WLKP - Earnings call transcript Q4 2018 | Westlake Chemical Partners LP

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Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Westlake Chemical Partners Fourth Quarter and Full Year 2018 Earnings Conference Call.

During the presentation, all participants will be in a listen-only mode. After the speakers' remarks, you will be invited to participate in a question-and-answer session.

and XXXX. conference ladies today, being reminder, XXth, February a gentlemen, is this recorded As now to would Mr. I like today's over host, to turn the call Holy, Treasurer. President Jeff Partners' and Chemical Westlake Vice Sir, begin. you may

Jeff Holy

management will everyone, and and Financial Senior Albert, by results. detailed regarding The and Vice Bender, quarter XXXX year team. performance current Albert Thank you. our with at year look of and quarter Good welcome in who the begin other a a and will and our Partners more full few Westlake full joined Westlake the opportunities. our I'm financial call. Chief our open President call President Officer; Steve comments XXXX, to members and conference performance as Chao, on with and as fourth will well Chemical today our Chemical operating then conference Partners' outlook a Steve morning, fourth CEO; provide

the then add Finally, a will open Albert to comments few and questions. we'll call concluding up

in A discussed webpage will be be longer an no be advise year a wlkpartners.com. release available Partners accurate conference This that I and of today and today's at XXX-XXX-XXXX; on Eastern document XXXX operating replay webpage well During funds Today, the assumptions governmental our press which owns and factors, Partnership, as reported of system to to and the borrow OpCo topics details Westlake with international the morning Chemical made this This and actions, going currently changes certain to to Chemical until information this can quarter XXX-XXX-XXXX. or our suggest XXth, regulatory be access Time are webcast through materially to to any PM could issued numbers: live may SEC is actual Internet as on management Westlake our Chemical of call we're finally following competitive XXXXXXX. proposed The fourth and olefins as factors would section uncertainties. of refer Westlake ethylene you financial the in by Release Westlake by capital information the subsidiary advised being sell, Westlake therefore ability other ethylene, a Westlake to or will we in note and XX, to may the Partnership. that products risk refer are time-sensitive callers is only management. today, prevailing callers filings. ourselves our or forward-looking of the as and which you're at on the information as may OpCo to information the February our beliefs, forward-looking based The full including based management's February results. of call Please and broadcast Partners assets. pressures, risks Press parent Corporation, contain markets, PM should economic X:XX thus conditions, and time dialing able at pricing References is at company, is Westlake volume sell XX:XX and accessed Chemical that this difficulties, price references access beginning replay differ domestic able wlkpartners.com. certain XXXX. that statements we replay discuss that to is refer LP, our of Eastern replay. speaks Time code available at call, expectations call results of on that or access operating that These dial available upon many predictions Actual subject accessed to

the I Now, Chao. like turn over Albert? call would to Albert to

Albert Chao

the provided of and increase a increase net XXXX to year million distribution. $XX income respect This XXXX. fourth is with Westlake fourth per the the $XX this XXth earnings from quarter quarterly for our discuss unit XXXX, bringing to is the ladies of Jeff. X.XX release, Thank quarter we distributions. you times over our distributions quarter consecutive third XXXX and fourth Partners' distributable OpCo's to increase XXXX. thank quarter of XXXX the morning, cash This our the and for unitholders, of XXXX million. over us and increase distribution fourth X.X% IPO full to XX% was joining morning's net we reported quarter consolidated On $X.XXXX In Good since declared in announced income in flow results. ever the fourth good distributions press gentlemen, including you, coverage January quarter MLP XXth, distributions XXX%. of

the more reset as Westlake to and and year, on Partnership over is continue and As earned with rights way its clears the long-term cash next Partnership. I rights, to the the path would will increase turn incentive last details demonstrated -- reset and rest the Steve for in to results. distribution previously that quarterly to earnings before distributions another July allow from years flows has over the this payment the for distribution distribution the XX the tiers which to Partnership line reset feel historical and commitment rates the operating our Steve? financial paid. call incentive will grow of Partnership its allow We growth from in announced now the support like to continued provide

