Genesis Energy, L.P. Reports Fourth Quarter 2023 Results
- None.
- Net Income Attributable to Genesis Energy, L.P. decreased significantly from the same period in 2022.
- Soda ash prices softened in export markets, impacting the soda and sulfur services segment.
- The soda ash business may face challenges in the first half of 2024 before potentially returning to mid-cycle earnings by 2025.
- The company's growth capital expenditures for 2024 increased slightly, mainly due to timing differences in expected spend related to ongoing projects.
Insights
Genesis Energy's Q4 financials reflect a mixed performance, with a noteworthy decline in net income from $42.0 million in the previous year to $12.0 million. However, this was counterbalanced by a significant increase in cash flows from operating activities, rising from $81.8 million to $124.8 million. The disparity suggests operational efficiency gains or changes in working capital management, which are positive signs for operational liquidity. The declared cash distributions on preferred units amounting to $21.9 million indicate a commitment to returning value to investors, albeit at the expense of available cash to common unitholders.
The leverage ratio of 3.96X is in line with the company's long-term target and indicates a balanced approach to debt management. The issuance of new notes and the extension of the senior secured facility's maturity date to February 2026 enhance the company's financial flexibility, which is crucial for navigating the capital-intensive energy sector. Investors should consider the implications of these refinancing activities on the company's interest expenses and long-term debt profile.
Genesis Energy's market position is reinforced by the completion of the Granger expansion project, which is expected to increase soda ash production capacity significantly and reduce operating costs. This strategic move could enhance the company's competitive edge in the global soda ash market, despite current softening in prices. The mention of 'hundreds of millions of tons of additional measured and indicated trona resources' suggests a long-term operational runway for the business, which is an attractive point for investors looking at sustainability of operations.
The structural shortage in the Jones Act market and the strong utilization rates across Genesis's marine transportation segment suggest a favorable outlook for revenue growth in this division. The successful commissioning of the SYNC pipeline and the progress on the CHOPS expansion project underscore Genesis's capabilities in offshore engineering and long-term value creation through infrastructure development.
The energy sector is known for its volatility and capital-intensive nature. Genesis Energy's diversified business model, with segments in offshore pipeline transportation, soda ash production and marine transportation, provides a hedge against sector-specific risks. The successful execution of the SYNC pipeline in deepwater conditions and the life of lease dedications for the Winterfell development are indicative of Genesis's operational expertise and strategic positioning in the Gulf of Mexico's offshore market.
However, investors should be cautious about the soda ash segment's near-term outlook, which is expected to be at the lower end of the anticipated margin contribution range due to macroeconomic conditions. The company's anticipation of a market rebalance in 2024-2025 should be evaluated against global economic trends and industry supply-demand dynamics. The marine transportation segment's performance is robust, with high utilization rates and strong demand, which could contribute positively to the company's earnings profile.
We generated the following financial results for the fourth quarter of 2023:
-
Net Income Attributable to Genesis Energy, L.P. of
$12.0 million $42.0 million -
Cash Flows from Operating Activities of
$124.8 million $81.8 million -
We declared cash distributions on our preferred units of
$0.94 73$21.9 million -
Available Cash before Reserves to common unitholders of
$88.3 million $0.15 -
Total Segment Margin of
$209.4 million -
Adjusted EBITDA of
$188.7 million -
Adjusted Consolidated EBITDA of
$842.3 million
Grant Sims, CEO of Genesis Energy, said, “We are once again very pleased with the financial performance of our market leading businesses for the fourth quarter. Our reported quarterly Adjusted EBITDA of
"For the full year, we generated record Adjusted EBITDA of
"In addition to our record results in 2023, we also achieved some significant project milestones that will continue to benefit the partnership for many decades to come. First and foremost, we reached substantial completion and commissioned our Granger expansion project. This almost four-and-a-half-year construction project overcame many challenges and delays as a result of the Covid-19 pandemic, but I could not be prouder of our team on the ground in
"As we mentioned last quarter, we also successfully laid the 105 miles of the SYNC pipeline in over 5,000 feet of water, which as many of you can imagine is an engineering marvel. This was a tremendous achievement and a testament to our offshore engineering, construction and operation’s teams that helped complete this portion of the project on schedule. In addition, we made significant strides in advancing our CHOPS expansion project, which includes installing pumps at certain strategic junction platforms. These offshore projects are long-term investments that are underpinned by existing upstream developments which have production profiles going out multiple decades, not years, and have ample capacity to handle much more than the currently discovered and contracted volumes.
"In addition to our operational and project milestones, we also took multiple steps in 2023 to strengthen our balance sheet and increase our financial flexibility. We opportunistically accessed the capital markets on two separate occasions in 2023 and successfully issued
"As we embark on 2024, I remain increasingly confident our businesses are well positioned to provide us with a stable foundation in advance of the notable step change in earnings we expect in 2025. In 2024, we expect to see continued volume growth in our offshore pipeline transportation segment from the combination of additional wells coming online at Argos, along with additional volumes from new sub-sea tiebacks and continuing in-field drilling around our existing infrastructure. While our total throughput volumes are expected to be up sequentially, we do have a certain economic step-down on the 10-year anniversary of an existing life-of-lease transportation dedication that will lead to our offshore pipeline transportation segment margin being generally flat year-over-year. I would point out this is a legacy contract and is a one-off situation in our portfolio and none of our other commercial agreements have similar contractual provisions. More importantly, we are now less than a year away from both the Shenandoah and
"In our soda ash business, we expect the macro conditions we saw in the back half of 2023 to continue through at least the first half of 2024 and as a result, even with an expanded Granger on-line, we expect the segment margin contribution from our soda ash business to be near the low end of our previously provided anticipated range of
"Our marine transportation segment is expected to have another banner year with sequential improvement in 2024, driven in large part by the continuing tight supply and demand dynamic in the Jones Act market. This structural backdrop is expected to continue to support steady to marginally increasing day rates across all classes of our marine vessels for the foreseeable future. In addition, our new long-term charter for the American Phoenix commenced at the end of last month and, when combined with the momentum of our Jones Act fleet, we would expect to see record results in our marine transportation segment in 2024.
