to the reversal of an incentive compensation accrual. Legal expense decreased due to certain claims being settled, in particular our claims related to the bankruptcy of Extraction.

Equity in Earnings of Unconsolidated Entities

The decrease in equity in earnings of $0.1 million during the three months ended September 30, 2021 was due primarily to lower earnings from certain membership interests related to specific land and water services operations.

Interest Expense

Interest expense includes interest charged on the asset-based revolving credit facility (“ABL Facility”), senior secured notes and senior unsecured notes, as well as amortization of debt issuance costs, letter of credit fees, interest on equipment financing notes, and accretion of interest on non-interest bearing debt obligations. The increase of $21.6 million during the three months ended September 30, 2021 was primarily due to the issuance of the 2026 Senior Secured Notes (as defined herein) which resulted in us paying a higher interest rate. See Note 6 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

Gain on Early Extinguishment of Liabilities, Net

During the three months ended September 30, 2021 and 2020, 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. See Note 6 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion.

Other Income, Net

The decrease in other income, net of $0.9 million during the three months ended September 30, 2021 was due primarily to proceeds received from a litigation settlement during the three months ended September 30, 2020.

Income Tax Benefit

Income tax benefit was $0.2 million during the three months ended September 30, 2021, compared to an income tax benefit of $0.8 million during the three months ended September 30, 2020. See Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion.

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Noncontrolling Interests

Noncontrolling interests represent the portion of certain consolidated subsidiaries that are owned by third parties. The increase in noncontrolling interest income of $0.2 million during the three months ended September 30, 2021 was due primarily to higher income from certain recycling operations and water solutions operations.

Segment Operating Results for the Six Months Ended September 30, 2021 and 2020

Water Solutions

The following table summarizes the operating results of our Water Solutions segment for the periods indicated:
Six Months Ended September 30,
2021 2020 Change
(in thousands, except per barrel and per day amounts)
Revenues:
Water disposal service fees $ 193,185  $ 152,054  $ 41,131 
Sale of recovered crude oil 30,983  9,754  21,229 
Other revenues 42,268  14,935  27,333 
Total revenues 266,436  176,743  89,693 
Expenses:
Cost of sales-excluding impact of derivatives 15,948  372  15,576 
Derivative loss 813  4,907  (4,094)
Operating expenses 82,490  70,686  11,804 
General and administrative expenses 3,726  3,197  529 
Depreciation and amortization expense 113,651  120,353  (6,702)
Loss on disposal or impairment of assets, net 9,453  6,552  2,901 
Total expenses 226,081  206,067  20,014 
Segment operating income (loss) $ 40,355  $ (29,324) $ 69,679 
Produced water processed (barrels per day)
Delaware Basin 1,456,810  1,083,229  373,581 
Eagle Ford Basin 93,796  88,279  5,517 
DJ Basin 134,197  123,242  10,955 
Other Basins 29,118  29,277  (159)
Total 1,713,921  1,324,027  389,894 
Solids processed (barrels per day) 1,120  1,378  (258)
Skim oil sold (barrels per day) 2,662  1,654  1,008 
Service fees for produced water processed ($/barrel) (1) $ 0.60  $ 0.63  $ (0.03)
Recovered crude oil for produced water processed ($/barrel) (1) $ 0.10  $ 0.04  $ 0.06 
Operating expenses for produced water processed ($/barrel) (1) $ 0.26  $ 0.29  $ (0.03)
(1)    Total produced water barrels processed during the six months ended September 30, 2021 and 2020 were 313,647,489 and 242,296,912, respectively.

Water Disposal Service Fee Revenues. The increase was due to an increase in crude oil production driven by higher crude oil prices and completion activity, primarily in the Delaware Basin, partially offset by higher volumes in areas with lower fees.

Recovered Crude Oil Revenues. The increase was due primarily to higher crude oil prices and an increase in the number of wells completed in our area of operations during the period which increased flowback activity resulting in higher skim oil volumes per barrel of produced water processed.

Other Revenues. The increase was due primarily to sales of brackish non-potable water, recycled water and raw produced water increasing during the current period, 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.

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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.

Derivative Loss. During the six months ended September 30, 2021 we had $5.1 million of net unrealized losses on derivatives and $4.3 million of net realized gains on derivatives. During the six months ended September 30, 2020 we had $12.8 million of net realized gains on derivatives and $17.7 million of net unrealized losses on derivatives.

Operating and General and Administrative Expenses. The increase was due primarily to an increase in produced water volumes processed. The Partnership continues to see a decrease in its operating expenses per barrel of produced water processed due to continued focus on cost reduction and an increase in overall disposal volumes.

Depreciation and Amortization Expense. The decrease was due primarily to an impairment charge recorded during the three months ended March 31, 2021 to write down the value of a customer relationship intangible asset which resulted in lower amortization expense during the six months ended September 30, 2021 as well as certain other long-term assets being fully amortized or impaired during the fiscal year ended March 31, 2021 and six months ended September 30, 2021. These decreases were partially offset by newly developed facilities and infrastructure.

Loss on Disposal or Impairment of Assets, Net. During the six months ended September 30, 2021, we recorded a net loss of $9.5 million primarily related to facilities damaged by lightning strikes, abandonment of certain capital projects and the sale of certain other miscellaneous assets. During the six months ended September 30, 2020, we recorded a net loss of $6.8 million primarily related to the write-down of equipment destroyed by lightning strikes and the abandonment of certain capital projects.

Crude Oil Logistics

The following table summarizes the operating results of our Crude Oil Logistics segment for the periods indicated:
Six Months Ended September 30,
2021 2020 Change
(in thousands, except per barrel amounts)
Revenues:
Crude oil sales $ 1,071,496  $ 648,902  $ 422,594 
Crude oil transportation and other 41,627  96,482  (54,855)
Total revenues (1) 1,113,123  745,384  367,739 
Expenses:      
Cost of sales-excluding impact of derivatives 1,000,621  581,122  419,499 
Derivative loss 39,394  25,710  13,684 
Operating expenses 27,783  27,767  16 
General and administrative expenses 3,868  4,059  (191)
Depreciation and amortization expense 24,863  34,027  (9,164)
(Gain) loss on disposal or impairment of assets, net (56) 1,140  (1,196)
Total expenses 1,096,473  673,825  422,648 
Segment operating income $ 16,650  $ 71,559  $ (54,909)
Crude oil sold (barrels) 15,512  19,470  (3,958)
Crude oil transported on owned pipelines (barrels) 14,371  20,468  (6,097)
Crude oil storage capacity - owned and leased (barrels) (2) 5,232  5,239  (7)
Crude oil storage capacity leased to third parties (barrels) (2) 1,501  2,062  (561)
Crude oil inventory (barrels) (2) 1,249  1,507  (258)
Crude oil sold ($/barrel) $ 69.075  $ 33.328  $ 35.747 
Cost per crude oil sold ($/barrel) (3) $ 64.506  $ 29.847  $ 34.659 
Crude oil product margin ($/barrel) (3) $ 4.569  $ 3.481  $ 1.088 
(1)    Revenues include $4.7 million and $2.5 million of intersegment sales during the six months ended September 30, 2021 and 2020, respectively, that are eliminated in our unaudited condensed consolidated statements of operations.
(2)    Information is presented as of September 30, 2021 and September 30, 2020, respectively.
(3)    Cost and product margin per barrel excludes the impact of derivatives.
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Crude Oil Sales Revenues. The increase was due primarily to an increase in crude oil prices during the six months ended September 30, 2021, compared to the six months ended September 30, 2020. This was offset by a reduction in sales volumes, primarily due to lower production in the DJ Basin. We had an increase in buy/sell transactions during the six months ended September 30, 2021, compared to the six months ended September 30, 2020. 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 netted for these transactions.

Crude Oil Transportation and Other Revenues. The decrease was primarily due to our Grand Mesa Pipeline, as revenues from third-parties decreased by $55.2 million during the six months ended September 30, 2021, compared to the six months ended September 30, 2020. During the six months ended September 30, 2021, financial volumes on the Grand Mesa Pipeline averaged approximately 79,000 barrels per day, compared to 121,000 barrels per day for the six months ended September 30, 2020 (volume amounts are from both internal and external parties) primarily due to the court approved rejection of the Extraction transportation agreement (as part of their bankruptcy) as well as decreased production in the DJ Basin.

Cost of Sales-Excluding Impact of Derivatives. The increase was due primarily to an increase in crude oil prices during the six months ended September 30, 2021, compared to the six months ended September 30, 2020.

Derivative Loss. Our cost of sales during the six months ended September 30, 2021 included $61.0 million of net realized losses on derivatives, driven by the increase in crude oil prices offset by $21.6 million of net unrealized gains on derivatives. Our cost of sales during the six months ended September 30, 2020 included $14.4 million of net realized losses on derivatives and $11.3 million of net unrealized losses on derivatives.

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

Operating and General and Administrative Expenses. Expenses for the six months ended September 30, 2021 were consistent with the prior year.

Depreciation and Amortization Expense. The decrease was due primarily to the reduction of amortization expense due to the impairment of certain intangible assets at the end of the prior year. This was offset by an increase in depreciation expense due to reducing the estimated useful lives of our railcars.

(Gain) Loss on Disposal or Impairment of Assets, Net. During the six months ended September 30, 2021, we recorded a net gain of $0.1 million. During the six months ended September 30, 2020, we recorded a net loss of $1.1 million related to the disposal of certain assets.