Steve Bender

mainly cash distributable interest Partners' XXXX expense. quarter flow of million income MLP income press decreased per Thank in $XX income higher net MLP fourth limited or $XX the you, and Partnership's and and and the XXXX. the XXXX ethylene of quarter OpCo's this million XX quarter distributable XXXX unit. to reported morning's fourth income million of cash million. Albert, Partnership to lower net of partner net on Fourth of per net million Westlake the we $XX In due $XX as production. for the third-party Quarter on flow good The the compared unit Fourth lower income $X attributable $XXX was partner including earnings million cash earnings to limited XXXX. The MLP XXXX third-party million consolidated $XX for were lower consolidated Partners quarter sales distributable net was and or cash distributable by was flow sales net decreased compared margins fourth of fourth for comparable and cash million, flow in income XXXX MLP $X.XX quarter $X $X.XX decrease million primarily with quarter sales distributable release, net The income quarter. everyone. decrease on flow morning was third in to Westlake fourth quarter

Partnership cash from transaction MLP $XXX,XXX is income. distributable of in result cash the record partially $XX net increase for drop-down of of distributable million. net The the of and as the $X flow was margins. MLP $XX distributable sales XXXX, million increased MLP OpCo For net a primarily lower ownership increased in income XXXX the $XX flow third-party from million was income million XXXX July X% due OpCo, flow and Xst, interest increased offset XXXX effective by that to which at cash production

agreement cash high Westlake to from sales cash with flows the us the of to ethylene touch partnership on Westlake businesses. $X.XX investment-grade is it's margin of our The fee-based operating with agreement of stable through which with to a important sales sales take-or-pay along Westlake an the generate our rates. continue long-term provisions that ethylene agreement production the look Chemical, and provides historical our Partnership's benefits Chemical opportunities the Partnership, ethylene net for to flow protects be to ethylene per think take-or-pay with incentivizes associated a Chemical, sponsor, can for company. This a margin the of agreement, volatility pound XX% the to structured with I to maintain

as declared full of coverage distributions funds to $X.XX of turnaround. have which increase at to Chemical of for and OpCo and more the XXXX the this XXXX on balance our Petro With Agreement the XX% and million Investment of the cash in OpCo. cash was we $XX guidance specifics X the Louisiana, million was we first planned get The planning of $XXX declared expected distributions. cash MLP end an million million, cash cost, turnaround a $XXX as scheduled $XXX X.XX $XXX funded already We'll of of attention distributions totaling our had $XX the as currently Charles, cash. a unit, facility our of XXXX. year times flow sheet next turnaround of Consolidated complete XXXX, distributable invested with to is the Lake the Westlake was and duration long-term compared including been respect in Turning reserved million, and provide Management to $XXX the provide At balance available half $X.XX. at our fourth million at for million, through of quarter, The consolidated flows. Partnership. of at we declared that's turnaround, the debt well closer per

As Albert in IDR continue per reset to years the unit reset paid. This rate reset from for amended the the we distribution earned the payment XX the Partnership the would a mentioned Partnership tiers XXXX, the over tiers increase in distribution next at to agreement July allow rights. earlier to the its target before low-double growth distribution of digit of is and for incentive distribution call, target

billion expected the this as to we lessing to half we've market Lotte our million opportunistically effectively levers pound believe immediately will accretive reset to Furthermore, $XX any access to Xth, will XXXX, the flow start positioned provide reduces reset capital. Westlake's This avenue available flows Partnership. such unitholders. as us investments as another of As not pursue per well with in growth point, joint program X.X first raise allow is grow was up Partnership's announced turn built distributions Partnership being size On that equity to offering cash Lake equity the us the is did cash IDR to improving capital lower the commencement program. ethylene Charles, capital October the unitholders. the venture in to that We cost frequency of and cost the in the Due cracker this pursue at-the-market more steps as needs the currently Chemicals year of pay burden, Louisiana, accretive to Partnership to this better consideration, the to of proceeds the to year. taken all the and the we of

