NGL Energy Partners LP Aktie

Greetings. Welcome to the NGL Energy Partners 1Q '27 Earnings Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Brad Cooper, CFO. You may begin.

Good afternoon, and thank you to everyone for joining us on the call today. Our comments today will include plans, forecasts and estimates that are forward-looking statements under the U.S. securities law. These comments are subject to assumptions, risks and uncertainties that could cause actual results to differ from the forward-looking statements. Please take note of the cautionary language and risk factors provided in our presentation materials and our other public disclosure materials.

We are pleased to report a strong start to fiscal 2027 and continued execution on our multiyear strategy of deleveraging the balance sheet through high-return water growth projects. This positions the partnership to continue to address the Class D preferreds later this fiscal year.

During the first quarter, we hit record produced water volumes, physically disposing of approximately 3.32 million barrels per day during the first quarter, growing 19.6% from the first quarter of fiscal 2026. The record water volumes also generated record Water Solutions adjusted EBITDA for a single quarter.

We are seeing the growth capital spend and the 500,000 barrels per day of producer commitments signed in fiscal 2026 flowing through our fiscal 2027 financials. These results validate the highly accretive investments we made throughout fiscal 2026 and further demonstrate the strength of the long-term customer commitments supporting our business. We believe fiscal 2028 could mirror this fiscal year as we continue to execute on additional growth capital projects in the first half of fiscal 2027.

During the quarter, we executed the LEX II Extension project, expanding the current long-haul LEX Pipeline System to 81 miles with the capability to transport approximately 560,000 barrels per day of produced water from Eddy and Lea Counties in New Mexico to Andrews County in Texas. The LEX II Extension is underwritten by a newly executed long-term volume commitment contract that includes increased volume commitments and an additional 4 township committed area in Eddy County. The LEX II Extension is expected to be in service by the end of this calendar year.

This contract, along with additional volume commitments recently executed, brings our total produced water volume commitments to approximately 1.77 million barrels a day, roughly 53% of our total volumes. Permitted injection capacity increased by approximately 200,000 barrels during the first quarter of fiscal 2027. This brings our total permitted capacity up to 5.62 million barrels per day in the Delaware. With the additional growth projects planned for this fiscal year, we will be adding to this capacity.

We continue to improve the credit profile of our customer base with over 90% of our produced water delivered from investment-grade counterparties and over 85% of our trailing 12 adjusted EBITDA generated from our Water Solutions segment.

We reduced leverage in the first quarter even with our growth capital spend heavily weighted to the first half of this fiscal year. We expect the delevering trend to continue the remainder of the fiscal year while we manage our growth capital spend and liquidity.

With our outperformance this quarter and the confidence we have in our customers' execution, we are raising the fiscal 2027 adjusted EBITDA guidance by $10 million, from $715 million to $725 million to the new guidance range of $725 million to $735 million.

Turning to our quarterly results. Our consolidated adjusted EBITDA from continuing operations for the quarter came in at $186.2 million versus $143.9 million in the prior first quarter, nearly 30% higher than the prior first quarter. This increase was primarily driven by the performance of our Water Solutions business segment.

Water Solutions adjusted EBITDA was $179.9 million in the first quarter versus $142.9 million in the prior first quarter, a 26% increase. For the quarter, Water Solutions generated 91% of the EBITDA for the partnership. Physical water disposal volumes were 3.32 million barrels per day in the first quarter versus 2.77 million barrels per day in the prior year first quarter, a 19.6% increase.

Total volumes we were paid to dispose, that includes deficiency volumes, were 3.43 million barrels per day in the first quarter versus 3.06 million barrels per day in the prior year first quarter. So total volumes we were paid to dispose of were up approximately 12% first quarter of fiscal '27 over the first quarter of fiscal 2026.

The increase in EBITDA is primarily driven by higher disposal volumes from contracted producer customers and skim oil revenue due to significantly higher skim oil volumes. The skim oil volumes are driven by an increase in physical water volumes disposed. We also saw a slight increase of the skim oil percentage, and we benefited from higher crude prices during the quarter on the unhedged skim oil barrels.

Operating expenses for the quarter on a per barrel basis were lower by $0.01 when compared to the same quarter of the previous year. For the first quarter, our operating expenses in the Water Solutions segment was $0.21 per barrel. The increase in volume will continue to dilute the fixed cost component of our cost structure over time.

We have continuous conversations with the producers to monitor activity levels and the potential impacts the macro backdrop could have on our Water Solutions segment. Even with the macro volatility, we continue to have a high level of interest in takeaway and disposal capacity and have signed over 200,000 barrels per day in volume commitments this quarter alone.

Crude Oil Logistics adjusted EBITDA was $8.6 million in the first quarter of fiscal '27 versus $9.6 million in the prior year's first quarter. During the quarter, volumes on the Grand Mesa Pipeline averaged approximately 74,000 barrels per day compared to 55,000 barrels per day for the first quarter of 2026.

Liquids Logistics adjusted EBITDA was $10.3 million in the first quarter versus $2.9 million in the prior first quarter. The largest driver for the increase year-over-year was additional contracted activity through our few remaining butane terminals. This is adjusted for the previously announced asset sales that closed in the prior year quarter. The primary EBITDA contributor of the Liquids Logistics segment going forward will be our butane blending business. And recall that a majority of that EBITDA from this segment occurs in the back half of the fiscal year.

With that, I would now like to turn the call over to our CEO, Mike Krimbill.

Thanks, Brad. Well, obviously, this was a very strong quarter. And if it continues, we anticipate further increases in EBITDA guidance. Operationally, we're experiencing 10% annual growth in our Water Solutions business, while margins remain steady. We are focused on performing reliably and consistently for our customers, especially during peak flowback periods.

Growth CapEx this fiscal year will exceed $200 million. A significant portion of the EBITDA generated will not be recognized until fiscal 2028. Majority of the capital will be spent in our first 2 quarters, so we will see long-term debt relatively flat until the back half of the year, while leverage decreases each quarter.

I would like to talk about the Class Ds here in particular. With respect to these Class Ds outstanding, we have several hundreds of millions of dollars of investment opportunities that are expected to generate a rate of return in excess of the cost of the Class D preferred. Therefore, reducing the Class Ds is not our highest and best use of cash.