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Liquids Logistics

The following table summarizes the operating results of our Liquids Logistics segment for the periods indicated:
Six Months Ended September 30,
2021 2020 Change
(in thousands, except per gallon amounts)
Refined products sales:
Revenues-excluding impact of derivatives (1) $ 837,441  $ 499,482  $ 337,959 
Cost of sales-excluding impact of derivatives 831,199  491,958  339,241 
Derivative loss 1,120  405  715 
Product margin 5,122  7,119  (1,997)
Propane sales:
Revenues (1) 380,943  259,487  121,456 
Cost of sales-excluding impact of derivatives 367,302  238,778  128,524 
Derivative gain (24,829) (5,999) (18,830)
Product margin 38,470  26,708  11,762 
Butane sales:
Revenues (1) 286,236  145,647  140,589 
Cost of sales-excluding impact of derivatives 268,157  134,667  133,490 
Derivative loss 21,513  6,477  15,036 
Product (loss) margin (3,434) 4,503  (7,937)
Other product sales:
Revenues-excluding impact of derivatives (1) 342,337  169,944  172,393 
Cost of sales-excluding impact of derivatives 321,549  163,955  157,594 
Derivative loss (gain) 2,668  (938) 3,606 
Product margin 18,120  6,927  11,193 
Service revenues:
Revenues (1) 12,303  18,599  (6,296)
Cost of sales 958  2,956  (1,998)
Product margin 11,345  15,643  (4,298)
Expenses:
Operating expenses 24,530  22,588  1,942 
General and administrative expenses 3,555  4,183  (628)
Depreciation and amortization expense 11,653  15,182  (3,529)
Loss on disposal or impairment of assets, net 71,833  47  71,786 
Total expenses 111,571  42,000  69,571 
Segment operating (loss) income $ (41,948) $ 18,900  $ (60,848)
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Six Months Ended September 30 ,
2021 2020 Change
(in thousands, except per gallon amounts)
Natural gas liquids and refined products storage capacity - owned and leased (gallons) (2)(3) 169,087  427,004  (257,917)
Refined products sold (gallons) 382,238  432,217  (49,979)
Refined products sold ($/gallon) $ 2.191  $ 1.156  $ 1.035 
Cost per refined products sold ($/gallon) (4) $ 2.175  $ 1.138  $ 1.037 
Refined products product margin ($/gallon) (4) $ 0.016  $ 0.018  $ (0.002)
Refined products inventory (gallons) (2) 2,576  1,209  1,367 
Propane sold (gallons) 350,601  504,982  (154,381)
Propane sold ($/gallon) $ 1.087  $ 0.514  $ 0.573 
Cost per propane sold ($/gallon) (4) $ 1.048  $ 0.473  $ 0.575 
Propane product margin ($/gallon) (4) $ 0.039  $ 0.041  $ (0.002)
Propane inventory (gallons) (2) 98,429  116,462  (18,033)
Propane storage capacity leased to third parties (gallons) (2)(3) —  53,947  (53,947)
Butane sold (gallons) 247,455  262,958  (15,503)
Butane sold ($/gallon) $ 1.157  $ 0.554  $ 0.603 
Cost per butane sold ($/gallon) (4) $ 1.084  $ 0.512  $ 0.572 
Butane product margin ($/gallon) (4) $ 0.073  $ 0.042  $ 0.031 
Butane inventory (gallons) (2) 75,500  92,672  (17,172)
Butane storage capacity leased to third parties (gallons) (2)(3) —  56,700  (56,700)
Other products sold (gallons) 190,163  228,956  (38,793)
Other products sold ($/gallon) $ 1.800  $ 0.742  $ 1.058 
Cost per other products sold ($/gallon) (4) $ 1.691  $ 0.716  $ 0.975 
Other products product margin ($/gallon) (4) $ 0.109  $ 0.026  $ 0.083 
Other products inventory (gallons) (2) 17,465  18,671  (1,206)
(1)    Revenues include $1.3 million and $1.5 million of intersegment sales during the six months ended September 30, 2021 and 2020, respectively, that are eliminated in our unaudited condensed consolidated statements of operations.
(2)    Information is presented as of September 30, 2021 and September 30, 2020, respectively.
(3)    Decrease from March 31, 2021 relates to the sale of Sawtooth on June 18, 2021 (see Note 15 to our unaudited condensed consolidated financial statements included in this Quarterly Report).
(4)    Cost and product margin per gallon excludes the impact of derivatives.

Refined Products Revenues and Cost of Sales-Excluding Impact of Derivatives. The increases in revenues and cost of sales, excluding the impact of derivatives, were due to an increase in refined products price. This was offset by a reduction in volumes sold due to the continued weakness in demand in certain geographical areas due to COVID-19 and tighter supply.

Refined Products Derivative Loss. Our refined products margin during the six months ended September 30, 2021 included a realized loss of $1.1 million and the six months ended September 30, 2020 included a realized loss of $0.4 million.

Refined Products product margins per gallon of refined products sold for the six months ended September 30, 2021 were consistent with the prior year six months ended September 30, 2020.

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 inventories and a strong export market due to the increase in international prices. This was partially offset by reduced volumes due to the loss of two producer services agreements, as well as backwardation in the propane market and deferred customer purchases in the six months ended September 30, 2021 compared to the six months ended September 30, 2020.

Propane Derivative Gain. Our wholesale propane cost of sales included $33.7 million of net unrealized gains on derivatives and $8.8 million of net realized losses on derivatives during the six months ended September 30, 2021. During the
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six months ended September 30, 2020, our cost of wholesale propane sales included $5.9 million of net unrealized gains on derivatives and $0.1 million of net realized gains on derivatives.

Propane product margins, excluding the impact of derivatives, were consistent with the six months ended September 30, 2020.

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 six months ended September 30, 2021 included $15.5 million of net unrealized losses on derivatives and $6.0 million of net realized losses on derivatives. Our cost of butane sales included $8.5 million of net unrealized losses on derivatives and $2.0 million of net realized gains on derivatives during the six months ended September 30, 2020.

Butane product margins per gallon of butane sold were higher during the six months ended September 30, 2021 than during the six months ended September 30, 2020 due primarily due to a tight supply market, driven by an increase in demand for exports, which is driving favorable sales differentials.

Other Products Sales and Cost of Sales-Excluding Impact of Derivatives. The increases in revenues and cost of sales, excluding the impact of derivatives, were due to higher commodity prices. This was partially offset by reduced natural gasoline volumes during the six months ended September 30, 2021 due to less natural gas production available to the rail and barge markets.

Other Products Derivatives Loss (Gain). Our derivatives of other products included $0.1 million of net unrealized gains on derivatives and $2.7 million of net realized losses on derivatives during the six months ended September 30, 2021. Our derivatives of other products during the six months ended September 30, 2020 included $0.5 million of net unrealized gains on derivatives and $0.4 million of net realized gains on derivatives.

Other product sales product margins during the six months ended September 30, 2021 increased due to an increase in biodiesel and biodiesel renewable identification number market prices, thus contributing to increased margins on these products during the six months ended September 30, 2021.

Service Revenues. This revenue includes storage, terminaling and transportation services income. The decrease during the six months ended September 30, 2021 decreased due to the disposition of Sawtooth in June 2021 as well as the loss of two producer services agreements.

Operating and General and Administrative Expenses. The increase during the six months ended September 30, 2021 was due to higher compensation, travel and entertainment and bad debt expense, offset by the disposition of Sawtooth in June 2021.

Depreciation and Amortization Expense. The decrease was primarily due to the disposition of Sawtooth.

Loss on Disposal or Impairment of Assets, Net. During the six months ended September 30, 2021, we recorded a net loss of $60.1 million related to the sale of Sawtooth (see Note 15 to our unaudited condensed consolidated financial statements included in this Quarterly Report for further discussion) and a net loss of $11.7 million related to the sale of another terminal during the three months ended September 30, 2021. During the six months ended September 30, 2020, we recorded a net loss of less than $0.1 million related to the retirement of certain assets.

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Corporate and Other

The operating loss within “Corporate and Other” includes the following components for the periods indicated:
Six Months Ended September 30,
2021 2020 Change
(in thousands)
Other revenues:
Revenues $ —  $ 628  $ (628)
Cost of sales —  908  (908)
Loss —  (280) 280 
Expenses:
General and administrative expenses 16,075  23,194  (7,119)
Depreciation and amortization expense 3,498  1,893  1,605 
Loss on disposal or impairment of assets, net —  10,237  (10,237)
Total expenses 19,573  35,324  (15,751)
Operating loss $ (19,573) $ (35,604) $ 16,031 

General and Administrative Expenses. The decrease during the six months ended September 30, 2021 was due primarily to lower compensation and legal expenses. Compensation expense decreased due to lower equity-based compensation and due to the reversal of an incentive compensation accrual. Legal expense decreased due to certain claims being settled, in particular our claims related to the bankruptcy of Extraction.

Loss on Disposal or Impairment of Assets, Net. During the six months ended September 30, 2020, we recorded a net loss of $10.2 million which was 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.

Equity in Earnings of Unconsolidated Entities

The decrease in equity in earnings of $0.1 million during the six months ended September 30, 2021 was due primarily to lower earnings from certain membership interests related to specific land and water services operations.

