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What changed in NGL Energy Partners LP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of NGL Energy Partners LP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+558 added−517 removedSource: 10-K (2024-06-06) vs 10-K (2023-05-31)

Top changes in NGL Energy Partners LP's 2024 10-K

558 paragraphs added · 517 removed · 391 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

95 edited+37 added−17 removed128 unchanged
Biggest changeStorage Capacity (in gallons) Location Number of Facilities Own (1) Lease (2) Total Terminal Interconnects Virginia 2 20,888,000 — 20,888,000 Rail Facility; Marine Facility Arkansas 3 3,765,000 90,000 3,855,000 Connected to Enterprise Texas Eastern Products Pipeline; Rail Facility Minnesota 1 1,829,000 — 1,829,000 Connected to Enterprise Mid-America Pipeline; Rail Facility Missouri 2 1,770,000 — 1,770,000 Connected to Phillips66 Blue Line Pipeline Indiana 1 1,530,000 — 1,530,000 Connected to Enterprise Texas Eastern Products Pipeline; Rail Facility Wisconsin 2 696,000 390,000 1,086,000 Connected to Enterprise Mid-America Pipeline; Rail Facility Massachusetts 2 668,400 120,000 788,400 Rail Facility Louisiana 1 720,000 — 720,000 Truck Facility Washington 3 300,000 355,000 655,000 Rail Facility Illinois 1 480,000 — 480,000 Connected to Phillips66 Blue Line Pipeline Michigan 1 480,000 480,000 Connected to Ambassador Pipeline New York 2 — 450,000 450,000 Rail Facility Pennsylvania 1 180,000 — 180,000 Rail Facility Maine 1 — 120,000 120,000 Rail Facility Vermont 1 — 120,000 120,000 Rail Facility United States Total 24 33,306,400 1,645,000 34,951,400 Ontario, Canada 1 — 120,000 120,000 Truck Facility Canada Total 1 — 120,000 120,000 Total 25 33,306,400 1,765,000 35,071,400 (1) These facilities are located on lands we own.
Biggest changeStorage Capacity (in gallons) Location Number of Facilities Own (1) Lease (2) Total Terminal Interconnects Virginia 2 20,888,000 — 20,888,000 Rail Facility; Marine Facility Arkansas 3 3,765,000 90,000 3,855,000 Connected to Enterprise Texas Eastern Products Pipeline; Rail Facility Missouri 3 2,124,000 — 2,124,000 Connected to Enterprise Texas Eastern Products Pipeline, Phillips66 Blue Line Pipeline and Magellan (OKE) #6 Pipeline Minnesota 1 1,829,000 — 1,829,000 Connected to Enterprise Mid-America Pipeline; Rail Facility Indiana 1 1,530,000 — 1,530,000 Connected to Enterprise Texas Eastern Products Pipeline; Rail Facility Wisconsin 2 696,000 390,000 1,086,000 Connected to Enterprise Mid-America Pipeline; Rail Facility Massachusetts 2 788,400 — 788,400 Rail Facility Louisiana 1 720,000 — 720,000 Truck Facility Illinois 1 480,000 — 480,000 Connected to Phillips66 Blue Line Pipeline Michigan 1 480,000 — 480,000 Connected to Ambassador Pipeline New York 2 — 450,000 450,000 Rail Facility Maine 1 — 120,000 120,000 Rail Facility Vermont 1 — 120,000 120,000 Rail Facility Washington 1 — 120,000 120,000 Rail Facility United States Total 22 33,300,400 1,290,000 34,590,400 Ontario, Canada (3) 1 — 120,000 120,000 Truck Facility Canada Total 1 — 120,000 120,000 Total 23 33,300,400 1,410,000 34,710,400 (1) These facilities are located on lands we own.
The primary factors on which we compete are: • price; • availability of supply; 14 • reliability of service; • available space on common carrier pipelines; • storage availability; • logistics capabilities, including the availability of railcars, and proprietary terminals; and • long-term customer relationships. Market Price Risk .
The primary factors on which we compete are: • price; 14 • availability of supply; • reliability of service; • available space on common carrier pipelines; • storage availability; • logistics capabilities, including the availability of railcars, and proprietary terminals; and • long-term customer relationships. Market Price Risk .
Our environmental, health and safety team: • Advises on safety and industrial hygiene regulatory requirements and best practices; • Develops safety procedures and guidelines; • Conducts safety inspections; • Advises on strategies to improve safety and health performance; and • Designs and conducts safety and industrial hygiene training courses.
Our environmental, health and safety team: • Advises on safety and industrial hygiene regulatory requirements and best practices; • Develops safety procedures and guidelines; • Conducts safety inspections; • Advises on strategies to improve health and safety performance; and • Designs and conducts safety and industrial hygiene training courses.
The FERC regulates oil pipelines under the Interstate Commerce Act and natural gas pipeline and storage companies under the Natural Gas Act, and Natural Gas Policy Act of 1978 (the “NGPA”), as amended by the Energy Policy Act of 2005.
The FERC regulates oil pipelines under the Interstate Commerce Act and natural gas pipeline and storage companies under the Natural Gas Act, and Natural Gas Policy Act of 1978 (“NGPA”), as amended by the Energy Policy Act of 2005.
Specifically, crude oil pipelines are subject to regulation by the DOT, through the Pipeline and Hazardous Materials Safety Administration (“PHMSA”), under the Hazardous Liquid Pipeline Safety Act of 1979 (“HLPSA”), which requires PHMSA to develop, prescribe, and enforce minimum federal safety standards for the storage and transportation of hazardous liquids and comparable state statutes with respect to design, installation, testing, construction, operation, replacement and management of pipeline facilities.
Specifically, crude oil pipelines are subject to regulation by the DOT, through the Pipeline and Hazardous Materials Safety Administration (“PHMSA”), under the Hazardous Liquid Pipeline Safety Act of 1979 (“HLPSA”), which requires the PHMSA to develop, prescribe, and enforce minimum federal safety standards for the storage and transportation of hazardous liquids and comparable state statutes with respect to design, installation, testing, construction, operation, replacement and management of pipeline facilities.
In January 2012, the federal government passed the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 (the “2011 Pipeline Safety Act”). This act provides for additional regulatory oversight of the nation’s pipelines, increases the penalties for violations of pipeline safety rules, and complements the DOT’s other initiatives.
In January 2012, the federal government passed the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 (“2011 Pipeline Safety Act”). This act provides for additional regulatory oversight of the nation’s pipelines, increases the penalties for violations of pipeline safety rules, and complements the DOT’s other initiatives.
In recent years, Congress has strengthened PHMSA’s safety authority and repeatedly extended it, most recently in the Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2020.
In recent years, Congress has strengthened the PHMSA’s safety authority and repeatedly extended it, most recently in the Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2020.
The law also provides for (i) additional pipeline damage prevention measures; (ii) allowing the Secretary of Transportation to require automatic and remote-controlled shut-off valves on new pipelines; (iii) requiring the Secretary of Transportation to evaluate the effectiveness of expanding pipeline integrity management and leak detection requirements; (iv) improving the way the DOT and pipeline operators provide information to the public and emergency responders; and (v) reforming the process by which pipeline operators notify federal, state and local officials of pipeline accidents.
The law also provides for (i) additional pipeline damage prevention measures; (ii) allowing the Secretary of 21 Transportation to require automatic and remote-controlled shut-off valves on new pipelines; (iii) requiring the Secretary of Transportation to evaluate the effectiveness of expanding pipeline integrity management and leak detection requirements; (iv) improving the way the DOT and pipeline operators provide information to the public and emergency responders; and (v) reforming the process by which pipeline operators notify federal, state and local officials of pipeline accidents.
These operations are supported by certain long-term, fixed rate contracts with producers, refiners and marketers and include minimum volume commitments on our owned and leased pipelines. • Our network of natural gas liquids transportation, terminal, and storage assets, which allows us to provide multiple services across the United States and Canada.
These operations are supported by certain long-term, fixed rate contracts with producers, refiners and marketers and include minimum volume commitments on our owned and leased pipelines and storage tanks. • Our network of natural gas liquids transportation, terminal, and storage assets, which allows us to provide multiple services across the United States and Canada.
Earl Blumenauer (D-OR) as H.R. 795 and in the Senate by Sen. Bernie Sanders (I-VT), which would require the President of the United States to declare a national climate emergency and take various actions to address climate change. The ultimate outcome of any possible future federal legislative initiatives is 19 uncertain.
Earl Blumenauer (D-OR) as H.R. 795 and in the Senate by Sen. Bernie Sanders (I-VT), which would require the President of the United States to declare a national climate emergency and take various actions to address climate change. The ultimate outcome of any possible future federal legislative initiatives is uncertain.
We own and operate a crude oil pipeline and marine terminal in Houma, Louisiana with 288,000 barrels of storage capacity, two off-loading LACTs, a brown water barge dock and two 12-inch bi-directional pipelines each capable of moving 120,000 barrels per day with connectivity to Shell’s Zydeco System. Operations.
We own and operate a crude oil pipeline and marine terminal in Houma, Louisiana with 288,000 barrels of storage capacity, two off-loading LACTs, a brown water barge dock and two 12-inch bi-directional pipelines each capable of moving 120,000 barrels per day with connectivity to Shell’s Zydeco System. 10 Operations.
Many of our facilities are strategically located near areas of high crude oil and natural gas production which provides us with a distinct advantage over a competitor that must build a system that can compete with our assets. Pricing Policy. We charge customers a fee per barrel of produced water received.
Many of our facilities are strategically located near areas of high crude oil and natural gas production which provides us with a distinct advantage over a competitor that must build a system that can compete with our assets. 9 Pricing Policy. We charge customers a fee per barrel of produced water received.
Federal agencies, including the EPA and the United States Department of the Interior, have asserted their regulatory authority to, for example, study the potential impacts of hydraulic fracturing on the environment, and initiate rulemakings to compel disclosure of the chemicals used in hydraulic fracturing operations, and establish pretreatment standards and effluent limitation guidelines for produced water from hydraulic fracturing operations.
Federal agencies, including the EPA and the United States Department of the Interior, have asserted their regulatory authority to, for example, study the potential impacts of hydraulic fracturing on the environment, and initiate rulemakings to compel disclosure of the chemicals used in hydraulic fracturing operations, and establish pretreatment standards and effluent limitation guidelines for produced 19 water from hydraulic fracturing operations.
In addition, the intrastate transportation and storage of crude oil and natural gas is subject to regulation by the state in which such facilities are located, and such regulation can affect the availability and price of our supply, and have both a direct and indirect effect on our business. Anti-Market Manipulation.
In addition, the intrastate transportation and storage of crude oil and natural gas is subject to regulation by the state in which such facilities are located, and such regulation can affect the availability and price of our supply, and have both a direct and indirect effect on our business. 16 Anti-Market Manipulation.
Our Crude Oil Logistics segment benefits when the market is in contango, as increasing prices result in inventory value gains during the time between when we purchase the inventory and when we sell it. In addition, we are able to better utilize our storage assets when contango markets justify storing barrels.
Our Crude Oil Logistics segment benefits when the market is in contango, as increasing 11 prices result in inventory value gains during the time between when we purchase the inventory and when we sell it. In addition, we are able to better utilize our storage assets when contango markets justify storing barrels.
Item 1. Business Overview We are a diversified midstream energy partnership that transports, treats, recycles and disposes of produced water generated as part of the energy production process as well as transports, stores, markets and provides other logistics services for crude oil and liquid hydrocarbons.
Item 1. Business Overview We are a diversified midstream energy partnership that transports, treats, recycles and disposes of produced and flowback water generated as part of the energy production process as well as transports, stores, markets and provides other logistics services for crude oil and liquid hydrocarbons.
NGL is an equal-opportunity employer, and our employee handbook underscores that commitment, with policies prohibiting discrimination, harassment, and retaliation. We understand the importance of competitive benefits packages for the health and welfare of our employees and for our ability to recruit and retain the best talent.
NGL is an equal-opportunity employer, and our employee handbook underscores that commitment, with policies prohibiting discrimination, harassment, and retaliation. 15 We understand the importance of competitive benefits packages for the health and welfare of our employees and for our ability to recruit and retain the best talent.
Our strategically located terminals, propane pipeline system in Michigan, large leased railcar fleet, shipper status on common carrier pipelines, and substantial leased 7 storage enable us to be a preferred purchaser and seller of natural gas liquids.
Our strategically located terminals, propane pipeline in Michigan, large leased railcar fleet, shipper status on common carrier pipelines, and substantial leased storage 7 enable us to be a preferred purchaser and seller of natural gas liquids.
We use back-to-back contracts for many of our liquids business sales to limit exposure to commodity price risk and protect our margins. We are able to match our supply and sales commitments by offering our customers purchase contracts with flexible price, location, storage, and ratable delivery.
We use back-to-back contracts for many of our liquids business sales to limit commodity price exposure and protect our margins. We are able to match our supply and sales commitments by offering our customers purchase contracts with flexible price, location, storage, and ratable delivery.
The CWA and analogous state laws impose restrictions and strict controls regarding the discharge of pollutants into state waters as well as navigable waters, defined as waters of the United States (“WOTUS”), and impose 18 requirements affecting our ability to conduct construction activities in waters and wetlands.
The CWA and analogous state laws impose restrictions and strict controls regarding the discharge of pollutants into state waters as well as navigable waters, defined as waters of the United States (“WOTUS”), and impose requirements affecting our ability to conduct construction activities in waters and wetlands.
We are subject to the anti-market manipulation provisions in the Natural Gas Act and the NGPA, which authorizes the FERC to impose fines of up to $1 million per day per violation of the Natural Gas Act, the NGPA, 16 or their implementing regulations.
We are subject to the anti-market manipulation provisions in the Natural Gas Act and the NGPA, which authorizes the FERC to impose fines of up to $1 million per day per violation of the Natural Gas Act, the NGPA, or their implementing regulations.
A significant percentage of our business is priced on a back-to-back basis which minimizes our commodity price exposure. 12 The following table summarizes the location of our facilities and respective storage capacity and interconnects to those facilities.
A significant percentage of our business is priced on a back-to-back basis which minimizes our commodity price exposure. The following table summarizes the location of our facilities and respective storage capacity and interconnects to those facilities.
The underground injection of crude oil and natural gas wastes is regulated by the Underground Injection Control Program, as authorized by the Safe Drinking Water Act, as well as by state programs focused on the conservation of hydrocarbon resources.
The underground injection of crude oil and natural gas wastes is regulated by the Underground Injection Control (“UIC”) Program, as authorized by the Safe Drinking Water Act, as well as by state programs focused on the conservation of hydrocarbon resources.
Existing regulatory structure shapes our decision-making and business activities in many ways, such as: • shaping decisions regarding what types of pollution-control equipment to deploy and how a facility should be designed; • informing decision-making regarding construction activities, such as where to locate and where not to locate a facility; e.g., locating construction activities away from sensitive environmental, cultural or historic areas, including wetlands, coastal regions or areas inhabited by endangered or threatened species, and limiting or prohibiting construction activities during certain sensitive periods, such as when threatened or endangered species are breeding/nesting; • informing decision-making regarding the timing of activities, for example, we will delay construction or system modification or upgrades during the issuance or renewal periods of certain permits; • informing decision-making pertaining to our approach to investigating, mitigating and remediating unplanned releases from our facilities and operations or attributable to former facilities or operations, as necessary and appropriate; and • shaping our decision-making about whether a facility or operation should be temporarily halted to address potential non-compliance with relevant permit requirements.
Existing regulatory requirements inform our decision-making and business activities in many ways, such as: • informing decisions regarding what types of pollution-control equipment to deploy and how a facility should be designed; • informing decision-making regarding construction activities, such as where to locate and where not to locate a facility; e.g., locating construction activities away from sensitive environmental, cultural or historic areas, including wetlands, coastal regions or areas inhabited by endangered or threatened species, and limiting or prohibiting construction activities during certain sensitive periods, such as when threatened or endangered species are breeding/nesting; • informing decision-making regarding the timing of activities, for example, we will delay construction or system modification or upgrades during the issuance or renewal periods of certain permits; • informing decision-making pertaining to our approach to investigating, mitigating and remediating unplanned releases from our facilities and operations or attributable to former facilities or operations, as necessary and appropriate; and • informing our decision-making about whether a facility or operation should be temporarily halted to address potential non-compliance with relevant permit requirements.
Our activities in this segment are supported by certain long-term, fixed rate contracts which include minimum volume commitments on our owned and leased pipelines. • 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.
Our activities in this segment are supported by certain long-term, fixed rate contracts which include minimum volume commitments on our owned and leased pipelines and storage tanks. • 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.
In addition, we have several minimum volume commitments and other commercial agreements covering the Delaware, DJ, Eagle Ford and Pinedale Anticline Basins. Our focus in building our Water Solutions business has been to secure long-term, fixed fee contracts that contain minimum volume commitments, acreage dedications or similarly strong contractual relationships with large, well-capitalized producer customers.
In addition, we have several minimum volume commitments and other commercial agreements covering the Delaware, DJ and Eagle Ford Basins. Our focus in building our Water Solutions business has been to secure long-term, fixed fee contracts that contain minimum volume commitments, acreage dedications or similarly strong contractual relationships with large, well-capitalized producer customers.
We seek to operate our business in a safe and environmentally responsible manner by working with our employees, customers, vendors and local communities to minimize our environmental impact and comply with local, state and federal environmental laws and regulations. • Focus on consistent annual cash flows from operations under multi-year contracts that minimize commodity price risk and generate fee-based revenues .
We seek to operate our business in a safe and environmentally responsible manner by working with our employees, customers, vendors and local communities to minimize our environmental impact and comply with local, state and federal environmental laws and regulations. • Focusing on consistent annual cash flows from operations under multi-year contracts that minimize commodity price risk and generate fee-based revenues .
Typical rack spot sale purchasers include commercial and industrial end users, independent retailers and small, independent marketers who resell product to retail gasoline stations or other end users.
Typical rack spot sale purchasers include commercial and industrial end users, independent retailers and small, independent marketers who resell 12 product to retail gasoline stations or other end users.
We seek to continue to increase cash flows that are supported by certain fixed fee, multi-year contracts, some of which include acreage dedications from producers or minimum volume commitments. • Achieve growth by utilizing our existing footprint of assets, investing in new assets, customers and ventures that increase volume and enhance our operations, and generate attractive rates of return .
We seek to continue to increase cash flows that are supported by certain fixed fee, multi-year contracts, some of which include acreage dedications from producers or minimum volume commitments. • Achieving growth by utilizing our existing footprint of assets, investing in new assets, customers and ventures that increase volume and enhance our operations, and generate attractive rates of return .
We provide transportation, storage, and throughput services to third parties at our facilities at Port Hudson, Louisiana and Chesapeake, Virginia. We purchase refined petroleum and renewable products primarily in the Gulf Coast, West Coast and Midwest regions of the United States and schedule them for delivery at various locations throughout the country.
We provide transportation, storage, and throughput services to third parties at our facilities in Port Hudson, Louisiana, Chesapeake, Virginia and Shelton, Washington. We purchase refined petroleum and renewable products primarily in the Gulf Coast, West Coast and Midwest regions of the United States and schedule them for delivery at various locations throughout the country.
In addition, some states and local governments have also proposed or adopted legislative or regulatory restrictions on hydraulic fracturing, which include additional permit requirements, public disclosure of fracturing fluid contents, operational restrictions, and/or temporary or permanent bans on hydraulic fracturing. We expect that scrutiny of hydraulic fracturing activities will continue in the future.
In addition, some states and local governments have also proposed or adopted legislative or regulatory restrictions on hydraulic fracturing, which include additional permit requirements, public disclosure of fracturing fluid contents, operational restrictions, and/or temporary or permanent bans on hydraulic fracturing. We expect that scrutiny of hydraulic fracturing activities will continue in the future. Endangered Species .
Our primary focus is to reduce our absolute debt and leverage and maintain sufficient liquidity to continue to reduce our overall leverage and reinstate the payment of distributions. We are also focused on maintaining credit metrics to manage existing and future capital requirements as well as to take advantage of market opportunities.
Our primary focus is to reduce our absolute debt and leverage and maintain sufficient liquidity to continue to reduce our overall leverage and reinstate the payment of common unit distributions. We are also focused on maintaining credit metrics to manage existing and future capital requirements as well as to take advantage of market opportunities.
Persons who are or were responsible for releases of hazardous substances under CERCLA may be subject to strict and/or joint and several liability for the costs of investigating and cleaning up the hazardous substances that have been released into the environment and for damages to natural resources and for the costs of certain health studies.
Persons who are or were liable for releases of hazardous substances under CERCLA may be subject to strict and/or joint and several liability for the costs of investigating and cleaning up the hazardous substances that have been released into the environment and for damages to natural resources and for the costs of certain health studies.
However, a portion of our customers’ crude oil and natural gas production is developed from unconventional sources that require hydraulic fracturing as part of the completion process, and our Water Solutions business treats and disposes of produced water generated from crude oil and natural gas production, including production employing hydraulic fracturing.
However, a portion of our customers’ crude oil and natural gas production is developed from unconventional sources that require hydraulic fracturing as part of the completion process, and our Water Solutions segment treats and disposes of produced water generated from crude oil and natural gas production, including production employing hydraulic fracturing.
