Genesis Energy, L.P. Reports Second Quarter 2023 Results
We generated the following financial results for the second quarter of 2023:
-
Net Income Attributable to Genesis Energy, L.P. of
for the second quarter of 2023 compared to Net Income Attributable to Genesis Energy, L.P. of$49.3 million for the same period in 2022.$35.3 million
-
Cash Flows from Operating Activities of
for the second quarter of 2023 compared to$157.7 million for the same period in 2022.$104.0 million
-
We declared cash distributions on our preferred units of
for each preferred unit, which equates to a cash distribution of approximately$0.94 73 and is reflected as a reduction to Available Cash before Reserves to common unitholders.$23.3 million
-
Available Cash before Reserves to common unitholders of
for the second quarter of 2023, which provided 5.24X coverage for the quarterly distribution of$96.3 million per common unit attributable to the second quarter.$0.15
-
Total Segment Margin of
for the second quarter of 2023.$214.6 million
-
Adjusted EBITDA of
for the second quarter of 2023.$198.0 million
-
Adjusted Consolidated EBITDA of
for the trailing twelve months ended June 30, 2023 and a bank leverage ratio of 4.00X, both calculated in accordance with our senior secured credit agreement and discussed further in this release.$778.7 million
Grant Sims, CEO of Genesis Energy, said, “Our financial results for the second quarter were generally in-line, if not slightly ahead of our internal expectations and once again demonstrated the resilient earnings power of our diversified market leading businesses. During the second quarter, our offshore pipeline transportation segment benefited from steady volumes across our footprint, along with a quicker than anticipated ramp in volumes from BP’s Argos facility, but was partially offset by longer than anticipated planned producer downtime at one of our major host fields in the Gulf of
Looking at the back half of the year, we expect the increasing contributions from our offshore pipeline transportation and marine transportation segments will be offset by softer than previously expected soda ash prices, in some of our export markets. Slowing global industrial production and a slower than anticipated re-opening of China’s economy, post their Covid lockdowns, combined with the anticipation of new supply in
As a result, we are today adjusting our full year guidance for Adjusted EBITDA(1) to a range of
The long-term outlook for Genesis remains constructive and we are excited about the ramp in earnings expected in the coming years. Even with an anticipated softer macro environment, we currently expect financial performance in 2024 to be greater than 2023 driven by a continued ramp in offshore volumes along with the additional volumes expected from our Granger expansion. In 2025, we would expect a significant step change in offshore volumes and segment margin contributions as both Shenandoah and
With that, I would like to discuss our individual business segments in more detail.
Our offshore pipeline transportation segment again performed in-line with, if not slightly ahead of, our internal expectations despite longer than anticipated planned producer downtime at one of our major host platforms. The extended downtime was partially offset during the quarter by a quicker than anticipated ramp in volumes from BP’s Argos facility and steady volumes from King’s Quay and our other host fields. As we look out over the remainder of the year, we continue to expect volumes from Argos to ramp towards its nameplate capacity of 140,000 barrels per day along with steady volumes from King’s Quay and new volumes from additional in-field development wells, field extensions and sub-sea tiebacks to existing production facilities connected to our leading midstream infrastructure in the Gulf of
We remain on schedule and importantly on budget with our CHOPS expansion and new SYNC lateral with completion for both expected in the second half of 2024. The contracted Shenandoah and
Our soda and sulfur services segment performed in-line with our expectations during the quarter. As I mentioned earlier, our soda ash business returned to normal operations in the second quarter as rail service in and out of the Green River basin recovered, which allowed us to run our production facilities at full utilization and optimize our operating costs. Over the last 12 to 18 months we have seen unprecedented demand for soda ash which drove pricing and margins to all-time record levels. It has never been realistic to expect to continue at these margin levels for a prolonged period of time and we have always believed the recent pricing environment was not sustainable and that soda ash pricing, and ultimately margins, would return to historical averages at some point. As we sit here today, the combination of slowing global industrial production, a slower re-opening of China’s economy and anticipated new supply in
While we do in fact have approximately
Our legacy Granger production facility is running at or above its original nameplate capacity of approximately 500,000 tons of annual soda ash production, and the Granger expansion project remains on schedule for first soda ash “on the belt” sometime over the next few months. Once fully on-line and ramped in 2024, we will have approximately 4.7 million to 4.8 million tons of annual soda ash production capacity and will be one of the largest natural soda ash producers in the world, representing approximately
While there will always be some expected volatility in the business given soda ash is a commodity, I would like to give some historical context that got us comfortable when we purchased the business in 2017. Looking at historical segment margin per ton sold from 2007 to 2023, pro forma for the Granger expansion and the expected cost savings, the business has averaged approximately
During the quarter, our legacy sulfur services business was impacted by certain operational issues at our host refinery partners which resulted in lower NaHS production during the quarter. Lower production levels at geographically advantaged sites required us to source our sulfur-based product from our others production sites, which led to increased costs and lower margins.
