GEL - Earnings call transcript Q2 2019

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Operator

Welcome to the 2019 Second Quarter Conference Call for Genesis Energy. Genesis has four 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. The sodium minerals and sulfur services segment include trona and trona-based exploring, mining, processing, producing, marketing and selling activities as well as the processing of sour gas streams to remove sulfur at refining operations.

The onshore facilities and transportation segment is engaged in the transportation, handling, blending, storage and supply of energy products including crude oil and refined products. is products. the segment primarily transportation transportation petroleum refined marine engaged maritime in of The are located operations Gulf Genesis primarily of and Coast Mexico. the States in Wyoming, Gulf

within may During call the Safe Securities XXXX. Act be Harbor the of and meaning Act law making of this XXXX provisions future of management most forward-looking The conference Exchange protection Securities the statements provides forward-looking avail Exchange itself with Safe Harbor encourage recently Securities to of its to and intends companies and information. to Commission. you Genesis filings provide the filed to directs those

you visit press to comparable GAAP issued encourage today also of also at We we of the most The located. reconciliation to measures release genesisenergy.com copy where financial measures. a is release, financial presents website press the a our non-GAAP

I and Development. time, joined will Sims CEO and Ryan Vice to L.P. introduce Sims, Chief Officer; like be Energy, Genesis would Financial Corporate Grant Senior of Finance this Sims, Mr. by Deere, Bob At President,

Grant Sims

all. Good morning and welcome to

As leverage one mentioned $XXX.X calculated X.XX is just morning's a from to pleased ago. for and million margin are bank total down we segment X.XX second announce quarter. of times times the Leverage in year ratio release, this

where rate achieved and time first close fact, further is $XXX XX diverse end. a process bank continues potential into that our X, million reduction unexpected on floating to previous continue quarter reductions This a our outstanding with businesses borrowing senior will credit this months, Despite Reserve's In will and the below believe secured under translate the Fed funds perform, challenges a which allowing the balance meaningful us debt from we leading XX stood we the a sheet, deliver the below benefit XX several to now with Genesis market three By X. ratio naturally combined coming our in to in rate and point reduction bps amounts one our raising ratio in leverage costs achieving recent Federal of years. pricing our years at associated grid has leverage over the basis the facility.

In some million sale the Wyoming received the down of We is from assets. outstanding fact, $XXX quarter. ago $XXX for year our approximately this debt million

last we've additional to under So over the managed an total our borrowings months, million. XX reduce by $XX revolver

life production Mexico of the lateral the production second was deep oil ultimate production our back to the system have During half platform impact asset development of across financial is see segments leads for drilling our an peak footprint the meaningful standalone the its Poseidon rate and Gulf for flow kbd from a our first continues of Lucius anticipated system, XX both new quarter Buckskin ramps infill in benefit XXXX. transportation The we consistent late to XXX% as longest expect to the Buckskin a to SEKCO transportation throughout and by quarter, shore. of our June operated in pipeline subsea water, offshore and and highlighted existing increasing activity volumes is tie from including The our opportunities. in development. to has dedicated into the log development

seeing base developments offshore leading expenditures us across in of and Gulf footprint. the Buckskin operating asset capital central from required of opportunities leverage is the and Importantly, we of types highlights development of the market Mexico. significant the zero our representative our also It are

third production producing impact experienced to permanent experienced July, offshore Barry. temporary some In damage shut to as systems no We financial do in Hurricane our results. quarter as expect our assets community early on disruptions our we throughput but the negative

Barry the only the Temporarily production almost Gulf our actually half of formed and in which storm approaches our Alabama typical south in terms in Gulf, storm anomalous rather normally from south north. throughput. all turning and the a then before central an west was in Mexico. operations disruption of shutting Barry in some moved than of

three Given days. four his to path and speed, most for be have been production or would expected offline

related residual of production one day. non-very remaining facilities weather the transportation delays and by sake However