We currently transport crude oil using the following assets: • The Grand Mesa Pipeline, which is described above, and 19 other common carrier pipelines owned by third parties; and • 396 owned railcars (all of which are leased or subleased to third parties).
We currently transport crude oil using the following assets: • The Grand Mesa Pipeline, which is described above, and 19 other common carrier pipelines owned by third parties; and • 396 owned railcars (all of which are leased to third parties).
For discretionary inventory, and for those instances where physical transactions cannot be appropriately matched, we utilize financial derivatives to mitigate commodity price exposure. Specific exposure limits are mandated in our credit agreement and in our market risk policy.
For discretionary inventory, and for those instances where physical transactions cannot be appropriately matched, we utilize financial derivatives to mitigate commodity price exposure. Specific exposure limits are mandated in our market risk policy.
We intend to accomplish these business objectives by executing the following strategies: • Prudently manage our balance sheet to provide us with maximum financial flexibility for funding our operations, capital projects and strategic acquisitions.
We intend to accomplish these business objectives by executing the following strategies: • Prudently managing our balance sheet to provide us with maximum financial flexibility for funding our operations, capital projects and strategic acquisitions.
The owner or operator of an SPCC-regulated facility is required to prepare a written, site-specific spill prevention plan, which details how a facility’s operations comply with the requirements.
The owner or operator of an SPCC-regulated facility is required to prepare a written, site-specific SPCC plan, which details how a facility’s operations comply with the spill prevention and control requirements.
These operations are conducted through our 25 owned terminals, third-party storage and terminal facilities, nine common carrier pipelines and a fleet of leased railcars. We also provide services for marine exports of butane through our facility located in Chesapeake, Virginia, and we own a propane pipeline system in Michigan.
These operations are conducted through our 23 owned terminals, third-party storage and terminal facilities, nine common carrier pipelines and a fleet of leased railcars. We also provide services for marine exports of butane through our facility located in Chesapeake, Virginia, and we also own a propane pipeline in Michigan.
We are subject to various federal, state, and local environmental laws and regulations governing the storage, distribution, and transportation of natural gas liquids and the operation of bulk storage liquefied petroleum gas (LPG) terminals, as well as laws and regulations governing environmental protection, including those addressing the discharge of materials into the environment or otherwise relating to protection of the environment.
We are subject to various federal, state, and local environmental laws and regulations governing the storage, distribution, and transportation of natural gas liquids and the operation of bulk storage liquefied petroleum gas (LPG) terminals, as well as laws and regulations governing hazardous substances and waste, including those addressing the discharge of materials into the environment or otherwise relating to protection of the environment.
Our activities in this segment are supported by certain long-term, fixed rate contracts which include minimum volume commitments on our owned and leased pipelines.
Our activities in this segment are supported by certain long-term, fixed rate contracts which include minimum volume commitments on our owned and leased pipelines and storage tanks.
In that regard, at the end of fiscal year 2021, we implemented $20 per hour 15 minimum wage for all regular, full-time employees. More than 95% of our eligible employees participated in the NGL 401(k) Plan in fiscal year 2023.
In that regard, at the end of fiscal year 2021, we implemented $20 per hour minimum wage for all regular, full-time employees. More than 95% of our eligible employees participated in the NGL 401(k) Plan in fiscal year 2024.
We believe these collective actions have substantially simplified our business mix and has allowed us to focus on what we believe are the core areas of our business and improved our overall financial position. These transactions are expected to position us for sustained growth in the future.
We believe our actions have substantially simplified our business mix and have allowed us to focus on what we believe are the core areas of our business and improved our overall financial position. These actions are expected to position us for sustained growth in the future.
Any leakage from the subsurface portions of the injection wells could cause degradation of fresh groundwater resources, potentially resulting in suspension of our underground injection control (“UIC”) permits, issuance of fines and penalties from governmental agencies, incurrence of expenditures for remediation of the affected resource and imposition of liability by third parties for property damages and personal injuries.
Any leakage from the subsurface portions of the injection wells could cause degradation of fresh groundwater resources, potentially resulting in suspension of our UIC permits, issuance of fines and penalties from governmental agencies, incurrence of expenditures for remediation of the affected resource and imposition of liability by third parties for property damages and personal injuries.
For additional information related to the ABL Facility and 2026 Senior Secured Notes, see Note 7 to our consolidated financial statements included in this Annual Report. 4 Primary Service Areas The following map shows the primary service areas of our businesses at March 31, 2023: 5 Organizational Chart The following chart provides a summarized overview of our legal entity structure at March 31, 2023: (1) Includes (i) NGL Water Solutions, LLC, which includes the operations of our Water Solutions segment, (ii) NGL Crude Logistics, LLC, which includes the operations of our Crude Oil Logistics segment and certain of our businesses within our Liquids Logistics segment and (iii) NGL Liquids, LLC, which includes the operations of certain of our businesses within our Liquids Logistics segment. 6 Our Business Strategies Our principal business objectives are to maximize the profitability and stability of our businesses, grow our businesses in an accretive and prudent manner, and maintain a strong balance sheet.
For additional information related to the 2029 Senior Secured Notes, 2032 Senior Secured Notes, Term Loan B and ABL Facility, see Note 7 to our consolidated financial statements included in this Annual Report. 4 Primary Service Areas The following map shows the primary service areas of our businesses at March 31, 2024: 5 Organizational Chart The following chart provides a summarized overview of our legal entity structure at March 31, 2024: (1) Includes (i) NGL Water Solutions, LLC, which includes the operations of our Water Solutions segment, (ii) NGL Crude Logistics, LLC, which includes the operations of our Crude Oil Logistics segment and certain of our businesses within our Liquids Logistics segment and (iii) NGL Liquids, LLC, which includes the operations of certain of our businesses within our Liquids Logistics segment. 6 Our Business Strategies Our principal business objectives are to maximize the profitability and stability of our businesses, grow our businesses in an accretive and prudent manner, and maintain a strong balance sheet.
Our Liquids Logistics segment serves approximately 1,300 customers in 48 states, Mexico and Canada, including national, regional and independent retail, industrial, wholesale, petrochemical, refiner and natural gas liquids production customers. During the year ended March 31, 2023, 23% of the revenues of our Liquids Logistics segment were generated from our ten largest customers of the segment. Seasonality .
Our Liquids Logistics segment serves approximately 1,200 customers in 48 states, Mexico and Canada, including national, regional and independent retail, industrial, wholesale, petrochemical, refiner and natural gas liquids production customers. During the year ended March 31, 2024, 23% of the revenues of our Liquids Logistics segment were generated from our ten largest customers of the segment. Seasonality .
These operations are conducted through our 25 owned terminals, third-party storage and terminal facilities, nine common 11 carrier pipelines and a fleet of leased railcars. We also provide services for marine exports of butane through our facility located in Chesapeake, Virginia, and we own a propane pipeline system in Michigan.
These operations are conducted through our 23 owned terminals, third-party storage and terminal facilities, nine common carrier pipelines and a fleet of leased railcars. We also provide services for marine exports of butane through our facility located in Chesapeake, Virginia, and we also own a propane pipeline in Michigan.
The CAA and its implementing regulations may require that we obtain permits prior to the construction, modification or operation of certain projects or facilities expected to produce or increase air emissions above certain threshold levels, that we obtain and strictly comply with air permits containing emissions and operational limitations, or utilize specific emission control technologies to limit emissions, any of which could impose significant costs on our business.
The CAA and its implementing regulations on the federal and state level may require that we obtain permits prior to the construction, modification or operation of certain projects or facilities expected to emit or increase air emissions above certain threshold levels, that we obtain and strictly comply with air permits containing emissions and operational limitations, or utilize specific emission control technologies to limit emissions, any of which could impose significant costs on our business.
These assets complement our existing assets in the upper Midwest and will expand our presence in Michigan, one of the top propane markets in the United States. We utilize a fleet of approximately 4,400 high-pressure and general purpose leased railcars of which 145 railcars are subleased by third parties.
These assets complement our existing assets in the upper Midwest and will expand our presence in Michigan, one of the top propane markets in the United States. We utilize a fleet of approximately 4,300 high-pressure and general purpose leased railcars of which 295 railcars are subleased by third parties.
Crude oil markets can either be in contango (a condition in which forward crude oil prices are greater than spot prices) or can be in backwardation (a condition in which forward crude oil prices are lower than spot prices).
Crude oil markets can either be in contango (a condition in which forward crude oil prices are higher than spot prices) or can be in backwardation (a condition in which forward crude oil prices are lower than spot prices).
These regulations include potential fines and penalties for violations. 20 The Pipeline Safety Act of 1992 added the environment to the list of statutory factors that must be considered in establishing safety standards for hazardous liquid pipelines, established safety standards for certain “regulated gathering lines,” and mandated that regulations be issued to establish criteria for operators to use in identifying and inspecting pipelines located in high consequence areas (“HCAs”), defined as those areas that are unusually sensitive to environmental damage, that cross a navigable waterway, or that have a high population density.
The Pipeline Safety Act of 1992 added the environment to the list of statutory factors that must be considered in establishing safety standards for hazardous liquid pipelines, established safety standards for certain “regulated gathering lines,” and mandated that regulations be issued to establish criteria for operators to use in identifying and inspecting pipelines located in high consequence areas (“HCAs”), defined as those areas that are unusually sensitive to environmental damage, that cross a navigable waterway, or that have a high population density.
We obtain crude oil from a large base of suppliers, which consists primarily of crude oil producers. We currently purchase crude oil from approximately 276 producers at approximately 2,875 leases. Pricing Policy. Most of our contracts to purchase or sell crude oil are at floating prices that are indexed to published rates in active markets such as Cushing, Oklahoma, St.
We obtain crude oil from a large base of suppliers, which consists primarily of crude oil producers. We currently purchase crude oil from 241 producers at 2,217 leases. Pricing Policy. Most of our contracts to purchase or sell crude oil are at floating prices that are indexed to published rates in active markets such as Cushing, Oklahoma, St.
These properties and the wastes disposed thereon may be subject to CERCLA, RCRA and analogous state laws.
These properties and the wastes disposed or released thereon may be subject to CERCLA, RCRA and analogous state laws.
During the year ended March 31, 2023, 85% of the revenues of our Crude Oil Logistics segment were generated from our ten largest customers of the segment. Additionally, certain key customers of the Crude Oil Logistics segment contribute significantly to the cash flows and profitability of the organization.
During the year ended March 31, 2024, 86% of the revenues of our Crude Oil Logistics segment were generated from our ten largest customers of the segment. Additionally, certain key customers of the Crude Oil Logistics segment contribute significantly to the cash flows and profitability of the organization.
Generally, these laws (i) regulate air and water quality, impose limitations on the discharge of pollutants and establish standards for the handling of solid and hazardous wastes; (ii) subject our operations to certain permitting and registration requirements; (iii) may result in the suspension or revocation of necessary permits, licenses and authorizations; (iv) impose substantial liabilities on us for pollution resulting from our operations; (v) require remedial measures to mitigate pollution from former or ongoing operations; and (vi) may result in the assessment of administrative, civil and criminal penalties for failure to comply with such laws.
Generally, these laws (i) regulate air and water quality, impose limitations on the discharge of pollutants and establish standards for the use, handling, storage, treatment, transport and disposal of solid and hazardous wastes; (ii) subject our operations to certain permitting and registration requirements; (iii) may result in the suspension or revocation of necessary permits, licenses and authorizations; (iv) impose substantial liabilities on us for pollution resulting from our operations; (v) require remedial measures to mitigate any violation of environmental laws and regulations or pollution from former or ongoing operations; and (vi) may result in the assessment of administrative, civil and criminal penalties for failure to comply with such laws.
The primary customers of our operations consist mainly of large publicly traded, oil and gas companies with diversified acreage positions across multiple leading oil and gas plays. During the year ended March 31, 2023, 70% of the revenues of our Water Solutions segment were generated from our ten largest customers of the segment. Competition.
The primary customers of our operations consist mainly of large publicly traded, oil and gas companies with diversified acreage positions across multiple leading oil and gas plays. During the year ended March 31, 2024, 69% of the revenues of our Water Solutions segment were generated from our ten largest customers of the segment.
The main line portion of this pipeline is comprised of an undivided interest with Saddlehorn Pipeline Company, LLC (“Saddlehorn”) in which we have ownership of 150,000 barrels per day of capacity of the pipeline. During the year ended March 31, 2023, approximately 27.7 million barrels of crude oil were transported on the Grand Mesa Pipeline.
The main line portion of this pipeline is comprised of an undivided interest with Saddlehorn Pipeline Company, LLC (“Saddlehorn”) in which we have ownership of 150,000 barrels per day of capacity of the pipeline. During the year ended March 31, 2024, approximately 25.6 million barrels of crude oil were transported on the Grand Mesa Pipeline.
The trend of more expansive and stringent environmental legislation and regulations, including GHG regulation, could continue, resulting in increased costs of conducting business and consequently affecting our profitability.
The trend of more expansive and stringent environmental legislation and regulations, including GHG regulation and regulations relating to climate change, could continue, resulting in increased costs of conducting business and consequently affecting our profitability.
With a system that handled approximately 849.5 million barrels of produced water across its areas of operation during the year ended March 31, 2023, we believe that we are the largest independent produced water transportation and disposal company in the United States. We currently have approximately 670,000 acres dedicated to our system under long-term agreements in the Northern Delaware Basin.
With a system that handled approximately 884.6 million barrels of produced water across its areas of operation during the year ended March 31, 2024, we believe that we are the largest independent produced water transportation and disposal company in the United States. We currently have approximately 664,000 acres dedicated to our system under long-term agreements in the Northern Delaware Basin.
HLPSA covers petroleum and petroleum products and requires any entity that owns or operates pipeline facilities to comply with such regulations, to permit access to and copying of records and to file certain reports and provide information as required by the United States Secretary of Transportation.
HLPSA covers petroleum and petroleum products and requires any entity that owns or operates pipeline facilities to comply with such regulations, to permit access to and copying of records and to file certain reports and provide information as required by the United States Secretary of Transportation. These regulations include potential fines and penalties for violations.
We employ a number of contractual and hedging strategies to minimize commodity exposure and maximize earnings stability of this segment. During the year ended March 31, 2023, we sold approximately 2.7 billion gallons of natural gas liquids, refined products and renewables products, or 7.45 million gallons (approximately 177,000 barrels) per day. Operations .
We employ a number of contractual and hedging strategies to minimize commodity exposure and maximize earnings stability of this segment. During the year ended March 31, 2024, we sold approximately 2.5 billion gallons of natural gas liquids, refined products and renewables products, or 6.97 million gallons (approximately 166,000 barrels) per day. Operations .
We also generate revenue from the sale of crude oil we recover in processing the produced water. In addition, we may charge fees for the sale of produced water for reuse by our customers, pipeline transportation fees, pipeline interconnection fees and solids disposal fees. Trade Names.
We also generate revenue from the sale of crude oil we recover in processing the produced water. In addition, we may charge fees for the sale of produced water for reuse by our customers, pipeline transportation fees, pipeline interconnection fees and solids disposal fees. Trade Names. Our Water Solutions segment operates under the NGL Water Solutions trade name. Technology.
Our system has approximately 730 miles of newly-built, in-service large diameter produced water pipelines connected to 57 active saltwater disposal facilities and 125 active disposal wells. We currently have approximately 670,000 acres dedicated to the Northern Delaware system providing a multi-decade drilling inventory and significant growth opportunity.
Our system has over 750 miles of newly-built, in-service large diameter produced water pipelines connected to 56 active saltwater disposal facilities and 127 active disposal wells. We currently have approximately 664,000 acres dedicated to the Northern Delaware system providing a multi-decade drilling inventory and significant growth opportunity.
The Biden Administration announced its intention to review the revisions to the GHG NSPS in President Biden’s January 20, 2021 Executive Order on Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis .
The Biden Administration announced its intention to review the revisions to the GHG NSPS in President Biden’s January 20, 2021 Executive Order on Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis . On November 15, 2021, the EPA issued a proposal to revise the GHG NSPS regulations.
Where applicable, we strive to maintain and implement SPCC plans for our facilities. Air Emissions. Our operations are subject to the CAA and comparable state and local laws and regulations, which regulate emissions of air pollutants from various industrial sources and mandate certain permitting, monitoring, recordkeeping and reporting requirements.
Our operations are subject to the CAA and comparable state and local laws and regulations, which regulate emissions of air pollutants from various industrial sources and mandate certain permitting, monitoring, recordkeeping and reporting requirements.
We make available on our website, free of charge, the periodic reports that we file with or furnish to the Securities and Exchange Commission (“SEC”), as well as all amendments to these reports, as soon as reasonably practicable after such reports are filed with or furnished to the SEC.
Available Information on our Website Our website address is www.nglenergypartners.com. We make available on our website, free of charge, the periodic reports that we file with or furnish to the SEC, as well as all amendments to these reports, as soon as reasonably practicable after such reports are filed with or furnished to the SEC.
Our Water Solutions segment operates primarily under the NGL Water Solutions and Anticline Disposal trade names. 9 Technology. We hold multiple patents for processing technologies. We believe that the technological capabilities of our Water Solutions business can be quickly implemented at new facilities and locations. Crude Oil Logistics Overview.
We hold multiple patents for processing technologies. We believe that the technological capabilities of our Water Solutions business can be quickly implemented at new facilities and locations. Crude Oil Logistics Overview.
With the consent and participation of Saddlehorn, we and Saddlehorn may consider future opportunities using these easements, to the extent such easements remain in effect, for projects involving the transportation of crude oil and condensate.
With the consent and participation of Saddlehorn, we and Saddlehorn may consider future opportunities using these easements, to the extent such easements remain in effect, for projects involving the transportation of crude oil and condensate. On December 6, 2023, we announced an open season for the Grand Mesa Pipeline.
Human Capital At March 31, 2023, we had 638 employees in 29 states and Canada. Of those employees, 229 provide work primarily for our Water Solutions segment, 67 provide work primarily for our Crude Oil Logistics segment, 167 provide work primarily for our Liquids Logistics segment, and 175 provide administrative services to the various business segments.
Human Capital At March 31, 2024, we had 607 employees in 27 states and Canada. Of those employees, 226 provide work primarily for our Water Solutions segment, 58 provide work primarily for our Crude Oil Logistics segment, 151 provide work primarily for our Liquids Logistics segment, and 172 provide administrative services to the various business segments.
For more information regarding our dispositions and acquisitions transactions and the impact to our operations, see Note 17 and Note 18 to our consolidated financial statements included in this current Annual Report and our Annual Reports on Form 10-K for the years ended March 31, 2022 and 2021 .
For more information regarding our dispositions and acquisitions transactions and the impact to our operations, see Note 17 to our consolidated financial statements included in this current Annual Report and our Annual Reports on Form 10-K for the years ended March 31, 2023 and 2022 . 3 Debt Refinancing On February 2, 2024, we closed a debt refinancing transaction of $2.9 billion.
Some states also maintain groundwater protection programs that require permits for discharges or operations that may impact groundwater conditions. Federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with discharge permits or other requirements of the CWA and analogous state laws and regulations. Underground Injection Control .
Federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with discharge permits or other requirements of the CWA and analogous state laws and regulations. Underground Injection Control .
Our facilities in Colorado, New Mexico and Texas dispose of produced water primarily into deep underground formations via injection wells. At our disposal facilities, we use proprietary well maintenance programs to enhance injection rates and extend the service lives of the wells. Customers.
Once we take delivery of the water, the level of processing is determined by the ultimate disposition of the water. Our facilities dispose of produced water primarily into deep underground formations via injection wells. At our disposal facilities, we use proprietary well maintenance programs to enhance injection rates and extend the service lives of the wells. Customers.
These laws include, among others, the Resource Conservation and Recovery Act (“RCRA”), the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), the federal Clean Air Act (“CAA”), the Homeland Security Act of 2002, the Emergency Planning and Community Right to Know Act, the Clean Water Act (“CWA”), the Safe Drinking Water Act, the Oil Spills Prevention and Preparedness Regulations, and comparable state statutes. 17 CERCLA, also known as the “Superfund” law, and similar state laws, impose liability on certain classes of potentially responsible persons that are considered to have contributed to the release of a “hazardous substance” into the environment.
These laws include, among others, the Resource Conservation and Recovery Act (“RCRA”), the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), the federal Clean Air Act (“CAA”), the Homeland Security Act of 2002, the 17 Emergency Planning and Community Right to Know Act, the Clean Water Act (“CWA”), the Safe Drinking Water Act, the Oil Spills Prevention and Preparedness Regulations, each as amended, and comparable state statutes.
