Genesis Energy, L.P. Provides Update on Balance Sheet Simplification

Rhea-AI Summary

Genesis Energy (NYSE: GEL) has announced significant progress in its balance sheet simplification following the receipt of approximately $1.010 billion in cash from the sale of its Alkali Business. The company has:

• Paid off its senior secured revolving credit facility, saving ~$25 million in annual cash interest
• Called remaining 8.0% senior unsecured notes due 2027, saving ~$33 million in annual interest
• Purchased $250 million of Class A convertible preferred units, eliminating ~$28 million in annual preferred distributions

Combined with $37 million savings from ORRI bonds transfer, these actions reduce annual cash costs by over $120 million ($1.00 per common unit). The company expects to generate excess free cash flow and aims to manage its leverage ratio towards a 4.0x target while considering capital returns to unitholders.

Positive

• Received $1.010 billion cash from Alkali Business sale
• Annual cash cost reduction of $120 million ($1.00 per unit)
• Complete payoff of senior secured revolving credit facility saving $25M annually
• Elimination of 8.0% senior unsecured notes saving $33M annually
• Purchase of $250M preferred units reducing $28M annual distributions

Negative

• Divestment of Alkali Business reduces operational diversity

Insights

Financial Analyst

Genesis Energy's balance sheet simplification represents a transformative financial restructuring that substantially improves the partnership's financial health and flexibility. The deployment of $1.01 billion from their Alkali Business sale delivers immediate and significant deleveraging:

They've completely paid down their revolving credit facility, called remaining 8.0% notes due 2027, and repurchased $250 million of preferred units - collectively eliminating $120+ million in annual cash obligations ($1.00 per common unit).

This financial restructuring creates three critical advantages:

• Enhanced free cash flow generation: The 100% reduction in revolver balance and elimination of high-cost debt immediately improves cash retention
• Simplified capital structure: Removing layers of obligations reduces financial complexity and lowers the partnership's weighted average cost of capital
• Increased financial flexibility: Management now has multiple capital allocation options - further debt reduction, additional preferred unit redemptions, or returning capital to unitholders

With leverage now trending toward their 4.0x target and upcoming cash flow increases from Gulf of America operations, Genesis has positioned itself at an inflection point where distributable cash flow can finally exceed their capital obligations - a milestone that could ultimately lead to distribution increases or unit repurchases for common unitholders.

HOUSTON--(BUSINESS WIRE)-- Genesis Energy LP (NYSE: GEL) today announced an update on its recent and near-term expected deployment of the approximately $1.010 billion in cash, net of estimated transaction costs and expenses, it received on Friday, February 28, 2025, from the sale of its Alkali Business. In summary, Genesis has:

• Paid its senior secured revolving credit facility to zero which will result in saving approximately $25 million in annual cash interest expense;
• Called the remaining 8.0% senior unsecured notes due 2027 which will result in saving approximately $33 million in annual cash interest expense; and
• Purchased $250 million of its Class A convertible preferred units, permanently extinguishing approximately $28 million in annual cash preferred distributions

Grant Sims, CEO, commented “We are happy to report the significant progress we have made in reducing our mandatory annual cash expenditures and jump starting the process of simplifying our balance sheet. When combined with the cash savings of approximately $37 million of principal and interest payments due under the ORRI bonds, which became an obligation of the purchaser of our Alkali business, we have reduced the annual cash cost on the capital underlying our remaining businesses by over $120 million annually, or approximately $1.00 per common unit outstanding.

With the steps we have recently taken, Genesis has reached that targeted inflection point and is now in position to generate free cash flow in excess of the cash costs of running our businesses, even before the dramatic increase in segment margin contribution scheduled to start ramping mid-year from our contracted business in the Gulf of America. We believe we are very well positioned to continue to reduce our outstanding debt and opportunistically redeem the remaining Class A convertible preferred units, combining to further reduce our annual cash obligations, as well as consider returning capital to common unitholders, in one form or another, all while managing our bank calculated leverage ratio towards its long-term target of 4.0x.”

Genesis Energy, L.P. is a diversified midstream energy master limited partnership headquartered in Houston, Texas. Genesis’ operations include offshore pipeline transportation, marine transportation, sulfur services and onshore facilities and transportation. Genesis’ operations are primarily located in the Gulf Coast region of the United States and the Gulf of America.

This press release includes forward-looking statements as defined under federal law. Although we believe that our expectations are based upon reasonable assumptions, no assurance can be given that our goals will be achieved. Actual results may vary materially. We undertake no obligation to publicly update or revise any forward-looking statement.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250310392703/en/

Genesis Energy, L.P.

Dwayne Morley

VP – Investor Relations

(713) 860-2536

Source: Genesis Energy, L.P.

FAQ

How much cash did Genesis Energy (GEL) receive from selling its Alkali Business?

Genesis Energy received approximately $1.010 billion in cash, net of estimated transaction costs and expenses, from the sale of its Alkali Business on February 28, 2025.

What is the total annual cash cost reduction achieved by GEL's recent financial actions?

Genesis Energy achieved over $120 million in annual cash cost reductions, equivalent to approximately $1.00 per common unit outstanding.

How much did GEL spend on purchasing Class A convertible preferred units?

Genesis Energy purchased $250 million of its Class A convertible preferred units, eliminating approximately $28 million in annual cash preferred distributions.

What is Genesis Energy's (GEL) target leverage ratio?

Genesis Energy aims to manage its bank calculated leverage ratio towards a long-term target of 4.0x.