Q4 2020 Genesis Energy LP Earnings Call
[music].
Greetings and welcome to the Genesis of Energy fourth quarter 2020 earnings conference call at the time, all participants are in a listen only mode. If anyone should require operator assistance. Please press star zero on your telephone keypad. As a reminder of this conference is being recorded its now my pleasure to turn the call over to Karen Pape.
Go ahead.
Genesis has for business segments.
Pipeline transportation segment is engaged in providing the critical infrastructure to move of oil produced from the long lived world class reservoirs from the deepwater Gulf of Mexico to onshore refining centers, the sodium minerals and sulfur services segment includes trona and trona based exploring mining process.
Thing, producing marketing and selling activities as well as the processing of sour gas streams to remove sulfur at refining operations.
The onshore facilities and transportation segment is engaged in the transportation handling blending storage and supply of energy products, including crude oil and refined products.
Marine Transportation segment is engaged in the maritime transportation of primarily refined petroleum products Genesis operations are primarily located in Wyoming, The Gulf Coast States and the Gulf of Mexico.
During this conference call management may be making forward looking statements within the meaning of the Securities Act of 1933, and the Securities Exchange Act of $19 30 for the law provides the safe Harbor protection to encourage companies to provide forward looking information Genesis intends to avail itself of the safe Harbor for.
Vision and direct you to its most recently filed and future filings with the Securities Exchange Commission. We also encourage you to visit our website at Genesis energy Dot Com, where a copy of the press release. We issued today is located in the press release also presents a reconciliation of non-GAAP financial measures to the most comp.
For both GAAP financial measures at this time I would like to introduce grant Sims CEO of Genesis Energy L. P. Mr. Sims will be joined by Bob Deere, Chief Financial Officer, and Ryan Sims, Senior Vice President Finance and corporate development.
Good morning, everyone.
As we mentioned on this morning's earnings release 2020 was understandably a challenging year for our business is due to the COVID-19 related demand destruction, lower refinery utilization and crude differentials as well as an unprecedented hurricane season.
Despite these challenges we were able to generate approximately $602 million of adjusted consolidated EBITDA as calculated under our senior secured credit facility hitting the midpoint of our previously announced guidance. In fact, we were able to pay down on otherwise reduced total adjusted debt by some $62 million despite plenty of.
Approximately $45 million of financing fees associated with two unsecured refinancings during the year and paying $50 million in the first quarter of this year that was actually associated with the quarterly distribution declared for the fourth quarter of 2019.
While we expect 2021 to be somewhat of a year of transition as our base of businesses continued to recover and we move ever closer to the significant contribution from several contracted offshore projects. We are increasingly confident in the long term fundamentals of our businesses and our significant operating leverage to the upside.
As the global economy continues to improve.
Our offshore pipeline transportation segment was challenged in 2020 from an unprecedented hurricane season, but the outlook remains strong.
While the downtime of nonrecurring costs associated with the inspections and repairs to the garden banks 72 platform negatively impacted 2000, Twenty's segment margin by some $40 million. The first quarter of 2021 remains on track to generate a more normalized earnings profile of approximately $85 million per quarter.
Regarding the new administration's most recent executive order, which direction of the department of interior to temporarily pause new oil and natural gas leasing on federal lands in our estimation of it is very important to note that the targeted pause by the department of interior does not impact of existing operations for <unk>.
Permits for valid existing leases, which are continuing to be reviewed and approved.
In fact since January of 'twenty one the.
The Bureau of Ocean Energy management has issued 63 new permits.
<unk> 38 revised new well permits and for brand new well permits through February of <unk>. So basically the last three weeks.
To put this in perspective because of the sheer magnitude of the deepwater Gulf is often misunderstood and in my opinion underappreciated.
The recoverable reserves for my single deepwater will is often in the range of 15 to 20 million barrels of oil equivalent.
Let me repeat 15 to 20 million barrels are often recovered from a single well.
