NGL Energy Partners LP (NGL): SWOT Analysis [Nov-2025 Updated]

You need to know if NGL Energy Partners LP (NGL) can finally outrun its debt, and the answer, as of late 2025, is a cautious yes, but the clock is ticking. The company is strategically leaning on its dominant, fee-based Water Solutions segment-the true cash engine-to chip away at a stubborn $2.2 billion net debt load and drive toward an Adjusted EBITDA of up to $680 million this fiscal year. This pivot is smart, but the pressure from high interest rates and the goal of hitting a 3.5x leverage ratio means every decision counts; let's look at the strengths they're relying on and the threats they defintely need to dodge.

NGL Energy Partners LP (NGL) - SWOT Analysis: Strengths

Dominant position in Water Solutions, a stable, fee-based segment.

You want to see a business unit that drives stability and growth, and for NGL Energy Partners LP, that's defintely the Water Solutions segment. This segment is not just a side business; it's the core engine, generating a record $542.0 million in Adjusted EBITDA for the full Fiscal Year 2025 (FY2025). [cite: 6 in previous step]

This dominance is a huge strength because the revenue stream is largely fee-based, which means it's less exposed to volatile commodity prices. The stability is further locked in by Minimum Volume Commitments (MVCs), essentially contracts that require producers to pay for a minimum amount of water disposal even if they don't use it all. This segment contributed approximately 85% of the total segment Adjusted EBITDA in the second quarter of Fiscal Year 2026, showing a highly concentrated and reliable source of cash flow. [cite: 5 in previous step, 8 in previous step]

In FY2025's final quarter, NGL processed approximately 2.73 million barrels of produced water per day, a 14.2% increase year-over-year. [cite: 6 in previous step] That's a lot of water, and it's a business that only grows as drilling activity continues. It's a non-negotiable service for producers.

Significant progress in debt reduction, targeting a leverage ratio near 3.5x by late 2025.

Honestly, the biggest risk for any midstream company is often its balance sheet, but NGL has been laser-focused on deleveraging (reducing debt). Their target is to get the total leverage ratio (Debt-to-Adjusted EBITDA) down to the 3.5x range, which is a key psychological and financial hurdle for credit rating agencies and investors. [cite: 14 in previous step]

To get there, management has been smart about selling non-core assets. They executed sales totaling approximately $270 million in May 2025, with the proceeds immediately going to pay down debt and improve the capital structure. [cite: 5 in previous step, 12 in previous step] Plus, they aggressively repurchased $100 million of the high-cost Class D preferred units by September 30, 2025, directly removing expensive equity claims. [cite: 8 in previous step] This focus is already paying off in lower borrowing costs, evidenced by the Term Loan B SOFR margin being reduced to 3.50% in September 2025. [cite: 5 in previous step] That's a clear sign of financial health improving.

Diversified midstream assets across key US production basins.

While Water Solutions is the main focus, NGL still maintains a diverse set of midstream assets that provide strategic optionality and geographic reach. This diversification helps mitigate risks tied to a single commodity or basin, even as they streamline the portfolio.

Their assets span all three major midstream categories: Water Solutions, Crude Oil Logistics, and Liquids Logistics. The Water Solutions network is the largest integrated system in the Delaware Basin but also has operations in the Eagle Ford and DJ Basins. [cite: 5 in previous step, 5]

The Crude Oil Logistics segment, for example, is a major player in the US midcontinent. The company owns 100% of the Grand Mesa Pipeline, a critical 550-mile line that moves up to 150,000 barrels per day from the DJ Basin to Cushing, Oklahoma. They also own significant storage capacity.

Segment	Key Asset/Service	Geographic Reach/Capacity
Water Solutions	Produced Water Disposal/Recycling	Delaware, Eagle Ford, and DJ Basins
Crude Oil Logistics	Grand Mesa Pipeline	DJ Basin to Cushing, OK (150,000 bpd capacity)
Crude Oil Logistics	Crude Oil Storage	7.7 million barrels of storage in Cushing, OK
Liquids Logistics	NGL Marketing and Storage	United States and Canada

Strong Adjusted EBITDA guidance for FY 2025, projected between $640 million and $680 million.