Once our offshore in the folks third and redeploy Gulf system other issues locations, were service. the a communication largest to provider party experience restoring

throughput As day a three offshore day to on or a have event systems. we of result, day would affecting eight be turned what expected some – an nine four event four three into XX% to to the our

the hope we third in we downtime not quarter, quarter’s negatively do the additional any third experience While further additional affect any results. could disruptions

to exit to incremental track across volume to of XX relative XXXX. footprint of with long an on quarter kbc the remain We XX XXXX our term dedicated fourth

to diligently finalize to little we to and position, our continue to of incremental excited dedicated to no to fundamentals disclosed. previously in team continues incremental volumes the very have levels with agreements volumes leading ability to Gulf remain activity significant add add our work market capital be Our strong we required. Mexico and about The

the quarter, complex April that in Baton credits Rail June in volumes our they and to the minimum allowed exceeded facilities take-or-pay transportation our pre-paid increased all utilize first and from Rouge resumed segment our with to the performed expected. During Canada July the main quarter. accrued customer delivered as volumes onshore May, which volumes in of

the we volumes differential volumes near does as term However, the but support quarter. to quarter should we the we and experienced in ramp in in the September movements, down third second see current aggregate, expect August not as similar

of believe XXXX curtailments and to the to exist XXXX into quarter or the Alberta production volumes XXXX Baton should XXXX. continue return curtailments complex. by the Rouge of our end the continue conditions of in of as We fourth the government and by they easing market through reduce to We production monitor remainder self-imposed

sulfur Turning to services minerals our and sodium segment.

longer production we move During than experienced due a our anticipated the quarter, machine. mining plan of to lower longwall volumes

perform expect near for continue capacity at has volumes expanded move, items. successfully higher on we we the second remain run year. we for along work year XXXX additional The export of been ash debottlenecking projects estimate with longwall track maintenance stronger full completed the in During future. completed several with slightly the and along expect soda or our and additional full to half the move our proactively We pricing as related the in business for foreseeable we to

supply coming of believe demand for the remains likely international of view to we Our remainder are the market prices the and balance the strengthen year in unchanged years.

turnarounds including of refinery Our unexpected host number despite performed unplanned as a services production at business issues some expected refineries. our challenges, and

the So third be quarter quarter negatively If affected customers. could our business short our has services chain control South some restored in a some bargain by or order, two. to American supply refinery of far experienced our disruptions beyond million in third not

a perform row. marine expected margin Our transportation for quarter increased segment segment as continues sixth the and to slightly in

we in rates and to of rates seen reflective near we As the day recent continue have previously is from bottom remain that an term for assets, the quarterly strength segment optimistic and discussed, entire fleet our of contribution utilization market. improving

common and times. results ratio times our of leverage full distributions In to that of businesses a our to X.XX below provided inclusive unitholders, summary, quarter a sequentially preferred X.XX our financial times to coverage unitholders, decreasing X.XX generated cash paid

at we distributions, target times times unit Our expect remain for $X.XX cash X.X foreseeable X.X rate per ratio, preferred will remains including our common the and future. coverage quarterly distribution all to

couple are than largely our for quarter As a term likely $XXX appear of end is I challenges towards the of guidance up look businesses we to the year, our will unless the lower adjusted end getting the noise the arise $XXX Notwithstanding mean half and the which generally we towards it in past strong EBITDA million first any earlier, second mentioned us from of previous non-recurring across can million. be of XXXX other stronger. year, half to the to long of in the things fundamentals

allow of build years. in to the intend reliable will maintaining stakeholders anticipated leverage of us operations. confident times continue We prudent, into term achieve the term intelligent and from And opportunistically more long without quarter believe to indicative footprint to target businesses of our partnership to our and and responsible XXXX coming all the our achieving on to long We our balance the for our that sheet existing losing deliver commitment are fourth XXXX. to the we financial track and ever and be value four our remains keep naturally flexibility going growth safe, diligent

we always, to recognize like fortunate we'd enough whom efforts work. As are to the with and of all those commitment

With turn for the it moderator to that. I'll back any questions.