Our marine transportation segment continues to meet or exceed our expectations as market supply and demand fundamentals remain steady. We continue to operate with utilization rates at or near
To give some context to the tightness we are seeing, today we are announcing that we recently entered into a new three-and-a-half-year contract starting in January of 2024 on the American Phoenix with a credit-worthy counterparty. The new contract term will begin immediately following its current contract that runs through mid-January 2024 and has the highest day rate we have received on the American Phoenix since we first purchased the vessel in 2014. With the American Phoenix now effectively contracted through the middle of 2027 and our belief the broader supply and demand fundamentals and structural tightness will remain favorable for both our brown and blue water fleets for the foreseeable future, we believe our marine transportation segment is set up to deliver marginally growing and steady earnings over the next few years.
Turning now to our balance sheet. While our outlook for the remainder of 2023 is slightly below our original expectations, we are less concerned with the short-term fluctuations in our earnings profile each quarter and more focused on building long-term value for everyone in the capital structure. Regardless of these quarterly fluctuations and based on our current expectations for the remainder of the year, we continue to expect to exit 2023 with a leverage ratio, as calculated by our senior secured lenders, at or slightly above 4.0 times. We are confident the decisions we are making will put us in an enviable position with significant cash flow, especially given our size, starting in 2024 and accelerating into 2025. This central thesis has not changed and will undoubtedly give us tremendous flexibility to optimize our capital structure and return capital to our stakeholders, all while maintaining a focus on our long-term leverage ratio.
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 second quarter of 2023 (the “2023 Quarter”) and the second 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 June 30, |
||||
|
|
2023 |
|
|
2022 |
|
(in thousands) |
||||
Offshore pipeline transportation |
$ |
93,300 |
|
$ |
118,980 |
Soda and sulfur services |
|
89,255 |
|
|
71,701 |
Onshore facilities and transportation |
|
6,305 |
|
|
11,018 |
Marine transportation |
|
25,758 |
|
|
17,573 |
Total Segment Margin |
$ |
214,618 |
|
$ |
219,272 |
Offshore pipeline transportation Segment Margin for the 2023 Quarter decreased
Soda and sulfur services Segment Margin for the 2023 Quarter increased
Onshore facilities and transportation Segment Margin for the 2023 Quarter decreased
