Ferrellgas Partners, L.P.

Alan Heitmann - CFO, EVP Steve Wambold - President and CEO Julio Rios - President and CEO, Bridger Logistics Tod Brown - EVP and CEO, Blue Rhino

TJ Schultz - RBC Gabe Moreen - Bank of America Merrill Lynch Jeremy Tonet - JP Morgan Nuraya Zak – Citigroup Ben Brownlow - Raymond James

Thank you, Laurel and good afternoon everybody. I am joined today by Steve Wambold, President and CEO; Julio Rios, President and CEO of Bridger Logistics; and Tod Brown, Executive Vice President and CEO of Blue Rhino.

Todd Soiefer, our Senior Vice President of Strategic Development, and CFO of Bridger Logistics will be available for the question and answer portion of our call. Before we get started, I'd like to remind you that some of the statements made during this call may be considered forward looking and that various risks, uncertainties, and other factors could cause actual performance to differ materially from anticipated performance.

These factors are discussed in our Form 10-K, 10-Q, and other documents filed from time to time with the SEC. Now with that out of the way, I’d like to turn the call over to Steve Wambold for his opening remarks.

Steve?

Okay. Thank you, Al.

Good afternoon everyone. I will start today's call with an overview of our Q3 performance which will provide some context as we enter the fourth quarter of 2016.

After that, I'll turn the call over to Julio who will provide an update on Bridger Logistics operations followed by a Blue Rhino update from Tod Brown. And then Al will take you through the Q3 numbers across the business in more detail and then finally we’ll wrap up with some Q&A.

As many of you know and obviously felt, we continued to experience record temperatures across the country in our Q3. This is a trend we have experienced all year.

Overall temperatures were 18% warmer than normal and 21% warmer than last year. In addition, continued pricing pressure in commodities market including crude oil prices, have persisted through -- driving down volumes and resulting in project delays and cancellations.

Like many in our industry, we've been impacted by the confluence of these factors. Despite these challenges, we continue to make progress on our revenue diversification strategy as underscored by the Bridger acquisition, our foothold into the midstream crude oil and logistics segments.

Importantly, Bridger continues to perform well and generated gross profits in our Q3 that more than offset decreases in our water solutions and propane segments. As a result, we delivered a 12% year-over-year increase in adjusted EBITDA during the quarter.

Bridger is on pace in fulfilling our expectations of $100 million in adjusted EBITDA for the partnership in fiscal ’16 and we remain confident in the fully integrated crude oil logistics focused model. We also remain laser focused on reducing expenses and have made considerable progress to date on this front.

Cost control remains a top priority, but we're also focused on enhancing value for unit-holders by driving profitable growth. To that end, we continued to examine both organic and external opportunities in both propane and midstream to accelerate growth and further diversify the company.

We recently declared another strong quarterly cash distribution of $0.5125 per common unit, which represents a $2.05 per common unit distribution on an annualized basis. With that, let me turn the call over to Bridger’s President and CEO Julio Rios to give an operational update on Bridger.

Thank you, Steve. First, I'd like to thank our dedicated employees at Bridger and the fantastic team at Ferrellgas for continuing our smooth transition and seamless integration.

We remain on track to deliver adjusted EBITDA in line with expectations for 2016 with $25.2 million generated in Q3. We regularly assess the impact of shifts in commodity prices and other trends in our operating environment and take them into careful consideration in our internal planning for growth.

While persistent downward pressure on crude continues to require a more measured approach, it presents us with opportunities to leverage our scale as we compete with others in the industry and thus our long term goals at Bridger have not changed. We still expect to grow the business across the various midstream sectors with a particular focus on areas within our existing portfolio of assets.

As Steve mentioned, we intend to grow both organically and through selective high return strategic acquisitions. One of the many reasons for our success is our fully integrated logistics focused model which is significantly less dependent on commodity prices and continues to be a key differentiator for the broader Ferrellgas partnership.

We are pleased this unique model has performed well in this challenging environment. Lastly, in reference to the 10-Q filed earlier today, I want to pause and reiterate that our take or pay contracts with Monroe Energy and its supplier remain in place as does our strong working relationship with them.

We are encouraged by the constructive discussions currently underway on the matter and look forward to supplying further information when appropriate. And with that, I'll turn over the call to Tod Brown to discuss the highlights from Blue Rhino.

Thank you, Julio. As many of you know, the third fiscal quarter marks the beginning of the outdoor barbecue season and our selling season at Blue Rhino.

That being said, the persistence of unfavorable weather across the United States, specifically cooler, wetter weather in the Northeast and the wetter weather pattern that persists in the Southwest resulted in slightly lower volumes relative to the same period last year. We experienced a volume decline of just over 2% but we note that overall volume versus prior year through the third quarter was relatively flat.

Importantly, Blue Rhino's business model was focused on distributing propane across a variety of classes of trade and across all 50 states which helps us to mitigate the impact of unfavorable conditions. This is underscored by our recent success in the grocery segment where we have undertaken initiatives, including engaging in a number of customized shopper marketing programs to drive sales results.