"Based on this backdrop currently expected in 2024, we expect to generate Adjusted EBITDA(1) this year in the range of
"With that, I will briefly discuss our individual business segments in more detail.
"During the quarter, our offshore pipeline transportation segment continued to perform in-line with our expectations, driven in large part by steady and marginally increasing volumes across our systems. We continued to see steadily increasing volumes from BP’s Argos facility, which is currently running in excess of 100,000 barrels per day along with solid volumes from King’s Quay, Spruance, Shenzi North and our other major host facilities, and we would reasonably expect this to be consistent for the remainder of 2024.
"In addition to steady volumes from our existing host production facilities, I am pleased to announce today that we recently entered into agreements with Beacon Offshore Energy LLC and other interest owners to provide downstream transportation services for
"Our marine transportation segment continues to exceed our expectations as market supply and demand fundamentals remain strong. We continue to operate with utilization rates at or near
"Regarding the longer-term outlook in our marine transportation segment, there continues to be no new construction of our type of marine vessels. If an operator were to undertake such an initiative, we believe it could take anywhere between 1 – 3 years, depending on the size of the vessel, to build a comparable piece of equipment. Current day rates would also have to significantly increase and be sustained through the construction period and for an extended period thereafter to earn a reasonable return on any invested capital. The continued lack of new supply of existing marine tonnage, continued retirements of older equipment, combined with strong demand and zero new construction continues to drive spot day rates and longer-term contracted rates in both of our fleets to record levels. These fundamentals, combined with our increasingly term contracted portfolio, lead me to continue to believe our marine transportation segment remains well positioned to deliver marginally growing and steady earnings over the years to come.
"Our soda and sulfur services segment performed in-line with our expectations during the quarter. The global macro environment for our soda ash business remained relatively consistent, with global supply continuing to outpace demand in most markets, especially in our export markets. Despite the current challenging supply and demand dynamic, we continue to believe the market is not as far as it might seem from balancing and that any sort of structural demand uptick or supply disruption could drive a rapid and potentially significant price response. Along those lines, we continue to see steady and increasing demand from both lithium and solar panel manufacturers in both
"Turning now to our capital expenditures. In 2024, we expect our growth capital expenditures to range from
"The long-term value proposition of Genesis has never been better. We remain uniquely positioned to generate significant cash flow, especially given our size, starting later this year, and accelerating into 2025, which will give us tremendous flexibility to optimize our capital structure for all of our stakeholders. In fact, as we gain an increasingly clear line of sight to generating cash flow of roughly
"The management team and board of directors remain steadfast in our commitment to building long-term value for everyone in the capital structure, and we believe the decisions we are making reflect this commitment and our confidence in Genesis moving forward. I would once again like to recognize our entire workforce for their efforts and unwavering commitment to safe and responsible operations. I’m proud to have the opportunity to work alongside each and every one of you.”
(1) Adjusted EBITDA is a non-GAAP financial measure. We are unable to provide a reconciliation of the forward-looking Adjusted EBITDA projections contained in this press release to its most directly comparable GAAP financial measure because the information necessary for quantitative reconciliations of Adjusted EBITDA to its most directly comparable GAAP financial measure is not available to us without unreasonable efforts. The probable significance of providing these forward-looking Adjusted EBITDA measures without directly comparable GAAP financial measures may be materially different from the corresponding GAAP financial measures.
Financial Results
Segment Margin
Variances between the fourth quarter of 2023 (the “2023 Quarter”) and the fourth quarter of 2022 (the “2022 Quarter”) in these components are explained below.
Segment Margin results for the 2023 Quarter and 2022 Quarter were as follows:
|
Three Months Ended December 31, |
||||
|
|
2023 |
|
|
2022 |
|
(in thousands) |
||||
Offshore pipeline transportation |
$ |
106,167 |
|
$ |
82,087 |
Soda and sulfur services |
|
64,695 |
|
|
87,575 |
Marine transportation |
|
31,845 |
|
|
21,220 |
Onshore facilities and transportation |
|
6,711 |
|
|
6,259 |
Total Segment Margin |
$ |
209,418 |
|
$ |
197,141 |
Offshore pipeline transportation Segment Margin for the 2023 Quarter increased
Soda and sulfur services Segment Margin for the 2023 Quarter decreased
Marine transportation Segment Margin for the 2023 Quarter increased
Onshore facilities and transportation Segment Margin for the 2023 Quarter increased
Other Components of Net Income
We reported Net Income Attributable to Genesis Energy, L.P. of
Net Income Attributable to Genesis Energy, L.P. in the 2023 Quarter was impacted by an increase in operating costs primarily due to a net unrealized loss of
2023 K-1 Tax Packages
The timing of the availability of Genesis Energy’s K-1 tax packages for 2023 is dependent upon actions of the
Earnings Conference Call
We will broadcast our Earnings Conference Call on Thursday, February 15, 2024, at 9:00 a.m. Central time (10:00 a.m. Eastern time). This call can be accessed at www.genesisenergy.com. Choose the Investor Relations button. For those unable to attend the live broadcast, a replay will be available beginning approximately one hour after the event and remain available on our website for 30 days. There is no charge to access the event.