So permitting and drilling a single well tied back into a production facility connected into one of our pipelines can be the equivalent of hooking up 25 to 30 onshore shale wells.
So the producers must hook these wells into a deepwater production handling facility, where once separated the oil would then be metered into one of our pipelines, which as a practical matter is the only pipeline option.
These kinds of typical deepwater wells are often it flush production for two or three years, not two or three months or even weeks and often have a productive economic life of seven to 10 years per well. It is a completely different worlds on onshore, especially shale basins.
If the temporary ban on new leases were to be extended or become permanent which we believe will require a change on the law. It is important to note. We have hundreds of thousands of acres that are dedicated to our offshore pipeline systems under life of lease dedications, all of which are existing valid leases under primary term.
<unk> previously granted extensions of their primary term or held by production in perpetuity.
Loan or and recognize units.
We believe there is a tremendous inventory of incremental drilling and subsea tieback opportunities on these existing valid leases that can keep our base production levels flat to slightly growing for many years, if not decades to come.
Near to intermediate term activity is quite robust around our producing customers facilities.
Occidental Petroleum has recently drilled and completed two new wells in the Lucius field, both of which are already contractually obligated to flow through our 100% zone Saco pipeline and on to shore through our 64% owned Poseidon pipeline.
BHP Petroleum has recently increased its working interest share and its operated Shinji field. It is publicly announced its intent to drill several more infill wells and <unk> Z proper along with its intent to pursue a new two well subsea development for what it called Shinji North of.
All of the production from these new wells are already contractually obligated to flow through our 100% on shinji lateral and on to shore through other Poseidon or are 100% owned chops pipeline.
Additionally, an affiliate of Beacon has just announced on new discovery of winter fill and late last year echo on or announce a major new discovery at of some monument prospect.
Together. These two new discoveries represents hundreds and hundreds of millions of barrels of newly discovered resources that are closer to our existing pipeline infrastructure than anyone else's.
All of this is of course on addition to our larger contracted offshore projects Argos and King's key which of both recently been publicly confirmed that they remain on track for first oil in 2022.
We anticipate that these two fields when fully ramped up will generate in excess of $25 million a quarter for over $100 million a year in additional segment margin.
We also remain in active discussions with three separate new stand alone deepwater production hubs in various stages of sanctioning and with first oil is starting in the late 2020 for 2025 timeframe totaling more than 220000 barrels a day of potential new Gulf of Mexico production.
Before moving on I'd like to discuss the deep waters carbon footprint and its critical role in the transition to a lower carbon world.
The Gulf of Mexico is already one of the most highly regulated upstream basins in North America from an environmental point of view.
I mean, there is no other base on the other than the Gulf of Mexico, that's overseen by Bessie or the Bureau of safety and environmental enforcement.
There is no hydraulic fracking and very very stringent anti flaring rules in the Gulf.
As a result oil produced on the Gulf has some of the lowest carbon intensity on a per barrel basis of any hydrocarbon production in the world.
In fact, according to third party research after taking into account the additional emissions incurred on shipping various imports to the United States the barrels safely and responsibly come into shore from the Gulf or less emissions intensity from reservoir to refinery the.
Any other barrel refined by Gulf Coast refineries.
Based on this information on alone notwithstanding the other things like jobs energy security balance of trade et cetera, not to mention the billions of dollars of go into the U S. Treasury on an annual basis and royalties, we conclude that it makes absolutely zero cents from the U S or a global perspective to potentially impede further activity in.
Production in the Gulf of Mexico, even as we focus on climate change and an orderly and practical transition to a lower carbon world.
Switching gears to our second largest segment sodium minerals on sulfur services.
Our soda ash business continues to improve for one of the most challenging operating environments in recent history.
Global demand for soda ash.
Continues to recover with total demand remains below pre pandemic levels, driven by the wide range and impact on demand from COVID-19.
As a result, we expect both domestic and export prices in 2021 will be marginally lower than we experienced this past year.