The following table summarizes our significant leased storage space at natural gas liquids and refined products storage facilities and interconnects to those facilities: Leased Storage Space (in gallons) Storage Facility Location Beginning April 1, 2023 At March 31, 2023 Storage Interconnects Kansas 56,700,000 56,700,000 Connected to Enterprise Mid-America Pipeline, NuStar Pipelines and ONEOK North System Pipeline; Rail Facility; Truck Facility Michigan 23,520,000 24,780,000 Rail Facility; Truck Facility Utah 15,750,000 16,800,000 Rail Facility Arizona 7,056,000 7,056,000 Rail Facility; Truck Facility Texas 4,830,000 3,150,000 Connected to Enterprise Texas Eastern Products Pipeline; Truck Facility Mississippi 3,780,000 3,780,000 Connected to Enterprise Dixie Pipeline; Rail Facility Oregon 2,100,000 554,400 Connected to Kinder Morgan Pipeline and Olympic Pipeline United States Total 113,736,000 112,820,400 Ontario, Canada 8,467,200 8,467,200 Rail Facility Alberta, Canada 3,970,092 3,970,092 Connected to Cochin Pipeline; Rail Facility Canada Total 12,437,292 12,437,292 Total 126,173,292 125,257,692 Customers .
The following table summarizes our significant leased storage space at natural gas liquids and refined products storage facilities and interconnects to those facilities: Leased Storage Space (in gallons) Storage Facility Location Beginning April 1, 2024 At March 31, 2024 Storage Interconnects Kansas 44,100,000 56,700,000 Connected to Enterprise Mid-America Pipeline, NuStar Pipelines and ONEOK North System Pipeline; Rail Facility; Truck Facility Michigan 21,000,000 26,692,050 Rail Facility; Truck Facility Arizona 5,510,400 5,510,400 Kinder Morgan West Pipeline; Truck Facility Utah 5,250,000 15,750,000 Rail Facility Texas 4,830,000 4,830,000 Connected to Enterprise Texas Eastern Products Pipeline; Truck Facility Mississippi 3,150,000 1,680,000 Connected to Enterprise Dixie Pipeline; Rail Facility Oregon 2,100,000 2,100,000 Rail Facility; Truck Facility United States Total 85,940,400 113,262,450 Ontario, Canada 8,467,200 8,467,200 Rail Facility Alberta, Canada 1,323,420 1,323,420 Connected to Cochin Pipeline; Rail Facility Canada Total 9,790,620 9,790,620 Total 95,731,020 123,053,070 Customers .
In addition, the CWA and analogous state laws require individual permits or coverage under general permits for discharges of storm water runoff from certain types of facilities. We maintain a number of discharge permits, some of which may require us to monitor and sample storm water runoff from such facilities.
Army Corps of Engineers or a delegated state agency pursuant to Section 404. In addition, the CWA and analogous state laws require individual permits or coverage under general permits for discharges of storm water runoff from certain types of facilities.
The facility has an aggregate storage capacity of 20,378,000 gallons. We own 28 transloading units, which enable customers to transfer product from railcars to trucks.
The facility has an aggregate storage capacity of 20,408,000 gallons. 13 We own 28 transloading units, which enable customers to transfer product from railcars to trucks. These transloading units can be moved to locations along a railroad where it is most convenient for customers to transfer their product.
(2) These facilities are located on lands we lease. (3) Certain facilities can dispose of both produced water and solids such as tank bottoms, drilling fluids and drilling muds. (4) Includes one facility with a permitted processing capacity of 40,000 barrels per day in which we own a 75% interest.
(2) These facilities are located on lands we lease. (3) Certain facilities can dispose of both produced water and solids such as tank bottoms, drilling fluids and drilling muds.
We continue to enhance our ability to transport produced water from the wellhead to treatment for disposal, recycle, or discharge, crude oil from the wellhead to refineries, and natural gas liquids from processing plants and supply hubs to end users. • Operate in a safe and environmentally responsible manner.
To a lesser extent, we move crude oil from the wellhead to refineries, and natural gas liquids from processing plants and supply hubs to end users. • Operating in a safe and environmentally responsible manner.
We expect to continue to evaluate the capital markets and may opportunistically pursue financing transactions to optimize our capital structure. • Focus on building a diversified midstream master limited partnership providing multiple services to customers.
We expect to continue to evaluate the capital markets and may opportunistically pursue financing transactions to optimize our capital structure. • Building a midstream master limited partnership focusing on providing water solutions to upstream customers. We continue to enhance our ability to transport produced water from the wellhead to treatment for disposal, recycle, or discharge.
Cushing is one of the most liquid crude oil trading hubs in the world and is the delivery point for West Texas Intermediate futures contracts.
Cushing is one of the most liquid crude oil trading hubs in the world and is the delivery point for West Texas Intermediate futures contracts. We own and operate a crude oil marine terminal in Point Comfort, Texas with 355,000 barrels of storage capacity and six off-loading LACTs.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, the actual amount of cash we will have available to fund our operations, repay indebtedness or pay distributions also depends on other factors, some of which are beyond our control, including: • fluctuations in working capital needs; • the level of capital expenditures we make; • the cost of acquisitions, if any; • restrictions contained in the ABL Facility and the indentures governing our outstanding 6.125% senior unsecured notes due 2025, 7.5% senior unsecured notes due 2026 and 2026 Senior Secured Notes (collectively, the “Indentures”); • restrictions contained in the agreements relating to our 9.00% Class B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class B Preferred Units”), 9.625% Class C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class C Preferred Units”) and 9.00% Class D Preferred Units (“Class D Preferred Units”) (collectively the “Preferred Units”); • our ability to borrow funds and access capital markets; • the amount, if any, of cash reserves established by our GP; and • other business risks discussed in this Annual Report that may affect our cash levels.
Biggest changeThe amount of cash we will have to fund our operations, repay indebtedness or pay distributions principally depends on the amount of cash we generate from our operations, not profitability, which will fluctuate from quarter to quarter based on, among other things: • the cost of crude oil, natural gas liquids, gasoline, diesel, and biodiesel that we buy for resale and whether we are able to pass along cost increases to our customers; • the volume of produced water delivered to our processing facilities; • disruptions in the availability of crude oil and/or natural gas liquids supply; • our ability to renew leases for storage and railcars; • the effectiveness of our commodity price hedging strategy; • weather conditions across the United States; • the level of competition from other energy providers; and • prevailing economic conditions. 24 In addition, the actual amount of cash we will have available to fund our operations, repay indebtedness or pay distributions also depends on other factors, some of which are beyond our control, including: • fluctuations in working capital needs; • the level of capital expenditures we make; • the cost of acquisitions, if any; • restrictions contained in the ABL Facility, Term Loan B and the indenture governing our 2029 Senior Secured Notes and 2032 Senior Secured Notes (collectively, the “Indenture”); • restrictions contained in the agreements relating to our 9.00% Class B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class B Preferred Units”), 9.625% Class C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class C Preferred Units”) and 9.00% Class D Preferred Units (“Class D Preferred Units”) (collectively, the “Preferred Units”); • our ability to borrow funds and access capital markets; • the amount, if any, of cash reserves established by our GP; and • other business risks discussed in this Annual Report that may affect our cash levels.
Timing risk cannot be entirely eliminated, and basis exposure, particularly in backwardated or other adverse market conditions, can adversely affect our consolidated financial position and results of operations. Competition from alternative energy sources, energy efficiency and new technology may reduce the demand for propane and adversely affect our operating results.
Timing risk cannot be entirely eliminated, and basis risk exposure, particularly in backwardated or other adverse market conditions, can adversely affect our consolidated financial position and results of operations. Competition from alternative energy sources, energy efficiency and new technology may reduce the demand for propane and adversely affect our operating results.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) which was enacted on July 21, 2010, established federal oversight and regulation of the over-the-counter derivatives market and of entities, such as us, that participate in that market. The Dodd-Frank Act requires the CFTC and the SEC to promulgate rules and regulations implementing the Dodd-Frank Act.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) which was enacted on July 21, 2010, established federal oversight and regulation of the over-the-counter derivatives market and of entities, such as us, that participate in that market. The Dodd-Frank Act requires the CFTC and the SEC to promulgate rules and regulations implementing the Dodd-Frank Act.
Risks Related to Our Partnership Structure and in an Investment in Us Our Partnership Agreement limits the fiduciary duties of our GP to our unitholders and restricts the remedies available to our unitholders for actions taken by our GP that might otherwise be breaches of fiduciary duty.
Risks Related to Our Partnership Structure and an Investment in Us Our Partnership Agreement limits the fiduciary duties of our GP to our unitholders and restricts the remedies available to our unitholders for actions taken by our GP that might otherwise be breaches of fiduciary duty.
Despite the fact that we are a limited partnership under Delaware law, a publicly traded partnership such as us will be treated as a corporation for federal income tax purposes unless, for each taxable year, 90% or more of its gross income is “qualifying income” under Section 7704 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”).
Despite the fact that we are a limited partnership under Delaware law, a publicly traded partnership such as us will be treated as a corporation for federal income tax purposes unless, for each taxable year, 90% or more of its gross income is “qualifying income” under Section 7704 of the Internal Revenue Code of 1986, as amended (“Internal Revenue Code”).
A deemed cash distribution may, under certain circumstances, result in the recognition of taxable gain by a unitholder, to the extent that the deemed cash distribution exceeds such unitholder’s tax basis in its units.
A deemed cash distribution may, under certain circumstances, result in the recognition of a taxable gain by a unitholder, to the extent that the deemed cash distribution exceeds such unitholder’s tax basis in its units.
Furthermore, a substantial portion of the amount realized on any sale of common units, whether or not representing gain, may be taxed as ordinary income due to potential recapture items, including depreciation recapture.
Furthermore, a substantial portion of the amount realized on any sale of common units, whether or not representing a gain, may be taxed as ordinary income due to potential recapture items, including depreciation recapture.
A holder of Preferred Units will be required to recognize gain or loss on a sale of Preferred Units equal to the difference between the amount realized by such holder and such holder’s tax basis in the Preferred Units sold.
A holder of Preferred Units will be required to recognize a gain or loss on a sale of Preferred Units equal to the difference between the amount realized by such holder and such holder’s tax basis in the Preferred Units sold.
Gain or loss recognized by a holder of Preferred Units on the sale or exchange of a Preferred Unit held for more than one year generally will be taxable as long-term capital gain or loss.
Gain or loss recognized by a holder of Preferred Units on the sale or exchange of a Preferred Unit held for more than one year generally will be taxable as a long-term capital gain or loss.
We are also subject to the obligation under Section 404(a) of the Sarbanes Oxley Act of 2002 (the “Sarbanes-Oxley Act”) to annually review and report on our internal control over financial reporting, and to the obligation under Section 404(b) of the Sarbanes Oxley Act to engage our independent registered public accounting firm to attest to the effectiveness of our internal control over financial reporting.
We are also subject to the obligation under Section 404(a) of the Sarbanes Oxley Act of 2002 (“Sarbanes-Oxley Act”) to annually review and report on our internal control over financial reporting, and to the obligation under Section 404(b) of the Sarbanes-Oxley Act to engage our independent registered public accounting firm to attest to the effectiveness of our internal control over financial reporting.
Examples include the exercise of its limited call right, its voting rights with respect to the units it owns and its determination whether or not to consent to any merger or consolidation of the Partnership; 37 • provides that our GP shall not have any liability to us or our unitholders for decisions made in its capacity as GP so long as it acted in good faith, meaning our GP subjectively believed that the decision was in, or not opposed to, the best interests of the Partnership; • generally provides that affiliated transactions and resolutions of conflicts of interest not approved by the conflicts committee of the board of directors of our GP and not involving a vote of our unitholders must be on terms no less favorable to us than those generally being provided to or available from unrelated third parties or be “fair and reasonable” to us and that, in determining whether a transaction or resolution is “fair and reasonable,” our GP may consider the totality of the relationships between the parties involved, including other transactions that may be particularly favorable or advantageous to us; and • provides that our GP and its officers and directors will not be liable for monetary damages to us or our limited partners for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our GP or those other persons acted in bad faith or engaged in fraud or willful misconduct.
Examples include the exercise of its limited call right, its voting rights with respect to the units it owns and its determination whether or not to consent to any merger or consolidation of the Partnership; • provides that our GP shall not have any liability to us or our unitholders for decisions made in its capacity as GP so long as it acted in good faith, meaning our GP subjectively believed that the decision was in, or not opposed to, the best interests of the Partnership; • generally provides that affiliated transactions and resolutions of conflicts of interest not approved by the conflicts committee of the board of directors of our GP and not involving a vote of our unitholders must be on terms no less favorable to us than those generally being provided to or available from unrelated third parties or be “fair and reasonable” to us and that, in determining whether a transaction or resolution is “fair and reasonable,” our GP may consider the totality of the relationships between the parties involved, including other transactions that may be particularly favorable or advantageous to us; and • provides that our GP and its officers and directors will not be liable for monetary damages to us or our limited partners for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our GP or those other persons acted in bad faith or engaged in fraud or willful misconduct.
Risks Related to Our Partnership Structure and in an Investment in Us • Our amended and restated limited partnership agreement (the “Partnership Agreement”) limits the fiduciary duties of our GP to our unitholders and restricts the remedies available to our unitholders. • Conflicts of interest by our GP and its affiliates. • Our unitholders have limited voting rights. • Control of our GP or the IDRs (as defined herein) may be transferred to a third party. • Our GP has a limited call right that may require our unitholders to sell their common units at an undesirable time or price. • Our Partnership Agreement requires that we distribute all of our available cash. • We may issue additional units without the approval of our unitholders. 22 • Our GP may elect to cause us to issue common units while also maintaining its GP interest in connection with a resetting of the target distribution levels related to its IDRs. • Our unitholders liability may not be limited if a court finds that unitholder action constitutes control of our business. • Our unitholders may have liability to repay distributions that were wrongfully distributed to them. • The Preferred Units (as defined herein) give the holders thereof liquidation and distribution preferences over our common unitholders. • The issuance of common units upon exercise of certain warrants would cause dilution to existing common unitholders.
Risks Related to Our Partnership Structure and an Investment in Us • Our amended and restated limited partnership agreement (“Partnership Agreement”) limits the fiduciary duties of our GP to our unitholders and restricts the remedies available to our unitholders. • Conflicts of interest by our GP and its affiliates. • Our unitholders have limited voting rights. • Control of our GP or the IDRs (as defined herein) may be transferred to a third party. • Our GP has a limited call right that may require our unitholders to sell their common units at an undesirable time or price. • Our Partnership Agreement requires that we distribute all of our available cash. • We may issue additional units without the approval of our unitholders. • Our GP may elect to cause us to issue common units while also maintaining its GP interest in connection with a resetting of the target distribution levels related to its IDRs. • Our unitholders liability may not be limited if a court finds that unitholder action constitutes control of our business. • Our unitholders may have liability to repay distributions that were wrongfully distributed to them. • The Preferred Units (as defined herein) give the holders thereof liquidation and distribution preferences over our common unitholders. • The issuance of common units upon exercise of certain warrants would cause dilution to existing common unitholders.
Industry conditions are influenced by numerous factors over which we have no control, such as the availability of commercially viable geographic areas in which to explore and produce crude oil and natural gas, the availability of liquids-rich natural gas needed to produce natural gas liquids, the supply of and demand for crude oil and natural gas, environmental restrictions on the exploration and production of crude oil and natural gas, such as existing and proposed regulation of hydraulic fracturing, domestic and worldwide economic conditions, political instability in crude oil and natural gas producing countries 26 and merger and divestiture activity among our current or potential customers.
Industry conditions are influenced by numerous factors over which we have no control, such as the availability of commercially viable geographic areas in which to explore and produce crude oil and natural gas, the availability of liquids-rich natural gas needed to produce natural gas liquids, the supply of and demand for crude oil and natural gas, environmental restrictions on the exploration and production of crude oil and natural gas, such as existing and proposed regulation of hydraulic fracturing, domestic and worldwide economic conditions, political instability in crude oil and natural gas producing countries and merger and divestiture activity among our current or potential customers.
In addition, while our consideration of changing weather conditions and inclusion of safety factors in design covers the uncertainties that climate change and other events may potentially introduce, our ability to mitigate 35 the adverse impacts of these events depends in part on the effectiveness of our facilities and our disaster preparedness and response and business continuity planning, which may not have considered or be prepared for every eventuality.
In addition, while our consideration of changing weather conditions and inclusion of safety factors in design covers the uncertainties that climate change and other events may potentially introduce, our ability to mitigate the adverse impacts of these events depends in part on the effectiveness of our facilities and our disaster preparedness and response and business continuity planning, which may not have considered or be prepared for every eventuality.
Tax Risks to Our Unitholders • Our tax treatment depends on our status as a partnership for federal income tax purposes. • Our unitholders may be subject to limitation on their ability to deduct interest expense incurred by us. • Additional entity-level taxation by individual states. • The tax treatment of publicly traded partnerships could be subject to potential changes or interpretations. • The IRS (as defined herein) may challenge certain income tax positions, methodologies or treatments that we have taken, and pursuant to the Bipartisan Budget Act of 2015, may make audit adjustments to our income tax returns for tax years beginning after 2018. • Our unitholders will be required to pay taxes on their share of our income even if they do not receive any cash distributions from us. • Certain action we take, such as issuing additional units, may increase a unitholder’s tax liability. • Tax gain or loss on the disposition of our common units could be more or less than expected. • Tax exempt entities and non-United States persons owning our common units face unique tax issues. • We have subsidiaries that are treated as corporations for federal income tax purposes and subject to corporate level income taxes. • A unitholder whose common units are loaned to a “short seller” to effect a short sale of units may be considered as having disposed of those common units. • There are limits on the deductibility of our losses that may adversely affect our unitholders. • Purchasers of our common units may become subject to state and local taxes and return filing requirements in jurisdictions where we operate or own or acquire properties. • Treatment of distributions on our Preferred Units as guaranteed payments for the use of capital creates a different tax treatment for the holders of Preferred Units than the holders of our common units.
Tax Risks to Our Unitholders • Our tax treatment depends on our status as a partnership for federal income tax purposes. • Our unitholders may be subject to limitation on their ability to deduct interest expense incurred by us. 23 • Additional entity-level taxation by individual states. • The tax treatment of publicly traded partnerships could be subject to potential changes or interpretations. • The IRS (as defined herein) may challenge certain income tax positions, methodologies or treatments that we have taken, and pursuant to the Bipartisan Budget Act of 2015, may make audit adjustments to our income tax returns for tax years beginning after 2019. • Our unitholders will be required to pay taxes on their share of our income even if they do not receive any cash distributions from us. • Certain action we take, such as issuing additional units, may increase a unitholder’s tax liability. • Tax gain or loss on the disposition of our common units could be more or less than expected. • Tax exempt entities and non-United States persons owning our common units face unique tax issues. • We have subsidiaries that are treated as corporations for federal income tax purposes and subject to corporate level income taxes. • A unitholder whose common units are loaned to a “short seller” to effect a short sale of units may be considered as having disposed of those common units. • There are limits on the deductibility of our losses that may adversely affect our unitholders. • Purchasers of our common units may become subject to state and local taxes and return filing requirements in jurisdictions where we operate or own or acquire properties. • Treatment of distributions on our Preferred Units as guaranteed payments for the use of capital creates a different tax treatment for the holders of Preferred Units than the holders of our common units.
For example, repairing our pipelines often involves securing consent from individual landowners to access their property; one or more landowners may resist our efforts to make needed repairs, which could lead to an interruption in the operation of the affected pipeline or facility for a period of time that is significantly longer than would have otherwise been the case.
For example, repairing our pipelines often involves securing consent from individual landowners to access their property; one or more landowners may resist our efforts to make 32 needed repairs, which could lead to an interruption in the operation of the affected pipeline or facility for a period of time that is significantly longer than would have otherwise been the case.
In addition to the risks set forth above, new businesses will subject us to additional business and operating risks, such as the acquisitions not being 31 accretive to our unitholders as a result of decreased profitability, increased interest expense related to debt we incur to make such acquisitions or an inability to successfully integrate those operations into our overall business operations.
In addition to the risks set forth above, new businesses will subject us to additional business and operating risks, such as the acquisitions not being accretive to our unitholders as a result of decreased profitability, increased interest expense related to debt we incur to make such acquisitions or an inability to successfully integrate those operations into our overall business operations.
In addition to the factors discussed elsewhere in this Annual Report, you should carefully consider the risks and uncertainties described below, which could have a material adverse effect on our business, financial condition or results of operations, including our ability to generate cash to 21 fund our operations, repay indebtedness and pay distributions.
In addition to the factors discussed elsewhere in this Annual Report, you should carefully consider the risks and uncertainties described below, which could have a material adverse effect on our business, financial condition or results of operations, including our ability to generate cash to fund our operations, repay indebtedness and pay distributions.
If our operating results are not sufficient to service our future indebtedness, we would be 24 forced to take actions such as reducing or delaying our business activities, acquisitions, investments or capital expenditures, selling assets or seeking additional equity capital. We may be unable to effect any of these actions on satisfactory terms or at all.
If our operating results are not sufficient to service our future indebtedness, we would be forced to take actions such as reducing or delaying our business activities, acquisitions, investments or capital expenditures, selling assets or seeking additional equity capital. We may be unable to effect any of these actions on satisfactory terms or at all.
It also could affect the amount of taxable gain from our unitholders’ sale of common units and could have a negative impact on the value of the common units or result in audit adjustments to our unitholders’ tax returns without the benefit of additional deductions. There are limits on the deductibility of our losses that may adversely affect our unitholders.