The holders of this security have an option to put them to us no sooner than January 1, 2028. And we must prepare for that possibility. Thus, we expect to redeem about 50% of the remaining Class D preferreds this fiscal year and leave the balance outstanding. If they are put to us, they will be easily financed. If they're not put to us, then we can take advantage of these attractive opportunities or further reduce leverage. I think the key here is it is not necessary to eliminate all the Class D preferreds before reinstating the common unit distribution.

Looking forward to the next couple of years, we are positioning NGL to potentially build another large diameter water pipeline, pursue M&A opportunities and reinstate the common unit distribution.

So with that, let's break for questions.

[Operator Instructions] The first question comes from Derrick Whitfield with Texas Capital.

Congrats on a very strong print. With regard to your growth outlook for Water Solutions, how do you guys view the opportunity set as you see it today for additional growth investments in the Delaware? It sounds like the second half of this year might be somewhat constrained. But as you look a little further out, it seems like there's a lot of opportunity that you're assessing today.

Doug, you want to take that one?

Sure, Brad. Thanks, Derrick, for the question. As we presented, we grew by 200,000 barrels a day of new capacity for new deals this last quarter. That capacity, we accelerated that development for those deals because there was a big demand for the water even in our existing contracts. We're going to develop another 300,000 barrels a day in the balance of this year for a total of 500,000 barrels a day. That is contracted capacity, which is a lot.

So the growth we're showing this first quarter, we continue to see additional growth through the balance of the year. So then you look and say, well, there's a little bit of a constraint on the back end of the year. Really, it's the large development, 500,000 barrels a day, it's a pretty big growth number. We expect that capacity to fill up. We are working on fiscal '28 deals as we speak.

So really, it's just a timing -- it's a timing opportunity here for us. As we continue to develop, we continue to develop faster, bringing on 16, 18 wells this year, plus all the surface and the pipeline expansions. We're not constrained really by anything in that matter. Really more than anything, it's just execution and looking to the new deals that are currently in process that will land, we think, prior to fiscal '28, but most likely be in spend and EBITDA in that next fiscal year.

Terrific. No, that makes complete sense. And then as my follow-up, could you maybe speak to the opportunities that you guys are seeing for beneficial reuse and mineral extraction? And I'm thinking about that on the back of TPL's water sourcing deal for Chevron and Select's mineral extraction announcements they've announced this year and a little bit later last year as well. Are you guys looking, seeing those kinds of opportunities in the marketplace today?

Yes. I'll take that, Brad. Yes, we are. It's interesting, the past year, there was a lot of talk about it. Now this calendar year, I really think all of us, including our peers, are either in talks on establishing MOUs or moving forward in contracts around both beneficial reuse or mineral extraction. I would say mineral extraction is ahead on the timeline because everyone's been working on lithium and iodine for several years now. We are engaged in those talks, and we expect some point in the future, we'll be able to talk about those as they firm up.

And then on the beneficial reuse side, once again, the same idea. Everyone is in talks with multiple either hyperscalers or data centers that, because of the pushback they've received or are receiving on their developments on groundwater, it's becoming really a self-fulfilling prophecy that produced water is the answer in West Texas around getting these projects off the ground. And there are dozens and dozens of these projects out there. We would expect, as the same as the critical minerals, we're going to make some announcements as time goes on around being able to supply that water.

And then we can't forget our TPDES permit through TCEQ. We're kind of growing weary of talking about it, but October will be 3 years since we applied for it. But our efforts, I think, are going to pay off. We expect and have received updates that this month, we will receive our permit, and it's going to be a very good permit, and it's going to be a permit that we believe will be economic, which is the first step. If we have an uneconomic permit with things that really run up the tab on the expenses and then you have a gap to fill there. That's where we've been for the last 18 months, I'd say. We think we're going to get one, and I think others will as well.

So we have some very exciting projects scoped around that permit that we can't talk about this time. There's still a lot of competitive advantage out there being first movers. But as time goes on with that as well, I think we'll be able to talk a lot more about it. But we're pretty excited about it.

Great. And one last for Brad, if I could, just on the balance sheet. You guys have made meaningful progress and strengthened your balance sheet over the last couple of years. If we look further out on the curve, when might you be or when you might first kind of be in a position to reinstate your dividend? Because that's a pretty meaningful landmark development when it occurs. And I know that there's a lot of investors who have an interest in that development.

Sure. Well, Derrick, we've been hesitant to talk about it until we could really see the light at the end of the tunnel. If we get rid of about half of these Ds this fiscal year, then I think a distribution reinstatement comes back on the table. So then it will just be more perhaps a leverage question, how much capital do we have to spend for these big EBITDA opportunities that would be better on the short-term spend building something than paying out a distribution. But I think what's significant is this is the first call we've talked about it, and we see it possibly happening in 2027.

Terrific. Again, hats off to you guys on progress on all parts of your business and the balance sheet.

The next question comes from Gregg Brody with Bank of America.

You listed M&A in those 3 pillars between building on the pipeline, dividends. Can you talk a little bit about the environment out there? And is that something that's likely given all the organic growth opportunities you have?

In the water space, just like others, consolidation makes sense, but there just aren't a lot of competitors. So we are preparing ourselves for that opportunity. We're not in discussions with anyone. But clearly, in M&A, and one reason we haven't been involved is we didn't have a lot of extra cash to do an all-cash deal. And doing a deal with equity, we were not excited, and I don't think our shareholders -- unitholders wanted us to give away $10 equity. So I think as our equity price increases, then it's more accretive, using an old term, to get back in the M&A game.

Got it. And then is -- you've highlighted getting down to about half the Ds. You think you could bring that into your capital structure. Is that just -- you're just assuming you can get to the leverage number so you can put more -- you can potentially raise more secured debt? Or are you thinking about potentially the unsecured bond market at some point?

No, I think just the incremental debt and/or asset sales could clean up that half of the Ds that Mike spoke to. Kind of the same strategy we've been deploying here over the last couple of years. Line of sight to being 4x levered at the end of this fiscal year, and we're positioned to -- we would be in position to do something if the market was there for us to chip away at the Ds some more.

Got it. And just remind us, the 4x leverage, you're excluding the preferreds from that, correct?

Yes, correct. That's just through the debt. That's correct.

Great. And last, [ quick ], for you. I saw you sold about $12 million of assets this quarter. What -- and what business was that? Is that part of NGL Logistics or Oil Logistics?

I just think that's some line fill that got monetized when a crude contract rolled off. It wasn't a hard physical asset in the Liquids business or anything like that. Just the timing of line fill, we sold and received the cash this quarter.