Operator

comes Thank a you. first line Your from of [Operator Instructions] question Schultz. TJ

TJ Schultz

Great. Hey, TJ. is this Grant,

adding volumes barrels finalize in as you I to offshore, XXXX, dedicated in I per about XXXX those when volumes you’ve the talked in range. think timeframe? XXXX some expect just dedicated think specific and some the of first, you past think about XX,XXX day would the

occur? can to CapEx potential trying bucks next just zero, understand So type time can the when

Grant Sims

basically the think again, those. crossing we’re that I call, last quarterly think of I we in number dotting I’s gave think T’s the estimate, I and the on a that

time. a is practical have on on reasons basically things As – it’s capacity, last zero that pipelines basis think the probability that not the us due a systems where capacity our mentioned mean there we contracted some have to and of of I proximity of to don’t to line I getting we finish the incremental most is of our matter, logistical competitor, existing

Dog XXXX So ones with end then coming or XXXX, X towards in that of larger incremental volumes and think especially I on. XXXX with do even coming XXXX, we Mad have in the early

some gave on in still So quarterly our very intimated that and I previous is guidance impact. think ramp we calls, much

TJ Schultz

And understood. leverage Okay, the then plan.

your you the more getting in ability would Just helpful? expansion on this context some some of coming growth, your Thanks. goals potential ability in to whether it offshore ash four of average growth as about additional think pipes? the projects, just or times years, should be that’s pursue your to of finance arise soda talked the You about meaningful thoughts the

Grant Sims

are would but with aggregate downstream account deal. of economics than profiles that into times offshore think when capital Mexico. incremental is there expenditures, in five combined will the of Gulf the less spend return in the I these be Again the economics, what and we that discretionary extent be the taking downstream certainly that to the

if not to will take or So including guarantee the risk term timing most in you cases. take or longer reserve pay that

So, take have agreements almost the project, where those kind under EBITDA we of credit material the with we any get from view we the we under have that essence would revolver of financeable in as pay or people. strength with flexibility that scenario

soda On opportunities ash business. the other in the

think which the end The we bit is there grinder construction it’s basis, day run I is a at that project five a a that than have rate we little less period. on it optimization believe do deal. year that discussed times three a the of the difficulty

incremental without and it EBITDA span contribution will would capital the would we of three the to years potentially ways it at if we’re So year to recognizing three have we we would finance look that from you that that other closer have kind once expect a where we to bridges idea.

TJ Schultz

it. Thanks. Got Understood.

Grant Sims

you. Thank

Operator

Shneur Okay, your comes thank next And you. line question Gershuni. a of from

Shneur Gershuni

morning, Actually, Shneur but good Gershuni everyone.

couple a follow-up questions Maybe partially TJ’s to on quick questions. of here. Just

So thinking or arrangement Is Or that that about some project those sort FID it when target you’re the leaseback incorrectly? of of others? we with sales we are and you’re so you of forth, that and about like structure the saw are about a structures thinking thinking of thinking about? type of JV sort in some the

Grant Sims

lag that otherwise sure under trying a does get allows that a start that this at the what project, to incrementally, it our us year with is structure any with is feel we’re come construction, goals. there conflict structures do we up not three recognizing not but to point. it I’m leveraging precluding the But before are we

So we’re consideration, what that’s to that to under point achieve. trying this discuss are structures various I’m prepared not but at Shneur. the

Shneur Gershuni

we plans. were think time And last sense. that original Okay. noted you perfect That the you I expansion met makes had the that updating

cost in so zone? and think that least if it Has you’ve of sort forth? I’m somewhere the happened, through curious materially I just are we’re or made process? at kind done in XXXX, that the of XXXX that higher time revaluation

Grant Sims

the affect the expansion we million and in color today’s or time think to of in that– into we’re that that that minus we’re believe I $XXX XXX,XXX dollars plus plus Granger. range fully well

Shneur Gershuni

little Okay. And so bit switching here, to nice forth. gears debt then a come down the balance just and see

point under portion where sort a speaking? years lower talked your facility given about sense at sort the where out this the turn today, times, right take to of XX You five now, you getting it what’s are advantage just make possibly of the rate today, of of just by does at triggered rates lower broadly

