WLKP - Earnings call transcript Q2 2020 | Westlake Chemical Partners LP

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Operator

Good afternoon. Thank you for standing by. Welcome to the Westlake Chemical Partners Second Quarter 2020 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded today, August 6, 2020. 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

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

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

XXXXXXX. we Actual price Release callers after when information Additionally, well quarter and morning, Partnership's hours able financial Press as a may call. operating Westlake of in cost, the our to available be International available management COVID-XX beginning actual dialing borrow live results and reasonable materially is conditions, available suggest SEC forward-looking cash The are proposed and page speaks replay A to management's on many and distributable risk of that and Please This funds markets governmental upon therefore, contain will may flow. including reported accurate wlkpartners.com. we're information to flow, XXXX Definitions as as difficulties, filings. products any economic would of second replay. in and advise details accessed management. certain ability thus our by through to call sell pandemic, press the assumptions prevailing dial Internet our going at two accessed could on access call this time regulatory August that pressures, of predictions is to Partners the advised the you replay are I document These system may ethylene the the information of website. of on at The factors competitive pricing with longer webcast is sell, this based Domestic on that call X, broadcast wlkpartners.com. this referring is Today, callers currently actions, section and discussed our code capital other at by operating conclusion discuss replay forward-looking are the able we is today's today, that This page only be results. at may volume web should be or numbers. finally release statements uncertainties. XXX-XXX-XXXX. note changes of cash information of which you're XXX-XXX-XXXX. and factors, expectations to as that to differ are ethylene, conference based the following at topics web be the to time-sensitive access that being of beliefs we these will that Chemical access on MLP or risks refer an a made Westlake subject Partners' our terms no the distributable available XXXX, issued

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

Albert Chao

discuss Thank to East for unprecedented afternoon quarter good results. the and Coast. times. are you, morning, our on and us Thank gentlemen, extraordinary Good Jeff. those joining ladies you XXXX to and These second

be those to the with are challenging this acknowledge and continues our Before been very we by COVID-XX. discuss like a to has time, quarter, and I would affected thoughts

continue our serve diligently the to employees, Our uncertain health and to produce essential work who in first our is these of to priority safety customers to products ensure times.

and remain short-term strong. creating is our Although fundamentals turbulence, thesis this long-term pandemic

$XX flow Partners' financial solid of net release, are second press of million consistency fixed $XX for income of quarter morning's this income In financials. our to including Westlake our the was second earnings These sales our to and margin for reported XXXX. Turning cash consolidated quarter OpCo's stability agreement resulting testament results of XX% from generated ethylene the stream. a sales our million. net

each and I delivered in from note well of that insulates and with the commodity Westlake operating production provide X% ran The investment-grade-rated slightly financial facilities I fixed solid annual plant at to provides thus flows. like down volumes us agreement second will produces production turn to to versus the same for predictable quarter. lower Steve period our and second performance year-to-date only our to results fuel more price are Steve? quarter. sponsor, on the the ethylene Chemical, call in would ethylene a XX% purchase financial volatility margin, now year XXXX. over cash detail Our approximately production for

Steve Bender

quarter Thank you, morning's consolidated release, and earnings The the gentlemen. of million and including of net for quarter we $XX on press for In distributable $X.XX was consolidated reported $X.XX Albert, day, Partnership unit. million second ladies unit. second sales or XXXX. $XXX flow net Westlake or cash the good income, Partners' OpCo's per this per quarter $XX of $XX million of had million income

the partially and second increase on lower second the at income The sold XXXX Westlake. Westlake was earnings cash from million reserve. The of $X income net was cash earnings XXXX by offset by increase net XXXX million second was Partnership's Westlake $XX to on to The $XX attributable XXXX. $XX net quarter second turnaround Second production million. decreased $X flow. quarter OpCo. was higher by to net offset quarter, $X XXXX of compared first compared flow and higher XXXX production quarter Partnership income reduced lower Partners for of million of expenditures for in quarter distributable capital Distributable increased maintenance million sold increased income to partially million quarter by production primarily the attributable slightly to the This production increased by quarter million $XX increased to for