Interest Expense

Interest expense includes interest charged on the ABL Facility, senior secured notes and senior unsecured notes, as well as amortization of debt issuance costs, letter of credit fees, interest on equipment financing notes, and accretion of interest on non-interest bearing debt obligations. The increase of $44.7 million during the six months ended September 30, 2021 was primarily due to the issuance of the 2026 Senior Secured Notes which resulted in us paying a higher interest rate. See Note 6 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

Gain on Early Extinguishment of Liabilities, Net

During the six months ended September 30, 2021 and 2020, 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, partially offset by a loss on the early extinguishment of the Sawtooth credit agreement. See Note 6 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion.

Other Income, Net

The decrease in other income, net of $0.6 million during the six months ended September 30, 2021 was due primarily to proceeds received from a litigation settlement during the six months ended September 30, 2020.

Income Tax Benefit

Income tax benefit was $0.7 million during the six months ended September 30, 2021, compared to an income tax benefit of $1.1 million during the six months ended September 30, 2020. See Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion.
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Noncontrolling Interests

The increase in noncontrolling interest income of $0.5 million during the six months ended September 30, 2021 was due primarily to higher income from certain recycling operations and water solutions operations.

Non-GAAP Financial Measures

In addition to financial results reported in accordance with accounting principles generally accepted in the United States (“GAAP”), we have provided the non-GAAP financial measures of EBITDA and Adjusted EBITDA. These non-GAAP financial measures are not intended to be a substitute for those reported in accordance with GAAP. These measures may be different from non-GAAP financial measures used by other entities, even when similar terms are used to identify such measures.

We define EBITDA as net income (loss) attributable to NGL Energy Partners LP, plus interest expense, income tax expense (benefit), and depreciation and amortization expense. We define Adjusted EBITDA as EBITDA excluding net unrealized gains and losses on derivatives, lower of cost or net realizable value adjustments, gains and losses on disposal or impairment of assets, gains and losses on early extinguishment of liabilities, equity-based compensation expense, acquisition expense, revaluation of liabilities, certain legal settlements and other. We also include in Adjusted EBITDA certain inventory valuation adjustments related to 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 as alternatives to net (loss) income, (loss) income from continuing operations before income taxes, cash flows from operating activities, or any other measure of financial performance calculated in accordance with GAAP, as those items are used to measure operating performance, liquidity or the ability to service debt obligations. We believe that EBITDA provides additional information to investors for evaluating our ability to make quarterly distributions to our unitholders and is presented solely as a supplemental measure. We believe that Adjusted EBITDA provides additional information to investors for evaluating our financial performance without regard to our financing methods, capital structure and historical cost basis. Further, EBITDA and Adjusted EBITDA, as we define them, may not be comparable to EBITDA, Adjusted EBITDA, or similarly titled measures used by other entities.

Other than for certain businesses within our Liquids Logistics segment, for purposes of our Adjusted EBITDA calculation, we make a distinction between realized and unrealized gains and losses on derivatives. During the period when a derivative contract is open, we record changes in the fair value of the derivative as an unrealized gain or loss. When a derivative contract matures or is settled, we reverse the previously recorded unrealized gain or loss and record a realized gain or loss. We do not draw such a distinction between realized and unrealized gains and losses on derivatives of certain businesses within our Liquids Logistics segment. The primary hedging strategy of these businesses is to hedge against the risk of declines in the value of inventory over the course of the contract cycle, and many of the hedges cover extended periods of time. The “inventory valuation adjustment” row in the reconciliation table reflects the difference between the market value of the inventory of these businesses at the balance sheet date and its cost, adjusted for the impact of seasonal market movements related to our base inventory and the related hedge. We include this in Adjusted EBITDA because the unrealized gains and losses associated with derivative contracts associated with the inventory of this segment, which are intended primarily to hedge inventory holding risk and are included in net income, also affect Adjusted EBITDA. In our Crude Oil Logistics segment, we purchase certain crude oil barrels using the West Texas Intermediate (“WTI”) calendar month average (“CMA”) price and sell the crude oil barrels using the WTI CMA price plus the Argus CMA Differential Roll Component (“CMA Differential Roll”) per our contracts. To eliminate the volatility of the CMA Differential Roll, we entered into derivative instrument positions in January 2021 to secure a margin of approximately $0.20 per barrel on 1.5 million barrels per month from May 2021 through December 2023. Due to the nature of these positions, the cash flow and earnings recognized on a GAAP basis will differ from period to period depending on the current crude oil price and future estimated crude oil price which are valued utilizing third-party market quoted prices. We are recognizing in Adjusted EBITDA the gains and losses from the derivative instrument positions entered into in January 2021 to properly align with the physical margin we are hedging each month through the term of this transaction. This representation aligns with management’s evaluation of the transaction.

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The following table reconciles net (loss) income to EBITDA and Adjusted EBITDA for the periods indicated:
Three Months Ended September 30, Six Months Ended September 30,
2021 2020 2021 2020
(in thousands)
Net (loss) income $ (1,207) $ 5,835  $ (135,709) $ (29,417)
Less: Net income attributable to noncontrolling interests (330) (168) (768) (219)
Net (loss) income attributable to NGL Energy Partners LP (1,537) 5,667  (136,477) (29,636)
Interest expense 68,512  46,840  135,642  90,906 
Income tax benefit (235) (827) (685) (1,128)
Depreciation and amortization 69,543  86,822  152,900  170,024 
EBITDA 136,283  138,502  151,380  230,166 
Net unrealized (gains) losses on derivatives (18,490) 4,457  (34,754) 31,128 
CMA Differential Roll net losses (gains) (1) 12,805  —  37,115  — 
Inventory valuation adjustment (2) (451) (1,641) 767  2,179 
Lower of cost or net realizable value adjustments 3,521  (1,531) (285) (33,534)
Loss on disposal or impairment of assets, net 13,695  6,063  81,233  19,147 
Gain on early extinguishment of liabilities, net (1,072) (13,747) (1,159) (33,102)
Equity-based compensation expense (3) (2,753) 2,256  (1,793) 4,558 
Acquisition expense (4) 36  169  103  326 
Other (5) 2,687  3,253  4,755  7,601 
Adjusted EBITDA $ 146,261  $ 137,781  $ 237,362  $ 228,469 
Adjusted EBITDA - Discontinued Operations (6) $ —  $ (190) $ —  $ (484)
Adjusted EBITDA - Continuing Operations $ 146,261  $ 137,971  $ 237,362  $ 228,953 
(1)    Adjustment to align, within Adjusted EBITDA, the net gains and losses of the Partnership’s CMA Differential Roll derivative instruments positions with the physical margin being hedged. See “Non-GAAP Financial Measures” section above for a further discussion.
(2)    Amount reflects the difference between the market value of the inventory at the balance sheet date and its cost, adjusted for the impact of seasonal market movements related to our base inventory and the related hedge. See “Non-GAAP Financial Measures” section above for a further discussion.
(3)    Equity-based compensation expense in the table above may differ from equity-based compensation expense reported in Note 8 to our unaudited condensed consolidated financial statements included in this Quarterly 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 8 to our unaudited condensed 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.
(5)    Amounts for the three months and six months ended September 30, 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.
(6)    Amounts include the operations of TPSL, Gas Blending and Mid-Con.

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The following tables reconcile depreciation and amortization amounts per the EBITDA table above to depreciation and amortization amounts reported in our unaudited condensed consolidated statements of operations and unaudited condensed consolidated statements of cash flows for the periods indicated:
Three Months Ended September 30, Six Months Ended September 30,
2021 2020 2021 2020
(in thousands)
Reconciliation to unaudited condensed consolidated statements of operations:
Depreciation and amortization per EBITDA table $ 69,543  $ 86,822  $ 152,900  $ 170,024 
Intangible asset amortization recorded to cost of sales (71) (76) (144) (153)
Depreciation and amortization of unconsolidated entities (192) (250) (358) (343)
Depreciation and amortization attributable to noncontrolling interests 283  973  1,267  1,927 
Depreciation and amortization per unaudited condensed consolidated statements of operations $ 69,563  $ 87,469  $ 153,665  $ 171,455 

Six Months Ended September 30,
2021 2020
(in thousands)
Reconciliation to unaudited condensed consolidated statements of cash flows:
Depreciation and amortization per EBITDA table $ 152,900  $ 170,024 
Amortization of debt issuance costs recorded to interest expense 8,492  6,775 
Amortization of royalty expense recorded to operating expense 123  123 
Depreciation and amortization of unconsolidated entities (358) (343)
Depreciation and amortization attributable to noncontrolling interests 1,267  1,927 
Depreciation and amortization per unaudited condensed consolidated statements of cash flows $ 162,424  $ 178,506 

The following table reconciles interest expense per the EBITDA table above to interest expense reported in our unaudited condensed consolidated statements of operations for the periods indicated:
Three Months Ended September 30, Six Months Ended September 30,
2021 2020 2021 2020
(in thousands)
Interest expense per EBITDA table $ 68,512  $ 46,840  $ 135,642  $ 90,906 
Interest expense attributable to noncontrolling interests —  13  17  26 
Interest expense attributable to unconsolidated entities (17) (18) (34) (36)
Interest expense attributable to discontinued operations —  100  —  — 
Interest expense per unaudited condensed consolidated statements of operations $ 68,495  $ 46,935  $ 135,625  $ 90,896 

