WLKP - Earnings call transcript Q2 2019 | Westlake Chemical Partners LP

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Operator

Good morning. Thank you for standing by. Welcome to the Westlake Chemical Partners Second Quarter 2019 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today, August 06, 2019.

I would now like to turn the call over to today's host, Jeff Holy, Westlake Chemical Partners' Vice President and Treasurer. begin. may you Sir,

Jeff Holy

our morning, quarter welcome joined XXXX our our Steve Albert Good and and Chemical members other today the Partners Chao, of Bender, CEO; and second conference team. President Vice everyone, you. President to CFO; and management Westlake by Senior Thank call. I'm

on Westlake opportunities with well in performance the will quarter as will The will a look with Partners' conference begin more call and a and at Chemical open the our current then provide our outlook as who Steve operating Albert, few strategy comments regarding detailed results. second financial

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

ourselves And OpCo LP, this refer our refer and or Westlake Chemical to Partners References references to which company, Westlake of Westlake assets. subsidiary During the to certain the Chemical Westlake to Partnership, Chemical we owns parent call, OpCo Corporation. as Chemical Westlake to refer a Partnership. Westlake or olefins'

going currently topics belief as is discuss forward-looking risks thus, management's assumptions by made are expectations management certain as or to uncertainties. on subject contain information management. predictions and that forward-looking that or statements These based well to and, Today, available information is suggest to will

and pricing our other ability ethylene, difficulties, based many economic actual materially sell differ are and could results SEC regulatory our conditions, Actual of factors, the including, ethylene to the changes competitive and upon are price pressures, to prevailing the products borrow we able operating governmental sell, filings. volume in able we that at which in capital and proposed to factors risk markets, access actions,

financial operating webpage Press section details is This Partners of results. Westlake issued our release available morning, a in our second wlkpartners.com. of with quarter and This the at Release document press

hours both today, replay at for no is accurate the the International that should time XXX-XX-XX. by access of today's sensitive you're information XXX-XXX-XXXX. available numbers. as this longer note XX, may of The reported call. will And may the August time Please replay therefore, of access two any replay dialing on only callers the replay. may callers as that dial be beginning XXX-XXX-XXXX. code accessed XXXX. call of information be after call conclusion following this be speaks A of Domestic The advised

I would broadcast is our wlkpartners.com. this that can Internet through accessed system you advise finally on that conference being call webcast live webpage be an at

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

Albert Chao

morning's Thank us XXXX. results. gentlemen, of ladies XXXX for Good you, OpCo's second we the for reported earnings you consolidated income, net thank quarter In and press and this morning, quarter Jeff. $XX discuss second release, our joining to million of including

partnership of Westlake Partners' incremental $XX second anchored continued through quarter, the we quarter dropped quarter we first of an and the OpCo XXXX, interest into by was million. benefits second strong In the reap to net transaction, the income this quarter production volumes. X.X% down of second

cash our growth continuing margin grow including I important and unit opportunities a we acquisition toward think and that us, holders. a to all to long-term to available maintaining path as to flows means are to growth our distribution expansion, it's evaluate emphasize through further

XXth increase On unitholders. XXXX with second This increase unit the distribution. first in per of the distributions quarter from increase distribution July we from to XX% a quarterly of our of consecutive the and XXXX, This XX, distributions respect is to quarter is announced XXXX. quarter X.X% X.XXXX XXXX the second

X.XX declared of ending XX, For times flow MLP XXXX, coverage the cash XX distributions. provided the months June distributable

quarter. results for the now Steve? on I call and like our turn provide would over to the financial Steve detail to to more second operating

Steven Bender

quarter of In everyone. XXXX. $XXX earnings on net release, of the $XX reported including OpCo's income, and good morning's sales million second we Albert, press morning, you, consolidated Thank this million consolidated for

million, net second or Partnership the per per MLP of was partner flow Partners' limited $XX partner million, quarter for $X.XX Westlake distributable quarter income cash The XXXX had or $X.XX unit. limited $XX unit.

quarter increase of and of by primarily increased Westlake ownership second XXXX to partnership million $XX compared XXXX net to net income was Partners it million. quarter X.X% in was $X Second $XX income million the increase for This due OpCo. interest

one-time distributable for flow cash normalization this, second OpCo, of cash maintenance was in March of incremental for as to of a was our well drop-down select second XXXX items. would of the $XX the MLP SG&A MLP from items the distributable quarter expect cash of million cost the distributable in quarter and spending half of the the of XXXX. by we flow The on as the XXXX interest impacted unchanged flow. XXXX reduction second capital certain Based acceleration related maintenance capital quarter

