Ngl Energy Partners Lp's Comment on Competitors and Industry Peers
Competition. Our Liquids business faces significant competition, as many entities,
including other natural gas liquids wholesalers and companies involved in the
natural gas liquids midstream industry (such as terminal and refinery operations),
are engaged in the liquids business, some of which have greater financial resources
than we do. The primary factors on which we compete are:
price;
availability of supply;
reliability of service;
available space on common carrier pipelines;
storage availability;
logistics capabilities, including the availability of railcars, and proprietary
terminals;
long-term customer relationships; and
the acquisition of businesses.
Pricing Policy. In our Liquids business, we offer our customers three categories
of contracts for propane sourced from common carrier pipelines:
customer pre-buys, which typically require deposits based on market pricing
conditions;
market based, which can either be a posted price or an index to spot price at
time of delivery; and
load package, a firm price agreement for customers seeking to purchase specific
volumes delivered during a specific time period.
We use back-to-back contracts for many of our Liquids segment sales to limit
exposure to commodity price risk and protect our margins. We are able to match
our supply and sales commitments by offering our customers purchase contracts
with flexible price, location, storage, and ratable delivery. However, certain
common carrier pipelines require us to keep minimum in-line inventory balances
year round to conduct our daily business, and these volumes are not be matched
with a purchase commitment.
Our Retail Propane business faces significant competition, as many entities
are engaged in the retail propane business, some of which have greater financial
resources than we do. Also, we compete with alternative energy sources, including
natural gas and electricity. The primary factors on which we compete are:
price;
availability of supply;
reliability of service;
long-term customer relationships; and
the acquisition of businesses.
Competition with other retail propane distributors in the propane industry
is highly fragmented and generally occurs on a local basis with other large
full-service, multi-state propane marketers, smaller local independent marketers,
and farm cooperatives. Our customer service locations generally have one to
five competitors in their market area.
The competitive landscape of the markets that we serve has been fairly stable.
Each customer service location operates in its own competitive environment,
since retailers are located in close proximity to their customers due to delivery
economics. Our customer service locations generally have an effective marketing
radius of 25 to 55 miles, although in certain areas the marketing radius may
be extended by satellite distribution locations.
The ability to compete effectively depends on the ability to provide superior
customer service, which includes reliability of supply, quality equipment, well-trained
service staff, efficient delivery, 24-hours-a-day service for emergency repairs
and deliveries, multiple payment and purchase options and the ability to maintain
competitive prices. Additionally, we believe that our safety programs, policies
and procedures are more comprehensive than many of our smaller, independent
competitors, which offers a higher level of service to our customers. We also
believe that our overall service capabilities and customer responsiveness differentiate
us from many of our competitors.
Our Refined Products and Renewables business faces significant competition,
as many entities are engaged in the refined products and renewables business,
some of which have greater financial resources than we do. The primary factors
on which we compete are:
price;
availability of supply;
reliability of service;
available space on common carrier pipelines;
storage availability;
logistics capabilities, including the availability of railcars, and proprietary
terminals; and
long-term customer relationships.