The following table summarizes additional amounts attributable to discontinued operations in the EBITDA table above for the periods indicated:
Three Months Ended September 30, Six Months Ended September 30,
2020 2020
(in thousands)
Income tax benefit $ (53) $ (53)
Inventory valuation adjustment $ (2) $ (22)
Lower of cost or net realizable value adjustments $ 1  $ 21 
Loss on disposal or impairment of assets, net $ 116  $ 1,181 

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The following tables reconcile operating income (loss) to Adjusted EBITDA by segment for the periods indicated.
Three Months Ended September 30, 2021
Water
Solutions 		Crude Oil
Logistics 		Liquids
Logistics 		Corporate
and Other 		Consolidated
(in thousands)
Operating income (loss) $ 32,772  $ 28,231  $ 11,461  $ (7,646) $ 64,818 
Depreciation and amortization 50,670  12,454  4,686  1,753  69,563 
Amortization recorded to cost of sales —  —  71  —  71 
Net unrealized losses (gains) on derivatives 1,521  (7,153) (12,858) —  (18,490)
CMA Differential Roll net losses (gains) —  12,805  —  —  12,805 
Inventory valuation adjustment —  —  (451) —  (451)
Lower of cost or net realizable value adjustments —  —  3,521  —  3,521 
Loss (gain) on disposal or impairment of assets, net 1,962  (14) 11,746  —  13,694 
Equity-based compensation expense —  —  —  (2,753) (2,753)
Acquisition expense —  —  —  36  36 
Other income, net 10  154  295  271  730 
Adjusted EBITDA attributable to unconsolidated entities 716  —  (9) (65) 642 
Adjusted EBITDA attributable to noncontrolling interest (614) —  3  —  (611)
Other 387  2,299  —  —  2,686 
Adjusted EBITDA $ 87,424  $ 48,776  $ 18,465  $ (8,404) $ 146,261 
Three Months Ended September 30, 2020
Water
Solutions 		Crude Oil
Logistics 		Liquids
Logistics 		Corporate
and Other 		Continuing
Operations 		Discontinued Operations
(TPSL, Mid-Con, Gas Blending) 		Consolidated
(in thousands)
Operating (loss) income $ (13,277) $ 48,239  $ 14,338  $ (12,984) $ 36,316  $ —  $ 36,316 
Depreciation and amortization 62,220  17,232  7,026  991  87,469  —  87,469 
Amortization recorded to cost of sales —  —  76  —  76  —  76 
Net unrealized losses (gains) on derivatives 4,413  (3,317) 3,361  —  4,457  —  4,457 
Inventory valuation adjustment —  —  (1,639) —  (1,639) —  (1,639)
Lower of cost or net realizable value adjustments —  (19) (1,513) —  (1,532) —  (1,532)
Loss (gain) on disposal or impairment of assets, net 6,223  (310) 43  (2) 5,954  —  5,954 
Equity-based compensation expense —  —  —  2,256  2,256  —  2,256 
Acquisition expense 1  —  —  168  169  —  169 
Other income, net 2  1,175  286  122  1,585  —  1,585 
Adjusted EBITDA attributable to unconsolidated entities 845  —  (13) (65) 767  —  767 
Adjusted EBITDA attributable to noncontrolling interest (441) —  (736) —  (1,177) —  (1,177)
Other 1,061  2,181  28  —  3,270  —  3,270 
Discontinued operations —  —  —  —  —  (190) (190)
Adjusted EBITDA $ 61,047  $ 65,181  $ 21,257  $ (9,514) $ 137,971  $ (190) $ 137,781 

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Six Months Ended September 30, 2021
Water
Solutions 		Crude Oil
Logistics 		Liquids
Logistics 		Corporate
and Other 		Consolidated
(in thousands)
Operating income (loss) $ 40,355  $ 16,650  $ (41,948) $ (19,573) $ (4,516)
Depreciation and amortization 113,651  24,863  11,653  3,498  153,665 
Amortization recorded to cost of sales —  —  144  —  144 
Net unrealized losses (gains) on derivatives 5,087  (21,607) (18,234) —  (34,754)
CMA Differential Roll net losses (gains) —  37,115  —  —  37,115 
Inventory valuation adjustment —  —  767  —  767 
Lower of cost or net realizable value adjustments —  (11) (274) —  (285)
Loss (gain) on disposal or impairment of assets, net 9,453  (56) 71,833  —  81,230 
Equity-based compensation expense —  —  —  (1,793) (1,793)
Acquisition expense —  —  —  103  103 
Other income, net 622  350  658  349  1,979 
Adjusted EBITDA attributable to unconsolidated entities 1,175  —  (19) (120) 1,036 
Adjusted EBITDA attributable to noncontrolling interest (1,568) —  (526) —  (2,094)
Other 160  4,620  (15) —  4,765 
Adjusted EBITDA $ 168,935  $ 61,924  $ 24,039  $ (17,536) $ 237,362 
Six Months Ended September 30, 2020
Water
Solutions 		Crude Oil
Logistics 		Liquids
Logistics 		Corporate
and Other 		Continuing
Operations 		Discontinued Operations
(TPSL, Mid-Con, Gas Blending) 		Consolidated
(in thousands)
Operating (loss) income $ (29,324) $ 71,559  $ 18,900  $ (35,604) $ 25,531  $ —  $ 25,531 
Depreciation and amortization 120,353  34,027  15,182  1,893  171,455  —  171,455 
Amortization recorded to cost of sales —  —  153  —  153  —  153 
Net unrealized losses on derivatives 17,725  11,321  2,082  —  31,128  —  31,128 
Inventory valuation adjustment —  —  2,201  —  2,201  —  2,201 
Lower of cost or net realizable value adjustments —  (29,079) (4,476) —  (33,555) —  (33,555)
Loss on disposal or impairment of assets, net 6,552  1,140  47  10,237  17,976  —  17,976 
Equity-based compensation expense —  —  —  4,558  4,558  —  4,558 
Acquisition expense 13  —  —  313  326  —  326 
Other income, net 258  1,513  663  186  2,620  —  2,620 
Adjusted EBITDA attributable to unconsolidated entities 1,310  —  (14) (127) 1,169  —  1,169 
Adjusted EBITDA attributable to noncontrolling interest (928) —  (1,272) —  (2,200) —  (2,200)
Intersegment transactions (1)
—  —  (27) —  (27) —  (27)
Other 2,014  5,554  50  —  7,618  —  7,618 
Discontinued operations —  —  —  —  —  (484) (484)
Adjusted EBITDA $ 117,973  $ 96,035  $ 33,489  $ (18,544) $ 228,953  $ (484) $ 228,469 
(1)    Amount reflects the transactions with TPSL, Mid-Con and Gas Blending that are eliminated in consolidation.

Liquidity, Sources of Capital and Capital Resource Activities

General

Our principal sources of liquidity and capital resource requirements are the cash flows from our operations, borrowings under our ABL Facility, debt issuances and the issuance of common and preferred units. We expect our primary cash outflows to be related to capital expenditures, interest and repayment of debt maturities.
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We believe that our anticipated cash flows from operations and the borrowing capacity under our ABL Facility will be sufficient to meet our liquidity needs. Our borrowing needs vary during the year due in part to the seasonal nature of certain businesses within our Liquids Logistics segment. Our greatest working capital borrowing needs generally occur during the period of June through December, when we are building our natural gas liquids inventories in anticipation of the butane blending and heating seasons. Our working capital borrowing needs generally decline during the period of January through March, when the cash inflows from our Liquids Logistics segment are the greatest.

Cash Management

We manage cash by utilizing a centralized cash management program that concentrates the cash assets of our operating subsidiaries in joint accounts for the purposes of providing financial flexibility and lowering the cost of borrowing, transaction costs and bank fees. Our centralized cash management program provides that funds in excess of the daily needs of our operating subsidiaries are concentrated, consolidated or otherwise made available for use by other entities within our consolidated group. All of our wholly-owned operating subsidiaries participate in this program. Under the cash management program, depending on whether a participating subsidiary has short-term cash surpluses or cash requirements, we provide cash to the subsidiary or the subsidiary provides cash to us.

Short-Term Liquidity

Our principal sources of short-term liquidity consist of cash generated from operating activities and borrowings under our $500.0 million ABL Facility, which we believe will provide liquidity to operate our business and manage our working capital requirements. 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.

As of September 30, 2021, our current assets exceeded our current liabilities by approximately $287.4 million.

For additional information related to our ABL Facility, see Note 6 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

Long-Term Financing

In addition to our principal sources of short-term liquidity discussed above, we expect to fund our longer-term financing requirements by issuing long-term notes, common units and/or preferred units, loans from financial institutions, asset securitizations or the sale of assets.

Senior Secured Notes

On February 4, 2021, we issued $2.05 billion of 7.5% 2026 Senior Secured Notes (“2026 Senior Secured Notes”) in a private placement. The 2026 Senior Secured Notes bear interest, which is payable on February 1 and August 1 of each year, which began on August 1, 2021. The 2026 Senior Secured Notes mature on February 1, 2026.

Senior Unsecured Notes

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

Repurchases

During the three months ended September 30, 2021, we repurchased $17.1 million of the 2023 Notes and $6.0 million of the 2026 Notes.

