NGL Energy Partners (NGL) risk factors, FY2025 10-K

Risks Related to Liquidity and Financing

1. 01We may not have sufficient cash to enable us to fund our operations, repay indebtedness or pay distributions to our unitholders following the establishment of cash reserves by our GP and the payment of costs and expenses, including reimbursement of expenses to our GP
2. 02Our substantial indebtedness may limit our flexibility to obtain financing and to pursue other business opportunities and our ability to service our debt could impact operations
3. 03Restrictions 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
4. 04The Partnership may be required by Class D Preferred Unitholders to redeem all or a portion of the Class D Preferred Units, which could require a substantial amount of cash
5. 05Increasing interest rates could impact our financing costs, our common unit price, our ability to issue equity or incur debt, and our ability to make cash distributions at our intended levels
6. 06and Class D Preferred Units converted from fixed rates to floating rates on October 15, 2024. Our results of operations, cash flows and financial position could be materially adversely affected by significant changes in interest rates
7. 07Our cash and cash equivalents may be exposed to failure of our banking institutions

Risks Related to the Operations of Our Business

1. 08Declining crude oil prices and crude production volumes could adversely impact our Water Solutions and Crude Oil Logistics segments
2. 09Our profitability could be negatively impacted by price and inventory risk related to our business
3. 10We are affected by competition from other midstream, transportation and terminaling and storage companies, some of which are larger, more firmly established and may have greater resources than we do
4. 11Our Water Solutions segment is in direct and indirect competition with other businesses, including disposal and other produced water treatment businesses
5. 12Our business would be adversely affected if service at our principal storage facilities, common carrier pipelines or railroads we use is interrupted
6. 13We lease certain facilities and equipment and therefore are subject to the possibility of increased costs to retain necessary land and equipment use
7. 14Our operations depend on various forms of storage and transportation for receipt and delivery of crude oil and natural gas liquids
8. 15Competition from alternative energy sources, energy efficiency and new technology may reduce the demand for propane and adversely affect our operating results
9. 16The Inflation Reduction Act of 2022 (“IRA”) could impact demand for hydrocarbon fuel products and impose new costs on certain customers
10. 17Seasonal weather conditions and natural or man-made disasters could severely disrupt normal operations and have an adverse effect on our business, financial position and results of operations
11. 18Weather conditions, including warm winters or dry or warm weather in the harvest season, may reduce the demand for propane, which could have a material adverse effect on our results of operations, cash flows, financial condition or liquidity
12. 19Growing our business by constructing new transportation systems and facilities subjects us to construction risks and risks that supplies for such systems and facilities will not be available upon completion thereof
13. 20We may face opposition to the operation of our pipelines and facilities from various groups
14. 21We depend on the leadership and involvement of key personnel for the success of our businesses, and we compete with other businesses to attract and retain qualified personnel

Risks Related to Regulatory Compliance

1. 22Our sales of crude oil, condensate, natural gas liquids and related transportation and hedging activities, and our processing of produced water, expose us to potential regulatory risks
2. 23Our business is subject to federal, state, provincial and local laws and regulations with respect to environmental, safety and other regulatory matters and the cost of compliance with, violation of or liabilities under, such laws and regulations could adversely affect our profitability
3. 24State and federal legislation and regulatory initiatives relating to our hydraulic fracturing customers could harm our business
4. 25Restrictions on drilling and related activities intended to protect certain species of wildlife or their habitat may adversely affect our customers’ ability to conduct drilling and related activities in some of the areas where we operate
5. 26For example, in May 2024, the dunes sagebrush lizard, which is found in areas where we operate, was listed as endangered under the ESA. In addition, the lesser prairie-chicken, which can also be found in areas where we operate, was listed under the ESA effective March 27, 2023
6. 27Federal and state legislation and regulatory initiatives relating to saltwater disposal wells could result in increased costs and additional operating restrictions or delays and could harm our business
7. 28Some of our operations are subject to the jurisdiction of the FERC and other operations may become subject in the future
8. 29FERC to establish a simplified and generally applicable ratemaking methodology for oil pipelines, keeping with its statutory mandate to ensure that oil pipelines’ rates are just and reasonable
9. 30We are subject to governmental regulation and other legal obligations related to privacy, data protection, and data security. Our actual or perceived failure to comply with such obligations could harm our business
10. 31Some of our operations cross the United States/Canada border and are subject to cross-border regulation