Genesis Energy, L.P. is a diversified midstream energy master limited partnership headquartered in
| GENESIS ENERGY, L.P. | |||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED |
|||||||||||||||
(in thousands, except unit amounts) |
|||||||||||||||
|
Three Months Ended December 31, |
|
Year Ended December 31, |
||||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
REVENUES |
$ |
774,104 |
|
|
$ |
714,037 |
|
|
$ |
3,176,996 |
|
|
$ |
2,788,957 |
|
|
|
|
|
|
|
|
|
||||||||
COSTS AND EXPENSES: |
|
|
|
|
|
|
|
||||||||
Costs of sales and operating expenses |
|
620,794 |
|
|
|
529,523 |
|
|
|
2,501,608 |
|
|
|
2,151,142 |
|
General and administrative expenses |
|
17,526 |
|
|
|
13,773 |
|
|
|
65,779 |
|
|
|
66,598 |
|
Depreciation, depletion and amortization |
|
70,223 |
|
|
|
79,080 |
|
|
|
280,189 |
|
|
|
296,205 |
|
Gain on sale of asset |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(40,000 |
) |
OPERATING INCOME |
|
65,561 |
|
|
|
91,661 |
|
|
|
329,420 |
|
|
|
315,012 |
|
Equity in earnings of equity investees |
|
16,592 |
|
|
|
13,954 |
|
|
|
66,198 |
|
|
|
54,206 |
|
Interest expense |
|
(60,606 |
) |
|
|
(57,383 |
) |
|
|
(244,663 |
) |
|
|
(226,156 |
) |
Other expense, net |
|
(2,815 |
) |
|
|
— |
|
|
|
(4,627 |
) |
|
|
(10,758 |
) |
INCOME BEFORE INCOME TAXES |
|
18,732 |
|
|
|
48,232 |
|
|
|
146,328 |
|
|
|
132,304 |
|
Income tax benefit (expense) |
|
1,767 |
|
|
|
(1,634 |
) |
|
|
19 |
|
|
|
(3,169 |
) |
NET INCOME |
|
20,499 |
|
|
|
46,598 |
|
|
|
146,347 |
|
|
|
129,135 |
|
Net income attributable to noncontrolling interests |
|
(8,549 |
) |
|
|
(4,623 |
) |
|
|
(28,627 |
) |
|
|
(23,235 |
) |
Net income attributable to redeemable noncontrolling interests |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(30,443 |
) |
NET INCOME ATTRIBUTABLE TO GENESIS ENERGY, L.P. |
$ |
11,950 |
|
|
$ |
41,975 |
|
|
$ |
117,720 |
|
|
$ |
75,457 |
|
Less: Accumulated distributions and returns attributable to Class A Convertible Preferred Units |
|
(21,505 |
) |
|
|
(24,000 |
) |
|
|
(90,725 |
) |
|
|
(80,052 |
) |
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON UNITHOLDERS |
$ |
(9,555 |
) |
|
$ |
17,975 |
|
|
$ |
26,995 |
|
|
$ |
(4,595 |
) |
NET INCOME (LOSS) PER COMMON UNIT: |
|
|
|
|
|
|
|
||||||||
Basic and Diluted |
$ |
(0.08 |
) |
|
$ |
0.15 |
|
|
$ |
0.22 |
|
|
$ |
(0.04 |
) |
WEIGHTED AVERAGE OUTSTANDING COMMON UNITS: |
|
|
|
|
|
|
|
||||||||
Basic and Diluted |
|
122,464,318 |
|
|
|
122,579,218 |
|
|
|
122,535,480 |
|
|
|
122,579,218 |
|
GENESIS ENERGY, L.P. |
|||||||||||
OPERATING DATA - UNAUDITED |
|||||||||||
|
Three Months Ended December 31, |
|
Year Ended December 31, |
||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||
Offshore Pipeline Transportation Segment |
|
|
|
|
|
|
|
||||
Crude oil pipelines (average barrels/day unless otherwise noted): |
|
|
|
|
|
|
|
||||
CHOPS(1) |
296,941 |
|
|
233,541 |
|
|
274,527 |
|
|
207,008 |
|
Poseidon(1) |
310,370 |
|
|
243,265 |
|
|
306,182 |
|
|
257,444 |
|
Odyssey(1) |
51,868 |
|
|
53,589 |
|
|
59,535 |
|
|
84,682 |
|
GOPL |
3,070 |
|
|
6,717 |
|
|
2,622 |
|
|
6,964 |
|
Offshore crude oil pipelines total |
662,249 |
|
|
537,112 |
|
|
642,866 |
|
|
556,098 |
|
|
|
|
|
|
|
|
|
||||
Natural gas transportation volumes (MMBtus/day)(1) |
413,597 |
|
|
357,441 |
|
|
401,976 |
|
|
343,347 |
|
|
|
|
|
|
|
|
|
||||
Soda and Sulfur Services Segment |
|
|
|
|
|
|
|
||||
NaHS (dry short tons sold) |
25,356 |
|
|
31,608 |
|
|
106,857 |
|
|
128,851 |
|
Soda Ash volumes (short tons sold) |
901,874 |
|
|
803,281 |
|
|
3,326,024 |
|
|
3,096,494 |
|
NaOH (caustic soda) volumes (dry short tons sold) |
19,522 |
|
|
24,893 |
|
|
78,272 |
|
|
90,876 |
|
|
|
|
|
|
|
|
|
||||
Onshore Facilities and Transportation Segment |
|
|
|
|
|
|
|
||||
Crude oil pipelines (barrels/day): |
|
|
|
|
|
|
|
||||
|
83,044 |
|
|
84,787 |
|
|
70,032 |
|
|
90,562 |
|
Jay |
6,039 |
|
|
7,352 |
|
|
5,793 |
|
|
6,601 |
|
|
3,951 |
|
|
5,131 |
|
|
4,635 |
|
|
5,725 |
|
|
51,212 |
|
|
68,255 |
|
|
65,895 |
|
|
94,389 |
|
Onshore crude oil pipelines total |
144,246 |
|
|
165,525 |
|
|
146,355 |
|
|
197,277 |
|
|
|
|
|
|
|
|
|
||||
Crude oil and petroleum products sales (barrels/day) |
23,655 |
|
|
26,969 |
|
|
23,170 |
|
|
24,643 |
|
|
|
|
|
|
|
|
|
||||
Rail unload volumes (barrels/day) |
— |
|
|
— |
|
|
— |
|
|
10,834 |
|
|
|
|
|
|
|
|
|
||||
Marine Transportation Segment |
|
|
|
|
|
|
|
||||
Inland Fleet Utilization Percentage(4) |
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
98.6 |
% |
Offshore Fleet Utilization Percentage(4) |
99.5 |
% |
|
99.0 |
% |
|
98.1 |
% |
|
96.9 |
% |
(1) |
As of December 31, 2023 and 2022, we owned |
|
(2) |
Our |
|
(3) |