The partnership's financial performance in the most recent fiscal year confirms their operational strength. For the full Fiscal Year 2025, NGL reported an actual consolidated Adjusted EBITDA of $622.9 million, which exceeded their previous guidance of $620 million. [cite: 6 in previous step, 12 in previous step] That's a solid beat.

Here's the quick math on that strength: the Water Solutions segment alone contributed $542.0 million of that total. [cite: 6 in previous step] Looking forward, management has already raised the Fiscal Year 2026 Adjusted EBITDA guidance range to $650 million to $660 million, showing confidence in continued growth, mostly fueled by new contracts and expansion in the Water Solutions business. [cite: 7 in previous step] That growth trajectory is a powerful signal to the market.

NGL Energy Partners LP (NGL) - SWOT Analysis: Weaknesses

High absolute net debt, still around $3.0 billion, limiting financial flexibility.

You cannot ignore the sheer size of the debt NGL Energy Partners LP is carrying. As of the third quarter of Fiscal Year 2025 (ending December 31, 2024), the long-term debt remained stubbornly high at approximately $3.08 billion. Even after factoring in cash, the net debt sits near $3.0 billion, a level that is burdensome and restrictive. This massive debt load, coupled with a high net debt-to-operating cash flow ratio, is a significant structural weakness. It forces the company to prioritize deleveraging over other capital allocation strategies, like common unit distributions.

Here's the quick math on the leverage challenge, using the Q1 FY2025 net debt figure:

• Net Debt (Q1 FY2025): $3.021 billion
• Operating Cash Flow (FY2023, an abnormally strong year): $447 million
• Net Debt-to-Operating Cash Flow: 6.76x

A leverage ratio this high, over 6.0x, is defintely a red flag for a Master Limited Partnership (MLP). It restricts your ability to maneuver when market conditions shift.

Limited common unit distribution, currently suspended, dampening investor appeal.

The biggest turn-off for many MLP investors is the lack of a reliable payout, and NGL Energy Partners LP has not declared a common unit distribution since 2020. This common unit distribution is currently suspended (effectively $0.00 per unit annually), which severely dampens the appeal for income-focused investors who are the core audience for MLPs. The capital structure is still under pressure, mainly from the preferred equity. The Class D series preferred units, in particular, could see a redemption obligation of up to $600 million arise in early 2028, and the company is actively repurchasing these expensive preferred units to address this. This obligation, plus the high debt, makes the reinstatement of a meaningful common distribution unlikely until at least 2029.

Exposure to commodity price volatility in Crude Oil Logistics segment.

While the company is strategically shifting its focus to the fee-based Water Solutions segment, the Crude Oil Logistics segment still exposes the partnership to commodity price volatility. Even though the segment relies on long-term, fixed-rate contracts with minimum volume commitments (MVCs), the operating income can still be negatively impacted by market swings.

For example, in the third quarter of Fiscal Year 2025, operating income for the Crude Oil Logistics segment decreased by $7.0 million compared to the prior year period. This decrease was directly linked to lower crude oil prices and an increase in derivative losses, despite the company's use of derivative instruments to secure a margin of approximately $0.20 per barrel on certain volumes. This shows the hedging strategy is not a perfect shield against market risk.

Capital expenditure requirements remain high to maintain and expand infrastructure.

To maintain its competitive edge and drive growth, NGL Energy Partners LP must commit significant capital expenditures (CapEx), which eats into the cash flow available for debt reduction or common unit distributions. The strategic pivot to the Water Solutions segment requires continuous investment in new infrastructure, such as the expansion of the Lea County Express Pipeline system (LEX II).

The CapEx requirements are substantial for the near-term future, as reflected in the Fiscal Year 2026 guidance:

CapEx Type	FY2026 Guidance (Announced May 2025)	Updated Growth CapEx (Announced November 2025)
Maintenance CapEx	$45 million	$45 million
Growth CapEx	$60 million	Increased to $160 million
Total CapEx	$105 million	$205 million

The dramatic increase in the growth CapEx guidance to $160 million, driven by new contracts in the Water Solutions segment, is a double-edged sword: it signals growth but also means a much larger cash outlay that must be financed before the full Adjusted EBITDA benefit is realized in Fiscal Year 2027.