We have reached the end of the question-and-answer session. And I will now turn the call over to Brad Cooper for closing remarks.

Yes. Thanks, everyone, for your interest in NGL today, and we look forward to catching up with you in early November during our second quarter call for 2027. Thank you.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Greetings. Welcome to the NGL Energy Partners' 4Q '26 Earnings Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Brad Cooper, CFO. You may begin.

Good afternoon, and thank you to everyone for joining us on the call today. Our comments today will include plans, forecasts and estimates that are forward-looking statements under the U.S. securities law. These comments are subject to assumptions, risks and uncertainties that could cause actual results to differ from the forward-looking statements. Please take note of the cautionary language and risk factors provided in our presentation materials and our other public disclosure materials.

We are pleased to report a strong finish to fiscal 2026, highlighted by record performance in our Water Solutions segment and meaningful progress on our capital structure priorities. For the year, adjusted EBITDA from continuing operations was approximately $660 million, which came in at the high end of our guidance range and represents meaningful growth year-over-year, driven by our Water Solutions segment. In the fourth quarter, we generated adjusted EBITDA of approximately $176 million. Excluding the goodwill impairment charge, income from continuing operations is approximately $70 million.

As we step back and look at the partnership's accomplishments this year, we believe fiscal 2026 encapsulates execution across every tenet of our multiyear strategy. First, in April, we closed on the sale of our wholesale propane and rack marketing businesses. As we are positioning the partnership to be a pure-play water company, the Liquids segment will continue to be rightsized as we work to monetize the noncore assets in this division. The disposition of the wholesale propane and rack marketing businesses significantly reduced the volatility in our quarterly reported EBITDA as well as eliminated swings in our working capital.

Second, we continue to attack and simplify the capital structure. We completed a $950 million refinancing transaction, extending maturities and providing cash to reduce the Class D preferred units outstanding. Over the course of the fiscal year, we redeemed approximately 285,000 Class D preferred units, significantly reducing our highest cost of capital. The redemption of the Class Bs represents approximately 47% of the original amount. Our strategy over the last few years has remained consistent since the refinancing in early 2024. We will continue to chip away at the Class Ds with free cash flow and noncore asset sales. And when leverage is at an appropriate level, we can access the capital markets to further reduce the Class Ds.

We've remained opportunistic with respect to the Term Loan B market and our ability to reprice this debt instrument. This component of our capital structure has allowed us to further reduce interest expense as our operational and financial performance continues to excel.

Third, the partnership bought 8.7 million common units under our buyback program at an attractive price of $5.72. At the time when the Board approved the $50 million buyback program, we believe the common units to be the best return in our portfolio. And I think the recent performance in the unit price validates our investment and belief in our multiyear strategy to allocate this capital to the common units.

Lastly, we continue to deploy capital to our Water Solutions segment that drove growth in our EBITDA year-over-year by 11%. Our disposal volumes committed under volume commitments grew from 45% to 53% during the fiscal year as well. Recall, over 90% of our volumes are contractual volume commitments or are acreage dedicated. We will get into the guide and outlook for fiscal 2027 later, but I would expect us to utilize the same playbook for fiscal '27 that we utilized in fiscal '26 by executing on accretive growth projects in our Water Solutions segment and continuing to simplify our capital structure.

Fiscal '27 is off to a great start. The momentum we exited with in fiscal '26 is carrying through to 2027, as evidenced by the press release issued earlier this month. On May 7, we announced a further expansion of our LEX II system, increasing capacity by 165,000 barrels per day with the capability to transport approximately 560,000 barrels of water per day on the LEX II system. The LEX II expansion is underwritten by a long-term volume commitment contract that includes increased volume commitments and an additional 4 township committed area in Eddy County. Additionally, the LEX II expansion is expandable up to 650,000 barrels of water per day.

Now let's hit the highlights for the fourth quarter of fiscal '26. Starting with Water Solutions, which continues to be the cornerstone of our business. This segment delivered another record year with adjusted EBITDA of approximately $153 million in the fourth quarter and approximately $603 million for the full year. From a volume standpoint, we achieved produced water volumes of approximately 3 million barrels per day in the fourth quarter, a 10% increase in physical volumes disposed compared to the previous year's fourth quarter. Total volumes we were paid on for the fourth quarter were approximately 3.1 million barrels per day compared to approximately 3 million barrels per day in the previous year's fourth quarter. For the full year, disposal volumes averaged approximately 2.9 million barrels per day, up 11% from the prior year.

From a margin and cost perspective, operating costs remained well managed. Our operating expenses per barrel was $0.22 in the quarter, improving when compared to the same quarter from the prior year, reflecting continued efficiency gains and system optimization. As we think about the drivers behind this performance, there are a few key factors. First, the scope and size of our integrated system in the Delaware Basin, which allows us to bolt on additional volume -- pipelines and volumes. Second, strong customer activity levels, particularly from large investment-grade producers. Third, our long-term fee-based contracts with minimum volume commitments and acreage dedications.

Additionally, our infrastructure footprint continues to expand in the Delaware Basin with incremental disposal capacity in Andrews County, where we have millions of barrels of pore space. We believe our Water Solutions segment remains one of the most durable and visible earnings streams in the midstream sector and provides the most attractive returns from internal growth opportunities. It continues to be the primary growth engine of the partnership.

Turning to Crude Oil Logistics. Adjusted EBITDA for the quarter was approximately $17 million. Grand Mesa Pipeline volumes averaged approximately 78,000 barrels per day during the quarter and for the full year, averaged 72,000 barrels per day. We continue to work with producers and gatherers in the DJ Basin to contract more barrels to ship on the pipeline.

In Liquids Logistics, we generated approximately $17 million of adjusted EBITDA in the quarter. As a reminder, this segment has been significantly streamlined following the divestiture of noncore assets, including the wholesale propane business. As a result, this segment is now a smaller, less volatile business. Performance continues to be stable and in line with expectations, with reduced seasonality and lower capital requirements than in previous years.

As I mentioned at the beginning of my prepared remarks, fiscal '26 was an important year in terms of strengthening our balance sheet and positioning the partnership for long-term success. Combined with our growth in adjusted EBITDA, the actions mentioned earlier collectively represent meaningful progress toward our key financial priorities of reducing leverage, lowering our cost of capital and improving overall financial flexibility. We ended the year with solid liquidity, no near-term debt maturities, and we remain focused on further balance sheet improvement.