Marine 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 primarily by: (i) an increase in operating income associated with our operating segments primarily due to increased volumes and activity in our offshore pipeline transportation segment, increased volumes and pricing in our Alkali Business, and higher day rates in our marine transportation segment, as discussed above; and (ii) a decrease in income attributable to our redeemable noncontrolling interests of
Earnings Conference Call
We will broadcast our Earnings Conference Call on Thursday, August 3, 2023, at 8:00 a.m. Central time (9:00 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 June 30, |
|
Six Months Ended June 30, |
||||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
REVENUES |
$ |
804,662 |
|
|
$ |
721,725 |
|
|
$ |
1,595,274 |
|
|
$ |
1,353,672 |
|
|
|
|
|
|
|
|
|
||||||||
COSTS AND EXPENSES: |
|
|
|
|
|
|
|
||||||||
Costs of sales and operating expenses |
|
616,520 |
|
|
|
570,802 |
|
|
|
1,270,039 |
|
|
|
1,066,450 |
|
General and administrative expenses |
|
16,931 |
|
|
|
20,665 |
|
|
|
31,483 |
|
|
|
35,787 |
|
Depreciation, depletion and amortization |
|
68,427 |
|
|
|
73,673 |
|
|
|
141,587 |
|
|
|
143,179 |
|
Gain on sale of asset |
|
— |
|
|
|
(40,000 |
) |
|
|
— |
|
|
|
(40,000 |
) |
OPERATING INCOME |
|
102,784 |
|
|
|
96,585 |
|
|
|
152,165 |
|
|
|
148,256 |
|
Equity in earnings of equity investees |
|
14,811 |
|
|
|
14,572 |
|
|
|
32,364 |
|
|
|
27,016 |
|
Interest expense |
|
(61,623 |
) |
|
|
(55,959 |
) |
|
|
(122,477 |
) |
|
|
(111,063 |
) |
Other income (expense) |
|
(4 |
) |
|
|
14,888 |
|
|
|
(1,812 |
) |
|
|
10,630 |
|
INCOME BEFORE INCOME TAXES |
|
55,968 |
|
|
|
70,086 |
|
|
|
60,240 |
|
|
|
74,839 |
|
Income tax expense |
|
(290 |
) |
|
|
(571 |
) |
|
|
(1,174 |
) |
|
|
(875 |
) |
NET INCOME |
|
55,678 |
|
|
|
69,515 |
|
|
|
59,066 |
|
|
|
73,964 |
|
Net income attributable to noncontrolling interests |
|
(6,334 |
) |
|
|
(11,548 |
) |
|
|
(11,366 |
) |
|
|
(13,424 |
) |
Net income attributable to redeemable noncontrolling interests |
|
— |
|
|
|
(22,620 |
) |
|
|
— |
|
|
|
(30,443 |
) |
NET INCOME ATTRIBUTABLE TO GENESIS ENERGY, L.P. |
$ |
49,344 |
|
|
$ |
35,347 |
|
|
$ |
47,700 |
|
|
$ |
30,097 |
|
Less: Accumulated distributions and returns attributable to Class A Convertible Preferred Units |
|
(22,910 |
) |
|
|
(18,684 |
) |
|
|
(46,912 |
) |
|
|
(37,368 |
) |
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON UNITHOLDERS |
$ |
26,434 |
|
|
$ |
16,663 |
|
|
$ |
788 |
|
|
$ |
(7,271 |
) |
NET INCOME (LOSS) PER COMMON UNIT: |
|
|
|
|
|
|
|
||||||||
Basic and Diluted |
$ |
0.22 |
|
|
$ |
0.14 |
|
|
$ |
0.01 |
|
|
$ |
(0.06 |
) |
WEIGHTED AVERAGE OUTSTANDING COMMON UNITS: |
|
|
|
|
|
|
|
||||||||
Basic and Diluted |
|
122,579,218 |
|
|
|
122,579,218 |
|
|
|
122,579,218 |
|
|
|
122,579,218 |
|
GENESIS ENERGY, L.P.
