Q1 2020 Earnings Call
[music].
Thank you for standing by welcome to the Westlake Chemical partners first quarter 2020 earnings conference call. During the presentation, all participants will begin to listen only mode.
The speakers remarks, you'll be invited to participate in the question and answer session. As a reminder, this conference is being recorded today may 4th 2020, I'll now turn the call over to todays host, Jeff Holly Westlake Chemical partners, Vice President and Treasurer, Sir you may begin.
Thank you good afternoon, everyone and welcome to the Westlake Chemical partners first quarter 2020 conference call Im joined today by Albert Chao, Our President and CEO, Steve Bender, Our senior Vice President and CFO and other members of our management team.
During this call we refer to ourselves as Westlake partners for the partnership references to Westlake Westlake chemical refer to our parent company Westlake Chemical Corporation and references to Opco refer to Westlake Chemical Opco LP, a subsidiary of Westlake chemical and the partnership which owns certain.
Allison's assets. Additionally, when we refer to distributable cash flow, we're referring to Westlake chemical partners MLP distributable cash flow definitions of these terms are available on the partnership's website.
Today management is going to discuss certain topics that we will contain forward looking information that is based on management's beliefs as well as assumptions made by an information currently available to management.
These forward looking statements suggest predictions were expectations and thus are subject to risks or uncertainties.
Actual results could differ materially based upon many factors, including operating difficulties the volume of ethylene that we're able to sell the price at which we are able to sell ethylene changes in the prevailing economic conditions.
Actual and proposed governmental regulatory actions competitive products and pricing pressures. The co. Good 19 pandemic, our ability to Barlow funds and excess capital markets at a reasonable cost and other risk factors discussed in our SEC filings.
This morning, Westlake partners issued a press release with details of our first quarter 2020 financial and operating results. This document is available on the press release section of our web page at W. LK partners Dot com.
A replay of today's call will be available beginning two hours after the conclusion of this call.
That replay may be accessed by dialing the following numbers domestic callers should dial 8558, Fivenine to 056 International callers may access the replay at 4045373 406, the access code for both numbers.
As 647 0789.
Please note that information reported on this call speaks only as of today may 4th 2020, and therefore, you're advised that time sensitive information made note no longer be accurate as of the time of any replay.
I would finally advise you that this conference call as brought being broadcast live through an internet webcast system that can be accessed on our web page at W. Allocate partners Dotcom now I'd like to turn the call over to Albert Chao Albert.
Thank you, Jeff good afternoon, ladies and gentlemen, and thank you for joining us discuss off first quarter 22 to itself results.
Before we talk about a quarter.
Our life recognize this is a very challenging time.
And our thoughts with those affected by Cobot 19.
I will highlight some of the ways, we are responding to calling 19 and thoughts on the Cowen situation.
Our operations were deemed essential by both the department of Homeland security and those local authorities.
Which has permitted us to operate.
Doing the state and local state at home orders.
In management, he managing each overall facilities.
We have followed with recommendations and instructions on those national state and local health authorities.
Safety of our employees has always being nimble and quality and in response to the threat posed by called at 19, we have implemented a variety of initiatives and actions protect our employees, including.
And showing personal spacing and providing personal protective equipment.
Conducting temperature screenings engines to all plants.
Postponing canceling all known critical business activities and travel.
Increased cleaning and disinfecting all facilities.
And having as many employees, who can work with mostly do so.
In addition to protecting our employees for supporting the communities, where we operate.
Our Poland Leslie chemical in connection with the team turned away from Shell Foundation.
Contributed a combined $1 million to the greater Houston Colbert 19 recovery fund.
As a business deemed essential the partnership makes the ethylene feedstock that our parent let's say chemical uses.
A wide range of life enhancing products.
Benefit lives everyday.
Many of which are particularly important in today's environment.
Including ethylene that goes into polyethylene does use a medical applications and food packaging.
And PVC, that's using medical equipment and a variety of construction and infrastructure uses.
Such as for fresh and place for the piping.
Once again I want to thank our employees, who are producing and supporting the production all of these products.
That are critical societies needs and safety in today's environment.
In this mornings press release reported consolidated net income, including Opcos earnings of $34 million for the first quarter of Twentytwenty.
Westlake Partners' first quarter net income was $18 million.
