NGL Energy details new long-term supply contract with Extraction

NGL Energy Partners LP further detailed the previously announced settlement of disputed midstream contracts between its subsidiary Grand Mesa Pipeline LLC and Extraction Oil & Gas Inc. NGL Energy said it also expects a fiscal 2021 adjusted EBITDA of $500 million and a fiscal 2022 adjusted EBITDA in the range of $570 million to $600 million.

The settlement included a new long-term supply agreement with NGL Energy unit NGL Crude Logistics LLC, which covers acreage dedication in the DJ Basin, retains Extraction's crude oil volumes for shipping on the Grand Mesa pipeline and applies a new rate structure, according to a Jan. 19 news release. NGL Energy will also get a liquidated payment of $35 million for Grand Mesa's remaining claim on the effective date of Extraction's reorganization plan.

In addition, NGL Energy said it lowered its fiscal 2021 adjusted EBITDA guidance by $45 million due to lower crude oil volumes delivered by Extraction and the litigation expenses related to the bankruptcy.

NGL Energy also anticipates a non-cash impairment charge in the range of $380 million to $400 million in the quarter ending Dec. 31, 2020. The impairment is related to the impacts of Extraction's bankruptcy on the partnership's assets and goodwill in the crude oil logistics segment, which had a net book value of roughly $768 million.

NGL Energy forecasts its fiscal 2022 capital expenditures to be between $100 million and $125 million. The partnership has also initiated adjusted EBITDA guidance for fiscal 2022 of $570 million to $600 million.

Before reaching the settlement, Extraction in its Chapter 11 bankruptcy filing nixed two transportation contracts with Grand Mesa pipeline. Extraction has already received the U.S. Bankruptcy Court for the District of Delaware's confirmation of its restructuring plans and expects to emerge from bankruptcy in January.