OPERATING DATA - UNAUDITED |
|||||||||||
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Offshore Pipeline Transportation Segment |
|
|
|
|
|
|
|
||||
Crude oil pipelines (average barrels/day unless otherwise noted): |
|
|
|
|
|
|
|
||||
CHOPS(1) |
258,939 |
|
|
220,498 |
|
|
246,606 |
|
|
198,313 |
|
Poseidon(1) |
288,384 |
|
|
262,800 |
|
|
301,698 |
|
|
251,872 |
|
Odyssey(1) |
59,924 |
|
|
100,237 |
|
|
62,774 |
|
|
98,742 |
|
GOPL |
2,380 |
|
|
8,579 |
|
|
2,185 |
|
|
6,777 |
|
Offshore crude oil pipelines total |
609,627 |
|
|
592,114 |
|
|
613,263 |
|
|
555,704 |
|
|
|
|
|
|
|
|
|
||||
Natural gas transportation volumes (MMBtus/day)(1) |
397,801 |
|
|
384,330 |
|
|
392,529 |
|
|
328,423 |
|
|
|
|
|
|
|
|
|
||||
Soda and Sulfur Services Segment |
|
|
|
|
|
|
|
||||
NaHS (dry short tons sold) |
26,086 |
|
|
35,633 |
|
|
54,176 |
|
|
67,802 |
|
Soda Ash volumes (short tons sold) |
852,019 |
|
|
772,141 |
|
|
1,556,831 |
|
|
1,516,929 |
|
NaOH (caustic soda) volumes (dry short tons sold) |
20,346 |
|
|
22,073 |
|
|
40,522 |
|
|
42,797 |
|
|
|
|
|
|
|
|
|
||||
Onshore Facilities and Transportation Segment |
|
|
|
|
|
|
|
||||
Crude oil pipelines (barrels/day): |
|
|
|
|
|
|
|
||||
|
66,505 |
|
|
93,739 |
|
|
65,278 |
|
|
81,604 |
|
Jay |
5,952 |
|
|
6,663 |
|
|
5,481 |
|
|
6,788 |
|
|
4,737 |
|
|
6,233 |
|
|
4,872 |
|
|
5,989 |
|
|
70,816 |
|
|
119,254 |
|
|
75,860 |
|
|
90,676 |
|
Onshore crude oil pipelines total |
148,010 |
|
|
225,889 |
|
|
151,491 |
|
|
185,057 |
|
|
|
|
|
|
|
|
|
||||
Crude oil and petroleum products sales (barrels/day) |
23,029 |
|
|
22,060 |
|
|
22,652 |
|
|
22,968 |
|
|
|
|
|
|
|
|
|
||||
Rail unload volumes (barrels/day) |
— |
|
|
25,680 |
|
|
— |
|
|
14,156 |
|
|
|
|
|
|
|
|
|
||||
Marine Transportation Segment |
|
|
|
|
|
|
|
||||
Inland Fleet Utilization Percentage(4) |
100.0 |
% |
|
99.6 |
% |
|
100.0 |
% |
|
95.0 |
% |
Offshore Fleet Utilization Percentage(4) |
94.7 |
% |
|
97.9 |
% |
|
97.1 |
% |
|
97.3 |
% |
(1) |
As of June 30, 2023 and 2022, we owned |
(2) |
Our |
(3) |
Total daily volumes for the three and six months ended June 30, 2023 include 29,891 and 30,703 Bbls/day, respectively, of intermediate refined products and 40,925 and 44,898 Bbls/day, respectively, of crude oil associated with our Port of Baton Rouge Terminal pipelines. Total daily volumes for the three and six months ended June 30, 2022 include 29,469 and 29,097 Bbls/day, respectively, of intermediate refined products and 67,832 and 49,219 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 units) |
|||||
|
June 30, 2023 |
|
December 31, 2022 |
||
|
(unaudited) |
|
|
||
ASSETS |
|
|
|
||
Cash, cash equivalents and restricted cash |
$ |
30,310 |
|
$ |
26,567 |
Accounts receivable - trade, net |
|
774,086 |
|
|
721,567 |
Inventories |
|
117,852 |
|
|
78,143 |
Other current assets |
|
43,446 |
|
|
26,770 |
Total current assets |
|
965,694 |
|
|
853,047 |
Fixed assets and mineral leaseholds, net of accumulated depreciation and depletion |
|
4,726,675 |
|
|
4,641,695 |
Equity investees |
|
274,233 |
|
|
284,486 |
Intangible assets, net of amortization |
|
138,280 |
|
|