NGL Energy Partners LP (NGL) - SWOT Analysis: Opportunities

Expansion of Core Water Solutions Footprint and Capacity

The clear opportunity for NGL Energy Partners LP lies in doubling down on its dominant Water Solutions segment, the single high-conviction growth driver for the Partnership. This segment delivered a record Adjusted EBITDA of $542.0 million for the full Fiscal Year 2025, a 6.6% increase over the prior year. You should see this as a platform for future expansion, especially considering the Delaware Basin's high water-to-crude ratios.

The core of this growth is the continued build-out of integrated pipeline systems. The Lea County Express Pipeline system (LEX II) expansion, which commenced operations in October 2024, is already driving higher water pipeline revenue. The Partnership's total produced water volumes processed in FY2025 reached approximately 2.63 million barrels per day, an 8.6% increase from the prior year. This trend confirms the demand for NGL's services in its existing footprint, which spans the Permian, Eagle Ford, DJ, Granite Wash, and Eaglebine basins. While the Haynesville basin isn't an announced expansion, the model is proven and scalable to other high-growth areas when the right bolt-on acquisition or greenfield project surfaces.

• Achieve greater operating leverage from the LEX II pipeline.
• Capture additional contracted volumes in the Delaware Basin.
• Leverage 6.5 million bpd of permitted disposal capacity across the system.

Here's the quick math on the segment's strength:

Water Solutions Metric	Fiscal Year 2025 Value	Year-over-Year Change
Adjusted EBITDA	$542.0 million	+6.6%
Average Daily Volumes Processed	2.63 million barrels per day	+8.6%
Q4 2025 Volume Increase	2.73 million barrels per day	+14.2% (Q4 2025 vs Q4 2024)

Strategic Asset Sales Accelerate Debt Deleveraging

The most immediate and impactful opportunity is the deliberate strategic pivot away from volatile, non-core assets to focus on the stable, fee-based Water Solutions business. This is defintely a necessary move to strengthen the balance sheet. NGL completed a series of non-core asset sales totaling approximately $270 million in the first half of 2025, a massive step toward deleveraging.

These sales included 17 natural gas liquids terminals, the refined products Rack Marketing business, and the winding down of the biodiesel business. The proceeds were immediately deployed to improve the capital structure. Specifically, NGL used the cash to pay off the borrowings under its Asset-Based Revolving Credit Facility (ABL Facility), which stood at $109.0 million as of March 31, 2025. Plus, management repurchased $100 million of the high-rate Class D preferred units during the six months ended September 30, 2025. This clear focus on debt reduction improves the financial risk profile and frees up working capital, which is critical for supporting future growth CapEx in the Water Solutions segment.

• Reduce volatility by exiting the Liquids Logistics segment.
• Improve credit profile by paying down high-cost debt.
• Free up working capital, estimated at $60-$70 million annually.

Improving Oil and Gas Drilling Activity Drives Higher Volumes Across Segments

While the broader US Lower 48 rig count is expected to remain largely flat in 2025, the overall US crude oil production is still projected to see a slight increase, moving from 13.23 million bbl/day in 2024 to 13.69 million bbl/day in 2025. This steady production environment directly benefits the Water Solutions segment through higher produced water volumes, as evidenced by the 8.6% volume growth in FY2025.

In the Crude Oil Logistics segment, the opportunity is to reverse the recent volume decline on the Grand Mesa Pipeline. While Q4 FY2025 saw volumes average approximately 56,000 barrels per day, down from the prior year, NGL signed a new long-term acreage dedication contract with Prairie Operating. This new contract has the potential to significantly enhance volumes and profitability, with a target of increasing crude oil volumes on the Grand Mesa pipeline to 100,000 barrels per day. That's a huge potential jump in throughput, and it shows the remaining core logistics business can still secure high-value, long-term contracts.

• Capitalize on new acreage dedication to boost Grand Mesa throughput.
• Benefit from stable US oil production growth of 13.69 million bbl/day in 2025.
• Secure additional long-term fee-based contracts in the Water Solutions segment.