Partnership's net $XX $XX income net of quarter quarter income The second decreased the million million from of XXXX XXXX of $X first million.

first Our flow flow second cash million quarter the quarter XXXX $XX $XX million. MLP XXXX distributable distributable $X million of from of decreased cash

decrease distributable due income net The by flow higher primarily of expense production at higher with OpCo, one-time and quarter associated are acquisition the incremental second offset partially in the XXXX OpCo. MLP for in interest cash the costs and to costs

the $XX of For from Partnership flow XXXX, the $X distributable million six of flow of increased million. million from income of first cash the net XXXX's distributable six of $XX XXXX MLP first Partnership cash million. for months was million million, months income of the $XX $XX increased net first of six the months $X

effective transaction by distributable to income and interest XXXX result that third-party X, sales due lower were -- interest MLP flow The ownership in increased margins. net was partially the a primarily X.X% OpCo offset as January the cash and of drop-down

ethylene stable the short is the who who of production, with short sales for from is Westlake long-term a Chemical, our -- Partnership. is derivative benefit fee-based agreement to sponsor, flow The their cash ethylene a

ethylene is the our margin ethylene take-or-pay be protects cash the sales from Partnership's the can This volatility agreement with and flows XX% of that associated business.

increase the net a to to opportunities take-or-pay an investment margin with capacity generate is to us structured to pound rated grade provisions continue to rates. of which and is Westlake Chemical, with which $X.XX operating Partnership, agreement, of company look incentivizes ethylene along per sales This for the

Turning our flows. $XX second Chemical Management of cash attention of quarter, Investment of in the million. cash with At the through we balance our the $XXX cash end Westlake Agreement sheet million had invested and consolidated to

$XXX The through million agreement throughout includes cash in cash invested reserve quarter operations the that from turnaround generated and expenditures. investment the for

for Petro the our details we in Our planning. turnaround timing provide is which complete length Charles, at turnaround more Lake facility next scheduled on We'll as currently the our and is specific the Louisiana, XXXX. of X

of and $XX million the was at at Partnership of which Long-term quarter debt OpCo. the the million end $XXX at $XXX was was million,

For $X.XXXX On the XXXX, our distribution million we unit. July XXXX, declared in unitholders of OpCo second consecutive $XX XXth quarter quarterly was This to per spent capital a expenditures. XX, yield in August distributions of a increase XX, unitholders XXXX, to based close. record distribution approximately to on unitholders. will quarterly paid This on yesterday's XXXX, X.X% XX, be August of on

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

Albert Chao

Steve. the marked and to you, made anniversary progress past the Two five years. we to meaningful days on creating our value wanted Thank fifth ago, Partnership of has reflect the over time the take IPO. this I

in interest ownership XX%. have of to We incremental Westlake downs approximately drop bringing Chemical OpCo, completed three total Partners'

capacities expanded per pounds We our year. our million Louisiana production Charles, have XXX City, Calvert and Lake Kentucky by at also facilities

general sponsor, for established our with new done we In year, strategic time per tier reset no our tier tiers compensation $X.XX partners first addition, target the highlights of quarterly a a Westlake with incentive distribution rights, to our the unit unit. previous the this of with was $X.XX at on long-term per first last distribution This Chemical. alignment and

All distribution. grow to have XX% initial actions our of allowed which to quarter us is these consistently today our full our than higher distribution unitholders,

growth, MLP, jointly streams, periodic our of facilities, Sales of fee-based or conditions negotiating on navigate Westlake. qualified the will delivering Westlake either will expansions with our of benefit continuation with of market, into a along MLP including maintain margin other value from income the to margin take-or-pay of Sales Agreement ethylene the the levers with current long-term Chemical organic our fixed with focus current and unitholders. Westlake cash flow fixed we continue by The in Ethylene four investment we generated the directly grade acquisitions Agreement higher our Chemical, of sponsor, drop-downs rated As to stable OpCo Partnership our Ethylene the

a As of example, an billion pound Lotte with is in an cracker its Westlake's X.X acquisition ethylene Chemical, joint an venture with interest option increase XX% XX%. ownership opportunity started at Westlake's up, up to to recently which

Westlake could mutually the to be this both well to as and strategy beneficial part of We the of as are asset. Westlake ownership Chemical for the be long-term Partners, asset growth evaluate continuing how

history We needs ability our a unitholders. distributions. distribution our to listening XXXX to yield in All have provide clear have to our low these demonstrated in provide continued Thank we to and to consistent to levers much very unit continue environment a price. believe grow for you could earnings In continuation this tax-sheltered quarter of our distribution be second call. in growth growth reflected where opportunities growth, distributions of

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

Jeff Holy

Thank you, Albert.