127,320 |
Goodwill |
|
301,959 |
|
|
301,959 |
Right of use assets, net |
|
223,179 |
|
|
125,277 |
Other assets, net of amortization |
|
39,439 |
|
|
32,208 |
Total assets |
$ |
6,669,459 |
|
$ |
6,365,992 |
LIABILITIES AND CAPITAL |
|
|
|
||
Accounts payable - trade |
$ |
524,268 |
|
$ |
427,961 |
Accrued liabilities |
|
333,712 |
|
|
281,146 |
Total current liabilities |
|
857,980 |
|
|
709,107 |
Senior secured credit facility |
|
133,600 |
|
|
205,400 |
Senior unsecured notes, net of debt issuance costs and premium |
|
3,009,850 |
|
|
2,856,312 |
Alkali senior secured notes, net of debt issuance costs and discount |
|
397,008 |
|
|
402,442 |
Deferred tax liabilities |
|
17,203 |
|
|
16,652 |
Other long-term liabilities |
|
516,143 |
|
|
400,617 |
Total liabilities |
|
4,931,784 |
|
|
4,590,530 |
Mezzanine capital: |
|
|
|
||
Class A Convertible Preferred Units |
|
865,802 |
|
|
891,909 |
|
|
|
|
||
Partners’ capital: |
|
|
|
||
Common unitholders |
|
531,291 |
|
|
567,277 |
Accumulated other comprehensive income |
|
6,357 |
|
|
6,114 |
Noncontrolling interests |
|
334,225 |
|
|
310,162 |
Total partners’ capital |
|
871,873 |
|
|
883,553 |
Total liabilities, mezzanine capital and partners’ capital |
$ |
6,669,459 |
|
$ |
6,365,992 |
|
|
|
|
||
Common Units Data: |
|
|
|
||
Total common units outstanding |
|
122,579,218 |
|
|
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
|
|
Six Months Ended
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
|
2023 |
|
|
2022 |
|
Net income attributable to Genesis Energy, L.P. |
$ |
49,344 |
|
$ |
35,347 |
|
|
$ |
47,700 |
|
$ |
30,097 |
|
Corporate general and administrative expenses |
|
18,487 |
|
|
21,105 |
|
|
|
34,251 |
|
|
36,826 |
|
Depreciation, depletion, amortization and accretion |
|
71,754 |
|
|
76,277 |
|
|
|
147,689 |
|
|
149,225 |
|
Interest expense |
|
61,623 |
|
|
55,959 |
|
|
|
122,477 |
|
|
111,063 |
|
Income tax expense |
|
290 |
|
|
571 |
|
|
|
1,174 |
|
|
875 |
|
Gain on sale of asset, net to our ownership interest(1) |
|
— |
|
|
(32,000 |
) |
|
|
— |
|
|
(32,000 |
) |
Change in provision for leased items no longer in use |
|
— |
|
|
(100 |
) |
|
|
— |
|
|
(531 |
) |
Cancellation of debt income(2) |
|
— |
|
|
(4,737 |
) |
|
|
— |
|
|
(4,737 |
) |
Redeemable noncontrolling interest redemption value adjustments(3) |
|
— |
|
|
22,620 |
|
|
|
— |
|
|
30,443 |
|
Plus (minus) Select Items, net(4) |
|
13,120 |
|
|
44,230 |
|
|
|
56,456 |
|
|
55,463 |
|
Segment Margin(5) |
$ |
214,618 |
|
$ |
219,272 |
|
|
$ |
409,747 |
|
$ |
376,724 |
|
(1) |
On April 29, 2022, we sold our Independence Hub platform and recognized a gain on the sale of |
(2) |
The 2022 Quarter includes income associated with the repurchase and extinguishment of certain of our senior unsecured notes on the open market of |
(3) |
The three and six months ended June 30, 2022 includes distributions paid in kind, accretion on the redemption feature and valuation adjustments to the redemption feature. The associated Alkali Holdings preferred units were fully redeemed during the 2022 Quarter. |
(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 June 30, |
|