It also could affect the amount of taxable gain from our unitholders’ sale of common units and could have a negative impact on the value of the common units or result in audit adjustments to our unitholders’ tax returns without the benefit of additional deductions. 46 There are limits on the deductibility of our losses that may adversely affect our unitholders.
Additionally, some customers’ obligations under their agreements with us may be permanently or temporarily reduced upon the 28 occurrence of certain events, some of which are beyond our control, including force majeure events wherein the production of or the supply of crude oil, condensate, and/or natural gas liquids are curtailed or cut off.
Additionally, some customers’ obligations under their agreements with us may be permanently or temporarily reduced upon the occurrence of certain events, some of which are beyond our control, including force majeure events wherein the production of or the supply of crude oil, condensate, and/or natural gas liquids are curtailed or cut off.
All holders of our Preferred Units are urged to consult a tax advisor with respect to the consequences of owning our Preferred Units. 46 General Risks The default by significant customers and counterparties or loss of one or more significant customers could materially or adversely affect our business, financial condition, results of operations and cash flows.
All holders of our Preferred Units are urged to consult a tax advisor with respect to the consequences of owning our Preferred Units. General Risks The default by significant customers and counterparties or loss of one or more significant customers could materially or adversely affect our business, financial condition, results of operations and cash flows.
The Dodd-Frank Act provides for a potential exemption from these clearing and cash collateral requirements for commercial end users and it includes a number of defined terms that will be used in determining how this exemption applies to particular derivative transactions and the parties to those transactions.
The Dodd-Frank Act provides for a potential 33 exemption from these clearing and cash collateral requirements for commercial end users and it includes a number of defined terms that will be used in determining how this exemption applies to particular derivative transactions and the parties to those transactions.
New laws or regulations, changes to existing laws or regulations, such as more stringent pollution control requirements or additional safety requirements, or more stringent interpretation or enforcement of existing laws and regulations, may adversely impact us, and could result in increased operating costs and have a material and adverse effect on our activities and profitability.
New laws or regulations, changes to existing laws or regulations, such as more stringent pollution control requirements or additional safety requirements, or more stringent interpretation or enforcement of existing laws and regulations, may adversely impact us, and could result in increased operating 34 costs and have a material and adverse effect on our activities and profitability.
As a result of purchasing common units, our unitholders consent to some actions and conflicts of interest that might otherwise constitute a breach of fiduciary or other duties under applicable state law; • permits our GP to make a number of decisions in its individual capacity, as opposed to in its capacity as our GP.
As a result of purchasing common units, our unitholders consent to some actions and conflicts of interest that might otherwise constitute a breach of fiduciary or other duties under applicable state law; 38 • permits our GP to make a number of decisions in its individual capacity, as opposed to in its capacity as our GP.
As a result, a reset election may cause our common unitholders to experience a reduction in the amount of cash distributions that our common 40 unitholders would have otherwise received had we not issued new common units and GP interests to our GP in connection with resetting the target distribution levels.
As a result, a reset election may cause our common unitholders to experience a reduction in the amount of cash distributions that our common unitholders would have otherwise received had we not issued new common units and GP interests to our GP in connection with resetting the target distribution levels.
Any position we take that is inconsistent with applicable Treasury Regulations may have to be disclosed on our federal income tax return. This disclosure increases the likelihood that the IRS will challenge our positions and propose adjustments to some or all of our unitholders.
Any position we take that is inconsistent with applicable Treasury Regulations may have to be disclosed on our federal income tax return. This disclosure increases the likelihood that the IRS will challenge our positions and propose adjustments to some or all of our 45 unitholders.
Our competitors include major integrated oil companies, other midstream or wholesale marketing companies, interstate and intrastate pipelines and companies that gather, compress, treat, 27 process, transport, store and market natural gas. Our natural gas liquids terminals compete with other terminaling and storage providers in the transportation and storage of natural gas liquids.
Our competitors include major integrated oil companies, other midstream or wholesale marketing companies, interstate and intrastate pipelines and companies that gather, compress, treat, process, transport, store and market natural gas. Our natural gas liquids terminals compete with other terminaling and storage providers in the transportation and storage of natural gas liquids.
Furthermore, if we consummate any future acquisitions, our capitalization and results of operations may change significantly, and unitholders will not have the opportunity to evaluate the economic, financial and other relevant information that we will consider in determining the application of these funds and other resources.
Furthermore, if we consummate any future acquisitions, our capitalization and results of operations may change 31 significantly, and unitholders will not have the opportunity to evaluate the economic, financial and other relevant information that we will consider in determining the application of these funds and other resources.
The renewal, amendment or modification of these permits, approvals and other authorizations may involve the imposition of even more stringent and burdensome terms and conditions with attendant higher costs and more significant effects upon our operations. Changes in environmental laws and regulations occur frequently.
The renewal, amendment or modification of these permits, approvals and other authorizations may involve the imposition of even more stringent and burdensome terms and conditions with higher costs and more significant effects upon our operations. Changes in environmental laws and regulations occur frequently.
Terrorist attacks in the areas of our operations could negatively impact our ability to transport crude oil, natural gas liquids and refined and renewables products to our locations. These risks could potentially negatively impact our consolidated results of operations. Product liability claims and litigation could adversely affect our business and results of operations.
Terrorist attacks in the areas of our operations could negatively impact our ability to transport crude oil, natural gas liquids and 49 refined and renewables products to our locations. These risks could potentially negatively impact our consolidated results of operations. Product liability claims and litigation could adversely affect our business and results of operations.
Separately, on January 20, 2021, the Acting Secretary of the United States Department of the Interior issued an order that, among other things, imposed a 60-day moratorium on the issuance of fossil fuel authorizations, including leases and permits, on federal lands.
Separately, on January 20, 2021, the Acting Secretary of the United States Department of the Interior (“DOI”) issued an order that, among other things, imposed a 60-day moratorium on the issuance of fossil fuel authorizations, including leases and permits, on federal lands.
The new owner of our GP would then be in a position to replace the board of directors and officers of our GP with its own designees and thereby exert significant control over the decisions made by the board of directors and officers. The IDRs of our GP may be transferred to a third party.
The new owner of our GP would then be in a position to replace the board of directors and officers of our GP with its own designees and thereby exert significant control over the decisions made by the board of directors and officers. 40 The IDRs of our GP may be transferred to a third party.
The number of common units to be issued to our GP will be equal to that number of common units that would have entitled their holder to an average aggregate quarterly cash distribution in the prior two quarters equal to the average of the distributions to our GP on the IDRs in the prior two quarters.
The number of common units to be issued to our GP will be equal to that number of common units that would have entitled their holder to an average aggregate quarterly cash distribution in the prior two quarters equal to the average of the distributions to 41 our GP on the IDRs in the prior two quarters.
Our Partnership Agreement provides that, if a law is enacted or existing law is modified or interpreted in a manner that subjects us to entity-level taxation, the minimum quarterly distribution amount and the target distribution amounts may be adjusted to reflect the impact of that law on us. 42 The tax treatment of publicly traded partnerships or an investment in our common units could be subject to potential legislative, judicial or administrative changes and differing interpretations, possibly on a retroactive basis.
Our Partnership Agreement provides that, if a law is enacted or existing law is modified or interpreted in a manner that subjects us to entity-level taxation, the minimum quarterly distribution amount and the target distribution amounts may be adjusted to reflect the impact of that law on us. 43 The tax treatment of publicly traded partnerships or an investment in our common units could be subject to potential legislative, judicial or administrative changes and differing interpretations, possibly on a retroactive basis.
Any of these occurrences could disrupt our business, resulting in potential liability or reputational damage or otherwise have an adverse effect on our financial results. Item 1B. Unresolved Staff Comments None. 48
Any of these occurrences could disrupt our business, resulting in potential liability or reputational damage or otherwise have an adverse effect on our financial results. Item 1B. Unresolved Staff Comments None.
Other actions that could be pursued by the Biden Administration may include the imposition of more restrictive requirements for the establishment of pipeline infrastructure or the permitting of liquified natural gas export facilities.
Other actions that could be pursued by the Biden Administration may include the imposition of more restrictive requirements for the establishment of pipeline infrastructure or the permitting of liquified natural 35 gas export facilities.
Risks Related to the Operations of Our Business • Our dependence on the ability and willingness of other parties to explore for and produce crude oil and natural gas. • Declining demand for hydrocarbons, commodity prices and production volumes, inventory risk, the availability of transportation and storage capacity, and increased transportation and leasing costs. • Competition from other midstream, transportation, and terminaling and storage companies. • Interruption of service at our principal storage facilities or on common carrier pipelines or railroads. • Fees charged to customers for products and services may not cover increases in costs. • Risk management procedures and the use of derivative financial instruments. • Reduced demand for our products due to energy efficiency, new technologies, alternative energy sources and new regulations. • Seasonal weather conditions, including warm winter weather, natural or man-made disasters, pandemics, terrorism and political unrest. • Our ability to successfully complete, integrate and operate accretive acquisitions and organic growth projects. • Constructing new transportation systems and facilities subjects us to construction risks. • Opposition from various groups to the operation of our pipelines and facilities. • Our dependence on the leadership, involvement and retention of key and qualified personnel.
Risks Related to the Operations of Our Business • Our dependence on the ability and willingness of other parties to explore for and produce crude oil and natural gas. • Declining demand for hydrocarbons, commodity prices and production volumes, inventory risk, the availability of transportation and storage capacity, and increased transportation and leasing costs. • Competition from other midstream, transportation, and terminaling and storage companies. • Interruption of service at our principal storage facilities or on common carrier pipelines or railroads. • Fees charged to customers for products and services may not cover increases in costs. • Risk management procedures and the use of derivative financial instruments. • Reduced demand for our products due to energy efficiency, new technologies, alternative energy sources and new regulations. • Seasonal weather conditions, including warm winter weather and natural or man-made disasters. • Our ability to successfully complete, integrate and operate accretive acquisitions and organic growth projects. • Constructing new transportation systems and facilities subjects us to construction risks. • Opposition from various groups to the operation of our pipelines and facilities. • Our dependence on the leadership, involvement and retention of key and qualified personnel.
We also own and lease a fleet of railcars, the operation of which is subject to the regulatory 33 jurisdiction of the Federal Railroad Administration of the DOT, as well as other federal and state regulatory agencies.
We also own and lease a fleet of railcars, the operation of which is subject to the regulatory jurisdiction of the Federal Railroad Administration of the DOT, as well as other federal and state regulatory agencies.
In addition, the 29 multiple incentives offered for various clean energy industries referenced above could decrease demand for crude oil and natural gas, increase our compliance and operating costs and consequently adversely affect our business. Reduced demand for refined products could have an adverse effect on our results of operations.
In addition, the multiple incentives offered for various clean energy industries referenced above could decrease demand for crude oil and natural gas, increase our compliance and operating costs and consequently adversely affect our business. 30 Reduced demand for refined products could have an adverse effect on our results of operations.
Our business depends on domestic spending by the oil and natural gas industry, and this spending and our business have been, and may continue to be, adversely affected by industry and financial market conditions and existing or new regulations, such as those related to environmental matters, that are beyond our control.
Our business depends on domestic spending by the oil and natural gas industry, and this spending and our business have been, and may continue to be, adversely affected by industry and financial market conditions and existing or new regulations, such as those related to environmental matters, which are beyond our control.
For instance, our Water Solutions business carries with it environmental risks, including the risk of leakage from the treatment plants to surface or subsurface soils, surface water or groundwater, or accidental spills. Our Crude Oil Logistics and Liquids Logistics segments carry similar risks of leakage and sudden or accidental spills of crude oil, natural gas liquids, and hydrocarbons.
For instance, our Water Solutions segment carries with it environmental risks, including the risk of leakage from the treatment plants to surface or subsurface soils, surface water or groundwater, or accidental spills. Our Crude Oil Logistics and Liquids Logistics segments carry similar risks of leakage and sudden or accidental spills of crude oil, natural gas liquids, and hydrocarbons.
In addition, a portion of our profitability in our Water Solutions business is generated from the sale of crude oil that we recover when processing produced water, and lower crude oil prices have an adverse impact on these sales if not hedged.
In addition, a portion of our profitability in our Water Solutions segment is generated from the sale of crude oil that we recover when processing produced water, and lower crude oil prices have an adverse impact on these sales if not hedged.
Our unitholders may not receive cash distributions from us equal to their share of our taxable income or even equal to the actual tax liability that results from that income. 43 Certain actions that we may take, such as issuing additional units, may increase the federal income tax liability of unitholders.
Our unitholders may not receive cash distributions from us equal to their share of our taxable income or even equal to the actual tax liability that results from that income. 44 Certain actions that we may take, such as issuing additional units, may increase the federal income tax liability of unitholders.
Liability under, or violation of, environmental laws and regulations could result in, among other things, the impairment or cancellation of operations, injunctions, fines and penalties, reputational damage, expenditures for remediation and liability for natural resource damages, property damage and personal injuries.
Liability under, or violation of, environmental laws and regulations could result in, among other things, the restriction or cancellation of operations, injunctions, fines and penalties, reputational damage, expenditures for remediation and liability for natural resource damages, property damage and personal injuries.
Given the difficulties inherent in the design and operation of internal control over financial reporting, as well as future growth of our businesses, we can provide no assurance as to either our or our independent registered public accounting firm’s conclusions about the effectiveness of internal controls in the future, and we may incur significant costs in our efforts to comply with Section 404.
Given the difficulties inherent in the design and operation of internal control over financial reporting, as well as future growth of our businesses, we can provide no assurance as to either our or our independent registered public accounting firm’s conclusions about the effectiveness of internal controls in the future, and we may incur significant costs in our efforts to comply with Section 404 of the Sarbanes-Oxley Act .
Although we expect that much of the income we earn is generally eligible for the 20% deduction for qualified publicly traded partnership income, recently issued Treasury Regulations, which are effective for our taxable years beginning on or after January 1, 2020, provide that a guaranteed payment for the use of capital is not eligible for the 20% deduction for qualified publicly traded partnership income.
Although we expect that much of the income we earn is generally eligible for the 20% deduction for qualified publicly traded partnership income, certain Treasury Regulations, which are effective for our taxable years beginning on or after January 1, 2020, provide that a guaranteed payment for the use of capital is not eligible for the 20% deduction for qualified publicly traded partnership income.
Our level of debt could have important consequences to us, including the following: • our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be impaired or such financing may not be available on favorable terms; • our funds available for operations and future business opportunities will be reduced by that portion of our cash flow required to make principal and interest payments on our debt; • lower availability under our ABL Facility caused by a higher level of borrowings on the ABL Facility could make it more likely that a reduction in our borrowing base following a periodic redetermination could require us to repay a portion of our then-outstanding ABL Facility borrowings; • we may be more vulnerable to competitive pressures or a downturn in our business or the economy generally; and • our flexibility in responding to changing business and economic conditions may be limited.
Our level of indebtedness could have important consequences to us, including the following: • our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be impaired or such financing may not be available on favorable terms; • our funds available for operations and future business opportunities will be reduced by that portion of our cash flow required to make principal and interest payments on our debt; • lower availability under the ABL Facility caused by a higher level of borrowings on the ABL Facility could make it more likely that a reduction in our borrowing base following a periodic redetermination could require us to repay a portion of our then-outstanding ABL Facility borrowings; • we may be more vulnerable to competitive pressures or a downturn in our business or the economy generally; • our flexibility in responding to changing business and economic conditions may be limited; and • it may make it more difficult for us to satisfy our debt obligations and increase the risk that we may default on our debt obligations.
Such negative sentiment regarding the hydrocarbon energy industry could influence consumer preferences and government or regulatory actions, which could, in turn, have an adverse impact on our business.
Such negative sentiment regarding the hydrocarbon energy industry could influence consumer preferences and government or regulatory actions, which could have an adverse impact on our business.
The ABL Facility and Indentures limit our ability to, among other things: • incur additional debt or issue letters of credit; • redeem or repurchase units; • make certain loans, investments and acquisitions; • incur certain liens or permit them to exist; • engage in sale and leaseback transactions; • enter into certain types of transactions with affiliates; • enter into agreements limiting subsidiary distributions; • change the nature of our business or enter into a substantially different business; • merge or consolidate with another company; and • transfer or otherwise dispose of assets.
The ABL Facility, Term Loan B and Indenture limit our ability to, among other things: • incur additional debt or issue letters of credit; • redeem or repurchase units; • make certain loans, investments and acquisitions; • incur certain liens or permit them to exist; • engage in sale and leaseback transactions; • enter into certain types of transactions with affiliates; • enter into agreements limiting subsidiary distributions; • change the nature of our business or enter into a substantially different business; • merge or consolidate with another company; and • transfer or otherwise dispose of assets.
In addition, cyber security attacks on our customer and employee data may result in a financial loss, including potential fines for failure to safeguard data, and may negatively impact our reputation. Third-party systems on which we rely could also suffer operational system failure.
In addition, cybersecurity attacks on our customer and employee data may result in a financial loss, including potential fines for failure to safeguard data, and may negatively impact our reputation. Third-party systems on which we rely could also suffer operational system failure.
The Inflation Reduction Act of 2022 (the “IRA”) could impact demand for hydrocarbon fuel products and impose new costs on certain customers. In August 2022, President Biden signed the IRA, which contains numerous incentives for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles and supporting infrastructure and carbon capture and sequestration, amongst other provisions.
The Inflation Reduction Act of 2022 (“IRA”) could impact demand for hydrocarbon fuel products and impose new costs on certain customers. In August 2022, President Biden signed the IRA, which contains, among other things, numerous incentives for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles and supporting infrastructure and carbon capture and sequestration.
Any product liability claim brought against us, with or without merit, could be costly to defend and could result in an increase of our insurance premiums. Some claims brought against us might not be covered by our insurance policies.
Any product liability claim or other litigation matter brought against us, with or without merit, could be costly to defend and could result in an increase of our insurance premiums. Some claims brought against us might not be covered by our insurance policies.
We use various systems in our financial and operations sectors, and this may subject our business to increased risks. Any future cyber security attacks that affect our facilities, our customers and any financial data could have a material adverse effect on our business.
We use various systems in our financial and operations sectors, and this may subject our business to increased risks. Any future cybersecurity attacks that affect our facilities, our customers and any financial data could have a material adverse effect on our business.
However, if the banks where we hold deposits were to experience a similar failure, we could experience additional risk. Any such loss or limitation on our cash and cash equivalents would adversely affect our business.
However, if the banking institutions where we hold deposits were to experience a similar failure, we could experience additional risk. Any such loss or limitation on our cash and cash equivalents would adversely affect our business.
We may face opposition to the operation of our pipelines and facilities from environmental groups, landowners, tribal groups, local groups and other advocates.
We may face opposition to the operation of our pipelines and facilities from environmental groups, landowners, environmental justice communities, tribal groups, local groups and other advocates.
Risk Factor Summary Risks Related to Liquidity and Financing • We may not have sufficient cash, which depends on cash flow rather than profitability, to enable us to fund our operations, repay indebtedness or pay distributions. • Our substantial indebtedness and restrictions contained in our debt and preferred unit agreements may limit our flexibility to obtain financing to pursue other business opportunities and restrict our current and future operations. • Increasing interest rates could impact our financing costs, common unit price, distributions on our Class B Preferred Units (as defined herein) and Class C Preferred Units (as defined herein) and our ability to issue equity and incur debt. • Failure of our banking institutions.
Risk Factor Summary Risks Related to Liquidity and Financing • We may not have sufficient cash, which depends on cash flow rather than profitability, to enable us to fund our operations, repay indebtedness or pay distributions. • Our substantial indebtedness and restrictions contained in our debt and preferred unit agreements may limit our flexibility to obtain financing to pursue other business opportunities and restrict our current and future operations. 22 • Increasing interest rates could impact our financing costs, common unit price, distributions on our preferred units and our ability to issue equity and incur debt. • Failure of our banking institutions.
While the United States Department of the Interior announced on April 15, 2022 that it will resume oil and gas leasing on public lands following a federal court’s decision, the topic of oil and gas leasing on public land remains politically fraught, as the announcement indicates that federal land available for oil and gas leasing will be reduced by 80 percent from the acreage originally nominated due to environmental and climate concerns.
While the DOI announced on April 15, 2022 that it will resume oil and gas leasing on public lands following a federal court’s decision, the topic of oil and gas leasing on public land remains politically fraught, as the announcement indicates that federal land available for oil and gas leasing will be reduced by 80 percent from the acreage originally nominated due to environmental and climate concerns.
In addition, the IRA imposes a federal fee on the emission of methane from sources required to report their greenhouse gas emissions to the EPA, including certain sources in the onshore petroleum and natural gas production categories. Some of our producer clients face exposure to the IRA pay to emit methane program.
In addition, the IRA imposes a federal fee on the emission of methane from sources required to report their GHG emissions to the EPA, including certain sources in the onshore petroleum and natural gas production categories. Some of our producer customers face exposure to the IRA pay to emit methane program.
Such opposition could take many forms, including organized protests, attempts to block or sabotage our operations, intervention in regulatory or administrative proceedings involving our assets, or lawsuits or other actions designed to prevent, disrupt or delay the operation of our assets and business.