Total daily volumes for the 2023 Quarter and 2022 Quarter include 25,746 and 33,948 Bbls/day, respectively, of intermediate refined products and 25,466 and 27,604 Bbls/day, respectively, of crude oil associated with our Port of Baton Rouge Terminal pipelines. Total daily volumes for the year ended December 31, 2023 and 2022 include 32,458 and 28,850 Bbls/day, respectively, of intermediate refined products and 33,019 and 53,459 Bbls/day, respectively, of crude oil associated with our Port of Baton Rouge Terminal pipelines. |
|
(4) |
Utilization rates are based on a 365-day year, as adjusted for planned downtime and dry-docking. |
| GENESIS ENERGY, L.P. | |||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
|||||
(in thousands, except unit amounts) |
|||||
|
December 31, 2023 |
|
December 31, 2022 |
||
|
(unaudited) |
|
|
||
ASSETS |
|
|
|
||
Cash, cash equivalents and restricted cash |
$ |
28,038 |
|
$ |
26,567 |
Accounts receivable - trade, net |
|
759,547 |
|
|
721,567 |
Inventories |
|
135,231 |
|
|
78,143 |
Other current assets |
|
41,234 |
|
|
26,770 |
Total current assets |
|
964,050 |
|
|
853,047 |
Fixed assets and mineral leaseholds, net of accumulated depreciation and depletion |
|
5,068,821 |
|
|
4,641,695 |
Equity investees |
|
263,829 |
|
|
284,486 |
Intangible assets, net of amortization |
|
141,537 |
|
|
127,320 |
Goodwill |
|
301,959 |
|
|
301,959 |
Right of use assets, net |
|
240,341 |
|
|
125,277 |
Other assets, net of amortization |
|
38,241 |
|
|
32,208 |
Total assets |
$ |
7,018,778 |
|
$ |
6,365,992 |
LIABILITIES AND CAPITAL |
|
|
|
||
Accounts payable - trade |
$ |
588,924 |
|
$ |
427,961 |
Accrued liabilities |
|
378,523 |
|
|
281,146 |
Total current liabilities |
|
967,447 |
|
|
709,107 |
Senior secured credit facility |
|
298,300 |
|
|
205,400 |
Senior unsecured notes, net of debt issuance costs, discount and premium |
|
3,062,955 |
|
|
2,856,312 |
Alkali senior secured notes, net of debt issuance costs and discount |
|
391,592 |
|
|
402,442 |
Deferred tax liabilities |
|
17,510 |
|
|
16,652 |
Other long-term liabilities |
|
570,197 |
|
|
400,617 |
Total liabilities |
|
5,308,001 |
|
|
4,590,530 |
Mezzanine capital: |
|
|
|
||
Class A Convertible Preferred Units |
|
813,589 |
|
|
891,909 |
|
|
|
|
||
Partners’ capital: |
|
|
|
||
Common unitholders |
|
519,698 |
|
|
567,277 |
Accumulated other comprehensive income |
|
8,040 |
|
|
6,114 |
Noncontrolling interests |
|
369,450 |
|
|
310,162 |
Total partners’ capital |
|
897,188 |
|
|
883,553 |
Total liabilities, mezzanine capital and partners’ capital |
$ |
7,018,778 |
|
$ |
6,365,992 |
|
|
|
|
||
Common Units Data: |
|
|
|
||
Total common units outstanding |
|
122,464,318 |
|
|
122,579,218 |
| GENESIS ENERGY, L.P. | |||||||||||||||
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO GENESIS ENERGY, L.P. TO SEGMENT MARGIN - |
|||||||||||||||
UNAUDITED |
|||||||||||||||
(in thousands) |
|||||||||||||||
|
Three Months Ended
|
|
Year Ended
|
||||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net income attributable to Genesis Energy, L.P. |
$ |
11,950 |
|
|
$ |
41,975 |
|
|
$ |
117,720 |
|
|
$ |
75,457 |
|
Corporate general and administrative expenses |
|
21,296 |
|
|
|
16,862 |
|
|
|
73,876 |
|
|
|
71,820 |
|
Depreciation, depletion, amortization and accretion |
|
72,943 |
|
|
|
81,993 |
|
|
|
291,731 |
|
|
|
307,519 |
|
Interest expense |
|
60,606 |
|
|
|
57,383 |
|
|
|
244,663 |
|
|
|
226,156 |
|
Income tax expense (benefit) |
|
(1,767 |
) |
|
|
1,634 |
|
|
|
(19 |
) |
|
|
3,169 |
|
Gain on sale of asset, net to our ownership interest(1) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(32,000 |
) |
Change in provision for leased items no longer in use |
|
— |
|
|
|
(72 |
) |
|
|
— |
|
|
|
(671 |
) |
Cancellation of debt income(2) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8,618 |
) |
Redeemable noncontrolling interest redemption value adjustments(3) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
30,443 |
|
Plus (minus) Select Items, net(4) |
|
44,390 |
|
|
|
(2,634 |
) |
|
|
99,091 |
|
|
|
96,780 |
|
Segment Margin(5) |
$ |
209,418 |
|
|
$ |
197,141 |
|
|
$ |
827,062 |
|
|
$ |
770,055 |
|
(1) |
On April 29, 2022, we sold our Independence Hub platform and recognized a gain on the sale of |
|
(2) |
The year ended December 31, 2022 includes income associated with the repurchase and extinguishment of certain of our senior unsecured notes on the open market. |
|
(3) |
The year ended December 31, 2022 includes paid-in-kind distributions, accretion on the redemption feature and valuation adjustments to the redemption feature as the associated preferred units were redeemed during the second quarter of 2022. |
