NYSE:GEL Genesis Energy Q2 2024 Earnings Report $14.09 -0.26 (-1.81%) Closing price 04/25/2025 03:59 PM EasternExtended Trading$14.21 +0.12 (+0.85%) As of 08:40 AM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Genesis Energy EPS ResultsActual EPS-$0.25Consensus EPS -$0.03Beat/MissMissed by -$0.22One Year Ago EPS$0.22Genesis Energy Revenue ResultsActual Revenue$756.26 millionExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/AGenesis Energy Announcement DetailsQuarterQ2 2024Date8/1/2024TimeBefore Market OpensConference Call DateThursday, August 1, 2024Conference Call Time10:00AM ETUpcoming EarningsGenesis Energy's Q1 2025 earnings is scheduled for Thursday, May 8, 2025, with a conference call scheduled on Thursday, May 1, 2025 at 10:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)SEC FilingEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Genesis Energy Q2 2024 Earnings Call TranscriptProvided by QuartrAugust 1, 2024 ShareLink copied to clipboard.There are 5 speakers on the call. Operator00:00:00Greetings, and welcome to the Genesis Energy, LP P. Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. Operator00:00:19It is now my pleasure to introduce your host, Duane Morley, Vice President of IOWA. Thank you, Duane. You may begin. Speaker 100:00:27Good morning. Welcome to the 2024 Second Quarter Conference Call for Genesis Energy. Genesis Energy has 4 business segments. The Offshore Pipeline Transportation segment is engaged in providing the critical infrastructure to move oil produced from the long lived world class reservoirs from the Deepwater Gulf of Mexico to onshore refining centers. So the Sulfur Services segment includes trona and trona based exploring, mining, processing, producing, marketing and selling activities as well as the processing of sour gas streams to remove sulfur refining operations. Speaker 100:00:59The Onshore Facilities and Transportation segment is engaged in the transportation handling, blending, storage and supply of energy products, including crude oil and refined products. The Marine Transportation segment is engaged in the maritime transportation and primarily refined petroleum products. Genesis' operations are primarily located in Wyoming, the Gulf Coast states and the Gulf of Mexico. During this conference call, management may be making forward looking statements within the meanings of the Securities Act of 1933 and the Securities Exchange Act of 1934. The law provides safe harbor protection to encourage companies to provide forward looking information. Speaker 100:01:36Genesis intends to avail itself of those safe harbor provisions and directs you to its most recently filed and future filings with the Securities and Exchange Commission. We also encourage you to visit our website at genesisenergy.com, where a copy of the press release we issued today is located. The press release also presents a reconciliation of non GAAP financial measures to the most comparable GAAP financial measures. At this time, I'd like to introduce Grant Sims, CEO of Genesis Energy L. P. Speaker 100:02:05Mr. Sims will be joined by Kristin Jeselaitis, Chief Financial Officer and Chief Legal Officer Ryan Sims, President and Chief Commercial Officer and Louis Nicholl, Chief Accounting Officer. Speaker 200:02:16Good morning to everyone and thank you for listening to the call. As we mentioned in our earnings release this morning, we continue to move closer and closer to the important inflection point when we will complete our current major capital spending program and be a short time away from a notable step change in earnings and cash flow. We have always viewed 2024 as kind of a transition year and have instead been more focused on 'twenty five and beyond. As such, I thought it'd be most useful to comment further on the internal discussions that have been ongoing at the Board level regarding capital allocation and strategic priorities for Jennifer. As we have detailed in the past and subject to certain assumptions, the current annual cash cost of running our businesses, including all cash interest payments, cash maintenance capital requirements, principal and interest on our alkali senior secured notes, cash taxes, approximately $88,000,000 worth of payments on the currently outstanding 11.24 percent coupon convertible preferred units and roughly $73,500,000 worth of cash payments based on the current common unit distribution of $0.60 per annum, all adds up to be approximately $620,000,000 per year. Speaker 200:03:38That's the annual cash cost of running our businesses as currently capitalized. At this point, we have spent everything we anticipated to spend on our Granger expansion and the vast majority of the cash required on our offshore expansion projects has already been or soon will be spent. While a little of this expansion capital will slip into the 1st part of 2025 due to some previously disclosed producer delays, the $1,000,000,000 plus of growth capital we have deployed over the last several years should all be out the door by the end of the Q1 2025. In advance of first production from our contracted offshore developments coming online and starting to ramp in the Q2 next year. Looking out over the coming years, we have identified no growth capital projects and remain committed to not pursuing any meaningful growth capital projects in the near term. Speaker 200:04:38In essence, because we believe we have laid the foundation for meaningfully higher and sustainable adjusted EBITDA for the foreseeable future and really don't need to pursue anything. As we look ahead to the full year of 2025, assuming a midyear startup for our contracted offshore developments, a marginal sequential recovery in our soda ash business and steady to marginally increasing performance in our Marine Transportation segment, we believe Genesis should be able to generate approximately $800,000,000 in adjusted EBITDA in 2025 and we could be approaching and potentially exceeding $900,000,000 of adjusted EBITDA in 2026, at least based on how we see our future world today. It is easy to figure out that upon completion of our capital spending program, coupled with the absence of any meaningful future growth capital requirements in the near term, we expect to be generating significant amounts of cash over the next several years and beyond. Looking at the balance sheet. The combination of