Six Months Ended June 30, |
||||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net income attributable to Genesis Energy, L.P. |
$ |
49,344 |
|
|
$ |
35,347 |
|
|
$ |
47,700 |
|
|
$ |
30,097 |
|
Interest expense |
|
61,623 |
|
|
|
55,959 |
|
|
|
122,477 |
|
|
|
111,063 |
|
Income tax expense |
|
290 |
|
|
|
571 |
|
|
|
1,174 |
|
|
|
875 |
|
Gain on sale of asset, net to our ownership interest |
|
— |
|
|
|
(32,000 |
) |
|
|
— |
|
|
|
(32,000 |
) |
Depreciation, depletion, amortization and accretion |
|
71,754 |
|
|
|
76,277 |
|
|
|
147,689 |
|
|
|
149,225 |
|
EBITDA |
|
183,011 |
|
|
|
136,154 |
|
|
|
319,040 |
|
|
|
259,260 |
|
Redeemable noncontrolling interest redemption value adjustments(1) |
|
— |
|
|
|
22,620 |
|
|
|
— |
|
|
|
30,443 |
|
Plus (minus) Select Items, net(2) |
|
14,959 |
|
|
|
51,351 |
|
|
|
58,022 |
|
|
|
63,562 |
|
Adjusted EBITDA(3) |
|
197,970 |
|
|
|
210,125 |
|
|
|
377,062 |
|
|
|
353,265 |
|
Maintenance capital utilized(4) |
|
(16,600 |
) |
|
|
(14,150 |
) |
|
|
(32,700 |
) |
|
|
(27,650 |
) |
Interest expense |
|
(61,623 |
) |
|
|
(55,959 |
) |
|
|
(122,477 |
) |
|
|
(111,063 |
) |
Cash tax expense |
|
(159 |
) |
|
|
(150 |
) |
|
|
(623 |
) |
|
|
(275 |
) |
Distributions to preferred unitholders(5) |
|
(23,314 |
) |
|
|
(18,684 |
) |
|
|
(47,316 |
) |
|
|
(37,368 |
) |
Available Cash before Reserves(6) |
$ |
96,274 |
|
|
$ |
121,182 |
|
|
$ |
173,946 |
|
|
$ |
176,909 |
|
(1) |
Includes distributions paid in kind and accretion on the redemption feature for the three and six months ended June 30, 2022, and also includes valuation adjustments to the redemption feature during the 2022 Quarter. The associated Alkali Holdings preferred units were fully redeemed during the 2022 Quarter. |
(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 are payable on August 14, 2023 to unitholders of record at close of business on July 31, 2023. |
(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
|
|
Six Months Ended
|
||||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Cash Flows from Operating Activities |
$ |
157,664 |
|
|
$ |
104,042 |
|
|
$ |
255,321 |
|
|
$ |
158,287 |
|
Adjustments to reconcile net cash flows from operating activities to Adjusted EBITDA: |
|
|
|
|
|
|
|
||||||||
Interest Expense |
|
61,623 |
|
|
|
55,959 |
|
|
|
122,477 |
|
|
|
111,063 |
|
Amortization and write-off of debt issuance costs, discount and premium |
|
(2,279 |
) |
|
|
(2,618 |
) |
|
|
(5,813 |
) |
|
|
(4,652 |
) |
Effects of available cash from equity method investees not included in operating cash flows |
|
6,687 |
|
|
|
4,200 |
|
|
|
13,384 |
|
|
|
10,372 |
|
Net effect of changes in components of operating assets and liabilities |
|
(18,605 |
) |
|
|
(2,939 |
) |
|
|
(957 |
) |
|
|
26,230 |
|
Non-cash effect of long-term incentive compensation plans |
|
(5,026 |
) |
|
|
(3,583 |
) |
|
|
(9,656 |
) |
|
|
(6,644 |
) |
Expenses related to business development activities and growth projects |
|
71 |
|
|
|
5,330 |
|
|
|
105 |
|
|
|
5,942 |
|
Differences in timing of cash receipts for certain contractual arrangements(1) |
|
11,559 |
|
|
|
16,477 |
|
|
|
22,134 |
|
|
|