|
(4) |
Refer to additional detail of Select Items later in this press release. |
|
(5) |
See definition of Segment Margin later in this press release. |
GENESIS ENERGY, L.P. |
|||||||||||||||
RECONCILIATIONS OF NET INCOME ATTRIBUTABLE TO GENESIS ENERGY L.P. TO ADJUSTED EBITDA |
|||||||||||||||
AND AVAILABLE CASH BEFORE RESERVES - UNAUDITED |
|||||||||||||||
(in thousands) |
|||||||||||||||
|
Three Months Ended December 31, |
|
Year Ended December 31, |
||||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net income attributable to Genesis Energy, L.P. |
$ |
11,950 |
|
|
$ |
41,975 |
|
|
$ |
117,720 |
|
|
$ |
75,457 |
|
Interest expense |
|
60,606 |
|
|
|
57,383 |
|
|
|
244,663 |
|
|
|
226,156 |
|
Income tax expense (benefit) |
|
(1,767 |
) |
|
|
1,634 |
|
|
|
(19 |
) |
|
|
3,169 |
|
Gain on sale of asset, net to our ownership interest |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(32,000 |
) |
Depreciation, depletion, amortization and accretion |
|
72,943 |
|
|
|
81,993 |
|
|
|
291,731 |
|
|
|
307,519 |
|
EBITDA |
|
143,732 |
|
|
|
182,985 |
|
|
|
654,095 |
|
|
|
580,301 |
|
Redeemable noncontrolling interest redemption value adjustments(1) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
30,443 |
|
Plus (minus) Select Items, net(2) |
|
45,017 |
|
|
|
(2,818 |
) |
|
|
102,272 |
|
|
|
106,327 |
|
Adjusted EBITDA(3) |
|
188,749 |
|
|
|
180,167 |
|
|
|
756,367 |
|
|
|
717,071 |
|
Maintenance capital utilized(4) |
|
(17,750 |
) |
|
|
(15,350 |
) |
|
|
(67,650 |
) |
|
|
(57,400 |
) |
Interest expense |
|
(60,606 |
) |
|
|
(57,383 |
) |
|
|
(244,663 |
) |
|
|
(226,156 |
) |
Cash tax expense |
|
(225 |
) |
|
|
(290 |
) |
|
|
(1,048 |
) |
|
|
(815 |
) |
Distributions to preferred unitholders(5) |
|
(21,909 |
) |
|
|
(24,000 |
) |
|
|
(91,837 |
) |
|
|
(80,052 |
) |
Available Cash before Reserves(6) |
$ |
88,259 |
|
|
$ |
83,144 |
|
|
$ |
351,169 |
|
|
$ |
352,648 |
|
(1) |
The year ended December 31, 2022 includes paid-in-kind distributions, accretion on the redemption feature and valuation adjustments to the redemption feature as the associated preferred units were redeemed during the second quarter of 2022. |
|
(2) |
Refer to additional detail of Select Items later in this press release. |
|
(3) |
See definition of Adjusted EBITDA later in this press release. |
|
(4) |
Maintenance capital expenditures in the 2023 Quarter and 2022 Quarter were |
|
(5) |
Distributions to preferred unitholders attributable to the 2023 Quarter were paid on February 14, 2024 to unitholders of record at close of business on January 31, 2024. |
|
(6) |
Represents the Available Cash before Reserves to common unitholders. |
GENESIS ENERGY, L.P. |
|||||||||||||||
RECONCILIATION OF NET CASH FLOWS FROM OPERATING ACTIVITIES TO ADJUSTED EBITDA - |
|||||||||||||||
UNAUDITED |
|||||||||||||||
(in thousands) |
|||||||||||||||
|
Three Months Ended
|
|
Year Ended
|
||||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Cash Flows from Operating Activities |
$ |
124,762 |
|
|
$ |
81,800 |
|
|
$ |
521,126 |
|
|
$ |
334,395 |
|
Adjustments to reconcile net cash flows from operating activities to Adjusted EBITDA: |
|
|
|
|
|
|
|
||||||||
Interest Expense |
|
60,606 |
|
|
|
57,383 |
|
|
|
244,663 |
|
|
|
226,156 |
|
Amortization and write-off of debt issuance costs, discount and premium |
|
(4,683 |
) |
|
|
(2,161 |
) |
|
|
(12,889 |
) |
|
|
(9,271 |
) |
Effects of available cash from equity method investees not included in operating cash flows |
|
6,346 |
|
|
|
5,097 |
|
|
|
26,050 |
|
|
|
19,834 |
|
Net effect of changes in components of operating assets and liabilities |
|
(570 |
) |
|
|
39,242 |
|
|
|
(4,174 |
) |
|
|
87,818 |
|
Non-cash effect of long-term incentive compensation plans |
|
(10,143 |
) |
|
|
(6,975 |
) |
|
|
(25,379 |
) |
|
|
(17,810 |
) |
Expenses related to business development activities and growth projects |
|
— |
|
|
|
458 |
|
|
|
105 |
|
|
|
7,339 |
|
Differences in timing of cash receipts for certain contractual arrangements(1) |
|
22,822 |
|
|
|
12,620 |
|
|
|
56,341 |
|
|
|
51,102 |
|
Distributions from unrestricted subsidiaries not included in operating cash flows(2) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
32,000 |
|
Other items, net(3) |
|
(10,391 |
) |
|
|
(7,297 |
) |
|
|
(49,476 |
) |
|
|
(14,492 |
) |
Adjusted EBITDA(4) |
$ |
188,749 |
|
|
$ |
180,167 |
|
|
$ |
756,367 |
|
|
$ |
717,071 |
|
(1) |
Includes the difference in timing of cash receipts from or billings to customers during the period and the revenue we recognize in accordance with GAAP on our related contracts. For purposes of our non-GAAP measures, we add those amounts in the period of payment and deduct them in the period in which GAAP recognizes them. |