our successful capital markets transactions, including our most recent bond offering in May and the recent extension of our senior secured credit facility into 2028 that we announced a couple of weeks ago, has positioned the partnership with no near term debt maturities. Speaker 200:06:06Given the expansion of certain buckets and permitted investments recently agreed to in our senior secured credit facility, we have ensured the Partnership has more than adequate financial flexibility and liquidity to continue to simplify and strengthen our capital structure by redeeming our high cost convertible preferred and paying down debt in absolute terms. These actions should in turn lower our cost of capital and ultimately reduce the long term annual cash costs of running our businesses, affording us over time even more flexibility and levers we can pull to maximize unitholder value. With this backdrop and given our confidence in this future cash flow, today we are announcing that the Board of Directors has approved an increase in our quarterly common unit distribution of $0.015 per unit, starting with the 3rd quarter distribution, which is scheduled to be paid in mid November. This represents a 10% increase over the 2nd quarter's distribution and yet only represents an incremental annual cash cost of approximately $7,300,000 The Board believes this is an important first step and should signal to the market the confidence we have in the future performance of our businesses. Subject to future Board deliberation and approval, we could envision this common unit distribution growth continuing in coming quarters years as we realize increasing EBITDA and benefit from the reduced cash obligations to run our businesses resulting from the redemption of high coupon securities throughout our capital structure. Speaker 200:07:56By way of illustration, if we were to continue this level of quarterly distribution growth for say 10 quarters in a row, the quarterly distribution by the end of 2026 would double from where it currently is and yet would only represent an incremental annual cash cost of approximately $73,500,000 per year. By 2027, we will have likely redeemed 100 of 1,000,000 of dollars of the high cost convertible preferred and or paid down meaningful amounts of debt and therefore would have reduced the cash cost of running our businesses. This in turn would result in even greater cash flow, everything else the same, and we would be able to accelerate the redemption of the remaining preferred, further reduce outstanding debt, as well as extend our flexibility to further increase the distribution and or take other strategic steps to drive unitholder value. In summary, absent unforeseen circumstances, we have we believe we have positioned the partnership with more than adequate financial flexibility and a clear line of sight on robust commercial opportunities to hopefully be able to create long term value for everyone in the capital structure in the coming years. Now I will touch briefly on our individual business segments. Speaker 200:09:26As mentioned in our earnings release, our Offshore segment was negatively affected by what can be characterized as technical issues at a couple of large fields and a couple of months delay from our original expectations and the start up of a couple of new subsea developments, I want to emphasize that the occasional technical issue off shore and or delays in bringing new developments online are not uncommon. While the timing of the production might move to the right a little or even a few quarters, there are rarely ever any long term impacts to the production profile or the reservoir. The oil will still be produced and ultimately flow through our pipelines. Our offshore expansion projects remain on schedule and we continue to expect to complete most of the construction work by the end of this year. We expect to finalize the connection of the new sink pipeline to the Shenandoah floating production system once it arrives at its final location in the Gulf of Mexico, with such work likely spilling over to the Q1 of 2025. Speaker 200:10:34Both the Shenandoah and Salamanca developments and their combined almost 200,000 barrels a day of incremental production handling capacity remain on schedule to be online in the Q2 of 2025. As we have mentioned in the past, these two developments alone will provide us with anticipated incremental annual segment margin of approximately $90,000,000 at the contracted take or pay level and upwards of $120,000,000 at 75% of the producers' respective forecasts. These amounts could approach $160,000,000 per annum net to us to the extent that producers meet or exceed 100 percent of their respective forecast when fully ramped. We continue to expect both these fields to ramp very quickly and reach initial peak production within 3 to 6 months of their respective dates of first production. These 2 new floating production facilities are also expected to serve as host platforms for additional future subsea developments or tieback opportunities, which could sustain increase these cash flows to us for years years into the future. Speaker 200:11:53In fact, a group of producers led by Beacon has recently taken a final investment decision on the Monument Field that will be developed as a 17 mile subsea tieback to the new Shenandoah floating production unit. The Shenandoah FPU has been expanded to accommodate an additional 20,000 barrels per day from Monument starting in mid to late 2026. We would expect to finalize agreements to move these volumes through our sink lateral and onto shore through the CHOPS pipeline under terms and conditions generally consistent with those for Shenandoah. Monument is the first example of what is likely a broader set of incremental opportunities that have been identified, but are not fully sanctioned by the producers involved in the geographic vicinity of our new infrastructure in the Central Gulf of Mexico. Importantly, our ongoing discussions around the connection of additional infield, subsea and or secondary recovery development opportunities would not require any incremental capital on our part and could turn to production as early as next year and certainly over the next few years. Speaker 200:13:12We remain advantageously positioned in the Central Gulf of Mexico and believe our steady and marginally increasing invasive