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 15 to our unaudited condensed consolidated financial statements included in this Quarterly Report).

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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 $24.2 million when this loan matures on November 1, 2027.

For additional information related to our long-term debt, see Note 6 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

Capital Expenditures, Acquisitions and Other Investments

The following table summarizes expansion and maintenance capital expenditures (which excludes additions for tank bottoms and linefill and has been prepared on the accrual basis), acquisitions and other investments for the periods indicated.
Capital Expenditures Other
Expansion Maintenance Acquisitions (1) Investments (2)
(in thousands)
Three Months Ended September 30,
2021 $ 20,388  $ 16,979  $ —  $ 119 
2020 $ 17,588  $ 6,830  $ —  $ 607 
Six Months Ended September 30,
2021 $ 44,523  $ 24,724  $ —  $ 235 
2020 $ 38,358  $ 15,998  $ —  $ 607 
(1)    There were no acquisitions during the three months or six months ended September 30, 2021 or 2020.
(2)    Amounts for the three months and six months ended September 30, 2021 and 2020 relate to contributions made to unconsolidated entities.

Capital expenditures for the fiscal year ending March 31, 2022 are expected to be approximately $115 million.

Distributions Declared

The board of directors of our general partner decided to temporarily suspend all distributions in order to deleverage our balance sheet until we meet the 4.75 to 1.00 total leverage ratio set forth within the indenture of the 2026 Senior Secured Notes. This resulted in the suspension of the quarterly common unit distributions, beginning with the quarter ended December 31, 2020, and all preferred unit distributions, beginning with the quarter ended March 31, 2021. 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.

Cash Flows

The following table summarizes the sources (uses) of our cash flows from continuing operations for the periods indicated:
Six Months Ended September 30,
Cash Flows Provided by (Used in): 2021 2020
(in thousands)
Operating activities, before changes in operating assets and liabilities $ 151,504  $ 174,026 
Changes in operating assets and liabilities (159,349) (28,775)
Operating activities-continuing operations $ (7,845) $ 145,251 
Investing activities-continuing operations $ (75,129) $ (153,548)
Financing activities-continuing operations $ 83,676  $ 4,096 

Operating Activities-Continuing Operations. The seasonality of our Liquids Logistics business has a significant effect on our cash flows from operating activities. Increases in natural gas liquids prices typically reduce our operating cash flows due to higher cash requirements to fund increases in inventories, and decreases in natural gas liquids prices typically increase our operating cash flows due to lower cash requirements to fund increases in inventories. In our Liquids Logistics business, we typically experience operating losses or lower operating income during our first and second quarters, or the six months ending
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September 30, as a result of lower volumes of natural gas liquids sales and when we are building our inventory levels for the upcoming butane blending and heating seasons, which generally begin in late fall, under normal demand conditions, and run through February or March. We borrow under the revolving credit facility to supplement our operating cash flows during the periods in which we are building inventory. Our operations, and as a result our cash flows, are also impacted by positive and negative movements in commodity prices, which cause fluctuations in the value of inventory, accounts receivable and payables, due to increases and decreases in revenues and cost of sales. The decrease in net cash provided by operating activities during the six months ended September 30, 2021 was due primarily to fluctuations in the value of accounts receivable and accounts payable during the six months ended September 30, 2021.

Investing Activities-Continuing Operations. Net cash used in investing activities was $75.1 million during the six months ended September 30, 2021, compared to net cash used in investing activities of $153.5 million during the six months ended September 30, 2020. 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 15 to our unaudited condensed consolidated financial statements included in this Quarterly Report); and
•a decrease in capital expenditures from $132.3 million (includes payment of amounts accrued as of March 31, 2020) during the six months ended September 30, 2020 to $77.8 million (includes payment of amounts accrued as of March 31, 2021) during the six months ended September 30, 2021 due primarily to fewer expansion projects in our Water Solutions segment.

These decreases in net cash used in investing activities were partially offset by a $43.6 million increase in payments to settle derivatives.

Financing Activities-Continuing Operations. Net cash provided by financing activities was $83.7 million during the six months ended September 30, 2021, compared to net cash provided by financing activities of $4.1 million during the six months ended September 30, 2020. The increase in net cash provided by financing activities was due primarily to:

•a decrease of $83.6 million in distributions paid to our general partners and common unitholders, preferred unitholders and noncontrolling interest owners during the six months ended September 30, 2021 due primarily to the reduction and subsequent suspension of the quarterly common unit and preferred unit distributions; and
•$77.6 million in contingent consideration payments during the six months ended September 30, 2020 due to installment payments related to the Mesquite Disposals Unlimited, LLC acquisition.

These increases in net cash provided by financing activities were partially offset by a decrease of $90.5 million in borrowings on the revolving credit facilities (net of repayments) during the six months ended September 30, 2021.

Guarantor Summarized Financial Information

NGL Energy Partners LP (parent) and NGL Energy Finance Corp. are co-issuers of the Senior Unsecured Notes (see Note 6 to our unaudited condensed consolidated financial statements included in this Quarterly Report). Certain of our wholly owned subsidiaries (“Guarantor Subsidiaries”) have, jointly and severally, fully and unconditionally guaranteed the Senior Unsecured Notes.

The guarantees are senior unsecured obligations of each Guarantor Subsidiary and rank equally in right of payment with other existing and future senior indebtedness of such Guarantor Subsidiary, and senior in right of payment to all existing and future subordinated indebtedness of such Guarantor Subsidiary. The guarantee of our Senior Unsecured Notes by each Guarantor Subsidiary is subject to certain automatic customary releases, including in connection with the sale, disposition or transfer of all of the capital stock, or of all or substantially all of the assets, of such Guarantor Subsidiary to one or more persons that are not us or a restricted subsidiary, the exercise of legal defeasance or covenant defeasance options, the satisfaction and discharge of the indentures governing our Senior Unsecured Notes, the designation of such Guarantor Subsidiary as a non-guarantor restricted subsidiary or as an unrestricted subsidiary in accordance with the indentures governing our Senior Unsecured Notes, the release of such Guarantor Subsidiary from its guarantee under our revolving credit facility, the liquidation or dissolution of such Guarantor Subsidiary or upon the consolidation, merger or transfer of all assets of the Guarantor Subsidiary to us or another Guarantor Subsidiary in which the Guarantor Subsidiary dissolves or ceases to exist (collectively, the “Releases”). The obligations of each Guarantor Subsidiary under its note guarantee are limited as necessary to prevent such note guarantee from constituting a fraudulent conveyance under applicable law. We are not restricted from making investments in the Guarantor Subsidiaries and there are no significant restrictions on the ability of the Guarantor Subsidiaries to make
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distributions to NGL Energy Partners LP (parent). None of the assets of the Guarantor Subsidiaries (other than the investments in non-guarantor subsidiaries) are restricted net assets pursuant to Rule 4-08(e)(3) of Regulation S-X under the Securities Act of 1933, as amended.

The rights of holders of our Senior Unsecured Notes against the Guarantor Subsidiaries may be limited under the U.S. Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law.

The following is the summarized financial information for NGL Energy Partners LP (parent) and the Guarantor Subsidiaries on a combined basis after elimination of intercompany transactions, which includes related receivable and payable balances, and the investment in and equity earnings from the non-guarantor subsidiaries. This summarized financial information is provided in accordance with the reporting requirements of Rule 13-01 under Securities and Exchange Commission Regulation S-X.

Balance sheet information:
NGL Energy Partners LP (Parent) and Guarantor Subsidiaries
September 30, 2021 March 31, 2021
(in thousands)
ASSETS:
Current assets $ 1,337,589  $ 1,002,708 
Noncurrent assets (1)(2) $ 4,616,481  $ 4,743,874 
LIABILITIES AND EQUITY (3):
Current liabilities $ 1,050,111  $ 906,512 
Noncurrent liabilities $ 3,614,635  $ 3,524,664 
Class D Preferred Units $ 551,097  $ 551,097 
(1)    Excludes $0.7 million of net intercompany payables and $50.9 million of net intercompany receivables due from/to NGL Energy Partners LP (parent) and the Guarantor Subsidiaries to/from the non-guarantor subsidiaries at September 30, 2021 and March 31, 2021, respectively.
(2)    Includes $1.9 billion and $1.9 billion of goodwill and intangible assets at September 30, 2021 and March 31, 2021, respectively.
(3)    There are no noncontrolling interests held at the co-issuers or Guarantor Subsidiaries for either period presented.

Statements of operations information:
NGL Energy Partners LP (Parent) and Guarantor Subsidiaries
Six Months Ended
September 30, 2021 		Twelve Months Ended
March 31, 2021
(in thousands)
Revenues $ 3,240,567  $ 5,214,499 
Operating loss $ (3,491) $ (390,210)
Loss from continuing operations $ (135,141) $ (636,626)
Net loss (1) $ (135,141) $ (638,395)
Loss from continuing operations allocated to common unitholders $ (186,560) $ (729,891)
(1)    There are no noncontrolling interests held at the co-issuers or Guarantor Subsidiaries for either period presented.

