Earnings call transcript Q2 2023

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Operator

Good afternoon. Thank you for standing by. Welcome to the Westlake Chemical Partners Second Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today, August 3, 2023.

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 afternoon, 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 Executive Thank Call. I'm

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

we distributable are flow. refer Definition Additionally, on we when cash Chemical terms these website. to available are Westlake referring to of distributable the flow, MLP Partners' Partnership's cash

more that based you our made management. regulatory subject that are will to differ Investor in website. contain the is or management available statements risks are information learn results suggest cautionary actual lead Today, forward-looking by or factors predictions on as and assumptions beliefs encourage Relations reviewing expectations to topics filings, is uncertainties. to as could by, well and our that available about forward-looking statements to currently thus our on going to also These certain We which management's information these discuss

can available hours A This the wlkpartners.com. available call. after be our in at is accessed release today's operating the morning, X of second replay Release web press website. This of of Westlake page of results. Press the Partners with this call quarter document beginning Partnership's via details issued a The and XXXX financial replay our conclusion will be section

any information as that this August on reported therefore, XXXX, no as time be today, information of accurate time-sensitive longer you of the X, are of that call speaks replay. and note only advised may Please

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

Albert Chao

Thank us this and second thank you of XXXX Westlake you, joining results. everyone, In press income Jeff. morning's we quarter for or unit. our reported discuss net XXXX million second $XX to release, Good $X.XX per afternoon, quarter Partners'

planned, City financial in completed turnaround was impacted maintenance XX-day by the As planned Calvert that these at were May. results

year result a quarter and below both our the the volumes of Consequently, our the the of our turnaround, As of and first prior and and sales XXXX. were second production XXXX of Calvert of City distributable below levels XXXX prior levels. second flow were cash net quarter income sales, quarter both quarter

completed returned sales Importantly, planned, Calvert levels City in cash volumes, was as and and flow turnaround the to expected June.

Looking of quarter only results us, for forward, our XXXX the financial to behind expect in the quarter third with improve from we year and second turnaround planned levels. fourth

fixed market of model of stability cash sales minimizes deliver margin which and our and demonstrated Westlake The has agreement, flow, stability other Partners' with through the volatility reliable paired consistently The us to business, predictability degree enabled of production of in the distributions our when risks. long is history coverage. business ethylene high

since distribution our in without reductions. distribution any IPO the quarterly is of quarter's consecutive July This XXth XXXX

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

Steve Bender

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

due City XXXX impacted compared the Partnership decreased Compared of to million of was second production the Calvert to quarter net decline the interest Partners XXXX in the quarter Westlake million distributable quarter $X by planned and Distributable to lower to XXXX, the second depreciation quarter compared of income of quarter decreased levels $XX million by cash income $X cash Partnership for million Second expense. due XXXX to flow for income net million turnaround $XX and net of million $X by million. lower higher second XXXX second flow expense. $XX of $XX

cash OpCo. million the $XXX and attention million. was our at At was of our at Westlake we the the totaling which cash million, $XXX management end $XX $XXX remaining consolidated Turning and to the of cash through Long-term quarter, at balance had the the investment quarter sheet end flows. was agreement second of with million Partnership the and debt investments

capital OpCo XXXX, of quarter with metrics ratio on leverage consolidated maintain second our spent million Xx. We up $X the expenditures. In a strong leverage approximately

X, quarter $X.XXXX to unitholders, grown of August will a distribution respect consecutive has since our have quarter XXXX, to original XXXX, IPO XX, unit XXXX, XX the quarterly on XX% the unit. to of quarterly distribution we record August per XXXX. per Partnership with distributions $X.XXX we of in quarterly unitholders On paid and distributions be XX, the distribution Partnership's made Since second minimum announced of second XXXX. August Partnership's of

beneficial The and flows. differentiated environment and fee-based the is today's flow Partnership's cash by predictable consistency of earnings cash continues in to prove our economic

X.Xx, accumulative distribution to of were Looking cash in in cash distributable the coverage of distribution since IPO need able access markets. without stability we've our current in -- back, XXXX, our July and the capital Partnership's the we to flow sustain flows, excess maintained

during remainder XXXX. For modeling no the have planned of turnarounds purposes, we

the additional Lake is Petro planned at we our details once XXXX, Our Charles, of the planned for which next in X Louisiana, on our we'll second half currently is planning. facility turnaround ethylene turnaround complete and provide

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

Albert Chao

expectations The second and consistent planned the quarter you, Thank financial historical in occurred. was Steve. our a with partnership's during performances when quarters performance turnaround

to is Similar that now turnaround us. precedents, recover to planned expect performance in coming those the financial historical the we behind quarters

of cash through for production, ups continue agreement, as fee-based planned and stable predictable well Westlake flow Our and unplanned cash as to sales a will contract downs XX% ethylene OpCo's provides take-or-pay economic our turnarounds. flows deliver from with which predictable structure and

Turning metrics. leverage We sheet -- balance financial capital maintain structure. and to a with our financing strong conservative

we'll expansions to evaluate continue of our acquisitions of negotiation facilities, streams, and to long-term distributions ethylene such our opportunities the Westlake. of we future, current opportunities, qualified ethylene unitholders. and fixed conditions, in our including of to navigate our X value higher remain organic our of with on increases OpCo, growth to a provide of continue agreement growth other as sales As in interest focused margin We levers income our ownership via market ability

live our broader we focus with along on As sustainability part operations, always, good the work stewards as to of efforts. and will being of safe we environment continue where

for our much earnings very you second Thank call. listening to quarter

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

Jeff Holy

Albert. you, Thank

this would Before we teleconference questions, that begin I after ended. will taking to be hours call a X available Stacy, we take has replay remind of the you will questions. like now

Operator

from first Matthew Our comes Blair Instructions] question with TPH. [Operator

Matthew Blair

potentially with thoughts current distribution well on resuming us share as you your as from Could drops restarting asset growth OpCo?