24,707 |
|
Distributions from unrestricted subsidiaries not included in operating cash flows(2) |
|
— |
|
|
|
32,000 |
|
|
|
— |
|
|
|
32,000 |
|
Other items, net(3) |
|
(13,724 |
) |
|
|
1,257 |
|
|
|
(19,933 |
) |
|
|
(4,040 |
) |
Adjusted EBITDA(4) |
$ |
197,970 |
|
|
$ |
210,125 |
|
|
$ |
377,062 |
|
|
$ |
353,265 |
|
(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) |
||||
|
|
June 30, 2023 |
||
Senior secured credit facility |
|
$ |
133,600 |
|
Senior unsecured notes, net of debt issuance costs and premium |
|
|
3,009,850 |
|
Less: Outstanding inventory financing sublimit borrowings |
|
|
(16,300 |
) |
Less: Cash and cash equivalents |
|
|
(11,081 |
) |
Adjusted Debt(1) |
|
$ |
3,116,069 |
|
|
|
|
||
|
|
Pro Forma LTM |
||
|
|
June 30, 2023 |
||
Consolidated EBITDA (per our senior secured credit facility) |
|
$ |
730,908 |
|
Consolidated EBITDA adjustments(2) |
|
|
47,762 |
|
Adjusted Consolidated EBITDA (per our senior secured credit facility)(3) |
|
$ |
778,670 |
|
|
|
|
||
Adjusted Debt-to-Adjusted Consolidated EBITDA |
|
|
4.00X |
|
(1) |
We define Adjusted Debt as the amounts outstanding under our senior secured credit facility and senior unsecured notes (including any unamortized premiums 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. |
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, Shenandoah and
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 June 30, |
|
Six Months Ended June 30, |
||||||||||||
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
(in thousands) |
||||||||||||||
I. |
Applicable to all Non-GAAP Measures |
|
|
|
|
|
|
|
||||||||
|
Differences in timing of cash receipts for certain contractual arrangements(1) |
$ |
11,559 |
|
|
$ |
16,477 |
|
|
$ |
22,134 |
|
|
$ |
24,707 |
|
|
Distributions from unrestricted subsidiaries not included in income(2) |
|
— |
|
|
|
32,000 |
|
|
|
— |
|
|
|
32,000 |
|
|
Certain non-cash items: |
|
|
|
|
|
|
|
||||||||
|
Unrealized losses (gains) on derivative transactions excluding fair value hedges, net of changes in inventory value(3) |
|
2,888 |
|
|
|
(8,319 |
) |
|
|
30,020 |
|
|
|
(10,212 |
) |
|
Loss on debt extinguishment |
|
3 |
|
|
|
501 |
|
|
|
1,812 |
|
|
|
501 |
|
|
Adjustment regarding equity investees(4) |
|
5,867 |
|
|
|
4,160 |
|
|
|
12,148 |
|
|
|
10,734 |
|
|
Other |
|
(7,197 |
) |
|
|
(589 |
) |
|
|
(9,658 |
) |
|
|
(2,267 |
) |
|
Sub-total Select Items, net(5) |
|
13,120 |
|
|
|
44,230 |
|
|
|
56,456 |
|
|
|
55,463 |
|
II. |
Applicable only to Adjusted EBITDA and Available Cash before Reserves |
|
|
|
|
|
|
|
||||||||
|
Certain transaction costs |
|
71 |
|
|
|
5,330 |
|
|
|
105 |
|
|
|
5,942 |
|
|
Other |
|
1,768 |
|
|
|
1,791 |
|
|
|
1,461 |
|
|
|
2,157 |
|
|
Total Select Items, net(6) |
$ |
14,959 |
|
|
$ |
51,351 |
|
|
$ |
58,022 |
|
|
$ |
63,562 |
|
(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 2022 Quarter includes |
|
(3) |
The three and six months ended June 30, 2023 include unrealized losses 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/20230803026937/en/
Genesis Energy, L.P.
Dwayne Morley
VP - Investor Relations
(713) 860-2536
Source: Genesis Energy, L.P.