XXXX first Second slightly distributable to quarter cash of result this production from flow offset on impact $XX Westlake. XXXX lower production lower earnings The by distributable decreases at million OpCo. of These quarter million. million cash of was ethylene partially decreased flow $XX were the of sold $X

period, $XX sold favorable income $X of from were the million. reduced offset net and due cash $XX the flow last cash The year XXXX, Distributable $XX million months of reserves. Partnership flow by XXXX Westlake distributable million of months X million of of maintenance on partially turnaround net of partially additional million. for of had the million $XX of Partnership offset a by from the $X first increased increased MLP the expenditures from the capital to -- distributable first X cash X cash lower increased to income For in and benefit the MLP income increases net distributable MLP first months to ethylene an earnings production. flow partially flow for

million, was and from the investment invested cash well through million balance of the management the of through invested $XX with flows. to second $XXX $XXX end Chemical throughout in million at attention Long-term the generated OpCo. was reserve At the our agreement at the as quarter a of includes for agreement as the sheet cash operations of million. the Westlake quarter the $XX which management cash Partnership end quarter, cash expenditures. million we million and of our debt was Turning cash balance turnaround consolidated $XXX had investment in $XXX at The

OpCo second in $X capital million spent For the XXXX, expenditures. of quarter

the ratio X below maintained leverage and capitalization net The ethylene second strong For with below reduce of to metrics X COVID-XX risk to unit consolidated September XXXX, our and of a strong and we times quarter half in first employees occur turnaround continued order a deferred Petro XX%. turnaround XXXX. performance in was until originally the the of scheduled Petro XXXX. contractors, of X the Due leverage been ratio to to has

amount to charge for provide details X finalize Westlake attractive and cracker fully The is of the reserved Chemical environment. turnaround. we our fee-based turnaround the the has in and predictable for cost will been we be continuing of are in cash to expected continues commencement attribute later uncertain an further of today's the Petro turnaround The economic ethylene flow Partnership's for We in at be to included this XXXX. turnaround, plan of the

the of flows we continued earnings our with distribution dislocation, and consistent and predictability our kept the have quarter. Given cash market prior

to allow eliminating equity targeted capital the X.X Partnership markets. thus distribution Our the access continue while to cash coverage, current need maintaining the times at our will level distributions flow the

will we apply per We second the Partnership's unitholders, how since XX, of XXXX, our evaluate $X.XXXX distribution continue grown four per of in Partnership our to has and to originally over quarter IPO unit. we approximately distributions to XX consecutive XXXX, the quarterly distributions XX% market of $X.XXX quarterly have future quarters Since levers. made conditions when XXXX. assess original and and unit respect growth -- an X% the the July distributions increase announced On of second quarter, with in we

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

be unitholders XX, paid August The XXXX, August on second quarter's on distribution Partnership to of XXXX. XX, record will

Now, comments. let Albert turn the some back me closing to Albert? to make over call

Albert Chao

you, Thank Steve.

to are Partnership's volumes. to strong We financial continue and deliver the performance ability pleased production with solid

in second quarter. mentioned, Steve lower ethylene the slightly As we had production

today's its take-or-pay the contract to with interest We period, flow financial strong improving well delivering by will of XXXX be parent, parent, strong, attractive for This time market OpCo's environment. cash conditions Chemical, and a cash the as an volatility even Westlake rate predictable from continues year, seen whole production market production fee-based XX% thesis believe While more caused May in was a a began remain flow. stable our prior lower cash performance. period. present environment structure that our the production predictable be for predictable and solid year Outlook flow and and COVID-XX versus Chemical, provides in as Westlake we remains ethylene as that investment has low economic uncertain should confident the

this have that external capital, providing flows This provides As to us to ability provide unitholders. to ability our flexibility of the optimize a outlined, existing predictable Steve relying beneficial distribution with greater on our decisions sustain also sources us cash distribution an growth and in environment. will impact in without financing our thus

will condition reflected strong in the As the of Partnership. unit financial market the recovers, anticipate these attributes better we price be

a strong metrics. financial with maintained leverage balance have We sheet conservative and

via As levers in in to such facilities; interest with opportunities, qualified acquisitions growth, Westlake's we'll evaluate including agreement of navigate evolving ethylene our ownership conditions, such of OpCo; a ethylene expansions the interest return market we of other cracker; higher to fixed continue growth our ethylene of as prepare normalized organic a opportunities four and as for our current negotiations of LACC the increases Westlake. of streams, our sales income margin market,

correct continuing we of believe utilization our the we dislocations provide As the to long have and the four value term. capability the unitholders market aforementioned to levers, over

you Thank safely to very much to and good in of with along call. continue earnings we operate and we'll communities being stewards environment XXXX the quarter always, work. listening which second for As our live the

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

Jeff Holy

Thank you, Albert.