That being said we were sold out in the fourth quarter and currently expect to be sold out of 100% of our production from our Westvaco facility in 2021.
This incremental volume over 2020 will drive our growth in segment margin contribution and allow for greater fixed cost absorption and an improved cost structure.
We believe all natural producers globally or in a similar situation of being sold out.
As we progress through this year and the demand continues to recover the incremental tons must be supplied with synthetic production, which is in general is twice as expensive to make as natural soda. This dynamic is why we believe prices will rise as we go through the year and the market will continue to tighten, especially towards the end of the year when we would.
Otherwise re determined most of our contract prices for the majority of our sales in 2022.
Yeah.
Future prospects of incremental demand for soda ash remained strong as it is an integral building block in the global economy with.
With just over 50% of the market being glass, which includes flat glass auto glass container glass consumer products and much more.
<unk> is well positioned to benefit from of continued economic recovery worldwide.
Furthermore, the glass manufacturers use soda ash to lower the melting point of other raw materials, mainly sand, which in turn reduces our energy consumption and lowers the greenhouse gas emissions at their respective manufacturing sites.
Our legacy refinery services, our sulfur services business continued to improve during the quarter as we move past certain supply disruptions in our supply chain caused by the active hurricane season, along the Gulf Coast.
Demand for Nash has returned almost all of the way the pre pandemic levels driven in large part by pulp and paper as well as our mining customers production levels returning to pre pandemic levels driven by the recent dramatic run up in copper prices, which we think is driven by rapid economic recoveries and the world economies.
While the recovery on our sodium minerals and sulfur services segment is predominantly underpinned by economic recovery in global GDP growth the.
Future is also going to be exciting because we are already very well positioned to actively participate in many aspects of the energy transition.
We are confident these benefits will benefit significantly from various green and emissions.
<unk>.
Our soda ash business will increasingly participate in multiple renew or renewable energy themes moving forward, including the production of new L. E. D certified glass windows to retrofit of older buildings manufacturing of glass for solar panels, and the production of lithium carbonate and lithium.
Sag the basic building blocks of lithium ion phosphate batteries used in both of the electrification of vehicles and long term battery storage.
In addition to being a building block of lower emissions initiatives U S. Natural soda ash. According to third party reports as a greenhouse gas footprint, roughly 37% less than Chinese synthetic soda ash, when leaving their respective manufacturing sites and approximately a 22% less.
House gas footprint in Chinese synthetic soda ash on a delivered basis to customers in Japan, and southeast Asia after factoring into the emissions incurred in rail and shipping transportation.
The process to produce synthetic soda ash also creates byproducts such as calcium chloride on ammonia chloride, which need further handling and ultimately increase synthetic soda ash is carbon footprint.
This further demonstrates how low cost natural soda ash produced from the largest low natural deposits of trona in the world right here in the United States is the most economic and equally important most environmentally friendly soda ash in the world.
Our refinery services business can tenure.
Tenuous to facilitate the eco friendly removal of the sulfur and trained in crude oil. So it doesn't remain and finished the refined products like gasoline jet and diesel fuel, which when combined would otherwise ended up in the atmosphere.
Additionally, we help our host refineries lower their emissions by processing, our sour gas streams, using our proprietary closed loop noncombustible technology to remove sulfur from their hydrogen sulfide gas streams.
This compares more favorably than the refineries alternative of very traditional sulfur recovery units utilizing the cloud process, which combust hydrogen sulfide gas and release of certain levels of harmful gases and incremental carbon dioxide emissions into the atmosphere.
In addition to our production process lowering emissions at our host refineries sodium hydrosulfide or Nash is used by our customers in many ways to help further reduce our emissions from various chemical industrial activities.
For example of Nash is used for move nitrogen oxide, which is a lot worse than carbon dioxide from the emission stacks of certain activities around metal refining and finishing.
The ash in soda Ash are also both used in flue gas scrubbing to remove harmful particulates for what would have otherwise been released into the atmosphere, especially at large industrial complexes and hydrocarbon fired power plants.
