NGL Energy Partners is no longer a diversified midstream partnership in any economic sense. It is a Delaware Basin produced-water system with two leftover logistics businesses and a capital stack that still treats common unitholders as residual claimants. The June quarter showed the water franchise compounding: physically disposed volumes rose at a high-teens rate, Water Solutions generated almost all of adjusted earnings before interest, taxes, depreciation and amortization, and management lifted full-year guidance after one print. That operating story is real. The investment debate is whether cash after secured-debt service, three preferred classes, and a heavy growth-spending year ever becomes a common-unit claim, or whether the unit price already assumes that recapitalization succeeds.
Water Solutions produced $180 million of adjusted EBITDA in the June quarter against $186 million for the whole partnership. Physically disposed produced water ran 3.3 million barrels a day. The remaining crude and liquids lines contributed almost nothing once corporate overhead is counted, which is the intended result of last year's wholesale-propane and refined-products sales. The tension is capital structure, not geology. Long-term debt sits above $3.2 billion, cash is negligible, and Class D, Class B, and Class C preferreds still absorb a high-double-digit million coupon each year before a single common distribution is even discussed. Common units have received nothing since late 2020.
The May LEX II extension, a sixty-mile large-diameter add-on underwritten by a new volume-commitment contract in Eddy County, is the growth project that has to convert this volume run-rate into another step-up in contracted cash. The March term-loan refinancing already swapped some of the most expensive preferred paper for secured debt. The open question for the next several quarters is whether incremental Delaware barrels and the calendar-year LEX II in-service date generate enough surplus, after interest and preferred distributions, to retire more Class D units rather than merely fund the next pipe.