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

Operator

Instructions] first [Operator Viswanathan question Arun from Our RBC. comes of

Arun Viswanathan

had On We perspective then increases vinyls, in maybe on the downtick us several either And give saw up market. just caustic months caustic a is here of can market down. July. usually, your you the going we or and

I come on pricing you So, there the How down here operating about expect, as Or regains year caustic do to remain continued relatively to do trade-off? are continue momentum? and you operating operating that and PVC in you thinking guess, some vinyl rates expect maybe high? later rates construction declines rates

Steve Bender

as caustic the the seasonal market. market as as is Arun, PVC not

And so in price have and announcements certainly, strength PVC. demand we seen

So, which puts chlorine, more pull cost into on market. the more does that

how So, to lot a totaling a $XXX to of the and combinations dependent by in $XXX recovers traction we see course really industrial see ton to during ton, caustic answer whether or price upon your starting April the And demand not March February, seen drive recover. while whether question the manufacturing highly is we've pricing more industry, strongly of we're the XXXX. and able will in it a further

the But we caustic pull the recover. PVC and more strength picks more manufacturing caustic upon on strength right, the will therefore, side a up look in and, fully stronger quickly chlorine forward, you're economy how as seeing we're real in certainly dependent in be of and begins very the industrial So market. puts to

Arun Viswanathan

on has the All because is relatively like it then That's I'll And maybe the again, PE, robust open momentum same here, right. on is the now side. and window side. maybe packaging ask helpful. olefins looks export Great. remained demand relatively positive question the

resulting destocking all So in December I some of to in a, see expect and you olefins chain and maybe pricing? August guess, Or of thus, typical those to dynamics do kind to the price do continue you get continue declines?

Steve Bender

really earliest We've strength, of and back year. the the continued goes that seen strength to parts

beginning traction July we've the pricing. as strength and price that in June rates of with nominations operating so in in seen now coming polyethylene August, $X.XX price in reflect through really And

tight. the think inventory marketplace. There's lot I excess in the chain is a fairly not of

so is very pricing. in traction traction And and operating I there good elevated being think in rates

So July. early seen It's we'll see August, how in market but out. far strength the earlier very plays good quarter in the so we've

see we'll the year rest plays So how out. the of

Operator

question Our from Leithead Barclays. Mike comes of next

Mike Leithead

when you a are in the yield looking relative a call versus increasing Apologies that for we dialogue for steady you're it constantly you past peers? the look, for level But get guess, me today? of better market? sense a evaluating steady around can a one give the or when on Are looking Kind you the keeping look distribution. now missing you I evaluate do you us been better couple the hour. at for it. it, and quarters, you distribution question I of kind past just But appreciate from partnership or sense, we've decreasing this how to If better of of just right frame now trying it yield versus today internal

Steve Bender

this The I dislocated. normalized looking and continues we've a MLP to we market seen be And midstream before kind assess to see move distributions. with think certainly of continues to in we're be fairly space we players these how market and many better across of more forward the

have, levers reflective stability clearly certainly, of the challenging they're last a I stability we likely become about the the been I And a a like the valuation The And for through environment proposition. very that most potentially and let's time in imminently actionable, think cash think XX% attractive. we of that got X say. of rate the most industries, rise, through rates with the when stability able more need, tax a should able very recent we about value but demonstrate earnings all to flows, growth this need certainly and we've the stability We've So been yield, we've that of of demonstrate. clearly think many is very years even this X vehicles period to interest low business. and to we

I looking to conditions, Mike, those assess as we how are and the stabilize kinds markets so to And reward see investors, the begin see. to of begin we're to think that

Steve Bender

You're welcome.

Operator

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

line is Your open.

Matthew Blair

Albert good Steve. Hey, morning, and

Steve Bender

Hi, Matthew.

Albert Chao

morning, Matthew. Good

Matthew Blair

said So tailwind can op sort in in And But at think the release look a that was year-to-date mentioned lower X%. to on ethylene of would op production as do into you production QX? about OpCo higher you be offer any QX. I rates the you commentary know you Partnership? down QX, rates

Steve Bender

elect turnaround ethylene. the you pounds to of during know, moved did Westlake So, quarter, the receive we've Chemical XXXX. But fewer as into

with 'XX be And so, that XXXX. production in second in now we fully of the line half of 'XX, production planned turnaround because will don't line in for that saw second the have that we expect I with half

see we you Chemical And payment year. course and Matthew, have as it not contractual obligation or we whether for receive so, that of to the well, takes during know Westlake a the ethylene, as

reduction year. it's So over that annual reason why turnaround there should Chemical 'XX, of And see we're comfortable is a nomination, and that of will we very the ethylene. course an the having into no Westlake pushed take the pounds

Matthew Blair

you guess consideration? And should there margins but realize then that any so lags? Or expect I in in factors other we good. sales, only spot it's QX? ethane of Sounds Are looks your know take timing I into on QX. X% to cracking improved far have it paper, would

Steve Bender

no the are it timing in We're merchant there per lags market. se. selling No,

merchant as And into market so, that's X% evolve, market see we sold that realized accordingly. the the is

Matthew Blair

Thank you very much. Great.