Westlake signify play sponsor Westlake's Finally, continue these strategic strategic The growth. of to its and between for cost-advantage to a a and its the continue Partnership equity in role will asset long-term Westlake significant source to alignment a the be has ability of Chemical. the further plan is developments that Chemical Partnership recent

to the Albert? make turn I'll to call Albert over Now, back comments. closing some

Albert Chao

Thank you, Steve.

with with agreements will acquisitions foundation ethylene expansion the Westlake and Chemical for XXXX, our the a Westlake deliver flow our Lake next from Gulf the the drop-down cracker ownership highlights third in the of and stable growth OpCo and considered to our be four to growth and into quarter. Charles constructing continue its Westlake will our organic and of joint In with all into us morning speaking facilities, ethylene considerable look currently added Calvert to growth. including Thank and of fund of increase margin very all with its for qualified we this to of fund earnings value ethylene as sales agreement cash to you and optimize fourth distribution look income call negotiating There continue we by Westlake have City benefit for to quarter periodic form We're flow the plans flows capacity quarter cash to has growth, these much XXXX's production to with acquisition ability distribution drop-downs generated of Lotte continuing our sponsor of we OpCo of evaluating is our fixed accretive MLP, growth. The Chemical margin to options jointly Coast long-term to opportunity expansions these in cash other sales over The and earning the Chemical higher to the or earnings, in XXXX deliver with distributions. you our The inventory, unitholders. to start-up. drop-down streams fixed unitholders. levers directly along to our ethylene continuing As for conclusion, four forward take-or-pay either Partnership listening incremental fee-based our transactions is evaluate ethylene recent time. that venture we again after OpCo an most levers are to current

Now, to back I'll Jeff. turn over the call

Jeff Holy

you, Thank Albert.

Eastern that X:XX taking like PM remind be we Before begin Time. this I today at questions, teleconference of would available to starting a you will replay

the of call. at We will we'll number the Latif, provide now again questions. that end take

Operator

Thank [Operator Barclays. comes of question Leithead you, Instructions] line first sir. Mike the Our from of

is open. line Your

Mike Leithead

over from few general me. as few high as interesting market level markets. there in a quarters just the have terms been well past or one dynamics both ethylene I guess, of question Just the MLP financial the

when four all think was market I about levers at they've between or light I about these distribution of you IPO, of maybe since the So growth guess, current outlined, do in wondering four opportunities think you conditions? areas the shipped the how relative you've how

Steve Bender

margin. of So Mike, when margin, how be think very you think ethylene we they do that remain may all we viable levers, the question really to think we given is, think four asking today, about because ethylene all us that we about the expanding when

the it significant in to in say, derivative, permit sponsor remember that so about think to think work. ethane lever an out chain integrated additional there our increase is still in in using the to all ethylene of to that margin and polyethylene, margin let's terms Now, way

So we -- of levers expansions, or all are pricing whether environment. ethylene those ethylene drop-downs, today's it margin even think expansion be environment in viable acquisitions, today four very

Mike Leithead

That's believe, heard I turnaround schedule, I And then that is half correct? the scheduled of XXXX, quickly no first earlier, until turnaround helpful. on just you

Steve Bender

Correct.

Operator

Thank you.

Pickering, question of next from comes Tudor, Our Matthew Blair Holt.

Your question please.