Risks Related to Our Partnership Structure and an Investment in Us

1. 32Our 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
2. 33Our GP and its affiliates have conflicts of interest with us and limited fiduciary duties to our unitholders, and they may favor their own interests to the detriment of us and our unitholders
3. 34Even if our unitholders are dissatisfied, they have limited voting rights and are not entitled to elect our GP or its directors
4. 35Our Partnership Agreement restricts the voting rights of unitholders owning 20% or more of our common units
5. 36Our GP interest or the control of our GP may be transferred to a third party without the consent of our unitholders
6. 37The IDRs of our GP may be transferred to a third party
7. 38Our GP has a limited call right that may require our unitholders to sell their common units at an undesirable time or price
8. 39Our Partnership Agreement requires that we distribute all of our available cash, which could limit our ability to grow and make acquisitions
9. 40We may issue additional units without the approval of our unitholders, which would dilute the interests of existing unitholders
10. 41Our GP, without the approval of our unitholders, 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. This could result in lower distributions to our unitholders
11. 42Our unitholders’ liability may not be limited if a court finds that unitholder action constitutes control of our business
12. 43Our unitholders may have liability to repay distributions that were wrongfully distributed to them
13. 44The Preferred Units give the holders thereof liquidation and distribution preferences over our common unitholders
14. 45The issuance of common units upon exercise of certain warrants would cause dilution to existing common unitholders and may place downward pressure on the trading price of our common units
15. 46Tax Risks to Our Unitholders
16. 47The anticipated after-tax economic benefit of an investment in our common units depends largely on our being treated as a partnership for federal income tax purposes. We have not requested, and do not plan to request, a ruling from the IRS with respect to our treatment as a partnership for federal income tax purposes
17. 48Our unitholders may be subject to limitation on their ability to deduct interest expense incurred by us
18. 49If we were subjected to a material amount of additional entity-level taxation by individual states, it would reduce our cash available for distribution to our unitholders
19. 50The 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
20. 51Changes in tax laws could adversely affect our performance
21. 52If the IRS contests the federal income tax positions we take, the market for our common units may be adversely impacted and the cost of any IRS contest will reduce our cash available for distribution to our unitholders
22. 53If the IRS makes audit adjustments to our income tax returns for tax years beginning after 2017, it may collect any resulting taxes (including any applicable penalties and interest) directly from us, in which case our cash available for distribution to our unitholders could be substantially reduced
23. 54Our unitholders will be required to pay taxes on their share of our income even if they do not receive any cash distributions from us
24. 55Certain actions that we may take, such as issuing additional units, may increase the federal income tax liability of unitholders
25. 56Tax gain or loss on the disposition of our common units could be more or less than expected
26. 57Tax exempt entities and non-United States persons face unique tax issues from owning our common units that may result in adverse tax consequences to them
27. 58We treat each purchaser of common units as having the same tax benefits without regard to the actual common units purchased. The IRS may challenge this treatment, which could adversely affect the market value of the common units
28. 59We have subsidiaries that are treated as corporations for federal income tax purposes and subject to corporate level income taxes
29. 60We have adopted certain valuation methodologies and monthly conventions for federal income tax purposes that may result in a shift of income, gain, loss and deduction between our GP and our unitholders. The IRS may challenge this treatment, which could adversely affect the value of our common units
30. 61tangible and intangible assets, and allocations of taxable income, gain, loss and deduction between the GP and certain of our unitholders
31. 62There are limits on the deductibility of our losses that may adversely affect our unitholders
32. 63Purchasers 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

General Risks

1. 64The 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
2. 65The counterparties to our commodity derivative and physical purchase and sale contracts may not be able to perform their obligations to us, which could materially affect our cash flows and results of operations
3. 66If we fail to maintain an effective system of internal control, including internal control over financial reporting, we may be unable to report our financial results accurately or prevent fraud, which would likely have a negative impact on the market price of our common units
4. 67Changes in the supply of and demand for hydrocarbon products impacts both the volume of products that we purchase and sell and the level of services that we provide to customers, which in turn impacts our financial position, results of operations and cash flows
5. 68The risk of terrorism and political unrest in various energy producing regions may adversely affect the economy and the price and availability of products
6. 69Product liability claims and litigation could adversely affect our business and results of operations
7. 70A failure in our operational systems or cybersecurity attacks on any of our facilities, or those of third parties, may adversely affect our financial results