Steve Bender

welcome. You're

Operator

Our comes Eric next from question Citi. Petrie of

open. is line Your

Eric Petrie

afternoon, good Hi, and Steve. Albert

Steve Bender

Hi, Eric.

Albert Chao

Good afternoon.

Eric Petrie

back XXX considering downtime? you time Petro believe was first 'XX expanded expanding half XXXX. upcoming million last X roughly the Are pounds during I capacity the you in

Steve Bender

or no There's outage. we'll in that It's 'XX. undertake just debottleneck maintenance this for expansion maintenance Yeah. a plan

Eric Petrie

olefins qualitative Okay. cycle split second And vinyls. into cycle in more in statements, quarter the olefin terms then positive on Westlake going Are XXXX? or roughly between just in for half of the the and were vinyl earnings and your you

Steve Bender

you supply two chains. in the as well, balance know Well, different demand quite is the

in construction the certainly, and we've seen during even building so And beginning year. And materials pipes, course this seen the the markets in strength businesses pandemic, we've in our siding. earlier fittings of strength

that in the and balance chain we strength in that very the we So in positioned demand well vinyls think have our the that vinyl further supply given products vinyls downstream cycle. business we're the

given think years. on we lot the but we're positioned a And capacity the we we an over strength well seen certainly, pounds certainly specialty has very second specialty of come given On seen, we've -- chain, I saw come last And think, quarter. polyethylene in. the that orientation, margins weighed in have our certainly illustration as of our ethylene several new the have that portfolio in

Operator

question America. Byrne Our of next Instructions] Bank comes Steve from of [Operator

line is open. Your

Steve Byrne

Yes, thank you.

also me for were Let call. missing they hour. the We earlier apologize an for on and your relying Bloomberg timing, off were

that. sorry to here questions So, relevant I'll about my your more more I'll keep questions keep crackers. --

furnaces it an easy and wanted new expanded I make low-take foundation was it capacity how to to over time? built with And infrastructure that For ask to has been just it increase to running? add cracker, the additional relatively

Steve Bender

market with running a for would industry, bring have you And plant's see unit So, be choose maintenance reliably. the you the We're in you're that cost-effective were to you install opportunities that indicative allow debottleneck performance should to the period, certainly, been in But until you have certainly, a piece choose to to the those down operating to there it do should debottlenecks certain seen and that plan pleased as going unit and the Steve, where the the take that. normal make and future to cost-effective, equipment to certain the time you pleased of of of very actions. the such. should so pre-installation to unit. Naturally, wouldn't get economics some we of that to do

Steve Byrne

kind a about $X.XX assuming by fuel you are fair comes molecule I'm And the at crackers. of And of off target thought the is kilogram. you're through revenue products, many, whether of than reflect that color that know proposition And hydrogen. for value of of different hydrogen there sure there's wanted increasing generated for And then you gray. there's jurisdictions alternative but that your ethylene, to just Obviously, some aware question amount combustion in just you the a encourage you to focus many hydrogen can of crackers. as would from levers a uses on a a stream high-level And had you these use it potentially I any to and the for the that whether Partnership? crackers, if I'm pull another one

Steve Bender

gas green or it of Steve, look hydrogen, -- But earlier more certainly, certainly do fuel, be on gray thought back green hydrogen value not tend terms coming market. be of as we necessarily and your about at but based from back So, just question renewable selling we or those to not other the -- merchant applications, a into at higher NGLs. of that using to are in base, times

term just want if see broadly. that to an value attention if at it's look more that stream doing we to, And we'll something paying on but we're have at it's anything looking front there's something that to and long so, underlying

Albert Chao

Steve, hydrogen colocalize from if we also, our may produce cells. that I

amount into brine on of make caustic, salt the brine, in when a hydrogen as salt So, they we lot and not well. turn you chlorine water produce electrolysis to do there's because whole

chlor-alkali do well plant as a we plants. from produce as So, ethylene hydrogen

enter ears, we So, we into economy, supply the any capacities. to have all production we hydrogen and are without way more today's adding to want and with

Steve Byrne

be Very yes, Very color, It good. but It interesting. might could not be sounds good. green. a different

Albert Chao

buy plants. renewable for then we power, welcome. greener chlor-alkali You're we become could But

Operator

the the time, now session turn over this back I call At Holy. now Jeff ended. Q&A will to is

Jeff Holy

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

Operator

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

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

Westlake Chemical Partners (WLKP) 8 Aug 202020 Q2 Earnings call transcript