While we are highly confident that crude oil will have a significant role to play for the foreseeable future. As hopefully you can tell we continue to look at ways to position ourselves to operate and importantly participate in a lower carbon world.
Along these lines. We're also pleased to announce that we are very near to launching our USG website, which will greatly increase our disclosures on illustrate to all investors that we are committed to operating our business and on ESG responsible manner.
I'll switch gears now and focus quickly on the balance sheet on our view of 2021.
In addition to the successful refinancing of our 2022 notes early in the year in December 2020, we of access the unsecured bond market and completed an upsized $750 million note offering to fully call and redeem our 2023 notes.
The remaining proceeds were used to pay down our senior secured credit facility by approximately $350 million.
Leaving us with ample capacity heading into 2021 and with our nearest unsure of unsecured maturity now in June of 2024.
This increased interest expense from tilting towards longer term fixed rate versus shorter term floating rate debt will likely pressure our ability to live comfortably within the interest coverage ratio on our existing bank of agreement, perhaps by the end of the second quarter How's.
However, we are highly confident we will enter into a new senior secured facility, which will replace our current facility that expires in may of 2022 anyway. During the first half of this year to ensure our continuing financial flexibility and increased tenure as our businesses recover from the challenging environment of this past year.
Our reported leverage ratio increased in the quarter, primarily due to $40 million of weather related impact we incurred in the second half of the year on the Gulf of Mexico.
If only we had experienced a more quote unquote normalized hurricane season, our total average ratio at the end of 2020 would have been closer to five.
Two times versus the reported 557 times.
Looking forward to 2021, we would reasonably expect to generate adjusted consolidated EBITDA.
In 2021 as calculated under our senior secured credit facility between 630, and $660 million, which includes some $30 million to $40 million of pro forma adjustments.
We currently expect cash obligations for 2021 totaling approximately $500 million, which includes all cash taxes interest on bank debt and bonds. All maintenance capital spent growth capital spent asset retirement obligations financing fees estimated changes in working capital preferred cash.
Cash distributions and common distributions at the current 15 per unit quarterly payout.
At this point, we of budgets at approximately $40 million of growth capital outside of the Granger expansion, which dollars for grainger expected to be paid by the redeemable preferred structure to soda ash operational level.
This minimal growth capital is predominantly allocated to the offshore segment for additional upgrades to our existing systems for anticipated future volumes.
Importantly.
We expect to generate free cash flow from these identified.
After these identified cash obligations of $80 million to $110 million, which we intend to use to repay debt.
In summary, we are highly encouraged by the rebound in our businesses.
Still believe we have a clear line of sight to $700 million to $800 million.
In dollars and annual adjusted consolidated EBITDA in the coming years, just a return to 2018 2019 soda ash pricing combined with the incremental contribution margin from our contracted offshore volumes.
Out of upwards of $100 million of additional segment margins during the 2021 guidance described above.
With this accelerating the ability to pay down debt and with relatively de Minimis capital requirements to realize the financial benefits of these improving business condition.
We remain steadfast in our commitment to achieving our long term target leverage ratio of four times.
I would like to once again recognize our entire workforce and especially our miners Mariners on offshore personnel, who live and work in close quarters. During this time of social distancing.
Extremely proud to say we of safely operated our assets under our own COVID-19 safety procedures and protocols with no impact to our business partners and customers with limited confirmed cases amongst our some 2000 employees.
It is an honor to have the opportunity to work alongside such quality folks.
With that I'll turn it back to the moderator for any questions.
Thank you well now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad.
Once again Thats star one to be placed in the question queue, if you'd like to remove yourself from the queue. Please press star two.
One moment, please while the poll for questions.
Our first question today is coming from share the <unk> from UBS. Your line is now live.
Hi, good morning, everyone glad to hear of United States.
Just to start off grant. Thank you for the thorough discussion on the Gulf of Mexico.