volumes transported Combined with these new developments coming online in mid-twenty 25 and 2026, plus the potential for additional subsea tieback and development opportunities just like Winterfell and Warrior and Monument give us the opportunity to deliver significantly higher sustainable cash flows from our Offshore Transportation segment for many years decades to come. Turning now to our Soda and Sulfur Services segment. Our soda ash business generally performed in line with our expectations despite some lingering production challenges at our Wesvaco operations as well as not having a full quarter's worth of production from Grainger due to the need to replace the defective component parts we discussed last quarter. With these items now behind us, we expect the back half of the year to be more representative of the true production capabilities of our soda ash operations. The global macro conditions for soda ash continue to show signs of bottoming. Speaker 200:14:26The market dynamics within China so far this year continue to be strong as evidenced by year to date export totals of soda ash from China being down 56% year over year, whilst imports into China were up 2 66% for the same period. Furthermore, 3rd party research indicates that apparent demand for soda ash within China has grown by 28% year to date, with the large drivers being the steady production of lithium carbonate, EV production and solar glass, Speaker 300:15:02which are up by approximately Speaker 200:15:0353%, 29% and 23%, respectively, year over year through the end of June. We also continue to see changes in the flow of physical volumes around the globe, most notably with natural soda ash tons that were moving to Asia last year that are now moving into Europe to displace high cost synthetic soda ash or to fill the holes left by the shuttering of high cost synthetic production facilities in the region. This schematic is supported by 3rd party research indicating that exports of natural soda from Turkey to Asia, excluding China, during the 1st 5 months of the year were down 17% year over year. At the same time, Turkish exports to Europe and the Middle East Africa were up 16% 14% year over year respectively through May. We believe these changes in physical flows and the steady demand for soda ash within China combined with recent increases in certain transportation costs and some supply disruptions from other U. Speaker 200:16:10S. Producers in the second quarter, have yet to fully trickle into the export markets, all should lead to continued tightness in our traditional export markets Operator00:16:20and Speaker 200:16:20the potential for soda ash prices to improve over the balance of the year and importantly in advance of our contract negotiations for open volumes in 2025. Regardless of these real time dynamics, there is no doubt that over time markets work. Physical volumes always flow to the highest valued markets. The market data points I mentioned, the expected continued return of normalized global economic growth and the continued increase in worldwide demand from low carbon transition initiatives, all lead us to believe that the market is in fact rebalancing and is poised to become increasingly more balanced, which in turn should provide support for higher prices and a sequential improvement in performance of our soda ash business over the coming quarters and years ahead. Our sulfur services business performed in line with our expectations during the quarter. Speaker 200:17:20Our Marine Transportation segment continues to meet or exceed our expectations as market conditions and demand fundamentals continue to remain very favorable. We continue to operate with utilization rates atornear100% of practical available capacity for all classes of our vessels and expect the progression of day rates to be commensurate with those underlying fundamentals as our existing term and spot charters renew over the remainder of the year and into 2025. These fundamentals combined with the completion of most of our previously scheduled dry docking work should drive sequential segment improvement in the back half of this year and continue into next year. As I have mentioned in the past and will reiterate again today, the value proposition for Genesis remains unchanged and totally intact. We have clear line of sight to the end of our current growth capital program in the next few quarters. Speaker 200:18:23As we sit here today, we look forward to the increasing financial performance of our businesses next year and accelerating into 2026, driven primarily by identified and contracted growth in our offshore transportation, a lighter dry docking schedule and full year of day rates at historically high levels driving improved performance in our Marine Transportation segment and in addition, a likely sequential improvement in soda ash pricing resulting in an improvement in the financial results from our soda ash operations. I want to emphasize again that Genesis is not and never has been a 2024 story, instead of it's a 25 and 26 story, where we reasonably expect ultimately be capable of generating upwards of $250,000,000 to $350,000,000 or more of excess cash per year and be able to sustain around those levels for many years to come. This will allow us to simplify our capital structure, lower our overall cost of capital, maintain prudent leverage and have the ability to drive long term value for our unitholders. Finally, I'd like to say the management team and the Board of Directors remain steadfast in our commitment to building long term value for all our stakeholders, regardless of where you are in the capital structure. Speaker 200:19:50We believe the decisions we are making reflect this commitment and our confidence in Genesis moving forward. I would once again like to recognize our entire workforce for their individual efforts and unwavering commitment to safe and responsible operations. And I'm extremely proud to be associated with each and every one of you. With that, I'll turn it back to the moderator for Speaker 300:20:14questions. Operator00:20:14Thank you. We'll now be conducting a question and answer Thank you. Our first question is from Michael Blum with Wells Fargo. Please proceed with your question. Speaker 400:20:52Thanks. Good morning, everyone. I wanted to ask on your capital allocation comments. Can you give us like