|
(2) |
On April 29, 2022, we sold our Independence Hub platform for |
|
(3) |
Includes adjustments associated with the noncontrolling interest effects of our non |
|
(4) |
See definition of Adjusted EBITDA later in this press release. |
| GENESIS ENERGY, L.P. | ||||
ADJUSTED DEBT-TO-ADJUSTED CONSOLIDATED EBITDA |
||||
(in thousands) |
||||
|
|
December 31, 2023 |
||
Senior secured credit facility |
|
$ |
298,300 |
|
Senior unsecured notes, net of debt issuance costs, discount and premium |
|
|
3,062,955 |
|
Less: Outstanding inventory financing sublimit borrowings |
|
|
(19,300 |
) |
Less: Cash and cash equivalents |
|
|
(8,498 |
) |
Adjusted Debt(1) |
|
$ |
3,333,457 |
|
|
|
|
||
|
|
Pro Forma LTM |
||
|
|
December 31, 2023 |
||
Consolidated EBITDA (per our senior secured credit facility) |
|
$ |
753,861 |
|
Consolidated EBITDA adjustments(2) |
|
|
88,479 |
|
Adjusted Consolidated EBITDA (per our senior secured credit facility)(3) |
|
$ |
842,340 |
|
|
|
|
||
Adjusted Debt-to-Adjusted Consolidated EBITDA |
|
3.96X |
||
(1) |
We define Adjusted Debt as the amounts outstanding under our senior secured credit facility and senior unsecured notes (including any unamortized premiums, discounts or issuance costs) less the amount outstanding under our inventory financing sublimit, and less cash and cash equivalents on hand at the end of the period from our restricted subsidiaries. |
|
(2) |
This amount reflects adjustments we are permitted to make under our senior secured credit facility for purposes of calculating compliance with our leverage ratio. It includes a pro rata portion of projected future annual EBITDA associated with material organic growth projects, which is calculated based on the percentage of capital expenditures incurred to date relative to the expected budget multiplied by the total annual contractual minimum cash commitments we expect to receive as a result of the project. These adjustments may not be indicative of future results. |
|
(3) |
Adjusted Consolidated EBITDA for the four-quarter period ending with the most recent quarter, as calculated under our senior secured credit facility agreement. |
This press release includes forward-looking statements as defined under federal law. Although we believe that our expectations are based upon reasonable assumptions, we can give no assurance that our goals will be achieved. Actual results may vary materially. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that we expect, believe or anticipate will or may occur in the future, including but not limited to statements relating to future financial and operating results, our bank leverage ratio and compliance with our senior secured credit facility covenants, the timing and anticipated benefits of the King’s Quay, Argos, Spruance, Shenandoah,
NON-GAAP MEASURES
This press release and the accompanying schedules include non-generally accepted accounting principle (non-GAAP) financial measures of Adjusted EBITDA and total Available Cash before Reserves. In this press release, we also present total Segment Margin as if it were a non-GAAP measure. Our non-GAAP measures may not be comparable to similarly titled measures of other companies because such measures may include or exclude other specified items. The accompanying schedules provide reconciliations of these non-GAAP financial measures to their most directly comparable financial measures calculated in accordance with generally accepted accounting principles in
When evaluating our performance and making decisions regarding our future direction and actions (including making discretionary payments, such as quarterly distributions) our board of directors and management team have access to a wide range of historical and forecasted qualitative and quantitative information, such as our financial statements; operational information; various non-GAAP measures; internal forecasts; credit metrics; analyst opinions; performance; liquidity and similar measures; income; cash flow expectations for us; and certain information regarding some of our peers. Additionally, our board of directors and management team analyze, and place different weight on, various factors from time to time. We believe that investors benefit from having access to the same financial measures being utilized by management, lenders, analysts and other market participants. We attempt to provide adequate information to allow each individual investor and other external user to reach her/his own conclusions regarding our actions without providing so much information as to overwhelm or confuse such investor or other external user.