Putting the executive orders into context.
For the expectations of Hawaii, we'll still see Gulf of Mexico volumes for years to come.
Just wanted to clarify actually some of your commentary around the soda ash side.
You sort of intimated and I'm wondering if you can expand on it that there might be a sizeable ESG tailwind.
Just with respect to the soda ash business, you talked about EV batteries and so forth I was just wondering if you can talk about.
Expand I guess on the renewable theme.
Will it be of driver of earnings for Genesis in 2000 to 2022, and 'twenty three and beyond.
If you don't mind, yes as of.
Good question. Thanks.
No there is no doubt that.
Just starting with the.
Construction of solar panels, so to speak of.
Very glass of intensive in the soda ash as is used in the manufacturing of all glass components on it has been since the late 18 hundreds.
Bodies ever found a substitute for it.
In terms of glassmaking and just on the line just remember that natural production doesn't compete with another.
Chemical it competes with synthetically produced.
Soda ash, which cost twice as much to manufacturers. So that's clearly one of the.
Other is is in the battery components.
Well glass for <unk>.
To the extent that we retrofit old buildings with the.
More environmentally sound.
<unk>, then obviously again from the glass manufacturing point of view, but importantly.
The growth that we see on top of just the normal economic recovery of GDP growth is developing economies continued to approach more developed economies on the per capita consumption basis of the soda ash.
As growth in the battery space.
In round terms. It takes two parts of soda ash for one part of lithium to make lithium carbonate, which is the building block for.
For new generation, the batteries and on that point too.
The other third party discussions.
About that from other public companies, but Albemarle I think reported yesterday of the day before with the.
Their view of the tremendously in this one of the.
World's largest producers of lithium.
But how the demand pull of the electrification of both the transportation vehicles as well as is of battery storage capabilities for renewable energy, both solar as well as wind and we live in Texas. So we've had some issues with the with both of those this week.
Certainly the storage and battery components would be helpful in terms of being able to manage.
That through the renewables through this crisis.
The third party validation of the incremental growth.
And then you look at the just the EV market with the.
Everybody from Tesla to general Motors switching to.
Only EV vehicles.
Admittedly, it's 10 or 15 years down the road, but thats going to generate tremendous incremental demand for for soda ash too.
Contribute to the electrification.
Okay.
Completely appreciate that and then maybe it's sort of a follow up and kind of more of a near term outlook.
<unk> had some very strong cost performance in 2020.
Just wondering.
As we sort of think about 'twenty, one and maybe into early 'twenty two how much of the cost reductions are you going to be able to permanently capture.
And then also as we're sort of thinking about the near term you talked about the 85 million dollar of on right out of the Gulf.
Does that include the first quarter also just given the the timing of the the startup or was the site in April too.
The make up for dollars just wondering if you can give us some context around both of those items.
Yes, I think on the cost side.
<unk> were implemented basic lease.
Starting in the third quarter of 2020, and so we're still ramping up in terms of realizing all of those I think <unk>.
Starting probably in the second quarter of 2021, we should start realizing across all of our.
The businesses, the $38 million or so of annual cost reductions.
We implemented at that point in time, obviously, we're also we're looking at additional.
Cost sides, primarily in the law.
Learning to work remotely and what that means for the cost of the office space and other things so.
We intend to continue to keep a keen eye on.
On the on the cost side.
As we move forward throughout 2021 and beyond relative to your question on the offshore of the $85 million.
For the first quarter of.
The <unk>.
2021 for the offshore we for.
Feel very comfortable with that number.
Chops.
<unk> initiated service on the February 4th normalized service.
And so.
Again, we're very comfortable that that's the number and as we've talked in the third quarter call. We think that that's the way that the.
The investment community and.
And everyone in the capital structure should look at the business that it's quite capable of on a normalized basis of generating the $80 million to $85 million per quarter.
Had some.
Actually surprises to the upside if you will relative to some of the.