a rank order of your priorities and if there are any limitations in repurchasing debt early in terms of prepayment penalties and Speaker 200:21:12the like? As I said, I think our priorities are a little bit of all the above. I think starting with the increase in the distribution as well as what we perceive to be further increases in the distribution as we go through time at the same time of redeeming high priced or high coupon securities in the capital structure. So as we mentioned, we have expanded buckets and increased the amount of permitted investments under our senior secured facility to be able to periodically harvest, so to speak, the high priced coupons in the capital structure, all of which reduces the costs of running our business and therefore increases the amount of excess cash flow that we can either accelerate the redemption and harvesting of those high priced securities or have the flexibility to continue to increase the distribution or otherwise return capital to equity holders. Speaker 400:22:27Okay, great. Thanks for that. And then I just wanted to ask a little bit on the marine transportation business. First, can you give us a sense of the magnitude of increase in day rates you're seeing? And then just remind us the long term strategy for this business. Speaker 400:22:41Do you consider this to be like a core asset within the Genesis portfolio? Thanks. Speaker 200:22:48Yes. I think that consistent with some of the other public commentary that came out today by other public companies, we would think that that's consistent that we're seeing day rates increase in the high single digits to mid teens depending upon class of vessels. Utilization for us is a practical matter of 100% available. That has not been either in dry dock or other kind of maintenance required. So we think it's we have the ability to we will set a record this year of contributed or segment margin in the Marine Group. Speaker 200:23:37And I think that we have room to grow for that in 2025. Also, I mean, as we've commented earlier that the only substantive way to kind of resolve the supply demand tightness in the marine world is the increase in Jones Act tonnage through new construction and that I think we would continue to believe that day rates need to go up 20% to 30% from here and be sustained at that level for a significant period of time before significant new build programs are undertaken. And so as a result, I think that we've used the next several years as a very good position to be in and holding and maintaining a young fleet of Jones Act tonnage such as ours. Operator00:24:49Thank you. Our next question is from Wade Suki with Capital One. Please proceed with your question. Speaker 300:24:56Good morning, everyone. Appreciate you taking my questions. Just offshore, really appreciate your commentary there, Grant, on the activity levels. I'm wondering if how we think about tiebacks and tie ins, is this potentially more than offsetting sort of base declines that you're seeing in the system? Is that a fair way to think about it, the opportunity going forward? Speaker 300:25:23Or is it really just sort of offsetting existing declines from the larger projects and base projects for that matter? Speaker 200:25:31Yes, we see the cadence of infill drilling and subsea tiebacks in essence at least offsetting the declines that we see from our more mature fields And therefore, these incremental opportunities such as Salamanca and Shenandoah and now Monument are kind of truly incremental. So that's and in some cases, we do see the level of activity of subsea and tiebacks and stuff actually increasing our base load of business. So it's all a very good situation and that's why we like to be the 1 and only export pipeline off of these deepwater facilities because you'll get set up for decades long worth of geographic franchise. Speaker 300:26:31Fantastic. Thank you for that. And just switch gears a little bit to soda ash, would you mind maybe updating us on where you guys are in terms of kind of price certain volumes, open capacity, so to speak, looking out to next year? Speaker 200:26:49Into next year, around 40% to 45% of our anticipated sales volumes in 25% are either known with certainty as we sit here today or subject to very tight caps or collars. So basically 55% or so will be redetermined as typical in our business towards the in the November, December timeframe, either under annual contracts or short term duration as we can get with our customers because we continue to believe that the market is balancing and that prices should continue to rise as we move through 'twenty five. Speaker 300:27:40Fantastic. Thank you so much. Appreciate it. Operator00:27:58Thank you. There are no further questions at this time. I would like to hand the floor back over to Grant Sims for any closing comments. Speaker 200:28:05Okay. Well, again, thanks, everyone. We appreciate your interest in listening in, and we look forward to continuing to create value for everybody in the capital structure. So thanks very much. Operator00:28:23This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallGenesis Energy Q2 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Genesis Energy Earnings HeadlinesWhy Genesis Energy (GEL) Is Up the Most So Far in 2025April 26 at 7:03 PM | msn.comGenesis Energy LP (GEL) Shares Up 3.84% on Apr 14April 14, 2025 | gurufocus.comFrom Social Security to Social Prosperity?In less than a decade, Social Security could be out of money. But a surprising plan from Trump’s inner circle may not just save the system — it could unlock a major opportunity for savvy investors. Financial insider Jim Rickards calls it “Social Prosperity,” and says those who act now could see the biggest gains.April 28, 2025 | Paradigm Press (Ad)Genesis Energy, L.P. Declares Quarterly DistributionApril 10, 2025 | gurufocus.comGenesis Energy LP Announces Quarterly Cash Distribution and Upcoming Earnings CallApril 10, 2025 | gurufocus.comGenesis Energy, L.P. Declares Quarterly Distribution | GEL Stock NewsApril 10, 2025 | gurufocus.comSee More Genesis Energy Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Genesis Energy? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Genesis Energy and other key companies, straight to your email. Email Address About Genesis EnergyGenesis Energy (NYSE:GEL) provides integrated suite of midstream services in crude oil and natural gas industry in the United States. It operates through Offshore Pipeline Transportation, Soda and Sulfur Services, Marine Transportation, and Onshore Facilities and Transportation segments. The Offshore Pipeline Transportation segment engages in offshore crude oil and natural gas pipeline transportation and handling operations, as well as deep water pipeline servicing. This segment also owns interests in offshore crude oil and natural gas pipeline systems, platforms, and related infrastructure. The Soda and Sulfur Services segment produces, markets, and sells soda ash; and provides sulfur removal services. This segment also owns and operates soda ash production facilities, underground trona ore mines and brine solution mining operations and related equipment, and logistics and other assets; and sells sodium hydrosulfide and caustic soda to industrial and commercial companies involved in the mining of base metals. The Marine Transportation segment offers waterborne transportation of petroleum and crude oil in North America. This segment owns a fleet of 91 barges and 42 push/tow boats. The Onshore Facilities and Transportation segment offers onshore facilities and transportation services to crude oil refineries and producers by purchasing, transporting, storing, blending, and marketing crude oil and refined products; and operates trucks, trailers, railcars, and terminals and tankage in various locations along the Gulf Coast. This segment also transports crude oil, as well as owns four onshore crude oil pipeline systems and four operational crude oil rail unloading facilities. The company was incorporated in 1996 and is headquartered in Houston, Texas.View Genesis Energy ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Markets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Texas Instruments: Earnings Beat, Upbeat Guidance Fuel RecoveryMarket Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of Earnings Upcoming Earnings AstraZeneca (4/29/2025)Booking (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Regeneron Pharmaceuticals (4/29/2025)Starbucks (4/29/2025)American Tower (4/29/2025)América Móvil (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 5 speakers on the call. Operator00:00:00Greetings, and welcome to the Genesis Energy, LP P. Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. Operator00:00:19It is now my pleasure to introduce your host, Duane Morley, Vice President of IOWA. Thank you, Duane. You may begin. Speaker 100:00:27Good morning. Welcome to the 2024 Second Quarter Conference Call for Genesis Energy. Genesis Energy has 4 business segments. The Offshore Pipeline Transportation segment is engaged in providing the critical infrastructure to move oil produced from the long lived world class reservoirs from the Deepwater Gulf of Mexico to onshore refining centers. So the Sulfur Services segment includes trona and trona based exploring, mining, processing, producing, marketing and selling activities as well as the processing of sour gas streams to remove sulfur refining operations. Speaker 100:00:59The Onshore Facilities and Transportation segment is engaged in the transportation handling, blending, storage and supply of energy products, including crude oil and refined products. The Marine Transportation segment is engaged in the maritime transportation and primarily refined petroleum products. Genesis' operations are primarily located in Wyoming, the Gulf Coast states and the Gulf of Mexico. During this conference call, management may be making forward looking statements within the meanings of the Securities Act of 1933 and the Securities Exchange Act of 1934. The law provides safe harbor protection to encourage companies to provide forward looking information. Speaker 100:01:36Genesis intends to avail itself of those safe harbor provisions and directs you to its most recently filed and future filings with the Securities and Exchange Commission. We also encourage you to visit our website at genesisenergy.com, where a copy of the press release we issued today is located. The press release also presents a reconciliation of non GAAP financial measures to the most comparable GAAP financial measures. At this time, I'd like to introduce Grant Sims, CEO of Genesis Energy L. P. Speaker 100:02:05Mr. Sims will be joined by Kristin Jeselaitis, Chief Financial Officer and Chief Legal Officer Ryan Sims, President and Chief Commercial Officer and Louis Nicholl, Chief Accounting Officer. Speaker 200:02:16Good morning to everyone and thank you for listening to the call. As we mentioned in our earnings release this morning, we continue to move closer and closer to the important inflection point when we will complete our current major capital spending program and be a short time away from a notable step change in earnings and cash flow. We have always viewed 2024 as kind of a transition year and have instead been more focused on 'twenty five and beyond. As such, I thought it'd be most useful to comment further on the internal discussions that have been ongoing at the Board level regarding capital allocation and strategic priorities for Jennifer. As we have detailed in the past and subject to certain assumptions, the current annual cash cost of running our businesses, including all cash interest payments, cash maintenance capital requirements, principal and interest on our alkali senior secured notes, cash taxes, approximately $88,000,000 worth of payments on the currently outstanding 11.24 percent coupon convertible preferred units and roughly $73,500,000 worth of cash payments based on the current common unit distribution of $0.60 per annum, all adds up to be approximately $620,000,000 per year. Speaker 200:03:38That's the annual cash cost of running our businesses as currently capitalized. At this point, we have spent everything we anticipated to spend on our Granger expansion and the vast majority of the cash required on our offshore expansion projects has already been or soon will be spent. While a little of this expansion capital will slip into the 1st part of 2025 due to some previously disclosed producer delays, the $1,000,000,000 plus of growth capital we have deployed over the last several years should all be out the door by the end of the Q1 2025. In advance of first production from our contracted offshore developments coming online