Contractual Obligations

For a discussion of contractual obligations, see Note 6, Note 7 and Note 13 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements other than the letters of credit discussed in Note 6 to our unaudited condensed consolidated financial statements included in this Quarterly Report and the short-term leases discussed in Note 13 to our unaudited condensed consolidated financial statements included in this Quarterly Report.
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Environmental Legislation

See our Annual Report for a discussion of proposed environmental legislation and regulations that, if enacted, could result in increased compliance and operating costs. However, at this time we cannot predict the structure or outcome of any future legislation or regulations or the eventual cost we could incur in compliance.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements that are applicable to us, see Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with GAAP requires the selection and application of appropriate accounting principles to the relevant facts and circumstances of our operations and the use of estimates made by management. We have identified certain accounting policies that are most important to the portrayal of our consolidated financial position and results of operations. The application of these accounting policies, which requires subjective or complex judgments regarding estimates and projected outcomes of future events, and changes in these accounting policies, could have a material effect on our consolidated financial statements. There have been no material changes in the critical accounting policies previously disclosed in our Annual Report.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

A portion of our long-term debt is variable-rate debt. Changes in interest rates impact the interest payments of our variable-rate debt but generally do not impact the fair value of the liability. Conversely, changes in interest rates impact the fair value of our fixed-rate debt but do not impact its cash flows.

The ABL Facility is variable-rate debt with interest rates that are generally indexed to the Wall Street Journal prime rate or LIBOR interest rate (or successor rate). At September 30, 2021, we had $146.0 million of outstanding borrowings under the ABL Facility at a weighted average interest rate of 4.89%. A change in interest rates of 0.125% would result in an increase or decrease of our annual interest expense of $0.2 million, based on borrowings outstanding at September 30, 2021.

Commodity Price Risk

Our operations are subject to certain business risks, including commodity price risk. Commodity price risk is the risk that the market value of crude oil, natural gas liquids, or refined and renewables products will change, either favorably or unfavorably, in response to changing market conditions. Procedures and limits for managing commodity price risks are specified in our market risk policy. Open commodity positions and market price changes are monitored daily and are reported to senior management and to marketing operations personnel.

The crude oil, natural gas liquids, and refined and renewables products industries are “margin-based” and “cost-plus” businesses in which gross profits depend on the differential of sales prices over supply costs. We have no control over market conditions. As a result, our profitability may be impacted by sudden and significant changes in the price of crude oil, natural gas liquids, and refined and renewables products.

We engage in various types of forward contracts and financial derivative transactions to reduce the effect of price volatility on our product costs, to protect the value of our inventory positions, and to help ensure the availability of product during periods of short supply. We attempt to balance our contractual portfolio by purchasing volumes when we have a matching purchase commitment from our wholesale and retail customers. We may experience net unbalanced positions from time to time. In addition to our ongoing policy to maintain a balanced position, for accounting purposes we are required, on an ongoing basis, to track and report the market value of our derivative portfolio.

Although we use financial derivative instruments to reduce the market price risk associated with forecasted transactions, we do not account for financial derivative transactions as hedges. All changes in the fair value of our physical contracts that do not qualify as normal purchases and normal sales and settlements (whether cash transactions or non-cash mark-to-market adjustments) are reported either within revenue (for sales contracts) or cost of sales (for purchase contracts) in
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our unaudited condensed consolidated statements of operations, regardless of whether the contract is physically or financially settled.

The following table summarizes the hypothetical impact on the September 30, 2021 fair value of our commodity derivatives of an increase of 10% in the value of the underlying commodity (in thousands):
Increase
(Decrease)
To Fair Value
Crude oil (Water Solutions segment) $ (337)
Crude oil (Crude Oil Logistics segment) $ (7,449)
Propane (Liquids Logistics segment) $ 6,893 
Butane (Liquids Logistics segment) $ (5,238)
Refined Products (Liquids Logistics segment) $ (3,601)
Other Products (Liquids Logistics segment) $ 31,114 
Canadian dollars (Liquids Logistics segment) $ 80 

Changes in commodity prices may also impact the volumes that we are able to transport, dispose, store and market, which also impact our cash flows.

Credit Risk

Our operations are also subject to credit risk, which is the risk of loss from nonperformance by suppliers, customers or financial counterparties to a contract. Procedures and limits for managing credit risk are specified in our credit policy. Credit risk is monitored daily and we believe we minimize exposure through the following:

•requiring certain customers to prepay or place deposits for our products and services;
•requiring certain customers to post letters of credit or other forms of surety;
•monitoring individual customer receivables relative to previously-approved credit limits;
•requiring certain customers to take delivery of their contracted volume ratably rather than allow them to take delivery at their discretion;
•entering into master netting agreements that allow for offsetting counterparty receivable and payable balances for certain transactions;
•reviewing the receivable aging regularly to identify issues or trends that may develop; and
•requiring marketing personnel to manage their customers’ receivable position and suspend sales to customers that have not timely paid outstanding invoices.

At September 30, 2021, our primary counterparties were retailers, resellers, energy marketers, producers, refiners, and dealers.

Fair Value

We use observable market values for determining the fair value of our derivative instruments. In cases where actively quoted prices are not available, other external sources are used which incorporate information about commodity prices in actively quoted markets, quoted prices in less active markets and other market fundamental analysis.

Item 4.    Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rule 13(a)-15(e) and 15(d)-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to provide reasonable assurance that information required to be disclosed in our filings and submissions under the Exchange Act is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management, including the principal executive officer and principal financial officer of our general partner, as appropriate, to allow timely decisions regarding required disclosure.

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We completed an evaluation under the supervision and with participation of our management, including the principal executive officer and principal financial officer of our general partner, of the effectiveness of the design and operation of our disclosure controls and procedures at September 30, 2021. Based on this evaluation, the principal executive officer and principal financial officer of our general partner have concluded that as of September 30, 2021, such disclosure controls and procedures were effective to provide the reasonable assurance described above.

There have been no changes in our internal controls over financial reporting (as defined in Rule 13(a)-15(f) of the Exchange Act) during the three months ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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PART II - OTHER INFORMATION

Item 1.    Legal Proceedings

We are involved from time to time in various legal proceedings and claims arising in the ordinary course of business. For information related to legal proceedings, see the discussion under the caption “Legal Contingencies” in Note 7 to our unaudited condensed consolidated financial statements included in this Quarterly Report, which is incorporated by reference into this Item 1.

Item 1A.    Risk Factors

There have been no material changes in the risk factors previously disclosed in Part I, Item 1A–“Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2021.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3.    Defaults Upon Senior Securities

Pursuant to certain covenants within the indenture of our 2026 Senior Secured Notes, the board of directors of our general partner temporarily suspended all common unit and preferred unit distributions. For additional information related to the suspension of distributions, see Note 8 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

Item 4.    Mine Safety Disclosures

Not applicable.

Item 5.    Other Information

None.

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Item 6.    Exhibits
Exhibit Number Exhibit
10.1*
22.1*
31.1*
31.2*
32.1*
32.2*
101.INS** XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH** Inline XBRL Schema Document
101.CAL** Inline XBRL Calculation Linkbase Document
101.DEF** Inline XBRL Definition Linkbase Document
101.LAB** Inline XBRL Label Linkbase Document
101.PRE** Inline XBRL Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*    Exhibits filed with this report.
**    The following documents are formatted in Inline XBRL (Extensible Business Reporting Language): (i) Unaudited Condensed Consolidated Balance Sheets at September 30, 2021 and March 31, 2021, (ii) Unaudited Condensed Consolidated Statements of Operations for the three months and six months ended September 30, 2021 and 2020, (iii) Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income for the three months and six months ended September 30, 2021 and 2020, (iv) Unaudited Condensed Consolidated Statements of Changes in Equity for the three months and six months ended September 30, 2021 and 2020, (v) Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2021 and 2020, and (vi) Notes to Unaudited Condensed Consolidated Financial Statements.
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NGL ENERGY PARTNERS LP
By: NGL Energy Holdings LLC, its general partner
Date: November 9, 2021 By: /s/ H. Michael Krimbill
H. Michael Krimbill
Chief Executive Officer
Date: November 9, 2021 By: /s/ Linda J. Bridges
Linda J. Bridges
Chief Financial Officer

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Exhibit 10.1

FIRST AMENDMENT TO CREDIT AGREEMENT
This FIRST AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) dated as of November 8, 2021, is among NGL ENERGY OPERATING LLC, a Delaware limited liability company (the “Company”), NGL ENERGY PARTNERS LP, a Delaware limited partnership (the Parent”), each Guarantor party hereto, JPMORGAN CHASE BANK, N.A., as administrative agent for the Lenders (in such capacity, together with its successors, the “Administrative Agent”) and the Lenders party hereto.

Recitals

A.    WHEREAS, the Company, the Parent, the Administrative Agent and the Lenders party thereto from time to time are parties to that certain Credit Agreement dated as of February 4, 2021 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time prior to the date hereof (the “Existing Credit Agreement”) and as amended by this Amendment and as the same may be further amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), pursuant to which the Lenders have agreed to make certain loans to, and extensions of credit on behalf of, the Company.

B.    WHEREAS, the Company, the Parent, the Administrative Agent and the Lenders party hereto have agreed to make certain amendments and modifications to the Existing Credit Agreement as set forth herein.

C.    NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1.    Defined Terms. Each capitalized term used herein but not otherwise defined herein has the meaning given to such term in the Credit Agreement.