In the first quarter of Twentytwenty, we achieved strong financial performance driven by continued strong operations of our facilities.
Ill fitting facilities consistently ran well and above industry operating rates and delivered solid financial performance.
This consistent production when combined with the ethylene sales agreement.
It is designed to insulate us from commodity price risk.
Combined with our investment grade rated sponsor Westlake chemical.
Produces predictable cash flows.
I'll now like to turn all coal the Steve provide more detail on the financial and operating results for the first quarter Steve.
Thank you Albert and good morning every good afternoon, everyone. In this mornings press release, we reported consolidated net income, including Opcos earnings of $94 million on consolidated sales of 251 million for the first quarter 2020.
Let's wait partners first quarter 2020, net income was $18 million or 50 cents per unit.
The partnership and distributable cash flow for the quarter of $18 million or 52 cents per unit.
First quarter 2020, net income per Westlake partners of $18 million increased by 3 million compared to the first quarter 2019, net income of $15 million.
The increase net income was primarily due to the increased production at Opco and higher third party sales margins.
Distributable cash flow of $18 million for the first quarter 2020 was consistent with the first quarter of 2019 distributable cash flow.
The partnership's first quarter 2020, net income of $18 million increased slightly from the fourth quarter 2019.
First quarter 2020, distributable cash flow of $18 million decreased $1 million from fourth quarter 2019, distributable cash flow of 19 million as a result of slightly higher maintenance capital spending.
Turning our attention to the balance sheet in cash flows.
At the end of the first quarter, we had a consolidated cash balance of $20 million and cash invested with Westlake chemical from our investment management agreement of $162 million.
The $162 million in cash invested through the investment management agreement includes cash generated from operations throughout the quarter and a reserve for turnaround expenditures.
Long term debt at the end of the quarter was $400 million of which $377 million because at the partnership and 23 million does that opco.
For the first quarter of 2020, Opco spent $12 million in capital expenditures.
For the first quarter 2020, we maintained strong leverage metrics with a consolidated leverage ratio below below one times and a net debt to capitalization ratio below 25%.
In past calls we discussed the turnaround of our Petro to ethylene unit, which was slated to occur in September.
Due to the continued strong performance of Petro too we will be to furthering the turnaround until the first half of 2021.
We will provide further updates later in the year as we finalize our 2021 turnaround plan for that Petro to cracker.
The cost of this turnaround has been included in the amount we charged to Westlake chemical and has been reserve for.
The partnership's predictable fee based cash flow is an attractive attribute and today's uncertain economic environment.
Given the uncertain environment and market dislocation for the first quarter, we made the decision to keep our distribution consistent with prior quarter.
Our cash flow allows the partnership to continue its current distributions without accessing the capital markets.
We will assess market conditions in future quarters to make use of our fourth growth levers on April Thirtyth 2020, we announced distributions of 47.14 cents per unit with respect to the first quarter of 2020, an increase of approximately 6% over the first quarter of 2019.
Since our IPO in 2014. The partnership is May 23 consecutive quarter is to distributions to unitholders and we have grown distributions, 71% since the partners original minimum quarterly distribution of 27.5 cents.
For the 12 months ending March 31, 2020, distributable cash flow provided coverage of 1.13 times the declared distributions.
The distribution, we paid on May 26, 2020 to unit holders of record May 11 2020.
Now I'd like to call ill turn the call back over to effort to make some closing comments Albert.
Thank you Steve.
We're pleased with a partnership solid operational and financial performance in the first quarter.
And believe it's possible fee based cash flow structure.
Almost take or pay contract with apparent Westlake chemical for 95% Opcos production.
Buys the stable and predictable cash flow.
Distributable cash flow should be at even more attractive investment thesis in today's uncertain economic environment caused by the impact of company 19, and low interest rate environment.
We also believe the ability to policies distribution growth by relying on the sole stable cash flow.
Allow us greater flexibility in this environment to make optimal growth and financing decisions for to unit holders.
We look forward to seeing these attributes that have effective in unit price of the partnership.
Furthermore, we have continued to maintain a strong balance sheet was consistent financial and leverage metrics.
As we continue to navigate the evolving market conditions, therefore returned to normalized market.
We continue to evaluate opportunities for levers of growth, including increases of ownership interest of Opco.