Such opposition could take many forms, including the delay or denial of required governmental permits, organized protests, attempts to block or sabotage our operations, intervention in regulatory or administrative proceedings involving our assets, or lawsuits or other actions designed to prevent, disrupt or delay the operation of our assets and business.
However, under the Tax Cuts and Jobs Act of 2017 (the “Act”) signed into law by the President of the United States on December 22, 2017, beginning in tax year 2018, the deductibility of net interest expense is limited to 30% of our adjusted taxable income.
However, under the Act signed into law by the President of the United States on December 22, 2017, beginning in tax year 2018, the deductibility of net interest expense is limited to 30% of our adjusted taxable income.
Our cash and cash equivalents may be exposed to failure of our banking institutions. While we seek to minimize our exposure to third-party losses of our cash and cash equivalents, we hold our balances in a number of large financial institutions. Notwithstanding such allocation, we are subject to the risk of bank failure.
Our cash and cash equivalents may be exposed to failure of our banking institutions. While we seek to minimize our exposure to third-party losses of our cash and cash equivalents, we hold our balances in several large banking institutions. Notwithstanding such allocation, we are subject to the risk of bank failure.
If the amount of withholding exceeds the amount of U.S. federal income tax actually due, non-U.S. holders of Preferred Units may be required to file U.S. federal income tax returns in order to seek a refund of such excess.
Distributions to non-U.S. holders of Preferred Units will be subject to withholding taxes. If the amount of withholding exceeds the amount of U.S. federal income tax actually due, non-U.S. holders of Preferred Units may be required to file U.S. federal income tax returns in order to seek a refund of such excess.
Our Crude Oil Logistics segment faces significant competition for crude oil supplies and customers for our services. These operations also face competition from transportation companies for incremental and marginal volumes in the areas we serve.
We also face significant competition for refined products supplies and customers for those services. 28 Our Crude Oil Logistics segment faces significant competition for crude oil supplies and customers for our services. These operations also face competition from transportation companies for incremental and marginal volumes in the areas we serve.
Our failure to maintain adequate insurance coverage or successfully defend against product liability claims could materially and adversely affect our business, consolidated results of operations, financial position and cash flows. A failure in our operational systems or cyber security attacks on any of our facilities, or those of third parties, may adversely affect our financial results.
Our failure to maintain adequate insurance coverage or successfully defend against product liability claims or other litigation matters could materially and adversely affect our business, consolidated results of operations, financial position and cash flows. A failure in our operational systems or cybersecurity attacks on any of our facilities, or those of third parties, may adversely affect our financial results.
Our ability to complete accretive acquisitions on economically acceptable terms may be limited by various factors, including, but not limited to: • increased competition for attractive acquisitions; • covenants in the ABL Facility and Indentures that limit the amount and types of indebtedness that we may incur to finance acquisitions; • the approval of the Class D Preferred Majority; • lack of available cash or external capital or limitations on our ability to issue equity to pay for acquisitions; and • possible unwillingness of prospective sellers to accept our common units as consideration and the potential dilutive effect to our existing unitholders caused by an issuance of common units in an acquisition.
Our ability to complete accretive acquisitions on economically acceptable terms may be limited by various factors, including, but not limited to: • increased competition for attractive acquisitions; • covenants in the ABL Facility, Term Loan B and Indenture that limit the amount and types of indebtedness that we may incur to finance acquisitions; • lack of available cash or external capital or limitations on our ability to issue equity to pay for acquisitions; and • possible unwillingness of prospective sellers to accept our common units as consideration and the potential dilutive effect to our existing unitholders caused by an issuance of common units in an acquisition.
General Risks • The default by significant customers and counterparties or the loss of one or more significant customers. • Failure to maintain an effective system of internal control, including internal control over financial reporting. • Product liability claims and litigation. • A failure in our operational systems or cyber security attacks on any of our facilities, or those of third parties.
General Risks • The default by significant customers and counterparties or the loss of one or more significant customers. • Failure to maintain an effective system of internal control, including internal control over financial reporting. • Pandemics, terrorism and political unrest. • Product liability claims and litigation. • A failure in our operational systems or cybersecurity attacks on any of our facilities, or those of third parties.
The agreements governing our indebtedness permit us to incur additional debt under certain circumstances, and we may need to incur additional debt in order to implement our growth strategy. We may experience adverse consequences from increased levels of debt.
The agreements governing our indebtedness permit us to incur additional debt under certain circumstances, and we may need to incur additional debt in order to implement our growth strategy. We may experience adverse consequences from increased levels of debt. Our leverage could have important consequences to our debt obligations.
For example, on January 20, 2021, the Biden Administration placed a 60-day moratorium on new oil and gas leasing and drilling permits on federal lands, and on January 27, 2021, the United States Department of the Interior acting pursuant to an Executive Order from President Biden suspended the federal oil and gas leasing program indefinitely.
For example, on January 20, 2021, the Biden Administration placed a 60-day moratorium on new oil and gas leasing and drilling permits on federal lands, and on January 27, 2021, the DOI acting pursuant to an Executive Order from President Biden suspended the federal oil and gas leasing program indefinitely.
The provisions of the ABL Facility and Indentures may affect our ability to obtain future financing and pursue attractive business opportunities and our flexibility in planning for, and reacting to, changes in business conditions.
The provisions of the ABL Facility, Term Loan B and Indenture may affect our ability to obtain future financing and pursue attractive business opportunities and our flexibility in planning for, and reacting to, changes in business conditions.
For example, on March 10, 2023, Silicon Valley Bank (“SVB”) was unable to continue its operations and the Federal Deposit Insurance Corporation was appointed as receiver for SVB and created the National Bank of Santa Clara to hold the deposits of SVB.
For example, on March 10, 2023, Silicon Valley Bank (“SVB”) was unable to continue its operations and the Federal Deposit Insurance Corporation was appointed as receiver for SVB and created the National Bank of Santa Clara to hold the deposits of SVB. None of our cash and cash equivalents were held at SVB.
We seek to mitigate this risk by entering into NYMEX futures contracts. However, price changes in locations where we operate do not correspond directly with changes in prices in the NYMEX futures market, and as a result these futures contracts cannot be perfect hedges of our commodity price risk.
However, price changes in locations where we operate do not correspond directly with changes in prices in the NYMEX futures market, and as a result these futures contracts cannot be perfect hedges of our commodity price risk.
If we were unable to repay the accelerated amounts, our lenders could proceed against the collateral we granted them to secure our debts under our 2026 Senior Secured Notes and ABL Facility.
If we were unable to repay the accelerated amounts, our lenders could proceed against the collateral we granted them to secure our debts under our 2029 Senior Secured Notes, 2032 Senior Secured Notes, ABL Facility and Term Loan B.
Other of our transportation services could in the future become subject to the jurisdiction of the FERC, which could adversely affect the terms of service, rates and revenues of such services.
The transportation services on the Grand Mesa Pipeline are subject to FERC regulation. Other of our transportation services could in the future become subject to the jurisdiction of the FERC, which could adversely affect the terms of service, rates and revenues of such services.
Restrictions in the ABL Facility and Indentures could adversely affect our business, financial position, results of operations, and the value of our common units.
Restrictions in the ABL Facility, Term Loan B and Indenture could adversely affect our business, financial position, results of operations, and the value of our common units.
If we were treated as a corporation for federal income tax purposes, we would pay federal income tax on our taxable income at the corporate tax rate, which is currently 21% (changed from 35% under the recently enacted tax reform law), and would likely pay state and local income tax at varying rates.
If we were treated as a corporation for federal income tax purposes, we would pay federal income tax on our taxable income at the corporate tax rate, which is currently 21% (changed from 35% under the Tax Cuts and Jobs Act of 2017 (“Act”)), and would likely pay state and local income tax at varying rates.
Natural gas and natural gas liquids also compete with other forms of energy, including electricity, coal, fuel oil and renewable or alternative energy. Our Liquids Logistics segment is also seeing increased competition for supply from international markets. We also face significant competition for refined products supplies and customers for those services.
Natural gas and natural gas liquids also compete with other forms of energy, including electricity, coal, fuel oil and renewable or alternative energy. Our Liquids Logistics segment is also seeing increased competition for supply from international markets.
Any disruptions in the operations of these railroads could adversely impact our ability to deliver product to our customers. We lease certain facilities and equipment and therefore are subject to the possibility of increased costs to retain necessary land and equipment use.
We do not own or operate the railroads on which these railcars are transported. Any disruptions in the operations of these railroads would adversely impact our ability to deliver product to our customers. We lease certain facilities and equipment and therefore are subject to the possibility of increased costs to retain necessary land and equipment use.
Any significant interruption in the service at these storage facilities or on common carrier pipelines we use would adversely affect our ability to obtain and deliver products. We transport natural gas liquids and biodiesel by railcar. We do not own or operate the railroads on which these railcars are transported.
We use third-party common carrier pipelines to transport our products and we use third-party facilities to store our products. Any significant interruption in the service at these storage facilities or on common carrier pipelines we use would adversely affect our ability to obtain and deliver products. We transport natural gas liquids and biodiesel by railcar.
Our sales may also be subject to certain reporting and other requirements. Additionally, some of our operations are currently subject to FERC regulations obligating us to comply with the FERC’s regulations and policies applicable to those assets and operations.
Additionally, some of our operations are currently subject to FERC regulations obligating us to comply with the FERC’s regulations and policies applicable to those assets and operations.

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Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed3 unchanged
Biggest changeAlthough some of these properties are subject to liabilities and leases, liens for taxes not yet due and payable, encumbrances securing payment obligations under non-compete agreements entered into in connection with acquisitions and other encumbrances, easements and restrictions, we do not believe that any of these burdens will materially interfere with our continued use of these properties in our business, taken as a whole.
Biggest changeAlthough some of these properties are subject to liabilities and leases, liens for taxes not yet due and payable, encumbrances, easements and restrictions, we do not believe that any of these burdens will materially interfere with our continued use of these properties in our business, taken as a whole.
Our obligations under the ABL Facility and indenture for the 2026 Senior Secured Notes are secured by liens and mortgages on substantially all of our real and personal property.
Our obligations under the ABL Facility, Term Loan B and Indenture are secured by liens and mortgages on substantially all of our real and personal property.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed3 unchanged
Biggest changeWe believe that such threshold is reasonably designed to result in disclosure of environmental proceedings that are material to our business or financial condition. Item 4. Mine Safety Disclosures Not applicable. 49 PART II
Biggest changeWe believe that such threshold is reasonably designed to result in disclosure of environmental proceedings that are material to our business or financial condition. Applying this threshold, there are no environmental matters to disclose for the three years ended March 31, 2024. Item 4. Mine Safety Disclosures Not applicable. 52 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+1 added−7 removed8 unchanged
Biggest changeMarginal Percentage Interest In Distributions Total Quarterly Distribution Per Unit Limited Partner Unitholders General Partner (1) Minimum quarterly distribution $ 0.337500 99.9 % 0.1 % First target distribution above $ 0.337500 up to $ 0.388125 99.9 % 0.1 % Second target distribution above $ 0.388125 up to $ 0.421875 86.9 % 13.1 % Third target distribution above $ 0.421875 up to $ 0.506250 76.9 % 23.1 % Thereafter above $ 0.506250 51.9 % 48.1 % (1) The maximum distribution of 48.1% does not include distributions that our GP may receive on common units that it owns. 50 Restrictions on the Payment of Distributions As described in Note 7 to our consolidated financial statements included in this Annual Report, the indenture to the 2026 Senior Secured Notes restricts us from paying 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.
Biggest changeMarginal Percentage Interest In Distributions Total Quarterly Distribution Per Unit Limited Partner Unitholders General Partner (1) Minimum quarterly distribution $ 0.337500 99.9 % 0.1 % First target distribution above $ 0.337500 up to $ 0.388125 99.9 % 0.1 % Second target distribution above $ 0.388125 up to $ 0.421875 86.9 % 13.1 % Third target distribution above $ 0.421875 up to $ 0.506250 76.9 % 23.1 % Thereafter above $ 0.506250 51.9 % 48.1 % (1) The maximum distribution of 48.1% does not include distributions that our GP may receive on common units that it owns. 53 Restrictions on the Payment of Distributions As described in Note 7 to our consolidated financial statements included in this Annual Report, the ABL Facility, Term Loan B and Indenture contain covenants limiting our ability to pay distributions if we are in default under these agreements.
As of March 31, 2023, we owned 8.69% of our GP. Incentive Distribution Rights The GP will also receive, in addition to distributions on its 0.1% GP interest, additional distributions based on the level of distributions to the limited partners.
As of March 31, 2024, we owned 8.69% of our GP. Incentive Distribution Rights The GP will also receive, in addition to distributions on its 0.1% GP interest, additional distributions based on the level of distributions to the limited partners.
Market for Registrant’s Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities Market Information Our common units are listed on the New York Stock Exchange (“NYSE”) under the symbol “NGL.” At May 26, 2023, there were approximately 100 common unitholders of record which does not include unitholders for whom common units may be held in “street name.” Cash Distribution Policy Available Cash Our Partnership Agreement requires that, within 45 days after the end of each quarter, we distribute all of our available cash (as defined in our Partnership Agreement) to unitholders as of the record date.
Market for Registrant’s Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities Market Information Our common units are listed on the New York Stock Exchange (“NYSE”) under the symbol “NGL.” At June 4, 2024, there were approximately 90 common unitholders of record which does not include unitholders for whom common units may be held in “street name.” Cash Distribution Policy Available Cash Our Partnership Agreement requires that, within 45 days after the end of each quarter, we distribute all of our available cash (as defined in our Partnership Agreement) to unitholders as of the record date.
In addition, quarterly distributions on the Preferred Units must be fully paid for all preceding fiscal quarters before we are permitted to declare or pay any distributions on our common units.
In addition, quarterly distributions on the Preferred Units must be fully paid for all preceding fiscal quarters before we are permitted to declare or pay any distributions on our common units. Securities Authorized for Issuance Under Equity Compensation Plans In connection with the completion of our initial public offering, our GP adopted the NGL Energy Partners LP Long-Term Incentive Plan.
Removed
As the distributions for all of our Preferred Units are cumulative, we are unable to declare a distribution for our common units unless all accumulated and unpaid distributions have been declared and paid on the Preferred Units.
Added
Also, the Term Loan B and Indenture restrict us from paying distributions if our total leverage ratio (as defined within the Indenture and Term Loan B agreement) for the most recently ended four full fiscal quarters at the time of the distribution is greater than 4.75 to 1.00, while the ABL facility restricts the payment of distributions if certain payment conditions (as defined in the ABL Facility) are below certain thresholds.
Removed
See Note 9 to our consolidated financial statements included in this Annual Report for a discussion of the cumulative distributions for the Preferred Units.
Removed
The board of directors of our GP decided to temporarily suspend all distributions in order to deleverage our balance sheet until we meet the 4.75 to 1.00 total leverage ratio set forth within the indenture of the 2026 Senior Secured Notes, as discussed further above.
Removed
This resulted in the suspension of the quarterly common unit distributions, which began with the quarter ended December 31, 2020, and all preferred unit distributions, which began with the quarter ending March 31, 2021.
Removed
The board of directors of our GP expects to evaluate the reinstatement of the common unit and all preferred unit distributions in due course, taking into account a number of important factors, including our leverage, liquidity, the sustainability of cash flows, upcoming debt maturities, capital expenditures and the overall performance of our businesses.
Removed
Common Unit Repurchases During February 2023, 23,874 common units were surrendered by employees to pay tax withholding in connection with the vesting of restricted common units. As a result, we are deeming the surrenders to be “repurchases.” The average price paid per common unit was $2.40.
Removed
These repurchases were not part of a publicly announced program to repurchase our common units, nor do we have a publicly announced program to repurchase our common units. Securities Authorized for Issuance Under Equity Compensation Plans In connection with the completion of our initial public offering, our GP adopted the NGL Energy Partners LP Long-Term Incentive Plan.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

163 edited+81 added−75 removed89 unchanged
Biggest changeYear Ended March 31, 2023 Water Solutions Crude Oil Logistics Liquids Logistics Corporate and Other Consolidated (in thousands) Operating income (loss) $ 198,924 $ 81,524 $ 66,624 $ (57,909) $ 289,163 Depreciation and amortization 207,081 46,577 13,301 6,662 273,621 Amortization recorded to cost of sales — — 274 — 274 Net unrealized (gains) losses on derivatives (4,464) (50,104) 2,951 1,179 (50,438) CMA Differential Roll net losses (gains) — 3,547 — — 3,547 Inventory valuation adjustment — — (7,795) — (7,795) Lower of cost or net realizable value adjustments — (2,247) (9,287) — (11,534) Loss (gain) on disposal or impairment of assets, net 46,431 31,086 10,283 (912) 86,888 Equity-based compensation expense — — — 2,718 2,718 Acquisition expense 29 — — 89 118 Other income (expense), net 70 330 (1,665) 30,013 28,748 Adjusted EBITDA attributable to unconsolidated entities 4,759 — 27 176 4,962 Adjusted EBITDA attributable to noncontrolling interest (2,269) — — — (2,269) Revaluation of liabilities 9,665 — — — 9,665 Other 2,865 203 1,933 6 5,007 Adjusted EBITDA $ 463,091 $ 110,916 $ 76,646 $ (17,978) $ 632,675 Year Ended March 31, 2022 Water Solutions Crude Oil Logistics Liquids Logistics Corporate and Other Consolidated (in thousands) Operating income (loss) $ 94,851 $ 45,033 $ (8,441) $ (48,400) $ 83,043 Depreciation and amortization 214,558 48,489 18,714 6,959 288,720 Amortization recorded to cost of sales — — 281 — 281 Net unrealized losses (gains) on derivatives 11,652 (23,664) (2,965) — (14,977) CMA Differential Roll net losses (gains) — 67,738 — — 67,738 Inventory valuation adjustment — — 8,409 — 8,409 Lower of cost or net realizable value adjustments — 2,235 8,627 — 10,862 Loss (gain) on disposal or impairment of assets, net 25,598 (3,101) 71,807 (50) 94,254 Equity-based compensation expense — — — (1,052) (1,052) Acquisition expense 4 — — 63 67 Other income, net 718 353 711 472 2,254 Adjusted EBITDA attributable to unconsolidated entities 2,363 — 14 (145) 2,232 Adjusted EBITDA attributable to noncontrolling interest (2,212) — (528) — (2,740) Revaluation of liabilities (6,495) — — — (6,495) Other 921 9,064 (65) — 9,920 Adjusted EBITDA $ 341,958 $ 146,147 $ 96,564 $ (42,153) $ 542,516 76 Year Ended March 31, 2021 Water Solutions Crude Oil Logistics Liquids Logistics Corporate and Other Continuing Operations Discontinued Operations (TPSL, Mid-Con, Gas Blending) Consolidated (in thousands) Operating (loss) income $ (92,720) $ (304,330) $ 70,441 $ (64,144) $ (390,753) $ — $ (390,753) Depreciation and amortization 222,107 60,874 29,184 5,062 317,227 — 317,227 Amortization recorded to cost of sales — — 307 — 307 — 307 Net unrealized losses (gains) on derivatives 24,500 23,432 (566) — 47,366 — 47,366 Inventory valuation adjustment — — 1,197 — 1,197 — 1,197 Lower of cost or net realizable value adjustments — (29,458) (617) — (30,075) — (30,075) Loss on disposal or impairment of assets, net 76,942 384,143 3,350 11,001 475,436 — 475,436 Equity-based compensation expense — — — 6,727 6,727 — 6,727 Acquisition expense 27 — — 1,684 1,711 — 1,711 Other income (expense), net 266 1,565 1,301 (39,635) (36,503) — (36,503) Adjusted EBITDA attributable to unconsolidated entities 3,019 — (3) (252) 2,764 — 2,764 Adjusted EBITDA attributable to noncontrolling interest (1,647) — (2,887) — (4,534) — (4,534) Revaluation of liabilities 6,261 — — — 6,261 — 6,261 Class D Preferred Unitholder consent fee — — — 40,000 40,000 — 40,000 Intersegment transactions (1) — — (27) — (27) — (27) Other 2,751 8,317 100 — 11,168 — 11,168 Discontinued operations — — — — — (621) (621) Adjusted EBITDA $ 241,506 $ 144,543 $ 101,780 $ (39,557) $ 448,272 $ (621) $ 447,651 (1) Amount reflects the transactions with TPSL, Mid-Con and Gas Blending that are eliminated in consolidation.