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

number again at of We provide that end will call. the the

questions. Skyler, we take will now

Operator

Barclays. Our from with first comes question Instructions] Leithead [Operator Mike

Your line is now open.

Mike Leithead

morning, again, Good fellows. Thanks.

Albert Chao

morning. Good

Mike Leithead

runway how extend continued did as guess a in your about to transaction start, I aiming drop-down your that you're current growth another you far recently think is you runway? for you before distribution you for; transaction think March do think just you growth distribution need

Steven Bender

demonstrated Mike, transaction think, first history able drop-down of have the we ability be do. we've it, to and illustrates we to capability think we showing undertook good pretty about that grow in to So, the a the as quarter that I had,

that I we ability say, margin expansion, expansion. have as that levers drop-downs, either an have, given through various to the or we acquisition do So

So, flow got Partnership's an to distributable ability long this cash grow for time. really we've a

always the committee So that function to as that, the the contributed. gets had that's the valuation do we've it that really it's we getting right discussions opportunity for of next the about issue about. with And asset think a

it, fair to we well value in about as valuation as long do as think as fair value that in get look continue to we'll market asset, that we as So can

Mike Leithead

look the as of Got prices declining a have roughly That's really yield helpful. distribution for And mentioned Westlake now unit flat you five then, chart, Partners just despite IPO. the improving it's an it. I environment. years, just even the yield relatively and at been you couple if past mentioned remained since And years Albert,

Partner what you today think I to at Westlake better when that value? to can on the missing investors realize investors you yield guess look are So, do get you story? do And what it, guys

Albert Chao

That's a very good question, Mike.

MLP issue. the five are we painted just the that mentioned, we our I for MLP, the And gas has like drop-downs to We're even the MLP from oil think the and same have different last we and MLP XX% regular broad-brush, or fact that's had with income years. we've sales. gas the still as probably we've a Steve have of oil IPO. over And whole outlook that pipeline stream and think at another people And growing been market industrial a doing that and try been ourselves distinguish whether we said our capacities. as guaranteed by

So, part bargain. of we the delivered our

the the of as part needs deliver I think market to well. their of the side bargain

Mike Leithead

Thank Got really you. it. That's helpful.

Albert Chao

welcome. You're

Operator

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

is line now open. Your

Mattthew Blair

Hey. Good morning, Steve and Albert

Albert Chao

Matt. morning, Good

Steven Bender

Good Matt. morning,

Mattthew Blair

might any your trailing I X.XX, growth improving think path risk your coverage? below I coverage? there coverage your which protect XX to you little the And is slightly and low QX the order now is is in that to months a XX% What's distribution number target. believe slow was in

Steven Bender

So -- is answer coverage the timing by really Matthew, the certain of part of the part expenditures. of driven

timing get back of of the those of path we a rest X.X kind one-time as expect maintenance to other some through of the the coverage. the get times year, us so costs targeted expenditures And of really and on I

X.XX concerned LTM too So, the for the get I period here. with coverage wouldn't at all

Albert evaluation as our trajectory, that deliver the to to the Albert distributions stay go sense given have this And said, quite we growth is see marketplace. makes that And in hand. we as to noted, levers hand two, to need on ability those in have. clear, and obviously, But

Mattthew Blair

sense. Makes

have ethane buying now you? prices an future been are, at run option that you ethane how to to that's a date? cheap Is Given extra available

Steven Bender

it XX% its for is works, exposed Partnership the for that small the It way the merchant sales ethylene. be to only its of of protected would production. So

them. to be Chemical that the But we about do the certainly So, Westlake Partnership. can as to certainly, for rather relevant we is think take than margins walk see probably opportunities and in question on we opportunities we as as that for those the X%, more when opportunistic much

Mattthew Blair

associated costs that? the talked with Sounds the a Could then good. about on provide And number release finally, one-time acquisition. you

Steven Bender

were expense. of Those impacts related are the smallest the component. to larger maintenance really Most the

And so year. of couple that related expenditures to to other was the million occur advisors related But drop-down. of to normally for and the the a one-time costs of dollars in related and that be spread the neighborhood dollars over to were activities related the would costs it those some course earlier those the in maintenance legal quarter mostly second maintenance

Mattthew Blair

Thank you. Sounds good.

Steven Bender

welcome. You're

Operator

next with Capital. Our SG question from comes Evans Jon

now line open. Your is

Jon Evans

Okay.