NGL Energy Partners LP (NGL) - SWOT Analysis: Threats

You're running a business highly concentrated in a single, regulated service-produced water disposal-which means your financial stability is directly exposed to shifts in energy prices, regulatory mandates, and interest rates. The core threat is that external forces could cut the volume of water you process or dramatically increase the cost of doing business, or both. For NGL Energy Partners LP, this is not a theoretical risk; it's a near-term reality we see mapped out in the latest market and regulatory data.

Regulatory changes impacting produced water disposal or carbon emissions

The most immediate and material threat to NGL's Water Solutions segment, which contributed approximately 85% of total Adjusted EBITDA in Q2 Fiscal Year 2026, stems from new state-level regulations on produced water disposal and reuse. Your primary operating areas, the Delaware and DJ Basins, are ground zero for these changes.

In Texas, the Railroad Commission of Texas (RRC) has already imposed restrictions on underground injection wells in seismic response areas like the Northern Culberson-Reeves area, and is contemplating further policy changes for new saltwater disposal wells. This is a clear threat to your permitted disposal capacity of approximately 6.5 million bpd (barrels per day) across your system.

Also, Colorado, home to your DJ Basin operations, has introduced the first statewide mandate for produced water reuse, requiring operators to reuse at least 4% of produced water by 2026, escalating to 10% by 2030. This policy forces your customers to divert water away from your disposal wells and into recycling facilities, potentially reducing the 2.63 million barrels per day of water processed in Fiscal Year 2025.

• Texas RRC restrictions: Limit disposal volumes due to seismic activity.
• Colorado mandate: Requires 4% water reuse by 2026, cutting disposal volumes.
• Increased compliance costs: New rules force investment in costly recycling infrastructure.

Sustained low oil and gas prices could reduce customer drilling activity and volumes

Your revenue is fundamentally tied to the drilling and completion activity of your exploration and production (E&P) customers. If oil prices fall and stay low, E&P companies will cut their capital expenditure (CapEx), meaning less drilling and, crucially for you, less produced water needing disposal. This is a simple equation: lower prices mean lower volumes for NGL.

Current forecasts for West Texas Intermediate (WTI) crude oil near the end of 2025 are clustering in the low-to-mid $60s per barrel, with some projections showing a decline into the mid-$50s or even $53 per barrel for WTI into early 2026. Should WTI prices drop below the $55 to $60 range, many producers will pull back on drilling new wells, challenging the stability provided by your Minimum Volume Commitments (MVCs).

Interest rate hikes increase the cost of servicing the $2.2 billion in debt

Your substantial debt load, which includes a variable-rate Term Loan B, makes you highly sensitive to interest rate movements. While your total long-term debt is closer to $2.9 billion, the cost of servicing this debt is a major drain on cash flow. Specifically, a significant portion of your debt, like your Term Loan B, is tied to the Secured Overnight Financing Rate (SOFR) plus a margin, which was recently amended to 3.50%.

Here's the quick math: with the SOFR rate currently around 3.91% as of November 2025, the all-in interest rate on that portion of the debt is approximately 7.41%. Even a minor increase in SOFR would immediately raise your interest expense, eating directly into Distributable Cash Flow (DCF). While some forecasts show SOFR easing slightly to around 3.74% by December 2025, the risk of the Federal Reserve reversing course on rate cuts due to persistent inflation is defintely real, keeping your debt service costs elevated.

Competition from larger, better-capitalized midstream operators

NGL operates in a capital-intensive sector against rivals that dwarf your scale. Your market capitalization is approximately $1.24 billion as of November 2025. Compare this to a key competitor like Energy Transfer LP, which has a market capitalization of approximately $57.77 billion, or ONEOK Inc., with a market cap of approximately $44.38 billion.

This massive disparity in scale creates a major competitive threat:

• Pricing Power: Larger competitors can offer better rates to producers, especially on bundled services.
• Capital Access: They can raise capital more cheaply and quickly to fund new infrastructure or acquire smaller players, accelerating their growth. Energy Transfer, for instance, is projecting approximately $5 billion in organic growth capital for 2025 alone.
• Integration: Fully integrated players offer a one-stop-shop for crude, natural gas, and water logistics, making it harder for NGL to compete solely on its core Water Solutions segment.

The ability of these larger, better-capitalized firms to absorb regulatory changes, weather prolonged price downturns, and outspend you on growth projects is a constant, structural headwind.