Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Westlake Chemical Partners LP (WLKP, Financial) reported a net income of $14 million or $0.41 per unit for the second quarter of 2024, an increase from the previous year.
- The company benefited from higher production and sales volumes due to last year's Calvert City turnaround and higher third-party ethylene sales prices and margins.
- WLKP has maintained a cumulative distribution coverage ratio of approximately 1.1x since its IPO in 2014.
- The company announced its 40th consecutive quarterly distribution since its IPO, demonstrating consistent performance.
- WLKP has a strong balance sheet with consolidated cash balances and cash investments totaling $160 million and a consolidated leverage ratio of approximately 1x.
Negative Points
- Higher interest expenses partially offset the benefits from increased production and sales volumes.
- The planned 60-day turnaround at the Petro 1 ethylene unit in Lake Charles, Louisiana, is expected to temporarily impact earnings and production.
- The global macroeconomic environment remains unpredictable, which could affect future performance.
- The MLP equity markets remain challenging, limiting opportunities for equity financing.
- Despite the positive outlook, the company faces risks associated with market volatility and production disruptions.
Q & A Highlights
Q: Regarding the turnaround of our Petro 1, should we assume approximately 30 days in the third quarter and 30 days in the fourth quarter and in terms of the financial impact, you mentioned this is a temporary impact to your coverage ratio, but this will also depress your earnings temporarily as well. Is that correct?
A: Yes. And so you're right, Matthew. From a planning perspective, it's probably half-half in terms of how it falls in the quarter, since it is a 60-day planned turnaround. And I think your assumptions of earnings and production impact are appropriate. (Steven Bender, CFO)
Q: On the spot exposure to the rising ethane cracker margins, it kind of sounds like in the first half of the year, you're actually below that 5% maximum level. Is that the right inference? And I guess going forward, would you expect to be at that 5% in the third quarter?
A: We have actually been selling ethylene in advance because ethylene margins for advance are elevated over the normal $0.1 margin earlier this year. So we actually have had made good progress in selling that normal 5% target through the course of '24. So knowing that we'd have this outage, we wanted to try to get advance of that, especially since margins were actually in pretty good shape. But as we think about the back half of the year, you've seen elevated ethylene margins. And I hope that we were able to participate in that for the rest of the year. (Steven Bender, CFO)
Q: Has there been any stalling of MLP equity markets? Or are you seeing any sort of increase in interest there or is that still an area that's fairly closed off for you?
A: It's still an area that we're exploring, I would say. As we look at the opportunities in the marketplace, I'd say, while the number of MLP names have continued to shrink, there still remains active interest in investors looking for values at the right price. And so we continue to maintain a good dialogue looking for the opportunities where the arbitrage and the valuations make sense for us to pull on one of those four levers that you heard us mention just a moment ago. (Steven Bender, CFO)
Q: Can you provide more details on the financial and operational performance in the second quarter?
A: In this morning's press release, we reported Westlake Partners Second Quarter 2024 net income of $14 million or $0.41 per unit. Consolidated net income, including OpCo's earnings, was $88 million on consolidated net sales of $284 million. The Partnership had distributable cash flows for the quarter of $17 million or $0.49 per unit. Compared to the second quarter of 2023, the Partnership benefited from OpCo's higher production and sales volumes due to last year's Calvert City's turnaround and higher third-party ethylene sales prices and margins, which were partially offset by higher interest expense. (Steven Bender, CFO)
Q: What are the future growth opportunities for Westlake Chemical Partners?
A: I look forward to evaluating opportunities to grow the distribution via our four levers of growth in the future, including increases of our ownership interest of OpCo, acquisitions of other qualified income streams, organic growth opportunities, such as expansions of our current ethylene facilities and negotiation of a higher fixed margin in our ethylene sales agreement with Westlake. (Jean Marc Gilson, President)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