Biggest changeYear Ended March 31, 2024 Water Solutions Crude Oil Logistics Liquids Logistics Corporate and Other Consolidated (in thousands) Operating income (loss) $ 231,256 $ 52,074 $ 2,481 $ (108,239) $ 177,572 Depreciation and amortization 214,480 36,922 10,372 4,749 266,523 Amortization recorded to cost of sales — — 260 — 260 Net unrealized losses (gains) on derivatives 385 65,786 (1,230) (1,179) 63,762 CMA Differential Roll net losses (gains) — (71,285) — — (71,285) Inventory valuation adjustment — — (3,419) — (3,419) Lower of cost or net realizable value adjustments — — 1,337 — 1,337 Loss (gain) on disposal or impairment of assets, net 53,639 3,094 59,923 (720) 115,936 Equity-based compensation expense — — — 1,098 1,098 Other income, net 1,110 105 12 1,566 2,793 Adjusted EBITDA attributable to unconsolidated entities 4,393 — (12) 124 4,505 Adjusted EBITDA attributable to noncontrolling interest (1,821) — — — (1,821) Revaluation of liabilities 2,680 — — — 2,680 Other 2,186 191 230 47,533 50,140 Adjusted EBITDA $ 508,308 $ 86,887 $ 69,954 $ (55,068) $ 610,081 78 Year Ended March 31, 2023 Water Solutions Crude Oil Logistics Liquids Logistics Corporate and Other Consolidated (in thousands) Operating income (loss) $ 198,924 $ 81,524 $ 66,624 $ (57,909) $ 289,163 Depreciation and amortization 207,081 46,577 13,301 6,662 273,621 Amortization recorded to cost of sales — — 274 — 274 Net unrealized (gains) losses on derivatives (4,464) (50,104) 2,951 1,179 (50,438) CMA Differential Roll net losses (gains) — 3,547 — — 3,547 Inventory valuation adjustment — — (7,795) — (7,795) Lower of cost or net realizable value adjustments — (2,247) (9,287) — (11,534) Loss (gain) on disposal or impairment of assets, net 46,431 31,086 10,283 (912) 86,888 Equity-based compensation expense — — — 2,718 2,718 Other income (expense), net 70 330 (1,665) 30,013 28,748 Adjusted EBITDA attributable to unconsolidated entities 4,759 — 27 176 4,962 Adjusted EBITDA attributable to noncontrolling interest (2,269) — — — (2,269) Revaluation of liabilities 9,665 — — — 9,665 Other 2,894 203 1,933 95 5,125 Adjusted EBITDA $ 463,091 $ 110,916 $ 76,646 $ (17,978) $ 632,675 Year Ended March 31, 2022 Water Solutions Crude Oil Logistics Liquids Logistics Corporate and Other Consolidated (in thousands) Operating income (loss) $ 94,851 $ 45,033 $ (8,441) $ (48,400) $ 83,043 Depreciation and amortization 214,558 48,489 18,714 6,959 288,720 Amortization recorded to cost of sales — — 281 — 281 Net unrealized losses (gains) on derivatives 11,652 (23,664) (2,965) — (14,977) CMA Differential Roll net losses (gains) — 67,738 — — 67,738 Inventory valuation adjustment — — 8,409 — 8,409 Lower of cost or net realizable value adjustments — 2,235 8,627 — 10,862 Loss (gain) on disposal or impairment of assets, net 25,598 (3,101) 71,807 (50) 94,254 Equity-based compensation expense — — — (1,052) (1,052) Other income, net 718 353 711 472 2,254 Adjusted EBITDA attributable to unconsolidated entities 2,363 — 14 (145) 2,232 Adjusted EBITDA attributable to noncontrolling interest (2,212) — (528) — (2,740) Revaluation of liabilities (6,495) — — — (6,495) Other 925 9,064 (65) 63 9,987 Adjusted EBITDA $ 341,958 $ 146,147 $ 96,564 $ (42,153) $ 542,516 Liquidity, Sources of Capital and Capital Resource Activities General Our principal sources of liquidity and capital resource requirements are cash flows from our operations, borrowings under the ABL Facility, issuing long-term notes, common and/or preferred units, loans from financial institutions, asset securitizations or asset sales.
We enter into derivatives in our Water Solutions segment to protect against the risk of a decline in the market price of the crude oil we expect to recover when processing produced water and selling recovered skim oil.
We enter into derivatives in our Water Solutions segment to protect against the risk of a decline in the market price of the crude oil we expect to recover when processing produced water and selling recovered skim oil.
The judgments made in the determination of the estimated fair value assigned to the assets acquired, the liabilities assumed and any noncontrolling interest in the investee, as well as the estimated useful life of each asset and the duration of each liability, can materially impact the financial statements in periods after acquisition, such as through depreciation and amortization expense.
The judgments made in the determination of the estimated fair value assigned to the assets acquired, the liabilities assumed and any noncontrolling interest in the investee, as well as the estimated useful life of each asset and the duration of each liability, can materially impact the financial statements in periods after the acquisition, such as through depreciation and amortization expense.
During the year ended March 31, 2022, we recorded a gain of $5.5 million on the sale of our trucking assets and a loss of $2.2 million due to damage caused by Hurricane Ida to one of our Gulf Coast terminals. 59 Liquids Logistics The following table summarizes the operating results of our Liquids Logistics segment for the periods indicated: Year Ended March 31, 2023 2022 Change (in thousands, except per gallon amounts) Refined products sales: Revenues-excluding impact of derivatives (1) $ 2,554,084 $ 1,899,898 $ 654,186 Cost of sales-excluding impact of derivatives 2,512,748 1,876,728 636,020 Derivative loss 1,255 2,907 (1,652) Product margin 40,081 20,263 19,818 Propane sales: Revenues (1) 1,161,129 1,325,941 (164,812) Cost of sales-excluding impact of derivatives 1,103,786 1,313,765 (209,979) Derivative loss (gain) 11,642 (20,519) 32,161 Product margin 45,701 32,695 13,006 Butane sales: Revenues (1) 773,633 863,348 (89,715) Cost of sales-excluding impact of derivatives 776,845 794,180 (17,335) Derivative (gain) loss (22,976) 18,690 (41,666) Product margin 19,764 50,478 (30,714) Other product sales: Revenues-excluding impact of derivatives (1) 1,025,733 791,125 234,608 Cost of sales-excluding impact of derivatives 970,176 748,392 221,784 Derivative loss 24,483 15,812 8,671 Product margin 31,074 26,921 4,153 Service revenues: Revenues (1) 14,218 16,200 (1,982) Cost of sales 1,603 1,404 199 Product margin 12,615 14,796 (2,181) Expenses: Operating expenses 51,456 55,907 (4,451) General and administrative expenses 7,571 7,166 405 Depreciation and amortization expense 13,301 18,714 (5,413) Loss on disposal or impairment of assets, net 10,283 71,807 (61,524) Total expenses 82,611 153,594 (70,983) Segment operating income (loss) $ 66,624 $ (8,441) $ 75,065 60 Year Ended March 31, 2023 2022 Change (in thousands, except per gallon amounts) Natural gas liquids and refined products storage capacity - owned and leased (gallons) (2) 160,329 156,219 4,110 Refined products sold (gallons) 769,151 776,797 (7,646) Refined products sold ($/gallon) $ 3.321 $ 2.446 $ 0.875 Cost per refined products sold ($/gallon) (3) $ 3.267 $ 2.416 $ 0.851 Refined products product margin ($/gallon) (3) $ 0.054 $ 0.030 $ 0.024 Refined products inventory (gallons) (2) 1,003 1,090 (87) Propane sold (gallons) 1,018,937 1,034,706 (15,769) Propane sold ($/gallon) $ 1.140 $ 1.281 $ (0.141) Cost per propane sold ($/gallon) (3) $ 1.083 $ 1.270 $ (0.187) Propane product margin ($/gallon) (3) $ 0.057 $ 0.011 $ 0.046 Propane inventory (gallons) (2) 48,379 37,719 10,660 Butane sold (gallons) 539,658 588,032 (48,374) Butane sold ($/gallon) $ 1.434 $ 1.468 $ (0.034) Cost per butane sold ($/gallon) (3) $ 1.440 $ 1.351 $ 0.089 Butane product (loss) margin ($/gallon) (3) $ (0.006) $ 0.117 $ (0.123) Butane inventory (gallons) (2) 17,409 19,825 (2,416) Other products sold (gallons) 391,723 376,906 14,817 Other products sold ($/gallon) $ 2.619 $ 2.099 $ 0.520 Cost per other products sold ($/gallon) (3) $ 2.477 $ 1.986 $ 0.491 Other products product margin ($/gallon) (3) $ 0.142 $ 0.113 $ 0.029 Other products inventory (gallons) (2) 12,893 18,614 (5,721) (1) Revenue includes $1.3 million of intersegment sales during the year ended March 31, 2022 that is eliminated in our consolidated statement of operations.
During the year ended March 31, 2022, we recorded a gain of $5.5 million on the sale of our trucking assets and a loss of $2.2 million due to damage caused by Hurricane Ida to one of our Gulf Coast terminals. 71 Liquids Logistics The following table summarizes the operating results of our Liquids Logistics segment for the periods indicated: Year Ended March 31, 2023 2022 Change (in thousands, except per gallon amounts) Refined products: Sales-excluding impact of derivatives (1) $ 2,554,084 $ 1,899,898 $ 654,186 Cost of sales-excluding impact of derivatives 2,512,748 1,876,728 636,020 Derivative loss 1,255 2,907 (1,652) Product margin 40,081 20,263 19,818 Propane: Sales (1) 1,161,129 1,325,941 (164,812) Cost of sales-excluding impact of derivatives 1,103,786 1,313,765 (209,979) Derivative loss (gain) 11,642 (20,519) 32,161 Product margin 45,701 32,695 13,006 Butane: Sales (1) 773,633 863,348 (89,715) Cost of sales-excluding impact of derivatives 776,845 794,180 (17,335) Derivative (gain) loss (22,976) 18,690 (41,666) Product margin 19,764 50,478 (30,714) Other products: Sales -excluding impact of derivatives (1) 1,025,733 791,125 234,608 Cost of sales-excluding impact of derivatives 970,176 748,392 221,784 Derivative loss 24,483 15,812 8,671 Product margin 31,074 26,921 4,153 Service: Sales (1) 14,218 16,200 (1,982) Cost of sales 1,603 1,404 199 Product margin 12,615 14,796 (2,181) Expenses: Operating expenses 51,456 55,907 (4,451) General and administrative expenses 7,571 7,166 405 Depreciation and amortization expense 13,301 18,714 (5,413) Loss on disposal or impairment of assets, net 10,283 71,807 (61,524) Total expenses 82,611 153,594 (70,983) Segment operating income (loss) $ 66,624 $ (8,441) $ 75,065 72 Year Ended March 31, 2023 2022 Change (in thousands, except per gallon amounts) Natural gas liquids and refined products storage capacity - owned and leased (gallons) (2) 160,329 156,219 4,110 Refined products sold (gallons) 769,151 776,797 (7,646) Refined products sold ($/gallon) $ 3.321 $ 2.446 $ 0.875 Cost per refined products sold ($/gallon) (3) $ 3.267 $ 2.416 $ 0.851 Refined products product margin ($/gallon) (3) $ 0.054 $ 0.030 $ 0.024 Refined products inventory (gallons) (2) 1,003 1,090 (87) Propane sold (gallons) 1,018,937 1,034,706 (15,769) Propane sold ($/gallon) $ 1.140 $ 1.281 $ (0.141) Cost per propane sold ($/gallon) (3) $ 1.083 $ 1.270 $ (0.187) Propane product margin ($/gallon) (3) $ 0.057 $ 0.011 $ 0.046 Propane inventory (gallons) (2) 48,379 37,719 10,660 Butane sold (gallons) 539,658 588,032 (48,374) Butane sold ($/gallon) $ 1.434 $ 1.468 $ (0.034) Cost per butane sold ($/gallon) (3) $ 1.440 $ 1.351 $ 0.089 Butane product (loss) margin ($/gallon) (3) $ (0.006) $ 0.117 $ (0.123) Butane inventory (gallons) (2) 17,409 19,825 (2,416) Other products sold (gallons) 391,723 376,906 14,817 Other products sold ($/gallon) $ 2.619 $ 2.099 $ 0.520 Cost per other products sold ($/gallon) (3) $ 2.477 $ 1.986 $ 0.491 Other products product margin ($/gallon) (3) $ 0.142 $ 0.113 $ 0.029 Other products inventory (gallons) (2) 12,893 18,614 (5,721) (1) Revenue includes $1.3 million of intersegment sales during the year ended March 31, 2022 that is eliminated in our consolidated statement of operations.
During the year ended March 31, 2022, we recorded a net loss of $60.1 million related to the sale of Sawtooth (see Note 17 to our consolidated financial statements included in this Annual Report) and a net loss of $11.8 million related to the sale of another terminal during the three months ended September 30, 2021. 62 Corporate and Other The operating loss within “Corporate and Other” includes the following components for the periods indicated: Year Ended March 31, 2023 2022 Change (in thousands) Cost of sales Derivative loss $ 1,181 $ — $ 1,181 Expenses: General and administrative expenses 50,978 41,491 9,487 Depreciation and amortization expense 6,662 6,959 (297) Gain on disposal or impairment of assets, net (912) (50) (862) Total expenses 56,728 48,400 8,328 Operating loss $ (57,909) $ (48,400) $ (9,509) Cost of Sales - Derivative Loss.
During the year ended March 31, 2022, we recorded a net loss of $60.1 million related to the sale of Sawtooth (see Note 17 to our consolidated financial statements included in this Annual Report) and a net loss of $11.8 million related to the sale of another terminal during the three months ended September 30, 2021. 74 Corporate and Other The operating loss within “Corporate and Other” includes the following components for the periods indicated: Year Ended March 31, 2023 2022 Change (in thousands) Cost of sales Derivative loss $ 1,181 $ — $ 1,181 Expenses: General and administrative expenses 50,978 41,491 9,487 Depreciation and amortization expense 6,662 6,959 (297) Gain on disposal or impairment of assets, net (912) (50) (862) Total expenses 56,728 48,400 8,328 Operating loss $ (57,909) $ (48,400) $ (9,509) Cost of Sales - Derivative Loss.
We also provide services for marine exports of butane through our facility located in Chesapeake, Virginia, and we own a propane pipeline system in Michigan. We attempt to reduce our exposure to price fluctuations by using back-to-back physical contracts and pre-sale agreements that allow us to lock in a margin on a percentage of our winter volumes.
We also provide services for marine exports of butane through our facility located in Chesapeake, Virginia, and we also own a propane pipeline in Michigan. We attempt to reduce our exposure to price fluctuations by using back-to-back physical contracts and pre-sale agreements that allow us to lock in a margin on a percentage of our winter volumes.
See Note 14 to our consolidated financial statements included in this Annual Report for a further discussion of our revenue recognition policies. 84 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.
See Note 14 to our consolidated financial statements included in this Annual Report for a further discussion of our revenue recognition policies. Asset Retirement Obligations We have contractual and regulatory obligations at certain facilities for which we have to perform remediation, dismantlement or removal activities when the assets are retired.
Pursuant to GAAP, an entity is allowed a reasonable period of time (not to exceed one year) to obtain the information necessary to identify and measure the fair value of the assets acquired and liabilities assumed in a business combination. Inventories Our inventories consist of crude oil, natural gas liquids, diesel, ethanol and biodiesel.
Pursuant to GAAP, an entity is allowed a reasonable period of time (not to exceed one year) to obtain the information necessary to identify and measure the fair value of the assets acquired and liabilities assumed in a business combination. Inventories Our inventories consist of crude oil, natural gas liquids, diesel and biodiesel.
A long-lived asset group is considered 83 impaired when the anticipated undiscounted future cash flows from the use and eventual disposition of the asset group is less than its carrying value. Individual assets are grouped at the lowest level for which the related identifiable cash flows are largely independent of the cash flows of other assets and liabilities.
A long-lived asset group is considered impaired when the anticipated undiscounted future cash flows from the use and eventual disposition of the asset group is less than its carrying value. Individual assets are grouped at the lowest level for which the related identifiable cash flows are largely independent of the cash flows of other assets and liabilities.
We depreciate our property, plant and equipment and amortize the majority of our intangible assets using the straight-line method, which results in our recording depreciation and amortization expense evenly over the estimated life of the individual asset. The estimate of depreciation and amortization expense requires us to make assumptions regarding the useful economic lives and residual values of our assets.
We depreciate our property, plant and equipment and amortize the majority of our intangible assets using the straight-line method, which results in our recording depreciation and amortization expense evenly over the estimated life of the individual asset. The estimate of depreciation and amortization expense requires us to make assumptions regarding the estimated useful lives and residual values of our assets.
Year Ended March 31, 2023 2022 Change (in thousands, except per barrel and per day amounts) Revenues: Water disposal service fees $ 524,689 $ 397,128 $ 127,561 Sale of recovered crude oil 120,705 77,203 43,502 Recycled water 13,841 11,343 2,498 Other revenues 37,803 59,192 (21,389) Total revenues 697,038 544,866 152,172 Expenses: Cost of sales-excluding impact of derivatives 9,737 26,340 (16,603) Derivative loss 4,363 7,640 (3,277) Operating expenses 212,115 175,022 37,093 General and administrative expenses 8,722 7,352 1,370 Depreciation and amortization expense 207,081 214,558 (7,477) Loss on disposal or impairment of assets, net 46,431 25,598 20,833 Revaluation of liabilities 9,665 (6,495) 16,160 Total expenses 498,114 450,015 48,099 Segment operating income $ 198,924 $ 94,851 $ 104,073 Produced water processed (barrels per day) Delaware Basin 2,042,777 1,531,830 510,947 Eagle Ford Basin 119,458 99,298 20,160 DJ Basin 150,619 142,611 8,008 Other Basins 14,483 24,179 (9,696) Total 2,327,337 1,797,918 529,419 Recycled water (barrels per day) 118,847 93,487 25,360 Total (barrels per day) 2,446,184 1,891,405 554,779 Skim oil sold (barrels per day) (1) 3,764 2,864 900 Service fees for produced water processed ($/barrel) (2) $ 0.62 $ 0.61 $ 0.01 Recovered crude oil for produced water processed ($/barrel) (2) $ 0.14 $ 0.12 $ 0.02 Operating expenses for produced water processed ($/barrel) (2) $ 0.25 $ 0.27 $ (0.02) (1) During the three months ended March 31, 2023, approximately 33,480 barrels of skim oil were stored and will be sold during fiscal year 2024.
Year Ended March 31, 2023 2022 Change (in thousands, except per barrel and per day amounts) Revenues: Water disposal service fees $ 524,689 $ 397,128 $ 127,561 Sale of recovered crude oil 120,705 77,203 43,502 Recycled water 13,841 11,343 2,498 Other revenues 37,803 59,192 (21,389) Total revenues 697,038 544,866 152,172 Expenses: Cost of sales-excluding impact of derivatives 9,737 26,340 (16,603) Derivative loss 4,363 7,640 (3,277) Operating expenses 212,115 175,022 37,093 General and administrative expenses 8,722 7,352 1,370 Depreciation and amortization expense 207,081 214,558 (7,477) Loss on disposal or impairment of assets, net 46,431 25,598 20,833 Revaluation of liabilities 9,665 (6,495) 16,160 Total expenses 498,114 450,015 48,099 Segment operating income $ 198,924 $ 94,851 $ 104,073 Produced water processed (barrels per day) Delaware Basin 2,042,777 1,531,830 510,947 Eagle Ford Basin 119,458 99,298 20,160 DJ Basin 150,619 142,611 8,008 Other Basins 14,483 24,179 (9,696) Total 2,327,337 1,797,918 529,419 Recycled water (barrels per day) 118,847 93,487 25,360 Total (barrels per day) 2,446,184 1,891,405 554,779 Skim oil sold (barrels per day) (1) 3,764 2,864 900 Service fees for produced water processed ($/barrel) (2) $ 0.62 $ 0.61 $ 0.01 Recovered crude oil for produced water processed ($/barrel) (2) $ 0.14 $ 0.12 $ 0.02 Operating expenses for produced water processed ($/barrel) (2) $ 0.25 $ 0.27 $ (0.02) (1) During the three months ended March 31, 2023, 34,380 barrels of skim oil were stored and will be sold during fiscal year 2024.
Most of these retirement obligations are many years, or decades, in the future and the contracts and regulations often have vague descriptions of what removal practices and criteria must be met when the removal event actually occurs. These estimates and assumptions are very subjective and can vary over time.
Most of these asset retirement obligations are many years, or decades, in the future and the contracts and regulations often have vague descriptions of what removal practices and criteria must be met when the removal event actually occurs. These estimates and assumptions are very subjective and can vary over time.
The estimated performance obligation over the life of a contract includes significant judgments by management including volume and forecasted production information. Changes in these assumptions or a contract modification could have a material effect on the amount of variable consideration recognized as revenue.
The estimated performance obligation over the life of a contract includes significant judgments by management including volume and forecasted production information. Changes in these assumptions or a contract modification could have a material 86 effect on the amount of variable consideration recognized as revenue.
Distributions Declared The board of directors of our GP decided to temporarily suspend all distributions in order to deleverage our balance sheet until we meet the 4.75 to 1.00 total leverage ratio set forth within the indenture of the 2026 Senior Secured Notes.
Distributions Declared The board of directors of our GP decided to temporarily suspend all distributions in order to deleverage our balance sheet until we meet the 4.75 to 1.00 total leverage ratio set forth within the indenture for the 2026 Senior Secured Notes.
(2) Information is presented as of March 31, 2023 and March 31, 2022, respectively. (3) Cost and product margin (loss) per gallon excludes the impact of derivatives. Refined Products Sales and Cost of Sales-Excluding Impact of Derivatives. The increases in revenues and cost of sales, excluding the impact of derivatives, were due to an increase in refined products prices.
