Good afternoon, ladies and gentlemen, and welcome to the NGL Energy Partners LP First Quarter 2023 Earnings Call. [Operator Instructions] After comments from Michael Krimbill and Linda Bridges, we will open the Q&A to sell-side analysts after the presentation. It is now my pleasure to turn the floor over to your host, Linda Bridges, CFO of NGL Energy Partners. Ma'am, the floor is yours.

Thanks. Hi, and welcome to NGL's first quarter fiscal 2023 earnings call. To start, I'd like to call your attention to our safe harbor language, which can be found towards the end of the partnership's earnings release, which was filed after the market close this afternoon. Today's remarks may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In accordance with the act, I would also like to direct your attention to the Management's Discussion and Analysis section and the risk factors discussed in the partnership's annual report on Form 10-K for the year ended March 31, 2022, and in other SEC filings made by the partnership, which are available on the website and on the SEC's website. These, together with the safe harbor statement in the earnings release set forth important factors that could cause actual results to differ materially from those contained in any such forward-looking statements. Starting with the financial results for the quarter, our Water Solutions segment had a very strong quarter and reported record adjusted EBITDA of $105 million, an increase of 29% when compared to the first quarter of fiscal 2022 and an increase of more than 16% from the immediately preceding quarter. These results were driven by record produced water volumes processed of approximately 2.15 million barrels per day, which was 12% higher than the immediately preceding quarter, as well as higher-than-expected skim oil volumes sold. Operating expenses continued to decrease and totaled $0.25 a barrel as the business successfully controlled costs in a challenging supply chain and inflationary macro environment. A reminder, three of our largest variable costs, utility, royalty and chemical expenses have not been and are not expected to be impacted by inflation due to contracted rates and favorable agreements with suppliers. Due to…

Thanks, Linda. Our focus continues to be on repaying the unsecured 2023 and reducing leverage below 4.75 so that we can pay the dividend to [in order to] reinstate the preferred dividends. We are experiencing continued growth in our water disposal volumes, adding additional producers and expanding current relationships. With the addition of the second Poker Lake pipeline and another 24-inch pipeline, we can accommodate all the water volumes delivered by producers. With respect to CapEx, these new pipelines resulted in 50% of our growth CapEx budget being incurred in this first quarter or $31 million. We also accelerated our maintenance cap spend with about 40% of budget incurred through June 30. We are prepared for increasing volumes for the remainder of the fiscal year. As Linda said, we are increasing the Water Solutions EBITDA guidance by $10 million to an amount in excess of $410 million. If the current energy environment continues, we could increase guidance further in the coming quarters. I think with that, we open it up for questions.

[Operator Instructions] Your first question is coming from James Spicer from TD Securities. Your line is live. James Spicer, your line is live.

Hi, thanks for taking the questions. First question is, can you just help a little bit with the trajectory of water volumes during the year? I understand that they're increasing but is there an exit rate that you can provide in terms of where you think you're going to be by the end of the year, for example?

Yes, James. So what we've guided to for the year is 2.2 million barrels for this year. We haven't provided a specific growth trajectory. First quarter volumes were right below that $2.2 million. It came in at $2.15 billion. So right now, we're really just guiding to the $2.2 million. I think we're hopeful we'll see growth through the remainder of the fiscal year, but we wanted to be a little conservative on the guidance.

Okay. Understand. Secondly, I wonder if you could just comment a little bit on the working capital and what you're expecting to see next quarter and then beyond that in terms of working capital use versus benefit?

Yes. At this point, I think you'll see working capital balances relatively -- follow the relative trend that they've had really every other year, which is where we start building inventory of butane and propane during the late summer fall. I think typically, we'll be continuing to build through our third fiscal quarter, and then you'll see a liquidation in our fourth fiscal quarter. I do think you'll see some -- last year, I think what we had seen was a delayed build in inventory. I think you'll see that build happen a little bit sooner this year. But relatively speaking, I think you'll see that same pattern continue. And one thing you might look at is commodity prices and the difference between last year's commodity prices and this year's commodity prices, specifically as it relates to butane and propane.

Okay. So with your inventory build, is it fair to assume that the majority of your free cash flow is going to come in the second half of the year then?

Yes.

Yes. Okay. That's it for me. Thanks a lot.

Yes.

Thank you. That concludes our Q&A session. I will now hand the conference back to Linda Bridges for closing remarks. Please go ahead.

All right. Well, guys, thank you again for joining the first quarter fiscal '23 earnings call. We'll look forward to updating you guys on our next quarter in the next few months. Thank you.

Thanks.

Thank you, ladies and gentlemen. This concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.