Matthew Blair

I'm production the this, if in I disclose volumes could QX? Steve, but not sure you missed

Steve Bender

the record had production course throughout XXXX. we Matthew, of

of And pounds, that think so, single-digit quarter. stated we when the of you for X.X percentages billion by exceeded our capacity

had that strong production say we we while recognize pounds, we those gotten that would take so, you quarter. into by exact if strong, And record performing -- a and discussing exceeded capacity haven't the I single-digits, that

Matthew Blair

ahead the -- What think favorable terms IDRs in this still down potential next moved, seemed a yield. hasn't reset the recently you but the stock equity Lotte a hefty drop it's then do transaction And like really you a driving trading so of in cost X.X% what of Westlake at pretty from acquisition? to is LP,

Steve Bender

the designed the to the the the the and And to Partnership for security. a XX is liquidity that for trading volume for free that to and headwind stock. the think Matthew, trading nearly was thing path improve -- transaction, the our I float ago, is really certainly begin months start

move investors I stock, forward our we as time an certainly Certainly, but to remains provide that to the So so address that certainly that liquidity element. can't is intention over overnight, as want has it. to important of the think in get out preventing of I from the it's stock lesser really on that or the its has. that's it security, valuation an achieving And impact it where proper given limited float more

Matthew Blair

I QX last drawing what lastly, XXXX any you potentially look on like Okay. used you program for then And should it. the program ATM your we the in along similar QX are What ATM expectations and announced doesn't of or model XXXX? in It lines, this guess quarter.

Steve Bender

Matthew, certainly off over issue be I we that do course units of able to expect the the XXXX, program. expect ATM to

that it to let's over issue we cover to year months. off XX I program ATM guidance expect and do the And was to specific be requirements our quarter, designed will of, units so, give the a while course don't want I to by say, able

Operator

Thank you.

Jon Our SG of next question from comes Evans Capital.

please. question Your

Jon Evans

guys think the talked you you do call going -- for I about Steve, an potentially just assets? you're or to drop you down the are in Westlake US that German that on looking facility. Partnership expansion Would to

Steve Bender

best that assets seem have qualify we we tax assets to those under that code is to for limitation that IRS and so qualify. The don't the the know

about fit seem and here. what to So a the assets within as and to qualify take we we're what opportunity, think the assets look going see parameters

Jon Evans

sense obviously insight was us the then very and on granular? do Can been to any lot of or not of you question, has of you of that just or all for X% because And there what market you margin Westlake QX ethane kind us it. the want obviously ethylene questions call. -- give volatile market the that at had and you other give can in there's that Got kind of into sold a kind on the any get of squeeze other that

Steve Bender

for can take if that are the you Well, quite at think the market see I look snug. merchant ethylene, a you margins

the ethylene And the you spot XX -- see the last the prices marketplace over that margins those so, will in as demonstrated so fourth even take just days or there, the been so look tight prices a you see merchant selling think over and quarter out the we're that if you have look when it I at ethylene sell the we in the into and or market, market. we are benchmark

those we where that and it's of So prices as very the is terms in market transactions. say, as we spot are I ethylene the clear undertake see

Jon Evans

Got it.

the I need to off you'll most likely looks have, in growth I of just mean, then Okay. or that ATM? like the be X.X% sequentially kind it QX QX the is do to drop-down you is question something numbers? missing -- then follow-up or there continue distribution in last the on And It the of the I'm of sometime by able it

Steve Bender

negotiating expect that we we So, of the consistently transaction, of Jon, expect that this we've function we that size probably of said half first somewhat that's a there will Westlake up but over the with Chemical. be end the year that course a

would year. first So the half the that potentially expect it's a certainly of transaction in I

Operator

any closing At session time remarks? now Are is this Q&A the ended. there

Jeff Holy

Thank for call for us XXXX hope conference today's quarter you next again in call. participating our discuss first our to join We you'll results.

Operator

in Partners Westlake today's Earnings Chemical for Call. you participating Conference Thank

the access calling code call the beginning on until XXXXXXX. accessed ended XXXX. should be be international Eastern this The is XXth, reminder, callers access two the be numbers: replay will replay replay domestic and call callers dial may can following may XXX-XXX-XXXX. accessed at by available XXX-XXX-XXXX; February PM for As The XX:XX a hours has after

Westlake Chemical Partners (WLKP) 19 Feb 192018 Q4 Earnings call transcript