Near term activity that I discussed in detail within the prepared remarks so.
We're very comfortable with that kind of the.
320% of $3 40, plus on.
On an annualized basis for the.
For 2022 coming out of the Gulf.
Alright perfect.
Thank you very much for that appreciate the color today and stay safe and stay warm.
Thanks Shneur.
Sure.
Thank you. Our next question today is coming from Theresa Chen from Barclays. Your line is now live.
Good morning, Thank you for taking my questions.
First as a follow up to Cheniere on.
On soda ash and its participation in the renewable thing on grant. Thank you for the color you've given there and I was just wondering and.
What percentage of I guess soda ash business today is that consistent and have you thought about how much.
Business that can grow into.
Yes.
I don't have a good handle on the participation today I think in <unk> I think we gave a little bit of color on the third quarter call that.
And I haven't been able to the cross check this and update on some of the Albemarle projections, which came out yesterday for lithium demand but.
At least at that point, we were looking at by.
The 2000, 32035 type timeframe, an incremental 6 million tons, a year of worldwide of soda ash demand strictly for the.
On the batteries from an EV point of view so of electric vehicle point of view not the massive.
The storage.
The battery farms that are going to have to be constructed in order to make of renewables.
All of our and win more.
Satisfactory or more efficient so.
And to put that in perspective Teresa the total worldwide demand on a pre pandemic level for soda ash was in round terms around $55 56 million tonnes.
So that alone is driving a 10% of annual.
Increase.
From.
Kind of pre pandemic levels and as I said, the other thing to keep in mind and I think we have some of this on our investor presentation, but the.
The per capita consumption of the soda ash in developing economies is.
Currently around 25% or 30% of the more developed EU, Japan and North America.
The economies so that that also provides.
A tailwind for incremental demand driving the.
Driving prices.
Realizing the benefits of being the low cost soda ash producer in the world.
Got it and then turning to 2021 guidance I'm just curious of what.
The board that $30 million to $40 million for them.
On the adjustments related to <unk>.
It's how we view it with our banks and we have on page 12 of the earnings release and footnote to theirs.
The reconciliation of the kind of the EBIT dollar adjusted EBITDA derived from the GAAP financial statements relative to the total adjusted EBITDA on that.
We view in terms of complying with all of our existing covenants.
In essence, there's two components of it at this point I'll get into a really quickly but one is is.
As the add back of at least through the second quarter of the one time expenses.
We took at the end of the second quarter of 2009.
2020 to reflect the.
The costs associated with achieving the $38 million worth of annual.
The cost savings that we discussed in the <unk>.
The context of <unk>.
Earlier question, when we get to add that back as of one time nonrecurring item.
Through the second quarter of 2021.
At which point, we should have the full.
The full $38 million of.
Anticipated savings reflected in our financial statements for the second is that.
On the growth capital that we're spending in the offshore which is sort of adding pumps and the.
Doing some other debottleneck and to increase capacity.
We have the investment grade take or pay agreements.
The various.
The portfolio of customers that the.
Backup and have contracted for that incremental capacity so we get.
Pro forma credit.
As we are on a percentage of completion as we spend the money than where you are the banks give us pro forma credit for the investment grade take or pay cash flows that are coming against debt.
Debt capital expenditure.
Understood.
And in terms of the onshore business, specifically looking at the WCS differentials and the.
Phoenix station and loading volumes that Youre seeing day.
Can you give us a sense of.
Where do you see that trending at when you see that increasing and is this contingent on.
On net no OPEC plus barrels coming back to the market.
So I'll, let et cetera for Rins that just based on the differential today on can you also on.
Remind us what is that threshold that the day.
First of all has to get to for the rail movements to make sense.
Yes.
The.
The.
I think that quite frankly, if the if the world were not still in the.
And the COVID-19 world that wed see substantially more volume is running it's still the fact that.
At least in the U S.
Retail gasoline sales in diesel sales are basically.
10 of 11% below where they were a year ago.