Acquisitions of other qualified income streams that your Westlake interest in the LTCC cracker.
Organic growth opportunities such as expansions of our current exiting facilities.
And of course patient all the higher fixed margin ethylene sales agreement with Westlake.
At the MLP and capital markets recover from the current dislocation with these four leavers. We believed that we have the capability to provide continuing value to our unit holders over the long term.
As always we'll continue to operate safely.
All being good stewards of the environment and a committed is in which we live and work.
Thank you very much for listening to our first quarter 2020 earnings call.
Now I'll turn the call back over to Jeff.
Thank you Albert before we begin taking questions I'd like to remind you that a replay of this teleconference will be available starting today at three PM Eastern time.
We will provide that number again at the end of the call.
Please also be aware that we have posted a presentation outlining our distribution philosophy, which is available on the partnership's website at W. LK partners Dot com.
Jimmy we will now take questions.
Thank you as a reminder to ask a question you will need to press Star then one on your touched on telephone to withdraw your question press the pound key they stand by will be compile the Q and a roster.
First question comes from Michael I have with Barclays. Your line is now open.
Thanks, guys good afternoon.
And Mike.
I guess just one question on a desk distribution for me I. Appreciate the color you guys offers year.
I guess.
Models.
Then per pound margin fuel specialties secure even where today to energy markets are so when you think about the decision going forward about whether to maintain the distribution or grow. It is more of a capital markets question and you wouldn't want to issue new equity a double digit distribution yield rather than an operator.
EBITDA question or I guess, maybe just said another way how should we think about the one or two things you're looking for internally before you consider raising the distribution going forward.
Well, Mike the strength of the partnership and that's the predictability of its cash flows is really driven by the ethylene sales agreement that we have we certainly need an effective in working capital markets to make that work and we need to make sure that it's accretive to all parties.
And so as we look to see the markets begin to become less dislocated for both Westlake and Westlake partners and we certainly have a model that it provides as Albert outline those four levers. So we look forward to find is an opportunity in the markets as they restabilize for an ability to really access to market to.
Act on any one of those four levers.
Okay. Thank you.
You're welcome Mike.
Thank you and our next question comes from Steve Byrne with Bank of America airline is now open.
Yes. Thank you good afternoon to good afternoon.
Is there potential risk that operating rates here in the second quarter dropped to a level that you you fall below some contract minimums to to the partnership maybe you could just remind me how that stands.
Steve we have a and arrangement to the ethylene sales agreement that outlines the planned production of ethylene during the course of year and Westlake and Westlake partners will work to see that that contract. The ethylene sales agreement arrangement is executed under the terms of its agreement.
So whether you have a short term period where demand for.
For that ethylene drops to a level that.
Does that represent a risk to the partnership in the quarter.
Well, Steve when we think about the operations of the business and the targets. We set there always on a rolling 12 month basis, if you recall.
Even when we had plans for a turnaround as we had announced earlier last year.
We would have had an outage during that period. So the operations of a particular quarter aren't overly relevant in terms of how we think about the metrics that we're shooting for the operations of Opco in the partnership we've always looked at the metrics on a rolling 12 month basis.
Okay that helps Steve.
And also just wanted to ask about.
The interest in using the partnership to raise capital when.
And to transfer some of the ownership of locate cracker two to the partnership.
With what is the what is the level of interest in such a transaction.
Well as Albert outlined earlier, we have those four levers available to us, but we need a market that has effectively functioning and properly valuing both entities Westlake partners and Westlake chemical.
And once we see a market that does effectively value those assets and is effectively working those tools. Those four levers are fully available to us and whether it be the acquisition of west wakes ownership of LTCC or other the other three levers there all fully available to us.
And just one last one I know you've got this turnaround on petro to that you're deferring.
What's the.
The footprint of that will look like in terms of the use which could be.
Expanded as part of a brownfields experience is that does that facility lends itself to that.
Steve at the those off all of our crackers have gone through a series of de bottlenecks and when one thinks of a cost effective de bottleneck. It's always a function of the return one gifts and the capital cost to expand the production to get that return.
And so both Petro one pet or two and our Calvert city crackers evolve into a series of de bottlenecks.
And so the more likely opportunity to expand production would be from the facility newly started last year.