With that, I'll turn the call over to Mike.

Thanks, Brad. Fiscal 2026 represents another important step forward in our transformation into a more focused, less volatile, higher growth, improved quality business. There are 3 key takeaways I'd highlight. First, Water Solutions continues to deliver strong growth with attractive returns. Second, our business mix transformation is improving adjusted EBITDA stability, reducing volatility and seasonality. And third, we have built a strong pipeline of contracted projects that supports continued growth in fiscal 2027 and into fiscal 2028.

Strategically, we remain focused on 3 priorities: accelerating our transition to a pure-play water company by expanding our water infrastructure and monetizing unrelated assets; continuing to strengthen the balance sheet; and opportunistically repurchasing both preferred and common equity when it creates value.

Our 2027 outlook. We are guiding consolidated adjusted EBITDA to a range of $715 million to $725 million. This represents approximately 10% growth year-over-year at the high end of our adjusted EBITDA guidance in 2027. We expect this growth to be driven primarily by continued expansion in Water Solutions, supported by projects already contracted, the larger of which we have previously announced. Our adjusted EBITDA guidance does not include any new contracts, which may be entered into from this point forward, nor the benefits from the current crude oil price levels.

From a capital standpoint, we're guiding to approximately $200 million of growth capital and about $45 million of maintenance capital. This capital includes the increased cost of the pipeline portion of the new projects, which we are absorbing and not passing on to our customers.

With that, operator, we are ready to open the line for questions.

[Operator Instructions] The first question comes from Derrick Whitfield with Texas Capital.

Congrats on the strength of your water business and the progress you've made just recently in improving the capital structure, been quite overhaul for you guys. I wanted to start first with your growth capital. With regard to the growth CapEx of $200 million for 2027, does that include growth projects beyond the LEX II expansion?

A bulk of that $200 million is the LEX II. There are some incremental projects embedded in that $200 million.

Great. And then just with respect to the LEX II expansion, how would you characterize the split between new and existing clients for underwriting that capacity and candidly, the need for further expansion up to 650,000 barrels based on those discussions?

Yes, it's current customers -- Doug, I don't know if you want to take the latter part of the expansion up to 650,000?

Yes, this is Doug. We really amended and extended an existing agreement, which included longer term additional barrel count, volume commitments and then the large 4 township dedication on this expansion. And then the question -- can you clarify the question on the further expansion, Derrick?

Yes. Just the need for it to further expand to 650,000 based on what your client discussions you're having today?

There is an incredible amount of demand for additional capacity in the basin. That should answer that question. It's continuing to increase and continuing to have a line out the door of demand for additional capacity.

Great. And just on the activity outlook side, I know that you guys stated in your prepared remarks that you didn't place any increased activity into your plans. Having said that, with you guys reporting nearly 1 month after most of the sector, what are you guys hearing around plans of acceleration beyond just the pull forward in activity that most of the independents announced during Q1 earnings?

The pull forward was -- has really been what we've been seeing. Probably more important is what I just mentioned, the dearth of available capacity with the -- at least 10% growth of the water volumes, have really driven a lot of interest in new underwriting and new projects to be underwritten and just more of the deal flow that we're seeing. It's not so much driven by the commodity price as it has just been driven by the acceleration of development over the last couple of years, and it's -- the efficiencies are really driving a lot more demand for the service.

Great. And maybe shifting over to beneficial reuse and other next-gen opportunities. Based on your announcements over the last couple of quarters with material and the progress you guys have talked about on the water desalination side, how would you characterize where those opportunities sit today, and again, the opportunities you see ahead of you for that next-gen type business?

We are continuing to make progress on those previously announced projects. We expect our draft permit from TCEQ any day now in the next -- certainly within the next few weeks, which has taken a lot of effort, making a lot of progress. Lots of progress on the energy campus project, which would include the nuclear power and we're looking at the data center addition to that campus as well as the large-scale desal, but we are making a lot of progress on those projects.

Great. And finally, if I could, maybe shifting over to Crude Logistics segment. While water is clearly the driver here, how are you thinking about EBITDA and production outlook for 2027?

Doug, do you want to maybe talk about what you're seeing in the DJ from producers?

Sure. This is Doug again. We are really seeing very, very good activity in the DJ this year. We're also seeing some of the smaller players, private equity-backed players really have consolidated acreage and have a more cohesive development plan moving forward. So we are seeing certainly an uptick in activity and we see that carrying into this fiscal year and the next couple of fiscal years versus where it has been in the past.

Terrific. And then just maybe to clarify one thing. I had an inbound from the client. But just on the build multiple for the LEX II expansion. Is all of that capital accounted for within 2027 or would there be capital to extend beyond 2027? It looks quite...

It will all be in this fiscal year. The bulk of it is in the first couple of quarters here, 2, 3 quarters of the fiscal year.

We have reached the end of the question-and-answer session. And I will now turn the call over to Brad Cooper for closing remarks.

Thanks, everyone. We'll talk to you in a few months. Take care.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Greetings. Welcome to NGL Energy Partners 3Q '26 Earnings Call.

[Operator Instructions]

Please note, this conference is being recorded. I will now turn the conference over to your host, Brad Cooper, CFO at NGL Partners. You may begin.

Good afternoon, and thank you to everyone for joining us on the call today. Our comments today will include plans, forecasts and estimates that are forward-looking statements under the U.S. securities law. These comments are subject to assumptions, risks and uncertainties that could cause actual results to differ from the forward-looking statements. Please take note of the cautionary language and risk factors provided in our presentation materials and our other public disclosure materials.

We delivered another strong quarter, highlighted by record water disposal volumes in Water Solutions and continued execution on our financial strategy. For the quarter, adjusted EBITDA from continuing operations was $172.5 million, up from $158 million a year ago, a 9.2% increase. On the financial strategy front, we executed on 2 of our priorities, reducing higher cost preferred equity and repurchasing common units. During the quarter, we redeemed an additional 18,506 Class D preferred units, bringing total redemptions to 88,506, about 15% of the original Class D outstanding.

On the common units, we repurchased 1.6 million units during the quarter and have now repurchased approximately 8.7 million units since program inception, which is almost 7% of the outstanding units at an average price of $5.70 per unit. We have almost fully exhausted the Board-approved common unit repurchase plan. At current unit price levels, we are primarily focused on eliminating the Class D preferred units. With the water growth projects we have line of sight into and the Class D preferreds, we will be targeting these 2 over the next fiscal year.