Grant Sims

on think any fairly been paper. I mean, that dramatic historic there’s of kind I in recovery energy, a basis unsecured clearly

have the a path paying we where still currently over forward continuing bits pay revolver. We down in. wide to On in clear clear the other mind fairly it’s coming years’ couple hand, fairly could hundred down a outstanding is do price our

on that we where of I revolver. some other a flat by than see to an that a extend in we on doing our the and firm existing we lot on could So them current maturities this think impetus we’re call coupon reasonably there’s us big statements for don’t out early the roll – –

Shneur Gershuni

with So shaken, where just today they’ve drilling given drawn that’s lot so the you’re prices you’re that plans amount effectively the it have and saying comfortable so added of volatility, and have revolver commodity forth. a on

to down further? a take You bit don’t think little it’s prudent

Grant Sims

any have so. outstanding don’t concerns about current We the

Shneur Gershuni

it. All right, Appreciate perfect. guys. very much, Thank you

Grant Sims

Thank you.

Operator

next from [Operator you. question Instructions] Our Thank Bellamy. Ethan of comes line

Ethan Bellamy

morning. Hey guys, good

and the bit ash onion will globally economic in hold about us confident and soda condition? if worsening you a see pretty we pricing that there term. the medium little seem for peel long You Could

Grant Sims

mean, a Asia but the but Southeast significant EU, and as U.S. Not think reduction South could lithium glass demand Yeah, demand and I are but recession, growth, China demand see or we certainly worldwide in I America. well we as that, that be under in the at the know in demand proper, there I growing. necessarily some again, don’t and least

year, see have we coming as long XXX,XXX that tons tons a as balanced. very XXX,XXX increasing So or without the whether it’s on, no a demand increasing still year, we supply natural markets incremental with not

two, currently supply least aware inconsequential at We’re disruptions. of not

and certainly to fundamental that the than sooner currently cost synthetic the, point. their our the fundamentally as demand vis-à-vis hopefully advantage changing of balance So, be see this cycles view rather supply we which is matter are production is but the solved later, production natural practical isn’t at in which going ultimately in is for incremental serving demand a

Ethan Bellamy

like held rate environment there. that’s in business, expect looks good look and it And like looks going now? the right what Should the up helpful. we forward utilization and then that is Marine Okay, pretty your does

Grant Sims

I’d say that, yeah.

to the the could IMOXXXX added refined I to incremental refinery up because right the with previous to utilization expect relative actually our demand heaters location We fundamentals for barge of so meet England certainly upon intermediate we’ve barrel standards. in that the barrel talked based getting internal the and or hold right think style to barge could calls right IMO

high. So we think utilization remains

up, to talk test had in rates, actually think which at the us margin incrementally are start firming we seeing view as the up they to which increasing talking they’re so that how in. are We spot we’ve I trying means litmus that to some going believe that go and customers about their mind, rates lock

soon. levels expect out So out bottom don’t reasonably said, so, comfortable baby in been as overall steps the had back that we improved side. it quarter that We’ve a for XXXX, six anytime row. we’ve think be we also a we fundamentally, to feel running we’ve marginally the it’s put XXXX performance of I but consecutive cited to But

Ethan Bellamy

One you log a you that of question. IPO jam. are consolidation at Do or actively Very Grant. M&A last the lot guys, sale for as opportunities assets there are an Thanks, out are big there? looking picture,

Grant Sims

existing I long I are a our on frothy the deliver and think active our of of on say look we term footprint of we in lot off participate have far activities. opportunities We and that not at I superior we advantage M&A on promises the make comments things that taking we’re mean, that. return to to profiles the creation we focused which like in are value But would believe that. We’re continuing don’t that don’t

Ethan Bellamy

much. Good very hear. to Thank you

Operator

more this you. presenters. time, thank [Operator There Instructions] at no questions Okay, are

Grant Sims

or and you. so. everyone Thank I you in thanks talk to XX well, days will Okay,

Operator

Thank to you. today’s ask presentation. disconnect may concludes your you lines. We That

Grant Sims	Chief Executive Officer
Robert Deere	Chief Financial Officer
TJ Schultz	RBC Capital Markets
Shneur Gershuni	UBS
Ethan Bellamy	Baird

Genesis Energy (GEL) 6 Aug 192019 Q2 Earnings call transcript