Thanks. This is the FCC joint venture right Nixon's thank you.
You're welcome.
Thank you and as a reminder to ask question you will need to press Star then one on your Touchstone telephone to withdraw your question press. The pound key. Our next question comes from Matthew Blair with Tudor Pickering Holt. Your line is now open.
Hey, good morning, Albert and Steve.
Measure how are you.
Good thanks.
Just regarding the decision to push out the turnaround.
As originally and coming up pretty soon here.
We will that affect earnings going forward.
In the form of reduce turnaround accruals for the next few quarters.
So Matthew we would've had agent we would have had a turnaround our earlier guidance was about.
Good thing about 60 days of outage approximately.
And so by moving this to 2021, we will obviously be earning in producing over that period when move otherwise would have had the turnaround occur so that that occurrence of the turnaround was now slated for the first half 2021.
We felt it was appropriate to do it because the plant was running very effectively and we felt like that bringing in additional contracts to the site.
Would've been brought people too close to each other to be able to effectively operate given the distancing and the desires to keep all of all personnel onesite contractors are employees safe.
And so we felt it was very prudent to go ahead and move that turnaround to first half of 21.
Okay sounds good and then.
Spot ethane cracking was down pretty meaningfully quarter over quarter in Q1 your earnings were up.
It was offset there and in would any of those factors persist into the into the second quarter.
For the strength of the ethylene sales agreement as we have kind of a fixed cost to manufacturing tolling arrangement and as you've seen in our previous filings. We have had some portion of the third party sales.
Got it thank you.
Welcome.
Thank you at this time the QNX session has now ended I.
I would like to turn the call over back over to Jeff Holly.
Thank you again for participating in today's call. We hope you will join US for our next conference call to discuss our second quarter 2020 results.
Thank you for participating in todays Westlake Chemical partners first quarter earnings Conference call. As a reminder, this call will be available for replay beginning two hours. After the call as ended the replay can be accessed by calling the following numbers domestic callers should dial 85585 920.
Five six.
International callers may access a replay at 4045373 406.
The access code is 647 0789.
This concludes today's call goodbye.
Thanks.
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[noise] [noise].
[music].
[music].
[music].
Good afternoon. Thank you for standing by welcome to the Westlake Chemical partners first quarter 2020 earnings conference call. During the presentation, all participants will be going to listen only mode.
Speakers remarks, you'll be invited to participate in the question and answer session. As a reminder, this conference is being recorded today May 420 20 <unk>.
Let's turn the call over to todays host, Jeff Ali Westlake Chemical partners, Vice President Treasurer, Sir you may begin.
Thank you good afternoon, everyone and welcome to the Westlake Chemical partners first quarter 2020 conference call.
I'm joined today by Albert Chao, our President and CEO, Steve Bender, our senior Vice President and CFO and other members upper management team.
During this call we refer to ourselves as Westlake partners were the partnership references to watch like Westlake chemical refer to our apparel company.
It's like Chemical Corporation, and references to Opco refer to Westlake Chemical Opco LP, a subsidiary of Westlake chemical and the partnership which owns certain olefins assets.
Additionally, when we refer to distributable cash flow, we're referring to Westlake chemical partners MLP distributable cash flow definitions of these terms are available on the partnership's website.
Today management is going to discuss certain topics that will contain forward looking information that is based on management's beliefs as well as assumptions made by an information currently available to management.
These forward looking statements suggest predictions or expectations, and that's our subject to risks or uncertainties.
Actual results could differ materially based upon many factors, including operating difficulties the volume of ethylene that we're able to sell the price at which were able to sell ethylene changes in the prevailing economic conditions.
Actual and proposed governmental regulatory actions competitive products in pricing pressures that cobot 19 pandemic, our ability to Barlow funds and access capital markets at a reasonable cost and other risk factors discussed inter FCC filings.
This morning, Westlake partners issued a press release details of our first quarter 2020 financial and operating results.
Document is available on the press release section of our web page at W. Ell Cape Partners Dotcom.
A replay of today's call will be available beginning two hours. After the conclusion of this call that replay may be accessed by dialing the following numbers domestic callers should dial 8558, Fivenine to 056 International callers may access the replay at four zero.
For 5373 406, the access code for both numbers as six or 70789.