AVAILABLE CASH BEFORE RESERVES
Purposes, Uses and Definition
Available Cash before Reserves, often referred to by others as distributable cash flow, is a quantitative standard used throughout the investment community with respect to publicly traded partnerships and is commonly used as a supplemental financial measure by management and by external users of financial statements such as investors, commercial banks, research analysts and rating agencies, to aid in assessing, among other things:
(1) |
the financial performance of our assets; |
|
(2) |
our operating performance; |
|
(3) |
the viability of potential projects, including our cash and overall return on alternative capital investments as compared to those of other companies in the midstream energy industry; |
|
(4) |
the ability of our assets to generate cash sufficient to satisfy certain non-discretionary cash requirements, including interest payments and certain maintenance capital requirements; and |
|
(5) |
our ability to make certain discretionary payments, such as distributions on our preferred and common units, growth capital expenditures, certain maintenance capital expenditures and early payments of indebtedness. |
We define Available Cash before Reserves (“Available Cash before Reserves”) as Adjusted EBITDA adjusted for certain items, the most significant of which in the relevant reporting periods have been the sum of maintenance capital utilized, net interest expense, cash tax expense and cash distributions paid to our Class A convertible preferred unitholders.
Disclosure Format Relating to Maintenance Capital
We use a modified format relating to maintenance capital requirements because our maintenance capital expenditures vary materially in nature (discretionary vs. non-discretionary), timing and amount from time to time. We believe that, without such modified disclosure, such changes in our maintenance capital expenditures could be confusing and potentially misleading to users of our financial information, particularly in the context of the nature and purposes of our Available Cash before Reserves measure. Our modified disclosure format provides those users with information in the form of our maintenance capital utilized measure (which we deduct to arrive at Available Cash before Reserves). Our maintenance capital utilized measure constitutes a proxy for non-discretionary maintenance capital expenditures and it takes into consideration the relationship among maintenance capital expenditures, operating expenses and depreciation from period to period.
Maintenance Capital Requirements
Maintenance Capital Expenditures
Maintenance capital expenditures are capitalized costs that are necessary to maintain the service capability of our existing assets, including the replacement of any system component or equipment which is worn out or obsolete. Maintenance capital expenditures can be discretionary or non-discretionary, depending on the facts and circumstances.
Prior to 2014, substantially all of our maintenance capital expenditures were (a) related to our pipeline assets and similar infrastructure, (b) non-discretionary in nature and (c) immaterial in amount as compared to our Available Cash before Reserves measure. Those historical expenditures were non-discretionary (or mandatory) in nature because we had very little (if any) discretion as to whether or when we incurred them. We had to incur them in order to continue to operate the related pipelines in a safe and reliable manner and consistently with past practices. If we had not made those expenditures, we would not have been able to continue to operate all or portions of those pipelines, which would not have been economically feasible. An example of a non-discretionary (or mandatory) maintenance capital expenditure would be replacing a segment of an old pipeline because one can no longer operate that pipeline safely, legally and/or economically in the absence of such replacement.
Beginning with 2014, we believe a substantial amount of our maintenance capital expenditures from time to time will be (a) related to our assets other than pipelines, such as our marine vessels, trucks and similar assets, (b) discretionary in nature and (c) potentially material in amount as compared to our Available Cash before Reserves measure. Those expenditures will be discretionary (or non-mandatory) in nature because we will have significant discretion as to whether or when we incur them. We will not be forced to incur them in order to continue to operate the related assets in a safe and reliable manner. If we chose not make those expenditures, we would be able to continue to operate those assets economically, although in lieu of maintenance capital expenditures, we would incur increased operating expenses, including maintenance expenses. An example of a discretionary (or non-mandatory) maintenance capital expenditure would be replacing an older marine vessel with a new marine vessel with substantially similar specifications, even though one could continue to economically operate the older vessel in spite of its increasing maintenance and other operating expenses.
In summary, as we continue to expand certain non-pipeline portions of our business, we are experiencing changes in the nature (discretionary vs. non-discretionary), timing and amount of our maintenance capital expenditures that merit a more detailed review and analysis than was required historically. Management’s increasing ability to determine if and when to incur certain maintenance capital expenditures is relevant to the manner in which we analyze aspects of our business relating to discretionary and non-discretionary expenditures. We believe it would be inappropriate to derive our Available Cash before Reserves measure by deducting discretionary maintenance capital expenditures, which we believe are similar in nature in this context to certain other discretionary expenditures, such as growth capital expenditures, distributions/dividends and equity buybacks. Unfortunately, not all maintenance capital expenditures are clearly discretionary or non-discretionary in nature. Therefore, we developed a measure, maintenance capital utilized, that we believe is more useful in the determination of Available Cash before Reserves.
Maintenance Capital Utilized
We believe our maintenance capital utilized measure is the most useful quarterly maintenance capital requirements measure to use to derive our Available Cash before Reserves measure. We define our maintenance capital utilized measure as that portion of the amount of previously incurred maintenance capital expenditures that we utilize during the relevant quarter, which would be equal to the sum of the maintenance capital expenditures we have incurred for each project/component in prior quarters allocated ratably over the useful lives of those projects/components.
Our maintenance capital utilized measure constitutes a proxy for non-discretionary maintenance capital expenditures and it takes into consideration the relationship among maintenance capital expenditures, operating expenses and depreciation from period to period. Because we did not use our maintenance capital utilized measure before 2014, our maintenance capital utilized calculations will reflect the utilization of solely those maintenance capital expenditures incurred since December 31, 2013.