Doug will provide some prepared remarks shortly, but in early January, we eclipsed 3.5 million barrels per day of disposal volumes, which is a record for the partnership. We have experienced a few days in mid-January where volumes were under 3 million barrels a day due to the extreme cold weather most of the Midwest and Southeast experienced. We do not expect this to have a material impact on our full year guide for fiscal 2026 due to the nature of how we contract. Recall that over 1.5 million barrels per day of our water disposal volume is under MVC or CVC, which allows us to get paid on volumes even if they are not disposed of. The new contracted volumes that Mike mentioned on the previous earnings call are coming online, and we anticipate a strong close to fiscal 2026. We are still guiding our full year EBITDA to a range of $650 million to $660 million. These new contracted volumes that have recently come online set us up for a strong start to fiscal 2027, where we are still projecting to exceed $700 million of EBITDA for the first time in the history of the partnership.

In the third quarter of fiscal 2026, Water Solutions segment generated adjusted EBITDA of $154.5 million versus $132.7 million in the prior year third quarter, an increase of 16.5%. We again set a physical disposal volume record processing roughly 3.07 million barrels per day of physical produced water versus 2.6 million barrels per day in the prior year third quarter, an increase of 17.1%. Total volumes we were paid to dispose that includes deficiency volumes were 3.13 million barrels per day in the third quarter versus 2.91 million barrels per day in the prior year third quarter. So total volumes we were paid to dispose were up approximately 7%, third quarter of fiscal 2026 over third quarter of fiscal 2025. Operating expenses for the quarter were $0.18 per barrel due to nonrecurring expense reductions.

Crude Oil Logistics adjusted EBITDA was $15.4 million in the third quarter of fiscal 2026 versus $17.3 million in the prior year's third quarter. Physical volumes on the Grand Mesa Pipeline averaged approximately 85,000 barrels per day, up significantly from 61,000 barrels per day in the prior year quarter. Margins for barrels on Grand Mesa were lower in the third quarter of fiscal 2026 when compared to the prior year's third quarter due to lower oil prices as well as a reduction in volumes from committed producers with higher contracted tariffs. Liquids Logistics adjusted EBITDA was $15.2 million in the third quarter of fiscal 2026 versus $18.6 million in the prior year's third quarter.

Strategically, we executed a significant repositioning in April 2025 with this segment. We sold our wholesale propane business and 17 NGL terminals, exited the refined products business and wound down our biodiesel marketing business. Today's liquid platform is more focused and anchored by our Centennial butane blending business. The streamline footprint is performing as expected for the full year.

Now I will turn the call over to Doug White. Doug?

Thank you, Brad. As Brad mentioned earlier, we entered into several volume commitment contracts in the Delaware Basin that included a large amount of asset development. Our development team executed these projects ahead of schedule and under budget. We are happy to report the water volumes associated with these projects is flowing and has been at or above our expectations. The capital investment included the Western Express pipeline expansion of 27 miles of 24-inch pipeline, further expanding our reach into our customer footprint and providing flexibility to transport water to areas of underutilized capacity and away from areas burdened by seismicity and poor pressure constraints. I want to thank the operations team for their successful execution of these projects.

In the quarter, we achieved an all-time daily record of approximately 3.3 million barrels of water. And on January 16, we received over 3.5 million barrels of water in a single day. This reflects the capacity increase from the capital investment I just mentioned. Our ability to execute large growth projects at attractive multiples over the last several years, combined with our operational capabilities is allowing us to deliver consistent economic results. We continue to engage our producer customers with opportunities, and we are working to secure additional disposal contracts in fiscal year 2027. We continue to improve the business. And as an example, we are in our second year of development of our AI machine-based learning project, which will begin to contribute to operational efficiencies in this calendar year.

We are utilizing the millions of data points collected through our SCADA system, automated electric power consumption meters and system flow models, which are fed into our proprietary AI model, and it is identifying opportunities to increase revenues and decrease expense. We are excited to continue to grow this project over time and increase the AI impact on our business.

As an update to our large-scale produced water treatment strategy in the Delaware Basin, we recently entered into an MOU with Natura Resources, a leading advanced modular nuclear reactor developer. We are pursuing a combination of nuclear power applied to thermal desalination technology in Reeves County, Texas, where our outfall for the TPDES discharge permit is located. We are progressing toward a final draft of that permit this month and expect to receive an issued permit early this year. These steps lead us closer to realizing our medium- to long-term goals of large-scale disposition of produced water.

I'll now turn the call over to our CEO, Mike Krimbill.

Thanks, Doug, and good afternoon, everyone. I have some just brief comments with respect to current operations, you have heard that we achieved another great quarter exhibiting continued growth. There are several takeaways worth mentioning. One, we continue to move towards a predominantly water solutions company as we grow our water footprint and shed non-water assets. Two, this effectively eliminates the seasonality of our cash flows and improves the consistency and predictability of those cash flows. And three, we already have significant growth contracted for fiscal 2027 beginning April 1 of this year.

So now let's look at our capital allocation priorities. First, our capital must finance internal growth projects for our producer customers. As we discussed on the previous quarter's earnings call, our growth capital increased by over $100 million in the second and third quarters of this fiscal year as new opportunities presented themselves. And as Doug said, these projects are currently in service. Next, we focused on redeeming the Class D. As Brad said, we have redeemed about 15% of the outstanding preferreds. But importantly, our leverage has declined to the low 4.0x area. So we will be looking to take out a significant portion of the remaining Class Ds in the very near future. So stay tuned for that.

Finally, we look at our common units opportunistically to purchase and retire them at attractive prices. The Board and management team have acted proactively to eliminate dilution and actually reduce the common unit -- common units outstanding. So going back to November of '24, you may remember, we purchased 23.3 million long-term common unit warrants that had strike prices from $13.50 to about $17.50, and we paid $6.9 million. These purchases eliminated approximately 18% of future dilution. Currently, we've reduced the outstanding, as Brad said, by nearly 7% through our Board-approved unit repurchase plan. So combined, we shouldn't lose sight. We have eliminated dilution of our common equity by approximately 25%. We will continue taking advantage of attractive common unit prices while balancing liquidity and leverage requirements.

In closing, we believe the future of our business 5 to 20-plus years from now is not dependent upon drilling more and more SWDs. That is our situation presently and in the near future. But ultimately, we must treat the produced water to a quality that can be released on the surface for irrigation, industrial and municipal use. We are closer to that goal. Natura agreement and the anticipated discharge permit are 2 of the steps in that direction. Not all of our initiatives on this journey will work, but time and technology is on our side.