The jet sales are probably 60 or 70% flow where they were.
A year ago. So the demand for refined products is still being dramatically affected by the effects of COVID-19.
So.
Currently the.
What we look at us and think about as the WCS in Hardesty, Alberta vs. WCS and Houston is that is kind of in the 12% to $15 range then.
As I say on that.
That seems to support.
The movement by rail and our particular situation.
Our customer which happens to be exxonmobil.
Built at the.
Credits.
Essence by paying for volumes that they didn't take or use in.
Primarily the second and third quarters of 2020, and they have for quarters. After the after each quarter to in essence make it up.
So right now they.
Of our moving trains, but we're not really getting anything because it's from a margin contribution because they are really making up the prepaid volumes that they pay this in 2020.
The question is on what happens in the back half of the year after that bank is.
Is used up and if the if the differentials continue to exist.
And there is a recovery in.
Refined product demand, which would therefore result in refinery utilization, increasing then we can see that that would continue through the back half of the year and it would be of net positive to us in the back half of the year relative to.
I think the viscosity is important.
For the Gulf Coast refineries represented by the the heavier Canadian barrels in terms of optimally loading the FCC's kocur's.
But again all of that is kind of dependent upon and dynamic associated with the.
What's the what's the refined product demand coming out of the back end of the refinery so we're being the.
Basically in our in the guidance that we gave were.
We're basically kind of assuming that.
The volumetric Lee it's.
Basically flat so we're currently moving but as we get to the back half of the year it would be of net contributor.
Whereas on the front half of the year, it's not really flowing through the cash through the financial results because of the.
Bank of the dollars that pay of working off.
That's very helpful.
Lastly on the Marine segment, so clearly that's alright.
Some volatility quarter on quarter on Earth.
And.
I understand that is partly on.
At the lower refinery utilization on the inland side.
The American Phoenix.
Stepped down last quarter and then it stepped up again recently, so as we look through 2021 on.
What is like a ratable.
On base from here.
Well that's a good question.
No the American Phoenix win.
Off of contracts, so that's a big.
Such a large portion of it it's a lot of the movement from one quarter to another is directly a result of that I can't get into a lot of specifics but.
Yeah.
Went off of.
It's.
Good five year contract.
At the end of September.
And this is the.
The anecdote of the COVID-19, everybody has one but we were actually in March of last year, almost a year ago, we were very close to finalizing the deal.
The two or three year deal for the American Phoenix at the numbers, which were really very close within the.
The call it 5% or 10% of that contract.
And we were going to finish it up when the Guy got back from spring break and we all know what happened when people went on spring break last year. So.
Nonetheless, it went off of the five year contract, which was a very attractive contract and the end of September.
We went to one customer for the fourth quarter and the first quarter.
The fourth quarter was not at a very attractive rate in the first quarter was even worse.
It's gone now gone under with an investment grade customer of new 12 month contract, which will start around April one which will be generally consistent with what it got into the fourth quarter.
But up from the bottom off of the first quarter.
And then the other as you said has pointed out as we've tried to dimension that in large part it's going to be a function of how refinery runs.
Runs in pad, two and pad three of the Midwest and Gulf Coast.
Recover.
I just got a note from.
Our.
Head of Marine operations. This morning at the beginning in the.
Brown utilization by the end of the day, it's going to be the highest it's been in the last <unk>.
Six months, so things are starting to improve.
But that's really what's going to drive things back, but we anticipate as we continue to go through.
<unk> 2021 that the.
The economy continues to recover as the demand for Iran.
<unk> products.
The returns somewhat maybe not all the way the normal but clearly if we get off of that we've seen the refinery utilization kind of from the depths go in the low <unk> to the kind of low to mid 80% range in the.
Unfortunately.
The reality is is that the Jones Act fleet, whether or not it starts at the EMR Classing comes true.
Ocean going.
Barges blue water barges and then into the inland fleet the.
The Jones Act fleet is really designed for refineries.