Section 2.    Amendments to Credit Agreement. On the Amendment Effective Date, the following amendments to the Existing Credit Agreement shall become effective:

2.1    Amendments to Section 1.2. Section 1.2 of the Existing Credit Agreement is hereby amended as follows:

(a) The following defined terms are hereby in the appropriate alphabetical order to read in their respective entirety as follows:

“Borrowing Base Availability” means, as of any date of determination, the amount by which the Borrowing Base then in effect exceeds the Aggregate Revolving Credit Extensions of Credit.

“First Amendment Effective Date” means November 8, 2021.

(b) The term “Designated Swap Obligations” is hereby amended and restated to read in its entirety as follows:

“Designated Swap Obligations” means, as of any date, Swap Obligations that are Finance Obligations and that have been designated in writing by the Company in its sole discretion (or designated in the Borrowing Base Certificate most recently delivered on or prior to such date) to the Administrative Agent as “Designated Swap Obligations”; provided that in each case such designation shall not become effective until the third Business Day following the Administrative Agent’s receipt of such designation (it being acknowledged and agreed that, unless so designated, no Reserve in respect of such Swap Obligation will be instituted or maintained).

2.2    Amendments to Section 8.2. Clause (i) of Section 8.2(f) of the Credit Agreement is hereby amended by adding the words “(A) if on or prior to February 28, 2022, (I) after the occurrence and during the continuance of a Cash Dominion Event or (II) if Borrowing Base Availability is less than $100,000,000 or (B) if after February 28, 2022,”.

Section 3.    Conditions Precedent. This Amendment shall become effective on the date (such date, the “Amendment Effective Date”) when each of the following conditions is satisfied (or waived in accordance with Section 12.1 of the Credit Agreement):

3.1    The Administrative Agent and the Lenders shall have received all fees and other amounts due and payable in connection with this Amendment or any other Credit Document on or prior to the Amendment Effective Date, including


reimbursement or payment of all out of pocket expenses required to be reimbursed or paid by the Company pursuant to this Amendment or any other Credit Document (including the out of pocket expenses of counsel to the Administrative Agent and its Affiliates).

3.2    The Administrative Agent shall have received a counterpart of this Amendment signed by the Company, the Parent, each Guarantor and Lenders constituting at least the Required Lenders.

3.3    The Administrative Agent shall have received a certificate from a Responsible Officer of the Company certifying that the representations and warranties set forth in Section 4.2(d) hereof are true and correct.

The Administrative Agent is hereby authorized and directed to declare this Amendment to be effective (and the Amendment Effective Date shall occur) when it has received documents confirming or certifying, to the satisfaction of the Administrative Agent, compliance with the conditions set forth in this Section 3 (or the waiver of such conditions as permitted in Section 12.1 of the Credit Agreement). Such declaration shall be final, conclusive and binding upon all parties to the Credit Agreement for all purposes.

Section 4.    Miscellaneous.

4.1    Confirmation. All of the terms and provisions of the Credit Agreement, as amended by this Amendment, are, and shall remain, in full force and effect following the Amendment Effective Date.

4.2    Ratification and Affirmation; Representations and Warranties. The Company, the Parent and each Guarantor hereby (a) acknowledges the terms of this Amendment and the Credit Agreement; (b) ratifies and affirms its obligations under, and acknowledges, renews and extends its continued liability under, the Credit Agreement and the other Credit Documents and agrees that the Credit Agreement and the other Credit Documents remain in full force and effect; (c) agrees that from and after the Amendment Effective Date (i) each reference to the Credit Agreement in the other Credit Documents shall be deemed to be a reference to the Credit Agreement, as amended by this Amendment and (ii) this Amendment does not constitute a novation of the Credit Agreement or any other Credit Document; and (d) represents and warrants to the Lenders that as of the date hereof, and immediately after giving effect to the terms of this Amendment, (i) each of the representations set forth in Article 6 of the Credit Agreement, or which are contained in any other Credit Document are, to the extent already qualified by materiality, true and correct in all respects, and, if not so already qualified, are true and correct in all material respects, on and as of the Amendment Effective Date as if made on and as of the Amendment Effective Date (unless stated to relate to a specific earlier date, in which case such representations and warranties are true and correct in all material respects as of such earlier date) and (ii) no Default or Event of Default has occurred and is continuing on the Amendment Effective Date.

4.3    Credit Document. This Amendment is a Credit Document.

4.4    Counterparts.

(a) This Amendment may be executed by one or more of the parties to this Amendment in any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

(b) Delivery of an executed counterpart of a signature page of this Amendment and/or any document, amendment, approval, consent, information, notice, certificate, request, statement, disclosure or authorization related to this Amendment and/or the transactions contemplated hereby and/or thereby (each an “Ancillary Document”) that is an Electronic Signature transmitted by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page shall be effective as delivery of a manually executed counterpart of this Amendment or such Ancillary Document, as applicable. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to this Amendment and/or any Ancillary Document shall be deemed to include Electronic Signatures, deliveries or the keeping of records in any electronic form (including deliveries by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page), each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be.

4.5    Integration. This Amendment, the Credit Agreement and the other Credit Documents represent the entire agreement of the Credit Parties, the Agents and the Lenders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by any Agent or any Lender relative to the subject matter hereof or thereof not expressly set forth or referred to herein, in the Credit Agreement or in the other Credit Documents.

4.6    GOVERNING LAW; NO THIRD PARTIES; SUBMISSION TO JURISDICTION; WAIVERS. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE LOANS SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS
2

OF THE STATE OF NEW YORK. Sections 12.10 and 12.11 of the Credit Agreement are hereby incorporated herein and apply hereto mutatis mutandis.

4.7    Successors and Assigns. The provisions of this Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted by the Credit Agreement.

4.8    Payment of Expenses. Pursuant to Section 12.05(a) of the Credit Agreement, the Company agrees to pay all reasonable and documented out of pocket expenses incurred by the Administrative Agent and its Affiliates in connection with the preparation and administration of this Amendment and the other Credit Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated).

4.9    Severability. Any provision of this Amendment held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

4.10    No Waiver. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender under the Credit Agreement or any Credit Document, or constitute a waiver or amendment of any provision of the Credit Agreement or any Credit Document. Section 12.3 of the Credit Agreement remains in full force and effect and is hereby ratified and confirmed by the Company, the Parent and each Guarantor.

[Signature Pages Follow]

3

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first written above.


COMPANY:                        NGL ENERGY OPERATING LLC


By:    /s/ Linda J. Bridges
Name:    Linda J. Bridges
Title:    Executive Vice President and Chief Financial Officer


PARENT:                        NGL ENERGY PARTNERS LP

By: NGL ENERGY HOLDINGS, LLC, its General Partner


By:    /s/ Linda J. Bridges
Name:    Linda J. Bridges
Title:    Executive Vice President and Chief Financial Officer
First Amendment to Credit Agreement Signature Page


GUARANTORS:
ANTICLINE DISPOSAL, LLC
AWR DISPOSAL, LLC
CENTENNIAL ENERGY, LLC
CENTENNIAL GAS LIQUIDS ULC
CHOYA OPERATING, LLC
DACO PERMIAN 76, LLC
DISPOSALS OPERATING, LLC
GGCOF HEP BLOCKER, LLC
GGCOF HEP BLOCKER II, LLC
GRAND MESA PIPELINE, LLC
GSR NORTHEAST TERMINALS LLC
HEP INTERMEDIATE HOLDCO, LLC
HEP INTERMEDIATE HOLDCO SUB, LLC
HEP OPERATIONS, LLC
HEP OPERATIONS HOLDINGS, LLC
HEP SHALEWATER SOLUTIONS, LLC
HILLSTONE DACO 76, LLC
HILLSTONE DACO PERMIAN, LLC
HILLSTONE ENVIRONMENTAL PARTNERS, LLC
HILLSTONE PERMIAN ADAMS, LLC
HILLSTONE PERMIAN ARTHUR, LLC
HILLSTONE PERMIAN CLEVELAND, LLC
HILLSTONE PERMIAN FORTRESS, LLC
HILLSTONE PERMIAN GARFIELD, LLC
HILLSTONE PERMIAN HAMILTON, LLC
HILLSTONE PERMIAN HARRISON, LLC
HILLSTONE PERMIAN HAYES, LLC,
HILLSTONE PERMIAN KNOX, LLC
HILLSTONE PERMIAN MADISON, LLC
HILLSTONE PERMIAN MCKINLEY, LLC
HILLSTONE PERMIAN MONROE, LLC
HILLSTONE PERMIAN PIPELINE, LLC
HILLSTONE PERMIAN PIPELINE LOVING BR, LLC
HILLSTONE PERMIAN POKER LAKE, LLC
HILLSTONE PERMIAN RATTLESNAKE, LLC
HILLSTONE PERMIAN REAGAN, LLC
HILLSTONE PERMIAN ROOSEVELT, LLC
HILLSTONE PERMIAN SHULTZ, LLC
HILLSTONE PERMIAN ST. LUCIA, LLC
HILLSTONE PERMIAN TAFT, LLC
HILLSTONE PERMIAN WILSON, LLC
LOVING FORTRESS, LLC
NGL CRUDE CUSHING, LLC
NGL CRUDE LOGISTICS, LLC
NGL CRUDE TERMINALS, LLC
NGL CRUDE TRANSPORTATION, LLC
NGL DELAWARE BASIN HOLDINGS, LLC
NGL ENERGY EQUIPMENT, LLC
NGL ENERGY FINANCE CORP.
NGL ENERGY GP LLC
NGL ENERGY HOLDINGS II, LLC