I think with that, we open it up for questions.

[Operator Instructions]

And the first question today is coming from Derrick Whitfield from Texas Capital.

Derrick Whitfield with Texas Capital. So congrats on your quarter and also on the strong operating performance of your water business. Maybe just starting there on the macro environment. Given the volatility in crude prices, can you speak to the firmness of the growth projects you highlighted in 2Q and really speak to the appetite of producers to further address and commit to future water disposal needs given the volatility we're currently seeing in crude prices?

Yes, Derrick, I mean, I think Mike hit on it. I mean the projects and the capital spend that we outlined on the last call, those projects are online here at the beginning of this calendar year. Doug, do you want to kind of take what you're seeing maybe into this current year and maybe through the end of next fiscal year for us?

Yes, Derrick, when we look at the projects that we have completed, those came with volume commitments and those were for long term. So those are very financially firm. As we see the oil price fluctuate, even when it dipped down to $55 range, we really didn't see a big change from our customers. As the consolidations happen, certainly in the Delaware Basin, and we saw some more of that announced today, that consolidation has created more of a level activity level versus what it may have been a few years ago when there was a lot more private equity type of producers in the basin. But as it has matured, we're seeing our customers and our large customers just on a continuous drilling forward and frac spreads, et cetera.

The other real big driver for us is you're asking about what does it look like prospectively. The other big driver is there is such a large wedge of foundational volumes of produced water in the Delaware Basin that when we saw, for an example, we hit that record on Friday, the 16th in January, that was right before the storm, we saw some people drop some frac crews or pause some frac crews. The uptick of water that happens when there is even a small slowdown is reflective positive for our business. We're not active recyclers like some others are. When that recycling may slow down because it doesn't have frac crew to send water to, all of that produced water has to go somewhere, and that comes to us. So we're continuing to see large opportunities for large-scale projects prospectively and expect to nail down some of those firmly in the coming months.

Terrific. And specific to Natura's release this morning, it seems the market was concerned about the near-term capital obligations for a project that might not be material for several quarters, if not years. I guess, a, how would you characterize this water treatment opportunity in volume and values? And then b, how material is the current CapEx obligation?

Yes. Good question. So we continue to explore the alternatives to injection based on seismicity, poor pressure increasing, just being prudent operators, we've continued for several years to be looking for other alternatives to injection. You might remember our very successful desalination project in Pinedale, Wyoming. We have a history and experience in the side of the desal part of the business. We know it takes several factors to come together for those projects to coalesce. What's happened in the past year, the Texas has passed the water bill, right, $1 billion a year of support for new water in Texas. The federal government support of production of domestically sourced critical minerals, requests from our customers. Our customers are paying attention, the producers and saying, hey, NGL, where are you going to take my water? What opportunities are there for something different rather than loving the Reeves County.

We've addressed a lot of that in the short to medium term and some percentages of the very long term with our Andrews County out-of-basin assets. But then we have to look at and say, what does it take to create large-scale desalination, which we very, very firmly believe is part of the future and the portfolio going forward. Basic requirements for that. First, you have to have produced water volumes that support an economic scaled plant. We checked that box, right? Our large system is a reason we applied for our outfalls on our TPDES permit in the particular location in Reeves County. That's because we can deliver 800,000 barrels a day of water to that location that you need those economies of scale to have an economic project.

Second is available energy source. You have to have an energy source for the treatment plant or as it goes with Natura, it becomes a means of treatment itself. And very interestingly, nuclear power generation produces about 60% waste heat of its energy. We would use that waste heat to be able to do thermal desalination of our water. It's not really even about the electricity, the 40% electricity that's produced. It's really about the waste heat. So we will be taking waste heat and produce and treating wastewater to create new water for the state of Texas, use the waste off of that process, which is [indiscernible] brine or concentrated brine, which has concentrated up the minerals within that brine. And then we are working on recovery of critical minerals through that. So you put all those pieces together, that's what it takes to get there. And our MOU with Natura, we're very excited about, while it will take -- have no CapEx demand to NGL on the nuclear side, our plan has not changed and our CapEx forecast and demand has not changed.

We are looking forward to developing the scaled treatment, and that will come over time, and we won't go straight to a giant scale treatment. Our TPDES discharge permit even has caps and ceilings on the amount of water you can discharge over a certain period of years. So for us to start, maybe we start with a 50,000 barrel a day plant that's able to be scaled, most likely, we'll be using natural gas to power that plant, not heavy CapEx demand.

And then as we move forward, we sign contracts with our customers, we sign contracts with downstream users of our new water, then we can create the economics around a larger CapEx spend to scale the project. Natura should that come to fruition, Natura has their own economics of their own capital spend around their project. But we would put the 2 projects together to really create a really unique and exciting project.

Tremendously helpful. If I could just ask one more only because you pique my interest on the AI and machine learning side. Maybe speak to the amount of value you've recovered to date and really the amount of potential value you could recover as you see this starting to take root within the organization?

Well, I think you can see in our OpEx numbers, how would they continue to improve. It's very hard to simply quantify that large move that we achieved this last quarter just down to the AI project. But certainly, the AI project is having an influence on expenses. What most don't really focus on is the impact on revenues. The more water we can move more efficiently, utilizing and increasing our utilization of our existing assets, saves us capital. We don't have to drill new wells. We don't have to build new facilities. That is -- it goes straight to the bottom line. Obviously, with helping out and reduce the capital spend, we reduced capital spend, we increase our low multiple returns, which is great to payback returns.

So if you're looking for just a dollar amount or a percentage, right now, I don't feel comfortable saying what that is. We are seeing increases in just efficiencies to start. As you know, these machines-based products, they learn from themselves and start to continue to create more and more value. So as time goes on, Derrick, I think as we see true, I guess, discernible returns on that or dollars, we'll be able to share that down the road.

[Operator Instructions]

The next question is coming from Tarek Hamid from JPMorgan.

This is Nevin on for Tarek. You had mentioned consolidation a little earlier. So we were just wondering if you had any conversations with Devon following the deal announcement earlier this week. And if so, were there any takeaways on potential changes to activities or volume?

We've been so busy with preparing for this call and run the business, Nevin, we have not had the opportunity to have those conversations with Devon.

And there were no other questions in queue at this time. I would now like to hand the call back to Brad Cooper for closing remarks.