(2) Information is presented as of March 31, 2023 and March 31, 2022, respectively. (3) Cost and product margin (loss) per gallon excludes the impact of derivatives. Refined Products Sales and Cost of Sales-Excluding Impact of Derivatives. The increases in sales and cost of sales, excluding the impact of derivatives, were due to an increase in refined products prices.
Consequently, our revenues, operating profits, and operating cash flows are typically lower in the first and second quarters of our fiscal year. The following table summarizes the range of low and high propane spot prices per gallon at Conway, Kansas, and Mt.
Consequently, our revenues, operating profits, and operating cash flows are typically lower in the first and second quarters of our fiscal year. 55 The following table summarizes the range of low and high propane spot prices per gallon at Conway, Kansas, and Mt.
The increase in net cash provided by operating activities during the year ended March 31, 2023 was due primarily to fluctuations in working capital, particularly accounts receivable, inventory and accounts payable, during the year ended March 31, 2023 and increased earnings from operations.
The increase in net cash provided by operating activities during the year ended March 31, 2023 was due primarily to fluctuations in working capital, particularly accounts receivable, inventory and accounts payable, during the year ended March 31, 2023 and increased earnings from operations. Investing Activities .
Estimates of future net cash flows include estimating future volumes, future margins or tariff rates, future operating costs and other estimates and assumptions consistent with our business plans as well as external factors such as industry and economic trends.
Estimates of future net cash flows include estimating future volumes, future margins or tariff rates, future operating costs and other estimates and assumptions consistent with our business 85 plans as well as external factors such as industry and economic trends.
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.
During the period when a 76 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.
The increase was due primarily to higher volumes of skim oil barrels sold due to an increase in produced water volumes processed as well as higher realized crude oil prices received from the sale of skim oil barrels.
The increase was due primarily to higher volumes of skim oil barrels sold due to an increase in produced water volumes processed as well as higher realized crude oil prices received from the sale of skim oil 68 barrels.
When we acquire and place our property, plant and equipment in service or acquire intangible assets, we develop assumptions about the useful economic lives and residual values of such assets that we believe to be reasonable; however, circumstances may develop that could require us to change these assumptions in future periods, which would change our depreciation and amortization expense prospectively and have a material impact on our results of operations.
When we acquire and place our property, plant and equipment in service or acquire intangible assets, we develop assumptions about the estimated useful lives and residual values of such assets that we believe to be reasonable; however, circumstances may develop that could require us to change these assumptions in future periods, which would change our depreciation and amortization expense prospectively and have a material impact on our results of operations.
Interest Expense The following table summarizes the components of our consolidated interest expense for the periods indicated: Year Ended March 31, 2023 2022 Change (in thousands) Senior secured notes $ 153,750 $ 153,750 $ — Senior unsecured notes 76,288 87,766 (11,478) Revolving credit facility 17,111 10,077 7,034 Other indebtedness 11,559 3,087 8,472 Total debt interest expense 258,708 254,680 4,028 Amortization of debt issuance costs 16,737 16,960 (223) Total interest expense $ 275,445 $ 271,640 $ 3,805 The debt interest expense increased $4.0 million during the year ended March 31, 2023 due primarily to a settlement of a claim for the failure to pay interest on royalty payments, as discussed further in Note 8 to our consolidated financial statements included in this Annual Report and an increase in our revolving credit facility interest rates in the current year.
Interest Expense The following table summarizes the components of our consolidated interest expense for the periods indicated: Year Ended March 31, 2023 2022 Change (in thousands) Senior secured notes $ 153,750 $ 153,750 $ — Senior unsecured notes 76,288 87,766 (11,478) ABL Facility 17,111 10,077 7,034 Other indebtedness 11,559 3,087 8,472 Total debt interest expense 258,708 254,680 4,028 Amortization of debt issuance costs 16,737 16,960 (223) Total interest expense $ 275,445 $ 271,640 $ 3,805 The debt interest expense increased $4.0 million during the year ended March 31, 2023 due primarily to a settlement of a claim for the failure to pay interest on royalty payments, as discussed further in Note 8 to our consolidated financial 75 statements included in this Annual Report and an increase in the ABL Facility interest rates in the current year.
We are unable to control changes in the net realizable value of these commodities and are unable to determine whether write-downs will be required in future periods.
We are unable to control changes in the net realizable value of these commodities and are unable to determine whether write-downs will be required in future periods. 87
Liquids Logistics Our Liquids Logistics segment conducts supply operations for natural gas liquids, refined petroleum products and biodiesel to a broad range of commercial, retail and industrial customers across the United States and Canada. These operations are conducted through our 25 owned terminals, third-party storage and terminal facilities, nine common carrier pipelines and a fleet of leased railcars.
Liquids Logistics Our Liquids Logistics segment conducts supply operations for natural gas liquids, refined petroleum products and biodiesel to a broad range of commercial, retail and industrial customers across the United States and Canada. These operations are conducted through our 23 owned terminals, third-party storage and terminal facilities, nine common carrier pipelines and a fleet of leased railcars.
The increase in net cash used in financing activities was due primarily to: • an increase of $396.1 million paid in cash to repurchase a portion of our Senior Unsecured Notes and redeem the remaining outstanding 2023 Notes during the year ended March 31, 2023; • a decrease of $90.0 million in borrowings on the revolving credit facility (net of repayments) during the year ended March 31, 2023; and • payments on other long-term debt of $43.3 million on the outstanding balance on our equipment loan and a prepayment premium as we sold our marine assets in March 2023 (see Note 17 to our consolidated financial statements included in this Annual Report). 81 These increases in net cash used in financing activities were partially offset by: • a decrease of $9.6 million in debt issuance costs for the revolving credit facility during the year ended March 31, 2023; and • a decrease of $5.0 million in payments on other long-term debt as the Sawtooth credit agreement was paid off and terminated prior to us selling our ownership interest in Sawtooth in June 2021.
The increase in net cash used in financing activities was due primarily to: • an increase of $396.1 million paid in cash to repurchase a portion of our Senior Unsecured Notes and redeem the remaining outstanding 2023 Notes during the year ended March 31, 2023; • a decrease of $90.0 million in borrowings on the ABL Facility (net of repayments) during the year ended March 31, 2023; and • payments on other long-term debt of $43.3 million on the outstanding balance on our equipment loan and a prepayment premium as we sold our marine assets in March 2023 (see Note 17 to our consolidated financial statements included in this Annual Report). 84 These increases in net cash used in financing activities were partially offset by: • a decrease of $9.6 million in debt issuance costs for the ABL Facility during the year ended March 31, 2023; and • a decrease of $5.0 million in payments on other long-term debt as the Sawtooth credit agreement was paid off and terminated prior to us selling our ownership interest in Sawtooth in June 2021.
EBITDA and Adjusted EBITDA should not be considered alternatives to net income (loss), income (loss) from continuing operations before income taxes, cash flows from operating activities, or any other measure of financial performance calculated in accordance with GAAP, as those items are used to measure operating performance, liquidity or the ability to service debt obligations.
EBITDA and Adjusted EBITDA should not be considered as alternatives to net (loss) income, (loss) income 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.
(2) Information is presented as of March 31, 2023 and March 31, 2022, respectively. The decrease in crude oil inventory was due primarily to capitalizing additional crude oil barrels as linefill as a result of increased requirements. (3) Cost and product margin per barrel excludes the impact of derivatives. Crude Oil Sales Revenues.
(2) Information is presented as of March 31, 2023 and March 31, 2022, respectively. The decrease in crude oil inventory was due primarily to capitalizing additional crude oil barrels as linefill as a result of increased requirements. (3) Cost and product margin per barrel excludes the impact of derivatives. Crude Oil Sales and Cost of Sales-Excluding Impact of Derivatives.
Propane Sales and Cost of Sales-Excluding Impact of Derivatives. The decreases in revenues and cost of sales, excluding the impact of derivatives, were due primarily to lower propane prices and a decline in volumes.
The decreases in sales and cost of sales, excluding the impact of derivatives, were due primarily to lower propane prices and a decline in volumes.
The board of directors of our GP expects to evaluate the reinstatement of the common unit and all preferred unit distributions in due course, taking into account a number of important factors, including our leverage, liquidity, the sustainability of cash flows, upcoming debt maturities, capital expenditures and the overall performance of our businesses.
The board of directors of our GP expects to evaluate the reinstatement of the common 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.
Actual amounts could vary materially from estimated fair values due to changes in market prices. In addition, changes in the methods or assumptions used to determine the fair value of our derivative financial instruments could have a material effect on our consolidated financial statements. See Item 7A.
Actual amounts could vary materially from estimated fair values due to changes in market prices. In addition, changes in the methods or assumptions used to determine the fair value of our derivative financial instruments could have a material effect on our consolidated financial statements. See “Item 7A.
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, Acquisitions and Other Investments The following table summarizes expansion, maintenance and other non-cash 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.
Loss on Disposal or Impairment of Assets, Net. During the year ended March 31, 2023, we recorded a net loss of $10.1 million due to the impairment of several underperforming natural gas liquids terminals. In addition, during the year ended March 31, 2023, we recorded a net loss of $0.2 million related to the sale and retirement of other assets.
During the year ended March 31, 2023, we recorded a net loss of $10.1 million due to the impairment of several underperforming natural gas liquids terminals. In addition, during the year ended March 31, 2023, we recorded a net loss of $0.2 million related to the sale and retirement of other assets.
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.
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 within our consolidated group. All of our wholly-owned operating subsidiaries participate in this program.
Recently, our disposal volumes have been positively impacted by the increase in the level of crude oil production, particularly in the Permian and DJ Basins, due to increasing or stable crude oil prices. Lower crude oil prices provide producers with less incentive to drill and complete new wells, which results in lower production and negatively impacts our disposal volumes.
Recently, our disposal volumes have been positively impacted by the increase in the level of crude oil production, particularly in the Delaware and Eagle Ford Basins, due to increasing or stable crude oil prices. Lower crude oil prices provide producers with less incentive to drill and complete new wells, which results in lower production and negatively impacts our disposal volumes.
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 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, revaluation of liabilities and other.
Cost of Sales-Excluding Impact of Derivatives. The increase was due primarily to an increase in crude oil prices during the year ended March 31, 2023, compared to the year ended March 31, 2022 which was offset by a decrease in sales volumes. 58 Derivative (Gain) Loss.
The increase in cost of sales, excluding the impact of derivatives, was due primarily to an increase in crude oil prices during the year ended March 31, 2023, compared to the year ended March 31, 2022 which was offset by a decrease in sales volumes.
The decreases in revenues and cost of sales, excluding the impact of derivatives, were due to lower volumes due to weaker spot demand for the product, especially exports, and lower prices. The softening of export economics continued throughout the year, which led to lower domestic prices as less product was being moved abroad. Butane Derivative (Gain) Loss.
The decreases in sales and cost of sales, excluding the impact of derivatives, were due to lower volumes due to weaker spot demand for the product, especially exports, and lower prices. The softening of export economics continued throughout the year, which led to lower domestic prices as less product was being moved abroad.
Sales volumes decreased due to the decommissioning of a critical underground storage facility in the Midwest in April 2022, which were offset by an increase in sales volumes in the state of Michigan due to the completion of the Ambassador Pipeline. Propane Derivative Loss (Gain).
Sales volumes decreased due to the decommissioning of a critical underground storage facility in the Midwest in April 2022, which were offset by an increase in sales volumes in the state of Michigan due to the completion of the Ambassador Pipeline.
Our consolidated balance sheet at March 31, 2023 includes a liability of $35.2 million related to asset retirement obligations, which is reported within other noncurrent liabilities. In addition to the obligations described above, we may be obligated to remove facilities or perform other remediation upon retirement of certain other assets.
Our consolidated balance sheet at March 31, 2024 includes a liability of $56.6 million related to asset retirement obligations, which is reported within other noncurrent liabilities. In addition to the obligations described above, we may be obligated to remove facilities or perform other remediation upon retirement of certain other assets.
We operate in a number of the most prolific crude oil and natural gas producing areas in the United States including the Delaware Basin in New Mexico and Texas, the DJ Basin in Colorado and the Eagle Ford Basin in Texas.
We operate in a number of the most prolific crude oil and natural gas producing areas in the United States including the Delaware Basin in New Mexico and Texas, the Denver-Julesburg (“DJ”) Basin in Colorado and the Eagle Ford Basin in Texas.
The amounts for the year ended March 31, 2023 included net realized losses of $13.1 million and net unrealized gains of $23.8 million associated with derivative instruments related to our hedge of the CMA Differential Roll, defined and discussed below under “Non-GAAP Financial Measures.” Our cost of sales during the year ended March 31, 2022 included $115.7 million of net realized losses on derivatives, driven by increasing crude oil prices, partially offset by $23.7 million of net unrealized gains on derivatives.
The amounts in the previous sentence for the year ended March 31, 2023 included net realized losses of $13.1 million and net unrealized gains of $23.8 million associated with derivative instruments related to our hedge of the CMA Differential Roll, defined and discussed below under “–Non-GAAP Financial Measures.” Our cost of sales during the year ended March 31, 2022 70 included $115.7 million of net realized losses on derivatives, driven by increasing crude oil prices, and $23.7 million of net unrealized gains on derivatives.
Other product sales product margins, excluding the impact of derivatives, during the year ended March 31, 2023 increased due to an increase in biodiesel and biodiesel renewable identification number market prices, as well as securing favorable biodiesel supply contracts in the Midwest and transporting the product for sale in more favorable markets. Service Revenues and Cost of Sales.
Other products sales product margins, excluding the impact of derivatives, during the year ended March 31, 2023 increased due to an increase in biodiesel and biodiesel renewable identification number market prices, as well as securing favorable biodiesel supply contracts in the Midwest and transporting the product for sale in more favorable markets. Other Products Derivative Loss.
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.
Due to the nature of these positions, the cash flow and earnings recognized on a GAAP basis differed from period to period depending on the current crude oil price and future estimated crude oil price which were 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.
We recognized 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 hedged each month through the term of this transaction. This representation aligns with management’s evaluation of the transaction.
Our activities in this segment are supported by certain long-term, fixed rate contracts which include minimum volume commitments on our owned and leased pipelines. Most of our contracts to purchase or sell crude oil are at floating prices that are indexed to published rates in active markets such as Cushing, Oklahoma, St. James, Louisiana, and Magellan East Houston.
Our activities in this segment are supported by certain long-term, fixed rate contracts which include minimum volume commitments on our owned and leased pipelines and storage tanks. Most of our contracts to purchase or sell crude oil are at floating prices that are indexed to published rates in active markets such as Cushing, Oklahoma, St.
Our wholesale propane cost of sales included $2.0 million of net unrealized gains on derivatives and $18.5 million of net realized gains on derivatives during the year ended March 31, 2022.
During the year ended March 31, 2022, our cost of propane sales included $2.0 million of net unrealized gains on derivatives and $18.5 million of net realized gains on derivatives. Butane Sales and Cost of Sales-Excluding Impact of Derivatives.
Crude Oil Logistics The following table summarizes the operating results of our Crude Oil Logistics segment for the periods indicated: Year Ended March 31, 2023 2022 Change (in thousands, except per barrel amounts) Revenues: Crude oil sales $ 2,376,434 $ 2,432,393 $ (55,959) Crude oil transportation and other 96,978 84,171 12,807 Total revenues (1) 2,473,412 2,516,564 (43,152) Expenses: Cost of sales-excluding impact of derivatives 2,274,089 2,271,973 2,116 Derivative (gain) loss (14,565) 92,027 (106,592) Operating expenses 50,154 54,606 (4,452) General and administrative expenses 4,547 7,537 (2,990) Depreciation and amortization expense 46,577 48,489 (1,912) Loss (gain) on disposal or impairment of assets, net 31,086 (3,101) 34,187 Total expenses 2,391,888 2,471,531 (79,643) Segment operating income $ 81,524 $ 45,033 $ 36,491 Crude oil sold (barrels) 25,497 31,091 (5,594) Crude oil transported on owned pipelines (barrels) 27,714 28,410 (696) Crude oil storage capacity - owned and leased (barrels) (2) 5,232 5,232 — Crude oil storage capacity leased to third parties (barrels) (2) 1,501 1,501 — Crude oil inventory (barrels) (2) 684 1,339 (655) Crude oil sold ($/barrel) $ 93.204 $ 78.235 $ 14.969 Cost per crude oil sold ($/barrel) (3) $ 89.190 $ 73.075 $ 16.115 Crude oil product margin ($/barrel) (3) $ 4.014 $ 5.160 $ (1.146) (1) Revenues include $8.6 million and $11.1 million of intersegment sales during the years ended March 31, 2023 and 2022, respectively, that are eliminated in our consolidated statements of operations.
During the year ended March 31, 2022, there was a decrease in expense for the valuation of our contingent consideration liabilities related to royalty agreements acquired as part of certain business combinations due primarily to lower expected production from new customers, resulting in a decrease to the expected future royalty payment. 69 Crude Oil Logistics The following table summarizes the operating results of our Crude Oil Logistics segment for the periods indicated: Year Ended March 31, 2023 2022 Change (in thousands, except per barrel amounts) Revenues: Crude oil sales $ 2,376,434 $ 2,432,393 $ (55,959) Crude oil transportation and other sales 96,978 84,171 12,807 Total revenues (1) 2,473,412 2,516,564 (43,152) Expenses: Cost of sales-excluding impact of derivatives 2,274,089 2,271,973 2,116 Derivative (gain) loss (14,565) 92,027 (106,592) Operating expenses 50,154 54,606 (4,452) General and administrative expenses 4,547 7,537 (2,990) Depreciation and amortization expense 46,577 48,489 (1,912) Loss (gain) on disposal or impairment of assets, net 31,086 (3,101) 34,187 Total expenses 2,391,888 2,471,531 (79,643) Segment operating income $ 81,524 $ 45,033 $ 36,491 Crude oil sold (barrels) 25,497 31,091 (5,594) Crude oil transported on owned pipelines (barrels) 27,714 28,410 (696) Crude oil storage capacity - owned and leased (barrels) (2) 5,232 5,232 — Crude oil storage capacity leased to third-parties (barrels) (2) 1,501 1,501 — Crude oil inventory (barrels) (2) 684 1,339 (655) Crude oil sold ($/barrel) $ 93.204 $ 78.235 $ 14.969 Cost per crude oil sold ($/barrel) (3) $ 89.190 $ 73.075 $ 16.115 Crude oil product margin ($/barrel) (3) $ 4.014 $ 5.160 $ (1.146) (1) Revenues include $8.6 million and $11.1 million of intersegment sales during the years ended March 31, 2023 and 2022, respectively, that are eliminated in our consolidated statements of operations.
If future results are not consistent with our estimates, we could be exposed to future impairment losses that could be material to our results of operations. During the year ended March 31, 2021, we recorded a goodwill impairment of $237.8 million. We did not record a goodwill impairment during the years ended March 31, 2023 and 2022.
If future results are not consistent with our estimates, we could be exposed to future impairment losses that could be material to our results of operations. During the year ended March 31, 2024, we recorded a goodwill impairment of $69.2 million. We did not record a goodwill impairment during the years ended March 31, 2023 and 2022.
Noncontrolling Interests Noncontrolling interests represent the portion of certain consolidated subsidiaries that are owned by third parties. Noncontrolling interest income was $1.1 million during the year ended March 31, 2023, compared to $0.7 million during the year ended March 31, 2022.
Noncontrolling Interests Noncontrolling interests represent the portion of certain consolidated subsidiaries that are owned by third-parties. Noncontrolling interest income was $0.6 million during the year ended March 31, 2024, compared to $1.1 million during the 67 year ended March 31, 2023.
Our derivatives of other products during the year ended March 31, 2022 included $15.8 million of net realized losses on derivatives and there was no unrealized gains or losses on derivatives.
Our derivatives of other products included $24.6 million of net realized losses on derivatives and $0.1 million of unrealized gains on derivatives during the year ended March 31, 2023. Our derivatives of other products during the year ended March 31, 2022 included $15.8 million of net realized losses on derivatives and there was no unrealized gains or losses on derivatives.
Quantitative and Qualitative Disclosures About Market Risk to see the impact of a 10% increase in the underlying commodity value and Note 2 and Note 10 to our consolidated financial statements included in this Annual Report for a further discussion of our derivative financial instruments.
Quantitative and Qualitative Disclosures About Market Risk–Interest Rate Risk” for the impact of a 10% increase in the underlying interest rate swap value and Note 2 and Note 10 to our consolidated financial statements included in this Annual Report for a further discussion of our derivative financial instruments.
See Note 7 to our consolidated financial statements included in this Annual Report for information regarding our outstanding debt principal and interest obligations and timing of our expected debt principal and interest payments. Operating Lease Obligations As of March 31, 2023, our undiscounted operating lease obligation was $121.4 million, with $40.8 million due within one year.
See Note 7 to our consolidated financial statements included in this Annual Report for information regarding our outstanding debt principal and interest obligations and timing of our expected debt principal and interest payments. Operating Lease Obligations As of March 31, 2024, our undiscounted operating lease obligation was $131.2 million, with $38.4 million due within one year.