and starting to ramp in the Q2 next year. Looking out over the coming years, we have identified no growth capital projects and remain committed to not pursuing any meaningful growth capital projects in the near term. Speaker 200:04:38In essence, because we believe we have laid the foundation for meaningfully higher and sustainable adjusted EBITDA for the foreseeable future and really don't need to pursue anything. As we look ahead to the full year of 2025, assuming a midyear startup for our contracted offshore developments, a marginal sequential recovery in our soda ash business and steady to marginally increasing performance in our Marine Transportation segment, we believe Genesis should be able to generate approximately $800,000,000 in adjusted EBITDA in 2025 and we could be approaching and potentially exceeding $900,000,000 of adjusted EBITDA in 2026, at least based on how we see our future world today. It is easy to figure out that upon completion of our capital spending program, coupled with the absence of any meaningful future growth capital requirements in the near term, we expect to be generating significant amounts of cash over the next several years and beyond. Looking at the balance sheet. The combination of our successful capital markets transactions, including our most recent bond offering in May and the recent extension of our senior secured credit facility into 2028 that we announced a couple of weeks ago, has positioned the partnership with no near term debt maturities. Speaker 200:06:06Given the expansion of certain buckets and permitted investments recently agreed to in our senior secured credit facility, we have ensured the Partnership has more than adequate financial flexibility and liquidity to continue to simplify and strengthen our capital structure by redeeming our high cost convertible preferred and paying down debt in absolute terms. These actions should in turn lower our cost of capital and ultimately reduce the long term annual cash costs of running our businesses, affording us over time even more flexibility and levers we can pull to maximize unitholder value. With this backdrop and given our confidence in this future cash flow, today we are announcing that the Board of Directors has approved an increase in our quarterly common unit distribution of $0.015 per unit, starting with the 3rd quarter distribution, which is scheduled to be paid in mid November. This represents a 10% increase over the 2nd quarter's distribution and yet only represents an incremental annual cash cost of approximately $7,300,000 The Board believes this is an important first step and should signal to the market the confidence we have in the future performance of our businesses. Subject to future Board deliberation and approval, we could envision this common unit distribution growth continuing in coming quarters years as we realize increasing EBITDA and benefit from the reduced cash obligations to run our businesses resulting from the redemption of high coupon securities throughout our capital structure. Speaker 200:07:56By way of illustration, if we were to continue this level of quarterly distribution growth for say 10 quarters in a row, the quarterly distribution by the end of 2026 would double from where it currently is and yet would only represent an incremental annual cash cost of approximately $73,500,000 per year. By 2027, we will have likely redeemed 100 of 1,000,000 of dollars of the high cost convertible preferred and or paid down meaningful amounts of debt and therefore would have reduced the cash cost of running our businesses. This in turn would result in even greater cash flow, everything else the same, and we would be able to accelerate the redemption of the remaining preferred, further reduce outstanding debt, as well as extend our flexibility to further increase the distribution and or take other strategic steps to drive unitholder value. In summary, absent unforeseen circumstances, we have we believe we have positioned the partnership with more than adequate financial flexibility and a clear line of sight on robust commercial opportunities to hopefully be able to create long term value for everyone in the capital structure in the coming years. Now I will touch briefly on our individual business segments. Speaker 200:09:26As mentioned in our earnings release, our Offshore segment was negatively affected by what can be characterized as technical issues at a couple of large fields and a couple of months delay from our original expectations and the start up of a couple of new subsea developments, I want to emphasize that the occasional technical issue off shore and or delays in bringing new developments online are not uncommon. While the timing of the production might move to the right a little or even a few quarters, there are rarely ever any long term impacts to the production profile or the reservoir. The oil will still be produced and ultimately flow through our pipelines. Our offshore expansion projects remain on schedule and we continue to expect to complete most of the construction work by the end of this year. We expect to finalize the connection of the new sink pipeline to the Shenandoah floating production system once it arrives at its final location in the Gulf of Mexico, with such work likely spilling over to the Q1 of 2025. Speaker 200:10:34Both the Shenandoah and Salamanca developments and their combined almost 200,000 barrels a day of incremental production handling capacity remain on schedule to be online in the Q2 of 2025. As we have mentioned in the past, these two developments alone will provide us with anticipated incremental annual segment margin of approximately $90,000,000 at the contracted take or pay level and upwards of $120,000,000 at 75% of the producers' respective forecasts. These amounts could approach $160,000,000 per annum net to us to the extent that producers meet or exceed 100 percent of their respective forecast when fully ramped. We continue to expect both these fields to ramp very quickly and reach initial peak production within 3 to 6 months of their respective dates of first production. These 2 new floating production facilities are also expected to serve as host platforms for additional future subsea developments or tieback opportunities, which could sustain increase these cash flows to us for years years into the future. Speaker 