Thanks, everyone, for joining today. We'll catch up with you in June on our year-end call.

Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Greetings. Welcome to the NGL Energy Partners 2Q ' 26 Earnings Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Brad Cooper, CFO. You may begin.

Good afternoon, and thank you to everyone for joining us on the call today. Our comments today will include plans, forecasts and estimates that are forward-looking statements under the U.S. securities law. These comments are subject to assumptions, risks and uncertainties that could cause actual results to differ from the forward-looking statements. Please take note of the cautionary language and risk factors provided in our presentation materials and our other public disclosure materials.

NGL had another solid quarter with record water volumes and 30% growth in Grand Mesa volumes. Consolidated adjusted EBITDA from continuing operations came in at $167.3 million in the second quarter versus $149.4 million the prior year second quarter or approximately 12% higher. The increase was primarily driven by the performance of our Water Solutions business segment.

On the heels of this strong performance in Water Solutions and additional growth opportunities in Water Solutions that Mike will speak to later, we are increasing our full year adjusted EBITDA guidance range from $615 million to $625 million, to $650 million to $660 million. With this increased guidance and operating cash flow associated with this increase, we project a zero ABL balance at the end of the fiscal year and approximately 4x leverage.

Also in the month of October, our Water Solutions segment has averaged over 3 million barrels per day of physical disposal volume. Doug White, EVP of our Water Solutions segment, will be providing a Water Solutions update following my comments.

We continue to be focused on our capital structure and remain opportunistic with how we are addressing it. Since April, we have purchased 88,506 units of the Class D preferred, which represents approximately 15% of the outstanding units. Based on the last Class D distribution, the Class Ds purchased represent $10.4 million in annual distribution savings going forward. We have opportunistically taken advantage of the ability to reprice our Term Loan B as permitted in the documents. In September, we launched a repricing and reduced the SOFR margin from 375 basis points to 350 basis points. This was the second repricing of the Term Loan B since February 2024. When you consider the 2 repricings and Fed rate cuts, we have achieved annual interest savings of $15 million on the Term Loan B.

Under the Board-authorized unit repurchase plan, we have purchased an additional 4.4 million units in the quarter for a total of approximately 6.8 million units, which equates to about 5% of the outstanding units. The average price for the units repurchased since the inception of the plan is $4.57.

With the additional water growth capital projects and the Class D preferred and common unit repurchases, we are demonstrating the optionality we have with our capital allocation. All three of these provide attractive returns to the partnership and our investors.

Water Solutions adjusted EBITDA was $151.9 million in the second quarter versus $128.9 million in the prior second quarter, an 18% increase. Physical water disposal volumes were 2.8 million barrels per day in the second quarter versus 2.68 million barrels per day in the prior year second quarter, a 4% increase. Total volumes we were paid to dispose that includes deficiency volumes were 3.15 million barrels per day in the second quarter versus 2.77 million barrels per day in the prior year second quarter. So total volumes we were paid to dispose were up approximately 14%, second quarter of fiscal '26 over second quarter of fiscal 2025. The increase in EBITDA was primarily driven by higher disposal revenues due to an increase in produced water volumes, processed from contracted customers as well as higher water pipeline revenue due to the LEX II pipeline commencing operations during the quarter ending December 31, 2024, as well as higher revenues for skim oil. The increase in skim oil revenue was due to an increase in skim oil barrels sold due to more skim oil recovered from receiving more produced water.

Operating expenses for the quarter were $0.22 per barrel, in line with previous quarters.

Crude Oil Logistics adjusted EBITDA was $16.6 million in the second quarter of fiscal 2026. During the quarter, physical volumes on the Grand Mesa pipeline averaged approximately 72,000 barrels per day compared to approximately 63,000 barrels per day for the quarter ended September 30, 2024. When compared to our previous fiscal quarter, Grand Mesa volumes are up 17,000 barrels or approximately 30% higher fiscal Q2 over fiscal Q1. Volumes for the fiscal third quarter were strong with October over 80,000 barrels per day for the month.

It's early in the fiscal year for the butane blending business, a bulk of their EBITDA generated for the fiscal year is occurring right now. We will have a better read on the fiscal year for this group at our next earnings call.

With that, I would like to turn the call over to our EVP of our Water Solutions segment, Doug White.

Thank you, Brad. This has been a year of excellent growth, both volumetrically and on an adjusted EBITDA basis. With respect to water disposal volumes during this year, we have recently surpassed 3 million barrels per day of physical volumes for an entire month and over 3 million barrels per day, including deficiency barrels related to volume commitments. We have underwritten new growth capital projects for approximately 750,000 barrels per day of newly contracted volume commitments. These projects are scheduled to be placed into service by the end of this calendar year. As a result of these contracts, we now have 1.5 million barrels per day of total volume commitments going into fiscal 2027. These commitments have an average remaining term of almost 9 years.

Regarding our Delaware Basin asset position, we now have over 5 million barrels per day of permitted injection capacity at 131 injection wells and 57 water processing facilities. We have the largest capacity pipeline system in the Delaware Basin with more than 800 miles of pipe, including approximately 700 miles of 12- to 30-inch diameter pipelines. This is a key metric as it determines the volume of water that is able to be transported directly affecting physical volumes and reliable takeaway.

With respect to permits and pore space, we have maintained a large inventory of legacy injection well permits in Texas. And this year, we have increased our inventory by almost 1 million barrels per day in Andrews County, Texas, where over a year ago, we secured approximately 4 million barrels per day of pore space that is unburdened by legacy injection, legacy vertical production or seismicity. This sets us apart from our competitors, creating a moat for future growth to more than double our current Delaware Basin volumes.

In addition to strategically increasing our pore space portfolio, NGL has been pioneering the effort to bring the Delaware Basin, its first large-scale produced water treatment plant through the Texas Commission on Environmental Quality, TPDES permitting process. We began this effort for a treated produced water discharge permit in 2023. And as of last month, received the first draft permit issued in the state of Texas. Our permit application is for influent volumes of approximately 800,000 barrels per day, which is a material amount of produced water that can be diverted to treatment for beneficial reuse and recharging the Pecos River Basin. This shows our commitment to sustaining our pore space inventory, and adding an alternative disposal option for our producer customers.