What we saw as a result of these programs was a nice uptick in our comp store sales growth in the grocery category during this past quarter. As I have discussed previously, our products business which includes patio heaters, outdoor fire pits, grilling tools and accessories continues to offer significant strategic benefits, including the synergies that arise from working with many of our retail partners.

To further drive the segment success, we have been actively shifting the focus from lower margin categories to more profitable products for branded -- one example of this, during this past quarter, we successfully exited the low margin opening price point in non-branded grill business and notably we did this and we offset the minimal EBITDA that was associated with those sales through a reduction in expense. This strategy will allow us to drive value by concentrating our resources within our higher margin tools and accessories business as we enter the line review process for summer of 2017.

We continue to be well positioned to navigate the unfavorable weather conditions while executing on our strategy to drive value. I look forward to sharing our all important selling season fourth quarter results on our next call.

With that, I'll turn the call back over to Al Heitmann who will provide our details on the partnership’s financial performance for this quarter.

Thanks, Tod. As Steve mentioned earlier, Ferrellgas delivered a 12% increase in year-over-year adjusted EBITDA of $108 million primarily as a result of Bridger's solid performance and our disciplined approach to expense controls.

Our adjusted EBITDA this quarter includes $96.3 million from our propane and related equipment sale segment and $25.2 million from our midstream crude oil logistics segment. A disciplined approach to expense controls and operational excellence helped to offset partially the decline in our propane sales resulting from the warmer temperatures.

During the quarter we sold 223 million propane gallons, down 9% from the 246 million gallons we sold in the prior year period on temperatures that were 18% warmer than normal and 21% warmer than the prior year period. Our midstream crude oil logistics segment contributed -- continued to deliver strong results.

Bridger's gross profit more than offset the decrease in the propane and related equipment sales segment. These results are a testament to Bridger strong customer relationships as well as the value of diversification.

Total gross profit for the quarter was $244.2 million which includes gross margin from our propane and related equipment sales segment of $210.6 million and the gross margin generated from our midstream crude oil logistics segment of $33.4 million. Operating expense for the quarter was $115.1 million, an increase from the prior year period primarily due to the incremental operating expenses from Bridger.

Likewise the increase in our general and administrative expense which rose to $12.4 million for the third quarter was also primarily a result of the Bridger operations. Interest expense was $34.4 million, up from the $23.5 million we recorded in the prior year period largely due to the notes issued in connection with the Bridger acquisition last June.

All of these, as well as the increase in depreciation and amortization expenses related to the Bridger transaction drove the decrease in net earnings for the quarter. Net earnings were $18.9 million, down from $36.2 million in the prior year quarter.

We expect our DCF coverage to rebound to more than 1 times by the end of 2016 as we continue to execute against our strategic plan. We remain confident that we have the initiatives in place to create value for all Ferrellgas unitholders.

I'll now turn the call over to the operator for some questions and answers.

Great, thanks. I guess maybe first for Julio, are you supplying crude volumes to the Trainer refinery right now, and what's the outlook for delivery into the refinery?

Yes, what I can say about the specifics of our operations with Monroe Energy is that we are continuing to operate within the confines of our contractual arrangements with them. The volume of crude that we're delivering to them is something that’s between us and Monroe, but you can rest assure that we are still operating within our contractual arrangements.

Okay. Understood.

I guess referencing some of the comments in the 10-Q, you stated that the crude supplier may not have some of the resources to satisfy the take or pay through 2019. So maybe if you could just give a little more color about that, near term it looks like there was $19 million due from them on April 30.

And then I guess bigger picture, what are the options to mitigate that risk or what steps are you taking right now on renegotiating that take or pay?

TJ, this is Steve. I appreciate the question.

Again the 10-Q is pretty clear, we’d like to be able to talk a little bit more about that, but we're in the middle of the negotiations. When we get this all wrapped up, we’ll certainly update everyone.

Fair enough. I guess just lastly, any update on 2016 guidance?

No change to the guidance for 2016.

Hi, I was going to ask more on I guess the Jamex stuff. But I guess from my perspective on getting back to leverage and stuff, is that just from EBITDA increasing and getting to a normal winter and getting leverage back under control?

I'm just wondering of other steps you're thinking about taking I guess to get the leverage metrics and coverage back to where you want to.

You're exactly right, Gabe. Our leverage, anticipated leverage for the full year ‘16 is reflective of a full year's worth of Bridger results and the ongoing expense initiatives that we have for the remainder of the year.

And then also in terms of looking at third-party deals, it sounds like there are still some -- potentially some things in the hopper, can you just talk about maybe what you're seeing out there and also the potential to kind of use your currency which you've done in years prior with a couple of these third party acquisitions?

Tod, do you want to take that one?

Sure, absolutely. So we have a decent pipeline both on the propane and on the midstream side and we feel we do have access to fund those transactions using the various forms of financing that we've used as you indicated, like in the past we've used a good mix of different forms of capital.

And then I guess last question for me maybe one on Jamex, do you have any anticipated timeline in terms of when you're going to kind of communicate resolution there on the Monroe deal?