In the U S.
To run in the mid 90% range and when they are running in the mid 80% range or as an excess supply of Jones Act tonnage.
So the main barometer to watch for that as the recovery is.
As refinery utilization.
Thank you very much Steve.
Thank you.
Thank you as a reminder of that star one to be placed in the question queue.
Our next question today is coming from Kyle May from capital One Securities. Your line is now of life.
Hey, good morning, everybody.
Grant as you pointed out Genesis should generate $80 million to $110 million of free cash flow. This year on a lot of that will go to repay debt. Just wondering if there's any other levers you can pull to further accelerate improving the balance sheet.
Well I mean, I think that.
Clearly the free cash flow generation as the number one priority on the number one thing that.
We are thinking.
Thinking about.
We continue to evaluate.
Evaluate.
Potential asset sales as we've.
Demonstrated in 2020, and some of the effects of which will be realized in 'twenty.
<unk> 2021 and are included in that guidance that we exited a non core business, which was the Sidoti pipeline business under a structured agreement with.
The <unk> Barry.
So I mean, I think as we progress through the through the year.
Hey, we're very comfortable where we are by being a net net cash flow.
The generator.
And so we would continue to evaluate.
The things on the cost side of potential asset sales to the extent that that makes sense.
The.
Accretive and the.
Both the.
Leverage as well as everybody else on the capital structure.
Got it thanks for that and as my follow up.
You also mentioned that Genesis is capable of generating in the range of $700 million to $800 million of annual EBITDA and I think one of the caveat you pointed out is returning.
Returning to the soda ash pricing that we saw in 2018 in 2019.
Given it sounds like soda ash pricing may step down in 2021 versus last year. Just wondering if you could talk about when you think we could see these these pricing levels from 2018 2019 again of what it's going to take to get there.
Well we've.
We've seen.
The cyclicality, if you will in the in prices and therefore actual results.
In the past in this business.
We haven't seen any of the volatility associated with the this event, which was the pure and simple the absolute demand destruction.
As the world the dealt with.
COVID-19 so.
We've seen a rapid rebounds of things are very tight or can be very tight and as I pointed out the important dynamic to remember is.
The market works.
Natural producers are all sold out because they are the lowest cost manufacturers of this and as the market demands where regardless of where it is.
Whether it's in the U S or in the and.
Japan, or Indonesia, or wherever is the market demands and incremental time, it's going to be supplied by.
Synthetic production from somewhere which is twice as expensive. So that's the background for prices.
To increase and so as we as we continue the economic recovery as we get some of the start realizing some of the tailwind from the green initiatives that we discussed earlier in the remarks as well as on the <unk>.
Some of the questions that.
That can that can result in the market tightening very quickly very rapidly and providing the background for for prices to rise.
We don't.
I don't have a crystal ball, we don't have a crystal ball other than.
Again, I can I can just say that.
The same or as we progress even through 2021 and admittedly we're a whopping.
Six or seven weeks into the year book debt.
For the.
The supply demand balance appears to be tightening even as we speak which is good for.
Cursor too.
Having prices rest of whether or not we get there in 2022 I'm not going to go out on the Lam or it takes two of 23 of 24, but theres no doubt in our mind the.
The supply demand fundamentals of the cost advantage that.
We have and the fact that all of the natural producers are already sold out. There is no question that prices are going to rise and they can rise rapidly and.
We intend to take advantage of that.
Got it thank you for that that's helpful.
Yes.
Thank you we reached the end of our question and answer session I'd like to turn the floor back over to management for any further of closing comments.
I'll always thank everyone for participating in.
Shout out to the citizens of Texas, and it's been a rough week on a lot of people a lot of us for had been more fortunate on others, but.
Texas will get through it and.
We will talk to everyone in another 90 days, if not sooner. So thanks very much for participating.
Thank you that does conclude today's teleconference and webcast you may disconnect. Your line at this time and have a wonderful day, we thank you for your patience today.
Yeah.