Please note that information reported on this call speaks only as of today may 4th 2020, and therefore, you're advised that time sensitive information may no longer be accurate as of the time of any replay.
I would finally advise you that this conference call is brought being broadcast live through an internet webcast system that can be accessed on our web page at W. Allocate partners Dotcom now I'd like to turn the call over to Albert Chao Albert.
Thank you, Jeff good afternoon, ladies and gentlemen, and thank you for joining us to discuss our first quarter two one daytona itself results.
Before we talk about a quarter.
Well liked recognize this is a very challenged in time.
And our thoughts with those affected by call. It 19.
I will highlight some of the ways, we are responding to calling 19 and thoughts on the current situation.
Our operations were deemed essential by both the department of Homeland security and various local authorities.
What you have permitted us to operate.
Doing the state and local stay at home orders.
A manager been managing each overall facilities.
We have followed recommendations and instructions helped those national state and local health authorities.
Safety of our employees has always being number one priority and we expose to the threat posed by corporate lighting, we have implemented a variety of initiatives and actions to protect our employees, including.
And showing personal spacing and providing personal protective equipment.
Conducting temperature screenings entrances to our plants.
Postponing canceling all non critical business activities and travel.
Increased cleaning and disinfecting all facilities.
And having as many employees, who can work with mostly do so.
In addition to protecting our employees, but supporting the communities where we operate.
Our parent Westlake chemical in connection with the team turned away from Shell Foundation.
Contributed a combined at $1 million to the greater Houston Colbert Nitin recovery fund.
As a business deemed essential the partnership makes the ethylene feedstock that up Havent, let's say chemical uses.
A wide range of life enhancing products.
Benefit lives everyday.
Which are particularly important in today's environment.
Including ethylene that goes into polyethylene, that's using medical applications and food packaging.
And PBC, that's using medical equipment and a variety of construction and infrastructure uses.
Such as for fresh and wastewater piping.
Once again I want to thank our employees, who are producing and supporting the production of these products.
That critical societies needs and safety in todays environment.
In this mornings press release reported call sort of net income, including Opcos earnings of $34 million for the first quartile twentytwenty.
Westlake Partners' first quarter net income was $18 million.
First quarter 2020, we achieved strong financial performance.
One by continued strong operations although facilities.
Our ethylene facilities.
We ran well and above industry operating rates and delivered solid financial performance.
This consistent production when combined with the ethylene sales agreement, which is designed.
So to us from commodity price risk.
Combined with investment grade rated sponsor Westlake chemical.
Produces predictable cash flows.
I'll now like to turn all call the Steve provide more detail on the financial and operating results for the first quarter Steve.
Thank you Albert and good morning, everyone. Good afternoon, everyone. In this mornings press release, we reported consolidated net income, including Opcos earnings of $94 million on consolidated sales of 251 million for the first quarter of 2020.
That's great partners first quarter 2020, net income was $18 million or 50 cents per unit.
The partnership and distributable cash flow for the quarter of $18 million or 52 cents per unit.
First quarter 2020, net income per Westlake partners of $18 million increased by 3 million compared to the first quarter 2019, net income of $15 million.
The increase net income was primarily due to the increased production at Opco and higher third party sales margins.
Distributable cash flow of $18 million for the first quarter 2020 was consistent with the first quarter 2019 distributable cash flow.
The partnership's first quarter 2020, net income of $18 million increased slightly from the fourth quarter 2019.
First quarter, 2020, and distributable cash flow of $18 million decreased $1 million from fourth quarter 2019, distributable cash flow of 19 million as a result of slightly higher maintenance capital spending.
Turning our attention to the balance sheet in cash flows.
At the end of the first quarter, we had consolidated cash balance of $20 million.
And cash invested with Westlake chemical from our investment management agreement of $162 million.
The $162 million in cash invested through the investment management agreement.
Crudes cash generated from operations throughout the quarter and a reserve for turnaround expenditures.
Long term debt at the end of the quarter was $400 million of which $377 million as at the partnership and 23 million does that opco.
First quarter of 2020, Opco spent $12 million and capital expenditures.
For the first quarter of 2020, we maintained strong leverage metrics with a consolidated leverage ratio, but below one times and a net debt to capitalization ratio below 25%.