Thank you, Doug. This is Mike. As you've heard from Brad and Doug, NGL is firing on all cylinders, both operationally and financially. First, some of this may be a repeat, but I think it's important. So first, let's discuss the operations. Last 60 to 90 days, we've contracted the 500,000 barrels per day of volume commitments that require in-service dates no later than December 31. Our Water Solutions employees have also exceeded our adjusted EBITDA guidance on the base business in addition to the new business. These two business developments have allowed us to increase our fiscal year 2025 adjusted EBITDA to a range of $650 million to $660 million with potential further increases in subsequent quarters.

We began the fiscal year with modest growth expectations as reflected in our initial growth CapEx guidance of about $60 million. The increase in contract volume requires an additional $100 million of growth CapEx, which we are pleased to spend. The majority of adjusted EBITDA will be generated in fiscal 2027 from these new projects. So we are providing initial fiscal 2027 adjusted EBITDA guidance of at least $700 million. So there'll be more to come to that as we progress through this year.

I would like to congratulate the entire Water Solutions team, led by Doug White and Christian Holcomb on their strong operational performance and positioning the business to capture new incremental business driven by the confidence producers have in NGL Water Solutions as the most reliable operator with the largest integrated water disposal network in the Delaware Basin.

Next, I believe there's been some misinformation and literature published recently. So I would like our unitholders to know that your NGL, a, generates the most adjusted EBITDA annually of any water company, transports the greatest volume of water for disposal of any water company, has the largest volume of water under volume commitments of any water company, operates its water business with the lowest cost per barrel of any water company, provides the most capacity to move water predominantly through the pipes, 12 to 30 inches that Doug mentioned of any water company, and has millions of barrels of pore space, as Doug stated.

We are not waiting until calendar '26, '27 or later to grow. Our growth is here today, approximately 10% in fiscal '26, and another 10% estimated next year.

So let's jump to our long-term corporate strategy and where we came from and where we sit today. So several years ago, we were settled with leverage above 4.75x and a dividend arrearage obligation that we needed to repay. So our first initiative was to remedy the situation. So we began identifying excess and idle assets that we sold. Next, we sold our crude oil trucking and marine divisions at very attractive multiples. These were not businesses that provide a real competitive advantage or we could grow. Then we sold the majority of our Liquids Logistics business, that was the most volatile business in terms of adjusted EBITDA that fluctuated quite a bit from year-to-year. Not a great asset for an MLP. Finally, we sold our New Mexico Ranches. All of this cash allowed us to eliminate the dividend arrearage and reduce leverage.

So our next target were the Class D preferred units. As you've heard, we've redeemed 88,000 shares of them at this time with more anticipated in the coming quarters. Under the terms of the pref, we must redeem them in $50 million tranches unless offered to us in small amounts. Each redemption or purchase should be accretive to our common unitholders.

With the increase in adjusted EBITDA, we are deleveraging, which provides greater flexibility to finance our growth capital to attack the capital structure and purchase common units simultaneously. We believe our common unit purchases thus far have been an excellent investment by the partnership.

In terms of valuation, we are seeing the market reward pure-play water companies. We have been simplifying our business and focusing on the water business and providing substantial growth capital to this division. We anticipate becoming more and more a pure-play water company as our adjusted EBITDA from water operations continues to grow.

Our finance group led by Brad Cooper has done an outstanding job financing NGL and managing these equity purchases, while reducing interest expense when the opportunity presents itself. They are also reducing corporate overhead, not taking their eye off the ball even in the good times.

So finally, barring a negative macro event, I believe we're in the final leg of our journey to finish strengthening balance sheet by limiting Class Ds and decreasing leverage to less than 4x. After that, anything is possible.

Thank you. Questions.

[Operator Instructions] First question comes from Derrick Whitfield with Texas Capital.

Congrats on a solid quarter and update, guys. Starting with the growth opportunities you're highlighting. As you guys know, [Technical Difficulty] we are focused in the Delaware water kind of backdrop, if you will. Having said that, I would love if you could maybe just offer some color to the macro, micro events that's leading to this increase in activity from a customer acquisition perspective since your last update? Is it fair to assume that you guys are picking up some opportunities now that Aris has been acquired by WES?

Doug?

I'll take that. Yes, this is Doug. Yes. Thanks, Derrick. Where we see a lot of our growth is in our base customer mix. As many of you know, the larger producers have really been segmented mostly between the few different larger water midstream groups. Some of us have split, some of the business between the super majors, but we also have large -- very large customers that are mostly dedicated to our system. We are really seeing from a macro perspective, the immense growth and commitment to growth from our larger customers. I think that speaks a lot to the maturation of the all infrastructure, including pipeline type takeaway, gas takeaway, but also infield processing, power availability, et cetera. The efficiencies that have been created within the basin have really shown to make them more economic. And we're just seeing a greater dependence on focus on economics that's creating lower econs on the cost side that really lend to more development.

Perfect. And then maybe shifting over to pore space. To your point, 4 million barrels of pore space in Andrews County is a tremendous amount of growth opportunity for you guys and not suggesting you're going to spend all the capital at once. But if you were to think about the amount of capital required to access that pore space, can you help frame that?

Sure. Much like the LEX system, we see continued growth on the pipeline side out of New Mexico to our pore space in Andrews County. Those projects -- those range in the $50 million to $150 million project, much of that includes infrastructure development on the power side, also anything around just the general development of disposal facilities and the injection wells themselves. So as we access that, we expect to pace that over several years' time, of course. I think the important item to note on that topic is we have secured the pore space and is excellent pore space, as I mentioned, unburdened by seismicity, existing injection, legacy vertical production. That's really important. And then as we continue to grow along with our customers, we'll layer in the capital side of things in order to respond to new deals.

Perfect. And one last, if I could. Just with the increase in growth capital this year, is that largely just for drilling SWD wells?

Brad, do you want to answer that?

Go ahead, Doug.

Okay. So with our growth projects that we mentioned, you'll notice that we increased the capital spend from $50 million to $150 million or $160 million. I'm not sure the exact number there. But that addition of the $100 million of capital is all growth related to the water side of the business.

Doug, how many SWDs just give us -- because you have saved these permits for many years, which is why competitors don't necessarily see us applying for permits because we have so many. But is it 10, 15...

We have 35 to 45 legacy permits. We're in the process of drilling 15 to 20 new drills this fiscal year.

We have reached the end of the question-and-answer session. And I will now turn the call over to Brad Cooper for closing remarks.

Yes. Thank you, everyone, for joining us today. Have a safe end of the year, and we'll talk to you guys early next year.

Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.