Steve Bender

Matthew, those two are obviously transactions related.

we of to about support Partnership think cash always And and both Partnership, that C drop-down earnings flows value we're for and the so and additional the would corp course, parent. looking the the proposition to a assessing opportunities as those at

that drop-down assess at to continue consider those. restart make Certainly, then something transaction points. at cash distributions. it's generate And So all flow which a would and look would sense, to those that then occur, we'll if we'll

Matthew Blair

valuation, think there? yield. limiting more the MLP an around that mind? you issuances? would And Any factor I be Do at think headwind Just equity today? do the looking thoughts still investor is in Is you for see what a MLP your the X.X% appetite

Steve Bender

of yield-oriented a any to to multiple yield attractive would corp that Corporation. investor. an parent arbitrage it's nice say relative trading the Matthew, be And to our reflective C I Westlake continues

make to Partnership and corp it's both right parent. of So just transactional value the accretive transaction course, attractive our the the a drop-down finding for to C

Operator

Our comes with from Advisory Aviation next James question Service. Altschul

James Altschul

of I couple may. if A questions,

appears if just of the correct? rough a results, to you is at more for and First first terms, parties sales why and year-on-year percentage the quarter sharply the sales It Westlake. -- And second third the have the I'm to in both all, I so, sales Am the declined look if that? very than doing half, calculation.

Steve Bender

in we rateable you And third-party correct. a Corporation. lower relative sales Yes, merchant to are that Westlake margins the of with reflection market the margin have the are ethylene

Westlake that attributable is to market for of that below of reflective are with conditions, have the production. been the that margin margin Corporation its the course, of $X.XX ethylene market we the months first have of merchant And year. which net XX% So for net X $X.XX margins

James Altschul

don't are So much? words, want to want the selling because in don't just you -- be as you lower, bothered other margins

Steve Bender

Well, to of corp C our a production. we contractual with sell XX% have our arrangement parent

to X% So in sell production of that the leaves merchant market. the

market, merchant the sell that X% to And market. in so the we merchant that as we're prices exposed of

sales. of reflective that's X% then lower, we are prices for the lower merchant those get of that if so And the value

James Altschul

is, interest but gone the owned the does much? Okay. debt? balance the doubled the the changed, terms total -- expense And is is on interest has [parent that more that, not have of rate the What than I other believe to] expense all or the debt question are to have Westlake. seem up year-on-year. I to sheet interest Why so the

Steve Bender

It's a that rate facility. floating on interest rate

is has all meaningfully credit on risen XX floating a months, rate the gone long-term that rates so accordingly over interest know, in facility. up But we as expense multiyear have the And and marketplace so last that interest agreement.

Operator

Bank with Securities. comes question from next of Our Byrne America Stephen

Stephen Byrne

cracker the are operations. years what And inflation that a how labor One and got recent of absorbed in materials the Partnership? trended equipment I so your have rates being, for about by questions about seen costs forth? turnarounds Has with costs couple unfavorably? those you and

Steve Bender

we costs higher cost and cost the costs, way materials rising about course, So naturally. the turnaround Steve, yes, trended per have and with think those labor rising, of

the about basis. Partnership that estimated basis, the fee the think we monthly into a parent costs on the as on monthly are are so those built charged a to that the charges parent And charges

on So on funds use expected undertake accumulate in as we turnaround, the that the the cost, we undertake basis, turnaround. charge they the balances cash see cost those sheet. and we a a then you those And of to monthly balance parent the

think cash some that of designed reserve turnaround that that be is able to might address So balance you those to as costs. about

Stephen Byrne

Okay. sense. to hydrogen higher-value crackers just opportunities generate that how as is the incentivized And was pursue Partnership and the also byproduct, makes curious That a hydrogen? for I

Steve Bender

Steve. think it, mix we constantly right as assess So is we what value the about certainly

with the Partnership to associated extent there associated benefits the or is accordingly. credit will certainly, see a that the coproducts so the And byproducts,

Stephen Byrne

just as to operating would well? maybe improvements to incremental for additional those some pursue rate, furnaces. operations is incentives you lead cracker on could But on lastly, there production partnership it And potentially continuous advances the added nothing what if like then the in place take

Steve Bender

is, there Yes, Steve.

incentive to we've And and of Partnership associated number -- is the is opportunity the achieve volume cash grow debottleneck, the so which units allows the the debottlenecks to of there us increased an us, distributable is undertaken able allows time. flow, of over That the increase distributions when to about IPO with those that to and you we the a since to balances, because grow production naturally Partnership, ethylene cash the pounds. that that margin increase with therefore, increased think

a undertake are is valued is a that X there opportunities X so to there if economically strong their. So debottleneck -- motivation for of

Operator

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

Jeff Holy

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

Operator

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

until available and [Thursday], As be be website. hours via will a XX, X can The p.m. may for Eastern Goodbye. XX:XX beginning ended, has Time the on XXXX. August, reminder, replay accessed after Partnership replay the call accessed call be this

Westlake Chemical Partners (WLKP) 3 Aug 232023 Q2 Earnings call transcript