In past calls we discussed the turnaround of our Petro to ethylene unit, which was slated to occur in September.
Due to the continued strong performance of Petro too we will be two furthering the turnaround until the first half of 2021.
We will provide further updates later in the year as we finalize our 2021 turnaround plan for that Petro to cracker.
Cost of this turnaround has been included in the amount we charged to Westlake chemical and has been reserved for.
The partnership's predictable fee based cash flow is an attractive attribute and today's uncertain economic environment.
Given the uncertain environment and market dislocation for the first quarter, we made the decision to keep our distribution consistent with prior quarter.
Cash flow allows the partnership to continue its current distributions without accessing the capital markets.
We will assess market conditions in future quarters to make use of our fourth growth levers on April Thirtyth 2020, we announced distributions of 47.14 cents per unit with respect to the first quarter of 2020, an increase of approximately 6% over the first quarter of 2019.
Since our IPO in 2014, the partnership has made 23 consecutive quarter just distributions to unitholders and we have grown distributions, 71% since the partners original minimum quarterly distribution of 27.5 cents.
For the 12 months ending March 31, 2020, distributable cash flow provided coverage of 1.13 times the declared distributions.
The distribution we paid on May 26, 2022 unit holders of record May 11 2020.
Now I'd like to call turn the call back over to effort to make some closing comments Albert.
Thank you Steve.
We're pleased with the partnership's solid operational and financial performance in the first quarter.
And believe it's possible fee based cash flow structure.
Thomas take or pay contract with apparent Westlake chemical for 95% Opcos production.
Right, the stable and predictable cash flow.
Distributable cash flow should be at even more attractive investment thesis in today's uncertain economic environment caused by the impact of cultivating and low interest rate environment.
We also believe the ability to pause that distribution growth by relying on the source of stable cash flow.
Allow us greater flexibility in this environment to make optimal growth and financing decisions for the unit holders.
We look forward to seeing these attributes that have effective price of the partnership.
Furthermore, we have continued to maintaining a strong balance sheet.
This call since the financial leverage metrics.
As we continue to navigate the evolving market conditions, the path will return to normalized market.
We continue to evaluate opportunities via quality because of growth including.
Increases of ownership interest of Opco.
In addition to other qualified incomes chains that your Westlake interest in the LTCC cracker.
Any growth opportunities such as expansions of our covenant setting facilities.
Negotiation of a higher fixed margin ethylene sales agreement with Westlake.
Yes, the MLP and capital markets recover from the Kevin dislocation.
These four leave US we believed that we have the capability to provide continuing value to our unit holders over the long term.
As always we'll continue to operate safely along being good stewards of the environment and a committed is in which we live and work.
Thank you very much for listening to our first quarter 2020 earnings call.
Now I'll turn the call back over to Jeff.
Thank you Albert before we begin taking questions I'd like to remind you that a replay of this teleconference will be available starting today at three PM Eastern time.
We'll provide that number again at the end of the call.
Please also be aware that we have posted a presentation outlining our distribution philosophy, which is available on the partnership's web site at W. LK partners Dot com.
Jimmy we will now take questions.
Thank you as a reminder to ask a question you will need to press Star then one on your touched on telephone to withdraw your question press the pound key hey, standby will be compiled the Q and a roster.
First question comes from Michael I have with Barclays. Your line is now open.
Thanks, guys and good afternoon.
You're welcome back.
I guess just one question on the distribution for me I. Appreciate the color you guys offered year I guess.
Models, and 10 cents per pound margin yields fairly secure even where today to energy markets are so when you think about the decision going forward about whether to maintain the distribution or grow. It is it more of a capital markets question and you wouldn't want to issuing new equity double digit distribution yield.
Rather than an operational EBITDA question or I guess, maybe just said another way how should we think about the one or two things you're looking for internally before you consider raising the distribution going forward.
Well, Mike the strength of the partnership and the predictability of its cash flows is really driven by the ethylene sales agreement that we have we certainly need an effective and working capital markets to make that work and we need to make sure that it's accretive to all parties.
And so as we look to see the markets begin to become less dislocated for both Westlake and Westlake partners and we certainly have a model that it provides as Albert outline those four levers. So we look forward to find is an opportunity in the markets as they restabilize for an ability to really access the market too.
Act on any one of those four levers.