I don't have a firm date. I am hoping that we can update you before the end of the fiscal year which is within the next six to eight weeks.

So, I appreciate with Monroe, don't want to beat a dead horse here, and there's only so much that you guys can say at this juncture. But I'm just wondering if you might be able to refresh us on just how the contracts with Monroe, how it's structured and the economics behind it and just kind of how to best understand the MBCs and the involvement in Jamex and paying those MBCs, if you could just refresh us on how those mechanics work.

I'll leave that to either Tod or Julio.

Jeremy, it’s Julio. So again we have an agreement with Monroe to provide logistics to move barrels to them that Jamex supplies for them that have an agreement that Monroe is to pay us under a take or pay arrangement for those logistic services.

And so, payment comes from Monroe and then we also have a separate transportation logistics agreement with Jamex for other logistics services within our logistics value chain that they pay us for as well. So it’s pretty simple.

Hi guys, good afternoon. My question also pertains to the Bridger assets.

So I don't know how much you can speak to this but if the commitments stay below 35,000 barrels a day, does that give Monroe an out on the contract with Ferrell or their contract with Jamex. And as Jamex, are they still on the hook with Ferrell through 2019, or do they have some sort of out as well?

Julio, do you want to take that?

Yes. Steve, I’ll be glad to take that question.

So, no if the volumes go down below 35,000 barrels a day at any point in time that does not release Munroe from the contract. That contract continues to play in place.

And again I'll reiterate as I mentioned earlier on the first call -- the first question I got from TJ. We are operating within our contractual arrangements with Munroe and with Jamex today, and both agreements are in effect.

And I believe you said they contributed about 25 million in margin roughly for the quarter and the entire midstream business contributed about 33 million. So is that roughly what your – the cash flows you’re getting for Jamex is roughly 25 million compared to 33 million total for the quarter, is that about right?

I think the 33 million that you're referencing is the gross profit contribution. The 25 that we referenced -- the 25.2 was the adjusted EBITDA contribution from Bridger.

And do you have similar contracts with Jamex on other assets other than the ones supporting Monroe, similar type of contracts?

Yeah, I mean Monroe is -- I mean excuse me, Jamex is a crude oil marketing company, we do provide services to them. Those services are provided to them on an as needed basis.

Okay, and can you say if they are an investment grade entity and what type of access to capital they have to continuing -- sort of continue servicing these obligations to you?

I wouldn't be able to answer that question what their financial rating is.

And just one final question, do you have other contractual obligations on assets supporting servicing the Monroe contracts such as the rail facility, the Jones Act vessel, are these sort of take or pay or reservation type contracts from your end?

You're talking about from a payables standpoint?

Correct. Basically it’s to service the Monroe contract.

Yeah. So we have a whole suite of assets that we use, if you want to talk about a specific asset, you want to talk about a barge, we move crude oil up and down the Delaware River for Monroe and for other people as well.

So your question is sort of guided towards asking me whether these assets are solely dedicated to Monroe and they're not.

Okay. Yes, I was just trying to get an idea of what type of obligation you have on those assets even let's say if volumes weren’t -- being transported on those assets, if you still have that commitment.

Well I know but – now I understand, that’s a separate question from what you asked, you asked specifically about the Monroe contract. The Monroe contract does not determine whether those assets are utilized or not.

Yeah I'm just -- if you can give just clarity as to what type of contracts those are, on the Jones Act vessel, or the rail facility.

We've got a term agreement on a barge that we use on the Delaware River for about another year and four months or so. And we're moving crude up and down the Delaware River for various parties.

But there are no terminals or anything like that, that I've got long term agreements with.

Hi guys. Thanks for taking the question.

Just touching on Bridger with the annual guidance of $100 million, I just wondered if you could touch on given the weaker logistics demand, what leverage you're pulling just going into detail a little bit more on what leverage you're pulling to reach that $100 million EBITDA contribution guidance and how much of that is sustainable versus just flexing variable OpEx.

Yeah. So the $100 million EBITDA guidance hasn’t been impacted by the commodity environment.

I had my sights set on a higher number for this year. We've got good contracts that are in place.

And the commodity price environment has sort of held us back in the last nine months from growing the business as dramatically as we've grown over the last five years. So when you look at the impact of the commodity price environment to Bridger, it's really impacted our ability to grow and do incremental projects for the last nine months.

However you see the uptick in commodity prices over the last four to six weeks and we're starting to get a lot of movement on some of the projects that we've been working on for the last nine months. So commodity price environment for Bridger’s business and how it impacts $100 million EBITDA guidance for Bridger is really -- the commodity price environment really just impacts our ability to grow the business beyond that $100 million.

That $100 million is not something that we feel, is something we would miss.

I guess just ask from a different perspective. I guess the $100 million in EBITDA, that you had originally kind of targeted, was that baking in the amount of crude that you are hauling currently?

Yes. End of Q&A

Okay. Thank you everyone for your time and attention today.

We look forward to updating you after our fourth quarter and year end. Have a great summer.