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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: S. maltophilia who wrote (78106)	9/13/2025 5:43:45 PM
From: Elroy	Read Replies (1) \| Respond to of 78478

NGL's successful business (which produces 85% of annual EBITDA) is water transport. It's like a water pipeline, transporting the water used for oil production to treatment facilities. They have contracts with customers with guaranteed minimum volumes, and the average contract is (I think) 9-10 years. Look at EBITDA, not at revenue. They've been selling portions of the other two businesses to pay down debt, and that may be why sales are declining for three year. Despite 3 years of sales declines, EBITDA is going up because the water business is doing well. A peer company (about 1/3rd the size of NGL's water business) is ARIS. It just got acquired, at I think 7x EBITDA. The preferreds don't care about company growth - they just want the partnership to be able to pay debt interest, preferred distributions and Cap Ex each quarter/year. NGL is growing (water) slowly, but honestly the growth affects the common units, not the preferreds. The price of the preferreds is already $24, and they may go as high as $25.50 (??), but even if the partnership's sales and profit triple, the par value is $25 and the preferreds aren't going much above that. But they will pay their 11.8% distribution. As long as the equipment doesn't need replacing. They have maintenance Cap Ex. Very manageable. About $75m per year. The equipment is water pipelines. Similar to oil and gas pipelines, once built and put into operation Cap Ex isn't too much. NGL did just build a major expansion pipeline last year for $120m cash. It's 40% full. They say they can increase it toward 100% (when demand materializes) at minimal Cap Ex now that it's built and in operation. I just say this because it shows they don't think the business is going away - the opposite, they just did a major expansion and spent $120m on it last year. Now they're just waiting for the existing customers to grow into the newly built and not at capacity new pipeline (it's called Lex 2, but it's not called Lex Luthor 2 which may have been a more interesting name).