By:    /s/ Linda J. Bridges
Name:    Linda J. Bridges
Title:    Executive Vice President and Chief Financial Officer


First Amendment to Credit Agreement Signature Page


GUARANTORS:
NGL ENERGY LOGISTICS, LLC
NGL LIQUIDS, LLC
NGL MARINE, LLC
NGL MILAN INVESTMENTS, LLC
NGL RECYCLING SERVICES, LLC
NGL SOUTH RANCH, INC.
NGL SUPPLY TERMINAL COMPANY, LLC
NGL SUPPLY WHOLESALE, LLC
NGL TM LLC
NGL WASTE SERVICES, LLC
NGL WATER PIPELINES, LLC
NGL WATER SOLUTIONS, LLC
NGL WATER SOLUTIONS DJ, LLC
NGL WATER SOLUTIONS EAGLE FORD, LLC
NGL WATER SOLUTIONS - ORLA SWD, LLC
NGL WATER SOLUTIONS PERMIAN, LLC
NGL WATER SOLUTIONS PRODUCT SERVICES, LLC
RED ROCK MIDSTREAM, LLC
SAND LAKE MIDSTREAM, LLC


By:    /s/ Linda J. Bridges
Name:    Linda J. Bridges
Title:    Executive Vice President and Chief Financial Officer
First Amendment to Credit Agreement Signature Page


ADMINISTRATIVE AGENT AND A LENDER:        JPMORGAN CHASE BANK, N.A


By:    /s/ Stephanie Balette
Name:    Stephanie Balette
Title:    Authorized Officer
First Amendment to Credit Agreement Signature Page


LENDER:                        WELLS FARGO BANK, NATIONAL ASSOCIATION


By:    /s/ Becky Rountree
Name:    Becky Rountree
Title:    Vice President
First Amendment to Credit Agreement Signature Page


LENDER:                        THE TORONTO-DOMINION BANK, NEW YORK
BRANCH


By:    /s/ Maria Macchiaroli
Name:    Maria Macchiaroli
Title:    Authorized Signatory
First Amendment to Credit Agreement Signature Page


LENDER:                        ROYAL BANK OF CANADA


By:    /s/ Stuart Coulter
Name:    Stuart Coulter
Title:    Authorized Signatory
First Amendment to Credit Agreement Signature Page


LENDER:                        BARCLAYS BANK PLC


By:    /s/ Jake Lam
Name:    Jake Lam
Title:    Assistant Vice President

First Amendment to Credit Agreement Signature Page


Exhibit 22.1
 
LIST OF ISSUERS AND GUARANTOR SUBSIDIARIES OF NGL ENERGY PARTNERS LP

The following sets forth the issuers and subsidiary guarantors of the Partnership’s 7.5% senior unsecured notes due 2023, 6.125% senior unsecured notes due 2025 and 7.5% senior unsecured notes due 2026 (collectively, the “Senior Unsecured Notes”).
Entity   Jurisdiction of
Organization 		NGL Energy Partners LP
Senior Unsecured Notes
NGL Energy Partners LP Delaware Issuer
NGL Energy Finance Corp. Delaware Issuer
AntiCline Disposal, LLC   Wyoming Guarantor
AWR Disposal, LLC   Delaware Guarantor
Centennial Energy, LLC   Colorado Guarantor
Centennial Gas Liquids ULC   Alberta, Canada Guarantor
Choya Operating, LLC   Texas Guarantor
DACO Permian 76, LLC Texas Guarantor
Disposals Operating, LLC   Delaware Guarantor
GGCOF HEP Blocker, LLC   Delaware Guarantor
GGCOF HEP Blocker II, LLC   Delaware Guarantor
Grand Mesa Pipeline, LLC   Delaware Guarantor
GSR Northeast Terminals LLC   Delaware Guarantor
HEP Intermediate Holdco, LLC Delaware Guarantor
HEP Intermediate Holdco Sub, LLC Delaware Guarantor
HEP Operations, LLC Delaware Guarantor
HEP Shalewater Solutions, LLC Delaware Guarantor
Hillstone DACO 76, LLC Delaware Guarantor
Hillstone DACO Permian, LLC Delaware Guarantor
Hillstone Environmental Partners, LLC   Delaware Guarantor
Hillstone Permian Adams, LLC Delaware Guarantor
Hillstone Permian Arthur, LLC Delaware Guarantor
Hillstone Permian Cleveland, LLC Delaware Guarantor
Hillstone Permian Fortress, LLC Texas Guarantor
Hillstone Permian Garfield, LLC Delaware Guarantor
Hillstone Permian Hamilton, LLC Delaware Guarantor
Hillstone Permian Harrison, LLC Delaware Guarantor
Hillstone Permian Hayes, LLC Delaware Guarantor
Hillstone Permian Knox, LLC Delaware Guarantor
Hillstone Permian Madison, LLC Delaware Guarantor
Hillstone Permian McKinley, LLC Delaware Guarantor
Hillstone Permian Monroe, LLC Delaware Guarantor
Hillstone Permian Pipeline, LLC Delaware Guarantor
Hillstone Permian Pipeline Loving BR, LLC Delaware Guarantor
Hillstone Permian Poker Lake, LLC Delaware Guarantor
Hillstone Permian Rattlesnake, LLC Delaware Guarantor
Hillstone Permian Reagan, LLC Delaware Guarantor
Hillstone Permian Roosevelt, LLC Delaware Guarantor
Hillstone Permian Shultz, LLC Delaware Guarantor
Hillstone Permian St. Lucia, LLC Delaware Guarantor
Hillstone Permian Taft, LLC Delaware Guarantor
Hillstone Permian Wilson, LLC Delaware Guarantor
Loving Fortress, LLC Texas Guarantor
NGL Crude Cushing, LLC   Oklahoma Guarantor
NGL Crude Logistics, LLC Delaware Guarantor
NGL Crude Terminals, LLC Delaware Guarantor


Entity Jurisdiction of
Organization 		NGL Energy Partners LP
Senior Unsecured Notes
NGL Crude Transportation, LLC   Colorado Guarantor
NGL Delaware Basin Holdings, LLC   Delaware Guarantor
NGL Energy Equipment LLC Colorado Guarantor
NGL Energy GP LLC   Delaware Guarantor
NGL Energy Holdings II, LLC   Delaware Guarantor
NGL Energy Logistics, LLC   Delaware Guarantor
NGL Energy Operating LLC   Delaware Guarantor
NGL Liquids, LLC   Delaware Guarantor
NGL Marine, LLC   Texas Guarantor
NGL Milan Investments, LLC Colorado Guarantor
NGL Recycling Services, LLC   Delaware Guarantor
NGL South Ranch, Inc. New Mexico Guarantor
NGL Supply Terminal Company, LLC   Delaware Guarantor
NGL Supply Wholesale, LLC Delaware Guarantor
NGL Waste Services, LLC New Mexico Guarantor
NGL Water Pipelines, LLC   Texas Guarantor
NGL Water Solutions DJ, LLC   Colorado Guarantor
NGL Water Solutions Eagle Ford, LLC   Delaware Guarantor
NGL Water Solutions, LLC   Colorado Guarantor
NGL Water Solutions Orla-SWD, LLC Delaware Guarantor
NGL Water Solutions Permian, LLC   Colorado Guarantor
NGL Water Solutions Product Services, LLC Delaware Guarantor
Red Rock Midstream, LLC Delaware Guarantor
Sand Lake Midstream, LLC Delaware Guarantor



Exhibit 31.1
CERTIFICATION

I, H. Michael Krimbill, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of NGL Energy Partners LP;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a.    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2021 /s/ H. Michael Krimbill
H. Michael Krimbill
Chief Executive Officer of NGL Energy Holdings LLC, the general partner of NGL Energy Partners LP



Exhibit 31.2
CERTIFICATION

I, Linda J. Bridges, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of NGL Energy Partners LP;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a.    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2021 /s/ Linda J. Bridges
Linda J. Bridges
Chief Financial Officer of NGL Energy Holdings LLC, the general partner of NGL Energy Partners LP
 



Exhibit 32.1

CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of NGL Energy Partners LP (the “Partnership”) on Form 10-Q for the fiscal quarter ended September 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, H. Michael Krimbill, Chief Executive Officer of NGL Energy Holdings LLC, the general partner of the Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”), that, to my knowledge:

1.    The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.    The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

Date: November 9, 2021 /s/ H. Michael Krimbill
H. Michael Krimbill
Chief Executive Officer of NGL Energy Holdings LLC, the general partner of NGL Energy Partners LP

This certification is being furnished solely pursuant to Section 906 and is not being filed as part of the Report or as a separate disclosure document.

A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.



Exhibit 32.2

CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of NGL Energy Partners LP (the “Partnership”) on Form 10-Q for the fiscal quarter ended September 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Linda J. Bridges, Chief Financial Officer of NGL Energy Holdings LLC, the general partner of the Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”), that, to my knowledge:

1.    The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.    The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

Date: November 9, 2021 /s/ Linda J. Bridges
Linda J. Bridges
Chief Financial Officer of NGL Energy Holdings LLC, the general partner of NGL Energy Partners LP

This certification is being furnished solely pursuant to Section 906 and is not being filed as part of the Report or as a separate disclosure document.

A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.