Got it okay. Thank you.
You're welcome Mike.
Thank you and our next question comes from Steve Byrne with Bank of America airline is now open.
Yes. Thank you good afternoon to good afternoon.
Is there a potential risk that operating rates here in the second quarter dropped to a level that you you fall below some contract minimums to to the partnership maybe you could just remind me how that stands.
Steve we have a at arrangement to the ethylene sales agreement that outlines the planned production of ethylene during the course of the year and Westlake and Westlake partners will work to see that that contract. The ethylene sales agreement arrangement is executed under the terms of its agreement.
So whether you have a short term period, where the demand.
For that ethylene drops to a level that.
Does that represent a risk to the partnership in the quarter.
Well, Steve when we think about the operations of the business and the targets. We set there always on a rolling 12 month basis, if you recall.
Even when we had plans for a turnaround as we had announced earlier last year.
We would have had an outage during that period. So the operations of a particular quarter aren't overly relevant in terms of how we think about the metrics that we're shooting for the operations of Opco and the partnership we've always looked at the metrics on a rolling 12 month basis.
Okay that helps Steve.
And also just wanted to ask about.
The interest in using a partnership to raise capital when.
And to transfer some of the ownership of locate cracker true to the partnership.
Well what is the what is the level of interest in such a transaction.
Well as Albert outlined earlier, we have those four levers available to us what we need a market that has.
Actively functioning then properly valuing both entities Westlake partners and Westlake chemical.
And once we see a market that does effectively value those assets and is effectively working those tools. Those four levers are fully available to us and whether it be the acquisition of websites ownership of LCC or other the other three levers theyre all fully available to us.
And just one last one I know you've got this turnaround on petro to that you're deferring.
What's the.
Footprint of that.
Look like in terms of the use which could be.
Expanded as part of a brownfields experience from is that does that facility lends itself to that.
Steve at the those off all of our crackers have gone through a series of de bottlenecks and when one thinks of a cost effective de bottleneck. It's always a function of the return one gifts and the capital cost to expand the production to get that return.
And so both Petro one petro two and our Calvert city crackers evolve into a series of de bottlenecks.
And so the more likely opportunity to expand production would be from this facility newly started last year.
Thanks. This is the FCC joint venture.
Makes sense. Thank you.
You're welcome.
Thank you and as a reminder to ask question you will need to press Star then one on your Touchstone telephone to withdraw your question press. The pound key. Our next question comes from Matthew Blair with Tudor Pickering Holt. Your line is now open.
Hey, good morning, Albert and Steve.
No matter how are you.
Good thanks.
Just regarding the decision to push out the turnaround.
Originally and coming up pretty soon here.
Will that affect earnings going forward.
Just in the form of reduce turnaround accruals for the next few quarters.
So Matthew we would've had agent we would have had a turnaround our earlier guidance was about.
The about 60 days of outage approximately.
So my moving this to 2021, we will obviously be earning in producing over that period when move otherwise would have had the turnaround occur.
So that that occurrence of the turnaround was now slated for the first half 2021.
We felt it was appropriate to do it because the plant was running very effectively and we felt like that bringing in additional contracts to the site.
Would've been brought people too close to each other to be able to effectively operate given the distancing and the desire to keep all of all personnel onesite contractors are employees safe.
And so we felt it was very prudent to go ahead and move that turnaround to first half of 21.
Okay sounds good and then.
Spot ethane cracking was down pretty meaningfully quarter over quarter in Q1 your earnings were.
What was offset there and what any of those factors persist into the into the second quarter.
Well the strength of the ethylene sales agreement as we have kind of a fixed cost to manufacturing tolling arrangement and as you've seen in our previous filings. We have had some portion of the third party sales.
Got it thank you.
Welcome.
Thank you at this time the QNX session has now ended.
I would like to turn the call over back over to Jeff Holly.
Thank you again for participating in today's call. We hope you'll join US for our next conference call to discuss our second quarter 2020 results.
Thank you for participating in todays Westlake Chemical partners first quarter earnings Conference call. As a reminder, this call will be available for replay beginning two hours. After the call as ended the replay can be accessed by calling the following numbers.
The callers should dial 8558592 056.
International callers may access the replay at 4045373 406.
The access code is 647 0789.
I will conclude today's call goodbye.