Income Tax (Expense) Benefit Income tax expense was $1.0 million during the year ended March 31, 2022, compared to an income tax benefit of $3.4 million during the year ended March 31, 2021. See Note 2 to our consolidated financial statements included in this Annual Report for a further discussion.
Income Tax Expense Income tax expense was $2.4 million during the year ended March 31, 2024, compared to income tax expense of $0.3 million during the year ended March 31, 2023. See Note 2 to our consolidated financial statements included in this Annual Report for a further discussion.
Noncontrolling Interests Noncontrolling interest income was $0.7 million during the year ended March 31, 2022, compared to $0.6 million during the year ended March 31, 2021.
Noncontrolling Interests Noncontrolling interest income was $1.1 million during the year ended March 31, 2023, compared to $0.7 million during the year ended March 31, 2022.
Our wholesale propane cost of sales included $6.9 million of net unrealized losses on derivatives and $4.7 million of net realized losses on derivatives during the year ended March 31, 2023.
Our cost of propane sales included $4.6 million of net unrealized gains on derivatives and $7.0 million of net realized losses on derivatives during the year ended March 31, 2024.
Our cost of butane sales during the year ended March 31, 2022 included $1.0 million of net unrealized gains on derivatives and $19.7 million of net realized losses on derivatives. Our cost of butane sales included $3.2 million of net unrealized losses on derivatives and $19.1 million of net realized losses on derivatives during the year ended March 31, 2021.
Our cost of butane sales during the year ended March 31, 2024 included $3.2 million of net unrealized losses on derivatives and $0.5 million of net realized gains on derivatives. Our cost of butane sales included $3.9 million of net unrealized gains on derivatives and $19.1 million of net realized gains on derivatives during the year ended March 31, 2023.
Net cash provided by financing activities was $5.6 million during the year ended March 31, 2022, compared to net cash used in financing activities of $100.4 million during the year ended March 31, 2021.
Net cash used in financing activities was $507.8 million during the year ended March 31, 2023, compared to net cash provided by financing activities of $5.6 million during the year ended March 31, 2022.
Belvieu, Texas for the periods indicated and the prices at period end: Butane Spot Price Per Gallon Year Ended March 31, Low High At Period End 2023 $ 0.85 $ 1.65 $ 0.92 2022 $ 0.78 $ 2.01 $ 1.71 2021 $ 0.28 $ 1.16 $ 0.98 The following table summarizes the range of low and high Gulf Coast gasoline spot prices per barrel using NYMEX gasoline prompt-month futures for the periods indicated and the prices at period end: Gasoline Spot Price Per Gallon Year Ended March 31, Low High At Period End 2023 $ 86.06 $ 179.60 $ 113.42 2022 $ 81.95 $ 154.67 $ 133.96 2021 $ 21.43 $ 90.30 $ 82.04 The following table summarizes the range of low and high diesel spot prices per barrel using NYMEX ULSD prompt-month futures for the periods indicated and the prices at period end: Diesel Spot Price Per Gallon Year Ended March 31, Low High At Period End 2023 $ 109.41 $ 215.69 $ 112.40 2022 $ 74.44 $ 186.37 $ 155.03 2021 $ 25.64 $ 82.64 $ 74.39 We believe volatility in commodity prices will continue, and our ability to adjust to and manage this volatility may impact our financial results.
Belvieu, Texas for the periods indicated and the prices at period end: Butane Spot Price Per Gallon Year Ended March 31, Low High At Period End 2024 $ 0.58 $ 1.14 $ 0.98 2023 $ 0.85 $ 1.65 $ 0.92 2022 $ 0.78 $ 2.01 $ 1.71 The following table summarizes the range of low and high Gulf Coast gasoline spot prices per barrel using NYMEX gasoline prompt-month futures for the periods indicated and the prices at period end: Gasoline Spot Price Per Barrel Year Ended March 31, Low High At Period End 2024 $ 83.15 $ 124.53 $ 115.97 2023 $ 86.06 $ 179.60 $ 113.42 2022 $ 81.95 $ 154.67 $ 133.96 The following table summarizes the range of low and high diesel spot prices per barrel using NYMEX ULSD prompt-month futures for the periods indicated and the prices at period end: Diesel Spot Price Per Barrel Year Ended March 31, Low High At Period End 2024 $ 93.76 $ 146.22 $ 109.86 2023 $ 109.41 $ 215.69 $ 112.40 2022 $ 74.44 $ 186.37 $ 155.03 We believe volatility in commodity prices will continue, and our ability to adjust to and manage this volatility may impact our financial results.
Belvieu, Texas Propane Spot Price Per Gallon Propane Spot Price Per Gallon Year Ended March 31, Low High At Period End Low High At Period End 2023 $ 0.63 $ 1.34 $ 0.74 $ 0.64 $ 1.39 $ 0.78 2022 $ 0.67 $ 1.64 $ 1.37 $ 0.72 $ 1.63 $ 1.39 2021 $ 0.23 $ 1.53 $ 0.86 $ 0.25 $ 1.07 $ 0.92 The following table summarizes the range of low and high butane spot prices per gallon at Mt.
Belvieu, Texas Propane Spot Price Per Gallon Propane Spot Price Per Gallon Year Ended March 31, Low High At Period End Low High At Period End 2024 $ 0.49 $ 0.91 $ 0.78 $ 0.53 $ 0.97 $ 0.84 2023 $ 0.63 $ 1.34 $ 0.74 $ 0.64 $ 1.39 $ 0.78 2022 $ 0.67 $ 1.64 $ 1.37 $ 0.72 $ 1.63 $ 1.39 The following table summarizes the range of low and high butane spot prices per gallon at Mt.
The increases in revenues and cost of sales, excluding the impact of derivatives, were due to an increased supply of biodiesel to sell during the current year compared to the prior year period due to favorable supply contracts entered into in the prior year. The increase was also related to the increase in asphalt revenues due to increased supply.
Other Products Sales and Cost of Sales-Excluding Impact of Derivatives. The increases in sales and cost of sales, excluding the impact of derivatives, were due to an increased supply of biodiesel to sell during the current year compared to the prior year period due to favorable supply contracts entered into in the prior year.
These are transactions in which we transact to purchase product from a counterparty and sell the same volumes of product to the same counterparty at a different location or time. The revenues, cost of sales and volumes are all netted for these transactions. Crude Oil Transportation and Other Revenues.
Buy/sell transactions are transactions in which we purchase product from a counterparty and sell the same volumes of product to the same counterparty at a different location or time. The sales, cost of sales and volumes are netted for these transactions.
See Note 15 to our consolidated financial statements included in this Annual Report for information regarding our lease obligations and timing of our expected lease payments. Pipeline Commitments Our pipeline commitments are noncancelable agreements with crude oil pipeline operators, which guarantee us minimum monthly shipping capacity on their pipelines.
See Note 15 to our consolidated financial statements included in this Annual Report for information regarding our lease obligations and timing of our expected lease payments. Pipeline Commitments Our pipeline commitment is a noncancelable agreement with a crude oil pipeline operator, which guarantee us minimum monthly shipping capacity on the pipeline.
Further, EBITDA and Adjusted EBITDA, as we define them, may not be comparable to EBITDA, Adjusted EBITDA, or similarly titled measures used by other entities. 73 Other than for the TPSL, Mid-Con, and Gas Blending businesses, which are included in discontinued operations, and certain businesses within our Liquids Logistics segment, for purposes of our Adjusted EBITDA calculation, we make a distinction between realized and unrealized gains and losses on derivatives.
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.
The amounts for the year ended March 31, 2022 includes net realized losses of $83.5 million and net unrealized gains of $45.0 million associated with derivative instruments related to our hedge of the CMA Differential Roll. Crude Oil Product Margin .
The amounts in the previous sentence for the year ended March 31, 2022 include net realized losses of $83.5 million and net unrealized gains of $45.0 million associated with derivative instruments related to our hedge of the CMA Differential Roll. Crude Oil Transportation and Other Sales.
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.
There were no open hedge positions as of March 31, 2024. 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.
During the year ended March 31, 2023, we sold an airplane for a gain of $1.3 million, which was partially offset by a loss recorded to write-off the remaining amount of a loan receivable, due July 31, 2023, that was prepaid by the debtor (as discussed further in Note 2 to our consolidated financial statements included in this Annual Report) and an impairment loss recorded on the sublease of a building we were no longer using.
During the year ended March 31, 2023, we sold an airplane for a gain of $1.3 million, which was partially offset by a loss recorded to write-off the remaining amount of a loan receivable, due July 31, 2023, that was prepaid by the debtor and an impairment loss recorded on the sublease of a building we were no longer using.
In addition, if we see a continuation or acceleration of fiscal year 2023’s inflationary conditions, rising interest rates, supply chain disruptions and tight labor markets, then we may also see higher costs of operating our assets and executing on our capital projects in fiscal year 2024.
In addition, if we see a continuation or acceleration of fiscal year 2023’s inflationary conditions, rising interest rates, supply chain disruptions and tight labor markets, we may also see higher costs of operating our assets and executing on our capital projects in fiscal year 2025. In an effort to curb inflation, the U.S.
Other Products Derivatives Loss. Our derivatives of other products included $24.6 million of net realized losses on derivatives and $0.1 million unrealized gains on derivatives during the year ended March 31, 2023.
Other Products Derivative (Gain) Loss. Our derivatives of other products included $11.5 million of net realized gains on derivatives and $0.1 million unrealized losses on derivatives during the year ended March 31, 2024.
Derivative Financial Instruments We record all derivative financial instrument contracts at fair value in our consolidated balance sheets except for normal purchase and normal sale transactions that are expected to result in physical delivery. Changes in the fair value are recorded within revenue (for sales contracts) or cost of sales (for purchase contracts) in our consolidated statements of operations.
Derivative Financial Instruments We record all derivative financial instrument contracts at fair value in our consolidated balance sheets except for normal purchase and normal sale transactions that are expected to result in physical delivery.
The increase of $0.4 million during the year ended March 31, 2023 was due primarily to higher income from certain water solutions operations during the year ended March 31, 2023 and a loss of $0.2 million from the operations of Sawtooth during the year ended March 31, 2022, partially offset by lower income from certain recycling operations during the year ended March 31, 2023. 64 Segment Operating Results for the Years Ended March 31, 2022 and 2021 Water Solutions The following table summarizes the operating results of our Water Solutions segment for the periods indicated.
The increase of $0.4 million during the year ended March 31, 2023 was due primarily to higher income from certain water solutions operations during the year ended March 31, 2023 and a loss of $0.2 million from the operations of Sawtooth during the year ended March 31, 2022, partially offset by lower income from certain recycling operations during the year ended March 31, 2023.
(3) Amounts represent expenses we incurred related to legal and advisory costs associated with acquisitions. 74 (4) Amounts represent the non-cash valuation adjustment of contingent consideration liabilities, offset by the cash payments, related to royalty agreements acquired as part of acquisitions in our Water Solutions segment.
(3) Amounts represent the non-cash valuation adjustment of contingent consideration liabilities, offset by the cash payments, related to royalty agreements acquired as part of acquisitions in our Water Solutions segment.
Short-Term Liquidity Our principal sources of short-term liquidity consist of cash flows from our operations and borrowings under our ABL Facility, which we believe will provide liquidity to operate our business, manage our working capital requirements and repay current maturities. The ABL Facility commitments are $600.0 million which includes a sub-limit for letters of credit of $250.0 million.
Short-Term Liquidity Our principal sources of short-term liquidity consist of cash flows from our operations and borrowings under the ABL Facility, which we believe will provide liquidity to operate our business, manage our working capital requirements and repay current maturities.
Our Liquids Logistics segment generated operating income of $66.6 million during the year ended March 31, 2023, compared to an operating loss of $8.4 million during the year ended March 31, 2022.
Our Liquids Logistics segment generated operating income of $2.5 million during the year ended March 31, 2024, compared to operating income of $66.6 million during the year ended March 31, 2023.
Gain on Early Extinguishment of Liabilities, Net Gain on early extinguishment of liabilities, net was $6.2 million during the year ended March 31, 2023, compared to $1.8 million during the year ended March 31, 2022.
(Loss) Gain on Early Extinguishment of Liabilities, Net Loss on early extinguishment of liabilities, net was $55.3 million during the year ended March 31, 2024, compared to a gain on early extinguishment of liabilities, net of $6.2 million during the year ended March 31, 2023.
Cash Flows The following table summarizes the sources (uses) of our cash flows from continuing operations for the periods indicated: Year Ended March 31, Cash Flows Provided by (Used in): 2023 2022 2021 (in thousands) Operating activities, before changes in operating assets and liabilities $ 447,024 $ 342,362 $ 295,301 Changes in operating assets and liabilities (1,838) (136,516) 10,462 Operating activities-continuing operations $ 445,186 $ 205,846 $ 305,763 Investing activities-continuing operations $ 64,188 $ (212,408) $ (221,493) Financing activities-continuing operations $ (507,765) $ 5,555 $ (100,376) Operating Activities-Continuing Operations.
Cash Flows The following table summarizes the sources (uses) of our cash flows for the periods indicated: Year Ended March 31, Cash Flows Provided by (Used in): 2024 2023 2022 (in thousands) Operating activities, before changes in operating assets and liabilities $ 324,993 $ 447,024 $ 342,362 Changes in operating assets and liabilities 51,171 (1,838) (136,516) Operating activities $ 376,164 $ 445,186 $ 205,846 Investing activities $ (83,761) $ 64,188 $ (212,408) Financing activities $ (258,925) $ (507,765) $ 5,555 Operating Activities.
During the year ended March 31, 2022, our cost of wholesale propane sales included $2.0 million of net unrealized gains on derivatives and 61 $18.5 million of net realized gains on derivatives.
Our cost of sales during the year ended March 31, 2024 included $0.2 million of net realized losses on derivatives and $1.2 million of net unrealized gains on derivatives.
During the year ended March 31, 2022, we recorded a net loss of $29.8 million primarily related to the write-down of an inactive saltwater disposal facility and damaged equipment and wells at other facilities, abandonment of certain capital projects and the sale of certain other miscellaneous assets.
During the year ended March 31, 2023, we recorded a net loss of $26.3 million primarily related to the sale of certain assets and a net loss of $21.8 million to write down the value of an inactive saltwater disposal facility and damaged equipment at another saltwater disposal facility, as well as the abandonment of certain capital projects and the retirement of certain assets.
In addition, we were also negatively impacted by lower location differentials as the product we contracted to purchase in the beginning of the season was continuing to compete with product purchased in the discounted market. Other Products Sales and Cost of Sales-Excluding Impact of Derivatives.
In addition, we were also negatively impacted by lower location differentials as the product we contracted to purchase in the beginning of the season was continuing to compete with product purchased in the discounted market. Butane Derivative (Gain) Loss.
This revenue includes storage, terminaling and transportation services income. The decrease during the year ended March 31, 2023 was due to the disposition of Sawtooth in June 2021 as well as less throughput in certain of our propane and butane terminals. Cost of sales increased due to higher chemical costs at our natural gas liquids terminals.
Service Sales and Cost of Sales. The sales include storage, terminaling and transportation services income. The decrease during the year ended March 31, 2023 was due to the disposition of Sawtooth Caverns, LLC (“Sawtooth”) in June 2021 as well as less throughput in certain of our propane and butane terminals.
Our cost of sales during the year ended March 31, 2023 included $35.5 million of net realized losses on derivatives, driven by increasing crude oil prices, and $50.1 million of net unrealized gains on derivatives.
Our cost of sales during the year ended March 31, 2024 included $58.4 million of net realized gains on derivatives, driven by decreasing crude oil prices, and $65.8 million of net unrealized losses on derivatives.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+5 added−0 removed10 unchanged
Biggest changeSee “Critical Accounting Estimates” above for a discussion of how we determine the fair value of our financial derivative instruments. 86 The following table summarizes the hypothetical impact on the March 31, 2023 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 (Crude Oil Logistics segment) $ 2,048 Propane (Liquids Logistics segment) $ (1,414) Butane (Liquids Logistics segment) $ (4,096) Refined Products (Liquids Logistics segment) $ (4,660) Other Products (Liquids Logistics segment) $ 8,957 Canadian dollars (Liquids Logistics segment) $ 124 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.
Biggest changeThe following table summarizes the hypothetical impact on the March 31, 2024 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) $ (1,504) Crude oil (Crude Oil Logistics segment) $ (152) Propane (Liquids Logistics segment) $ (1,432) Butane (Liquids Logistics segment) $ (6,186) Refined Products (Liquids Logistics segment) $ (2,867) Other Products (Liquids Logistics segment) $ (912) Canadian dollars (Liquids Logistics segment) $ 124 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.
On or after July 1, 2024, the holders of our Class D Preferred Units can elect, from time to time, for the distributions to be calculated based on a floating rate equal to the applicable three-month LIBOR interest rate (or alternative rate as determined in the Partnership Agreement) plus a spread of 7.00% (“Class D Variable Rate”, as defined in the Partnership Agreement).
On or after July 1, 2024, the holders of our Class D Preferred Units can elect, from time to time, for the distributions to be calculated based on a floating rate equal to the applicable three-month LIBOR interest rate (or alternative rate as determined in accordance with our Partnership Agreement) plus a spread of 7.00% (“Class D Variable Rate”, as defined in our Partnership Agreement).
All changes in the fair value of our physical contracts that do not qualify as normal purchases and normal sales and settlements (whether cash transactions or non-cash mark-to-market adjustments) are reported either within revenue (for sales contracts) or cost of sales (for purchase contracts) in our consolidated statements of operations, regardless of whether the contract is physically or financially settled.
All changes in the fair value of our physical 88 contracts that do not qualify as normal purchases and normal sales and settlements (whether cash transactions or non-cash mark-to-market adjustments) are reported either within revenue (for sales contracts) or cost of sales (for purchase contracts) in our consolidated statements of operations, regardless of whether the contract is physically or financially settled, and within cash flows from operations in our consolidated statements of cash flows.
A change in interest rates of 0.125% would result in an increase or decrease of our Class B Preferred Unit distribution of $0.1 million, based on the Class B Preferred Units outstanding at March 31, 2023.
A change in interest rates of 0.125% would result in an increase or decrease of our Class B Preferred Unit distribution of $0.1 million, based on the Class B Preferred Units outstanding at March 31, 2024.
For our Class C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units, distributions on and after April 15, 2024 will accumulate at a percentage of the $25.00 liquidation preference equal to the applicable three-month LIBOR interest rate (or alternative rate as determined in the amended and restated limited partnership agreement (the “Partnership Agreement”)) plus a spread of 7.384%.
On April 15, 2024, the distributions for the Class C Preferred Units will accumulate at a percentage of the $25.00 liquidation preference equal to the applicable three-month LIBOR interest rate (or alternative rate as determined in accordance with our amended and restated limited partnership agreement (“Partnership Agreement”)) plus a spread of 7.384%.
At March 31, 2023, our primary counterparties were retailers, resellers, energy marketers, producers, refiners, and dealers. 87
At March 31, 2024, our primary counterparties were retailers, resellers, energy marketers, producers, refiners, and dealers. 89
Conversely, changes in interest rates impact the fair value of our fixed-rate debt but do not impact its cash flows. 85 The ABL Facility is variable-rate debt with interest rates that are generally indexed to the prime rate or SOFR, an adjusted forward-looking term rate based on the secured overnight financing rate.
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 prime rate or SOFR. At March 31, 2024, there were no borrowings under the ABL Facility.
At March 31, 2023, we had $138.0 million of outstanding borrowings under the ABL Facility at a weighted average interest rate of 8.70%. 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 March 31, 2023.
A change in interest rates of 0.125% would result in an increase or decrease of our annual interest expense of $0.9 million, based on borrowings outstanding at March 31, 2024.
On July 1, 2022, the Class B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class B Preferred Units”) distribution rate changed from a fixed rate of 9.00% to a floating rate of the three-month London Interbank Offered Rate (“LIBOR”) interest rate (4.77% for the quarter ended March 31, 2023) plus a spread of 7.213%.
The current distribution rate for the Class B Preferred Units is a floating rate of the three-month London Interbank Offered Rate (“LIBOR”) interest rate (5.3314% for the quarter ended March 31, 2024) plus a spread of 7.213%.
Added
The Term Loan B is variable-rate debt with interest rates that are generally indexed to the SOFR. At March 31, 2024, there was $700.0 million of outstanding borrowings under the Term Loan B at a weighted average interest rate of 5.33% plus a margin of 4.50%.
Added
In March 2024, we entered into a $200.0 million interest rate swap to reduce the variability of cash outflows associated with our floating-rate, SOFR-based borrowings, including borrowings on the Term Loan B.
Added
An increase of 10% in the value of the underlying interest rate swap would result in a net change in the fair value of our interest rate swap of $0.1 million at March 31, 2024.
Added
Effective July 3, 2023, the reference to LIBOR in the formulation for the distribution rate in these securities was replaced with three-month CME Term SOFR, as calculated and published by CME Group Benchmark Administration, Ltd., plus a tenor spread adjustment of 0.26161% in accordance with the Adjustable Interest Rate (LIBOR) Act (“LIBOR Act”), and the rules implementing the LIBOR Act.
Added
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations–Critical Accounting Estimates” for a discussion of how we determine the fair value of our financial derivative instruments.

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