ADJUSTED EBITDA
Purposes, Uses and Definition
Adjusted EBITDA is commonly used as a supplemental financial measure by management and by external users of financial statements such as investors, commercial banks, research analysts and rating agencies, to aid in assessing, among other things:
(1) |
the financial performance of our assets without regard to financing methods, capital structures or historical cost basis; |
||
(2) |
our operating performance as compared to those of other companies in the midstream energy industry, without regard to financing and capital structure; |
||
(3) |
the viability of potential projects, including our cash and overall return on alternative capital investments as compared to those of other companies in the midstream energy industry; |
||
(4) |
the ability of our assets to generate cash sufficient to satisfy certain non-discretionary cash requirements, including interest payments and certain maintenance capital requirements; and |
||
(5) |
our ability to make certain discretionary payments, such as distributions on our preferred and common units, growth capital expenditures, certain maintenance capital expenditures and early payments of indebtedness. |
We define Adjusted EBITDA (“Adjusted EBITDA”) as Net income (loss) attributable to Genesis Energy, L.P. before interest, taxes, depreciation, depletion and amortization (including impairment, write-offs, accretion and similar items) after eliminating other non-cash revenues, expenses, gains, losses and charges (including any loss on asset dispositions), plus or minus certain other select items that we view as not indicative of our core operating results (collectively, “Select Items”). Although we do not necessarily consider all of our Select Items to be non-recurring, infrequent or unusual, we believe that an understanding of these Select Items is important to the evaluation of our core operating results. The most significant Select Items in the relevant reporting periods are set forth below.
The table below includes the Select Items discussed above as applicable to the reconciliation of Net income attributable to Genesis Energy, L.P. to Adjusted EBITDA and Available Cash before Reserves:
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
||||||||||||
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
(in thousands) |
||||||||||||||
I. |
Applicable to all Non-GAAP Measures |
|
|
|
|
|
|
|
||||||||
|
Differences in timing of cash receipts for certain contractual arrangements(1) |
$ |
22,822 |
|
|
$ |
12,620 |
|
|
$ |
56,341 |
|
|
$ |
51,102 |
|
|
Distributions from unrestricted subsidiaries not included in income(2) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
32,000 |
|
|
Certain non-cash items: |
|
|
|
|
|
|
|
||||||||
|
Unrealized losses (gains) on derivative transactions excluding fair value hedges, net of changes in inventory value(3) |
|
18,967 |
|
|
|
(21,800 |
) |
|
|
36,688 |
|
|
|
(5,717 |
) |
|
Loss on debt extinguishment |
|
2,815 |
|
|
|
— |
|
|
|
4,627 |
|
|
|
794 |
|
|
Adjustment regarding equity investees(4) |
|
6,100 |
|
|
|
5,218 |
|
|
|
24,635 |
|
|
|
21,199 |
|
|
Other |
|
(6,314 |
) |
|
|
1,328 |
|
|
|
(23,200 |
) |
|
|
(2,598 |
) |
|
Sub-total Select Items, net(5) |
|
44,390 |
|
|
|
(2,634 |
) |
|
|
99,091 |
|
|
|
96,780 |
|
II. |
Applicable only to Adjusted EBITDA and Available Cash before Reserves |
|
|
|
|
|
|
|
||||||||
|
Certain transaction costs |
|
— |
|
|
|
458 |
|
|
|
105 |
|
|
|
7,339 |
|
|
Other |
|
627 |
|
|
|
(642 |
) |
|
|
3,076 |
|
|
|
2,208 |
|
|
Total Select Items, net(6) |
$ |
45,017 |
|
|
$ |
(2,818 |
) |
|
$ |
102,272 |
|
|
$ |
106,327 |
|
(1) |
Includes the difference in timing of cash receipts from or billings to customers during the period and the revenue we recognize in accordance with GAAP on our related contracts. For purposes of our non-GAAP measures, we add those amounts in the period of payment and deduct them in the period in which GAAP recognizes them. |
|
(2) |
The year ended December 31, 2022 includes |
|
(3) |
The 2023 Quarter includes an unrealized loss of |
|
(4) |
Represents the net effect of adding distributions from equity investees and deducting earnings of equity investees net to us. |
|
(5) |
Represents all Select Items applicable to Segment Margin and Available Cash before Reserves. |
|
(6) |
Represents Select Items applicable to Adjusted EBITDA and Available Cash before Reserves. |
SEGMENT MARGIN
Our chief operating decision maker (our Chief Executive Officer) evaluates segment performance based on a variety of measures including Segment Margin, segment volumes where relevant and capital investment. We define Segment Margin (“Segment Margin”) as revenues less product costs, operating expenses and segment general and administrative expenses (all of which are net of the effects of our noncontrolling interest holders), plus or minus applicable Select Items. Although, we do not necessarily consider all of our Select Items to be non-recurring, infrequent or unusual, we believe that an understanding of these Select Items is important to the evaluation of our core operating results.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240215483573/en/
Genesis Energy, L.P.
Dwayne Morley
VP - Investor Relations
(713) 860-2536
Source: Genesis Energy, L.P.
FAQ
What were Genesis Energy, L.P.'s Net Income Attributable for the fourth quarter of 2023 and how does it compare to the same period in 2022?
What was the Cash Flows from Operating Activities for the fourth quarter of 2023 compared to the same period in 2022?
What was the Total Segment Margin reported by Genesis Energy, L.P. for the fourth quarter of 2023?
What was the Adjusted EBITDA for the fourth quarter of 2023 and the trailing twelve months for Genesis Energy, L.P.?
What was the record Adjusted EBITDA achieved by Genesis Energy, L.P. in 2023 and how did it compare to guidance?
What significant project milestones did Genesis Energy, L.P. achieve in 2023?
How did Genesis Energy, L.P. strengthen its financial flexibility in 2023?