200:11:53In fact, a group of producers led by Beacon has recently taken a final investment decision on the Monument Field that will be developed as a 17 mile subsea tieback to the new Shenandoah floating production unit. The Shenandoah FPU has been expanded to accommodate an additional 20,000 barrels per day from Monument starting in mid to late 2026. We would expect to finalize agreements to move these volumes through our sink lateral and onto shore through the CHOPS pipeline under terms and conditions generally consistent with those for Shenandoah. Monument is the first example of what is likely a broader set of incremental opportunities that have been identified, but are not fully sanctioned by the producers involved in the geographic vicinity of our new infrastructure in the Central Gulf of Mexico. Importantly, our ongoing discussions around the connection of additional infield, subsea and or secondary recovery development opportunities would not require any incremental capital on our part and could turn to production as early as next year and certainly over the next few years. Speaker 200:13:12We remain advantageously positioned in the Central Gulf of Mexico and believe our steady and marginally increasing invasive volumes transported Combined with these new developments coming online in mid-twenty 25 and 2026, plus the potential for additional subsea tieback and development opportunities just like Winterfell and Warrior and Monument give us the opportunity to deliver significantly higher sustainable cash flows from our Offshore Transportation segment for many years decades to come. Turning now to our Soda and Sulfur Services segment. Our soda ash business generally performed in line with our expectations despite some lingering production challenges at our Wesvaco operations as well as not having a full quarter's worth of production from Grainger due to the need to replace the defective component parts we discussed last quarter. With these items now behind us, we expect the back half of the year to be more representative of the true production capabilities of our soda ash operations. The global macro conditions for soda ash continue to show signs of bottoming. Speaker 200:14:26The market dynamics within China so far this year continue to be strong as evidenced by year to date export totals of soda ash from China being down 56% year over year, whilst imports into China were up 2 66% for the same period. Furthermore, 3rd party research indicates that apparent demand for soda ash within China has grown by 28% year to date, with the large drivers being the steady production of lithium carbonate, EV production and solar glass, Speaker 300:15:02which are up by approximately Speaker 200:15:0353%, 29% and 23%, respectively, year over year through the end of June. We also continue to see changes in the flow of physical volumes around the globe, most notably with natural soda ash tons that were moving to Asia last year that are now moving into Europe to displace high cost synthetic soda ash or to fill the holes left by the shuttering of high cost synthetic production facilities in the region. This schematic is supported by 3rd party research indicating that exports of natural soda from Turkey to Asia, excluding China, during the 1st 5 months of the year were down 17% year over year. At the same time, Turkish exports to Europe and the Middle East Africa were up 16% 14% year over year respectively through May. We believe these changes in physical flows and the steady demand for soda ash within China combined with recent increases in certain transportation costs and some supply disruptions from other U. Speaker 200:16:10S. Producers in the second quarter, have yet to fully trickle into the export markets, all should lead to continued tightness in our traditional export markets Operator00:16:20and Speaker 200:16:20the potential for soda ash prices to improve over the balance of the year and importantly in advance of our contract negotiations for open volumes in 2025. Regardless of these real time dynamics, there is no doubt that over time markets work. Physical volumes always flow to the highest valued markets. The market data points I mentioned, the expected continued return of normalized global economic growth and the continued increase in worldwide demand from low carbon transition initiatives, all lead us to believe that the market is in fact rebalancing and is poised to become increasingly more balanced, which in turn should provide support for higher prices and a sequential improvement in performance of our soda ash business over the coming quarters and years ahead. Our sulfur services business performed in line with our expectations during the quarter. Speaker 200:17:20Our Marine Transportation segment continues to meet or exceed our expectations as market conditions and demand fundamentals continue to remain very favorable. We continue to operate with utilization rates atornear100% of practical available capacity for all classes of our vessels and expect the progression of day rates to be commensurate with those underlying fundamentals as our existing term and spot charters renew over the remainder of the year and into 2025. These fundamentals combined with the completion of most of our previously scheduled dry docking work should drive sequential segment improvement in the back half of this year and continue into next year. As I have mentioned in the past and will reiterate again today, the value proposition for Genesis remains unchanged and totally intact. We have clear line of sight to the end of our current growth capital program in the next few quarters. Speaker 200:18:23As we sit here today, we look forward to the increasing financial performance of our businesses next year and accelerating into 2026, driven primarily by identified and contracted growth in our offshore transportation, a lighter dry docking schedule and full year of day rates at historically high levels driving improved performance in our Marine Transportation segment and in addition, a likely sequential improvement in soda ash pricing resulting in an improvement in the financial results from our soda ash operations. I want to emphasize again that Genesis is not and never has been a 2024 story, instead of it's a 25 and 26 story, where we reasonably expect ultimately be capable of generating upwards of $250,000,000 