I this you or you have talked anything side the there I Steve, you've guess about a not guys -- the recognize you you stock tone the here model think that or do of So, in past this to feel market of in sense that guys anything kind like with no? performance. are that guys change maybe frustrated can just Is pretty quarter your the there on the liquidity? Is power

Steven Bender

educate to see to company to through that. Well, growth to distributions be the of we'll able the I continue think in capability continue to opportunity its do the and about investors the levers

Chemical And from business more, so the certainly on noted the I think, has to market deliver Westlake had some visibility our separate versus challenged lost that that to the think I in models of capability say earlier sometimes deliver comments, those his let's growth. growth as that Albert

the we done in levers and so ability really years. there have we've that five the deliver last four growth talk that Those distribution. over are about And really to

should models have who been of this think that mostly place. space I probably sort first has have but in the the that market the by that been weren't really challenged, business in others

But educate I to So, for market got to be Chemical about growth. the to we've and of Westlake XX% offtake accordingly going think the ability the continue we're provide that backstop rewarded growth. that to for sustained

Jon Evans

haven't because to talked to I for get the Do chicken kind You've valuation. thought do you've potentials that transaction? big growth, But think margin on you all, weren't haven't you or these seized buy egg? at you you other you potentially asset $X.XX, that in there a like going you you maybe think them the of think rewarded also, Lotte them seized and like the it's Steve, in about the in changes the and raised but on

Steven Bender

Well, as acted on of have you noted, two four. those we

of So, we've in £XXX our and in expanded Charles City facilities about ethylene. Calvert million Lake and added

ownership as opportunity portion some is of sites. done we've cusp drop-downs. We've just the consideration to ramp up our now and and thought that of on footprint margin, expanded certainly to is those Lotte So, a margin, in expand that real margin. the also opportunity. in can The at margin is because acquire to of ethylene of us just Westlake's plant the looks Westlake stable real not integrated very a Chemical be the

very opportunity is viable a that So,

Jon Evans

Okay. And last the then just question.

you're delay quarter facility selling that that the X% QX, probably the real You of things assessment opposed assume is mentioned fair with So, no? little a you in that X%. or the was as ethane that in right? your a a in into bit there hit release margin the is on your ethane cheap relative, in one bring I when now

Steven Bender

XX delay sales flowing Yes. is in probably that a -- It any the of between through period in of probably of days time. cost in ethane neighborhood

Jon Evans

Okay, thank as great. really appreciate for Hey, comments. you the always. I it

Steven Bender

welcome. You're

Operator

Our question Capital. Leming Water comes with next from Paul Street

now is open. line Your

Paul Leming

remind if there timing is just acquiring question. timing Thank color it the up the Good can are in on from me my to What XX% you Westlake be into if a down that today of should moving I separate morning, give XX% acquiring any wondering is thanks or Partnership portion and taking on was for the interest can -- Lotte acquisition. bringing JV? of up looking at parameters the the of And Chemical of kind interest, some the to you. moved you Partnership? then that, how there us in

Steven Bender

decide increased up with choose Westlake if to all to, through way So, which current from of And going is just years to refresh the has ownership, XX%. to Westlake an their option an to they memory, three still Chemical ownership, valued. your elect Chemical the assessment

analysis at process no is made So, that at Westlake stage. decision that has and in -- still Chemical this least in

ownership some that Westlake Westlake the based terms determination between of that that the Chemical, undertook the certainly upon first of something Lotte Partnership. owns, on Chemical the in very similar of Partnership a to Partnership of the that's of In year acquiring portion currently can be cracker with Chemical value and a transaction drop-down decided Westlake this quarter

talk will, one which a acquisition, as if income qualifying certainly is that streams. certainly, we being So of and one on you viable the opportunity levers, of four about an

it is well. think the earlier three certainly investor, to And just we options viable noted is that other like so as as just we that, about are another very

Paul Leming

follow-up, And of with cracker that in would could that of the if the that I bit agreement it to is with Chemical Westlake's assets? on the Partnership fixed there ask make Lotte agreement there as in agreement it Is between anything ethylene difficult all complicated? anything little and the a structure makes exists a that type Westlake margin more same

Steven Bender

it believe -- will it's We actionable.

Paul Leming

you. Thank

Steven Bender

You are welcome.

Operator

I'm I'd time, like closing no remarks. further the this for any turn questions. to call to back showing Jeff At over

Jeff Holy

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

Operator

today's for Chemical call. conference earnings you participating Partners Westlake second quarter Thank in

beginning can XXX-XXX-XXXX. The be numbers. International the conclude will at This two today's this As The access replay a accessed hours dial call. be for XXX-XX-XX. may The the ended. call callers reminder, call is callers XXX-XXX-XXXX. following access calling will by has after domestic available replay the should code replay

Westlake Chemical Partners (WLKP) 10 Aug 192019 Q2 Earnings call transcript