to $350,000,000 or more of excess cash per year and be able to sustain around those levels for many years to come. This will allow us to simplify our capital structure, lower our overall cost of capital, maintain prudent leverage and have the ability to drive long term value for our unitholders. Finally, I'd like to say the management team and the Board of Directors remain steadfast in our commitment to building long term value for all our stakeholders, regardless of where you are in the capital structure. Speaker 200:19:50We believe the decisions we are making reflect this commitment and our confidence in Genesis moving forward. I would once again like to recognize our entire workforce for their individual efforts and unwavering commitment to safe and responsible operations. And I'm extremely proud to be associated with each and every one of you. With that, I'll turn it back to the moderator for Speaker 300:20:14questions. Operator00:20:14Thank you. We'll now be conducting a question and answer Thank you. Our first question is from Michael Blum with Wells Fargo. Please proceed with your question. Speaker 400:20:52Thanks. Good morning, everyone. I wanted to ask on your capital allocation comments. Can you give us like a rank order of your priorities and if there are any limitations in repurchasing debt early in terms of prepayment penalties and Speaker 200:21:12the like? As I said, I think our priorities are a little bit of all the above. I think starting with the increase in the distribution as well as what we perceive to be further increases in the distribution as we go through time at the same time of redeeming high priced or high coupon securities in the capital structure. So as we mentioned, we have expanded buckets and increased the amount of permitted investments under our senior secured facility to be able to periodically harvest, so to speak, the high priced coupons in the capital structure, all of which reduces the costs of running our business and therefore increases the amount of excess cash flow that we can either accelerate the redemption and harvesting of those high priced securities or have the flexibility to continue to increase the distribution or otherwise return capital to equity holders. Speaker 400:22:27Okay, great. Thanks for that. And then I just wanted to ask a little bit on the marine transportation business. First, can you give us a sense of the magnitude of increase in day rates you're seeing? And then just remind us the long term strategy for this business. Speaker 400:22:41Do you consider this to be like a core asset within the Genesis portfolio? Thanks. Speaker 200:22:48Yes. I think that consistent with some of the other public commentary that came out today by other public companies, we would think that that's consistent that we're seeing day rates increase in the high single digits to mid teens depending upon class of vessels. Utilization for us is a practical matter of 100% available. That has not been either in dry dock or other kind of maintenance required. So we think it's we have the ability to we will set a record this year of contributed or segment margin in the Marine Group. Speaker 200:23:37And I think that we have room to grow for that in 2025. Also, I mean, as we've commented earlier that the only substantive way to kind of resolve the supply demand tightness in the marine world is the increase in Jones Act tonnage through new construction and that I think we would continue to believe that day rates need to go up 20% to 30% from here and be sustained at that level for a significant period of time before significant new build programs are undertaken. And so as a result, I think that we've used the next several years as a very good position to be in and holding and maintaining a young fleet of Jones Act tonnage such as ours. Operator00:24:49Thank you. Our next question is from Wade Suki with Capital One. Please proceed with your question. Speaker 300:24:56Good morning, everyone. Appreciate you taking my questions. Just offshore, really appreciate your commentary there, Grant, on the activity levels. I'm wondering if how we think about tiebacks and tie ins, is this potentially more than offsetting sort of base declines that you're seeing in the system? Is that a fair way to think about it, the opportunity going forward? Speaker 300:25:23Or is it really just sort of offsetting existing declines from the larger projects and base projects for that matter? Speaker 200:25:31Yes, we see the cadence of infill drilling and subsea tiebacks in essence at least offsetting the declines that we see from our more mature fields And therefore, these incremental opportunities such as Salamanca and Shenandoah and now Monument are kind of truly incremental. So that's and in some cases, we do see the level of activity of subsea and tiebacks and stuff actually increasing our base load of business. So it's all a very good situation and that's why we like to be the 1 and only export pipeline off of these deepwater facilities because you'll get set up for decades long worth of geographic franchise. Speaker 300:26:31Fantastic. Thank you for that. And just switch gears a little bit to soda ash, would you mind maybe updating us on where you guys are in terms of kind of price certain volumes, open capacity, so to speak, looking out to next year? Speaker 200:26:49Into next year, around 40% to 45% of our anticipated sales volumes in 25% are either known with certainty as we sit here today or subject to very tight caps or collars. So basically 55% or so will be redetermined as typical in our business towards the in the November, December timeframe, either under annual contracts or short term duration as we can get with our customers because we continue to believe that the market is balancing and that prices should continue to rise as we move through 'twenty five. Speaker 300:27:40Fantastic. Thank you so much. Appreciate it. Operator00:27:58Thank you. There are no further questions at this time. I would like to hand the floor back over to Grant Sims for any closing comments. Speaker 200:28:05Okay. Well, again, thanks, everyone. We appreciate your interest in listening in, and we look forward to continuing to create value for everybody in the capital structure. So thanks very much. Operator00:28:23This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.Read morePowered by