Q3 2022 Westlake Chemical Partners LP Earnings Call
The conference will begin shortly.
Raise your hand during Q&A you can dial.
Good afternoon. Thank you for standing by and welcome to the Westlake Chemical partners third quarter 2022 earnings conference call. During the presentation, all participants will be in a listen only mode. After the Speakers' remarks, you will be in.
<unk> to participate in a question and answer session. As a reminder, this conference is being recorded today November three 2022.
I'd like now to turn over the call to today's host Jeff Holy.
Westlake Chemical partners, Vice President and Treasurer, Sir you may begin.
Thank you good afternoon, everyone and welcome to the Westlake Chemical partners third quarter 2022 conference call I'm joined today by Albert Chao, our President and CEO .
Steve Bender, our executive Vice President and CFO and other members of our management team.
During this call we refer to ourselves as Westlake partners or the partnership.
References to Westlake referred to our parent company Westlake Corporation and references to Opco refer to Westlake Chemical Opco LP, a subsidiary of Westlake and the partnership which owns certain olefins assets.
Additionally, when we refer to distributable cash flow.
We are referring to Westlake chemical partners' MLP distributable cash flow.
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.
And information currently available to management.
These forward looking statements suggest predictions or expectations, and thus are subject to risks or uncertainties.
We encourage you to learn more about the factors that could lead our actual results to differ by reviewing the cautionary statements in our regulatory filings, which are also available on our Investor Relations website.
This morning, Westlake partners issued a press release with details of our third quarter 2022 financial and operating results. This document is available in the press release section of our webpage at W. L. K partners Dot Com a.
A replay of today's call will be available beginning two hours after the conclusion of this call.
The replay.
Can be accessed via the partnership's website.
Please note that information reported on this call speaks only as of today November three 2022.
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 being broadcast live through an internet webcast system that can be accessed on our webpage at W. L. K partners Dot Com now I would like to turn the call over to Albert Chao Albert.
Thank you Jeff.
Good afternoon, everyone.
And thank you for joining us today.
To discuss our third quarter 2022 results.
In this morning's press release.
We reported Westlake Partners' third quarter 2022, net income of $15 million or <unk> 42 per unit.
Consolidated net income, including Opco or $78 million for the third quarter of 2022.
Westlake Partners' earnings stability is consistently demonstrated.
Through our fixed margin ethylene sales agreement.
Which insulate us from market volatility and other production risks.
This contractual arrangement.
Continue to benefit us in the third quarter as we generated earnings and cash flow in line with our expectations.
Despite challenging industry conditions.
The associated high degree of stability in our cash flow.
When paired with.
The ability of our business.
Enabled us to deliver the long history of reliable distributions and coverage.
This quarter's distribution.
30, <unk> consecutive quarterly distribution since our IPO.
Which has grown by 71% since the IPO and has never being reduced or cut.
I would now like to turn our call over to Steve.
More detail on our financial and operating results for the quarter Steve.
Thank you Robert and good afternoon, everyone.
In this morning's press release, we reported Westlake Partners' third quarter 2022, net income of $15 million or <unk> 42 per unit.
Net income, including up goes earnings was $78 million on net sales of $415 million.
The partnership had distributable cash flow for the quarter of $17 million or <unk> 48 per unit.
<unk> to the third quarter of 2021 net income for Westlake partners increased by $2 million as <unk> benefited from higher production. Following the turnaround of Petro two in the second quarter of 2021 as well as a borrower deficiency of approximately $14 million in the third quarter of 2022.
Resulting from lower planned offtake by Westlake of ethylene.
Distributable cash flow of $17 million for the third quarter of 2022 increased $4 million compared to the third quarter of 2021 distributable cash flow of $13 million.
<unk> from a higher earnings at Opco.
Compared to the second quarter of 2022, our net income for the third quarter decreased by $2 million due.
Due to lower third party revenues as we optimize the benefits our third party sales and margins by electing to complete these sales in a period of higher margins in the first and second quarters of 2022.
Distributable cash flow decreased $3 million compared to the second quarter of 2022 as a result of the timing of these third party sales and the recognition of the buyer deficiency fee.
Turning our attention to the balance sheet and cash flows at the end of the third quarter, we had a consolidated cash balance and cash investments with Westlake to our investment management agreement totaling $155 million.
Consolidated debt at the end of the quarter was $400 million of which $377 million was at the partnership and the remaining $23 million.
No.
As I mentioned in last quarter's call in July of this year Opco in the partnership extended their revolving lines of credit Westlake per new five year term.
This is another example of Westway demonstrating support for the partnership by providing ample liquidity for future capital needs.
We maintained our strong leverage metrics with a consolidated leverage ratio below one times.
In the third quarter, Opco spent $13 million on capital expenditures.
On Monday, we announced a quarterly distribution of $47 14 per unit with respect to the third quarter of 2022.
Our IPO in 2014.
Since the IPO in 2014, the partnership has made 33 consecutive quarterly distributions to our unit holders and we have grown distributions, 71% since the partnership's original minimum quarterly distribution of $27.05 per unit.
Our distributable cash flow coverage for the 12 months ending September was 1.07 times, which is slightly below our one one target as expected due to the timing of the planned turnaround of Petro two in the at the end of last year.
Partnerships third quarter distribution will be paid on November 28, 2022 to unit holders of record November 10 2022.
We continue to evaluate our distribution policy and outlook, while remaining mindful of the more volatile equity market conditions and looking to drive the value of the partnership provides us two provides to our unit holders.
Since our IPO in July of 2014, we have maintained a cumulative distribution coverage ratio in excess of one one times and with the partners stability in cash flows we are able to sustain our current distributions without the need to X to access capital markets.
As a reminder for modeling purposes, we have no turnarounds planned for the fourth quarter of 2022, and our next planned maintenance outage is at our Calvert City ethylene facility in Calvert City, Kentucky, which is currently planned for the first half of 2023.
Now I'd like to turn the call back over to Albert to make some closing comments Albert.
Thank you Steve.
Despite the currently challenging macro.
Economic backdrop.
The partnerships financial performance for the year.
<unk> <unk> with a stable fee based cash flows.
Is designed to produce.
Looking into 'twenty 2023.
While the global economy faces headwinds, we remain optimistic about the fundamentals of our business.
As our insulative ethylene sales agreement provides a predictable fee based cash flow structure from a contract with Westlake for 95% of op cost production.
Which delivered stable and consistent cash flows.
And insulate us from potential volatility in the market.
We're maintaining a strong balance sheet with conservative financial leverage metrics.
Hence we continue to navigate market conditions.
We'll evaluate opportunities via our four levers of growth in the future, including increases our ownership interest of Opco.
Acquisitions of other qualified income streams.
Organic growth opportunities such extensions of our current ethylene facilities.
And negotiations of a higher fixed margin in our.
Our ethylene sales agreement with Westlake.
We remained focus on our ability to continue to provide long term value and distributions to our unit holders.
As always we will continue to focus on safe operations.
Along with being good stewards.
Diamond, where we work and live.
Thank you very much for listening to our third quarter earnings call.
Now I'll turn the call back over to Jeff.
Albert before.
Before we begin taking questions I would like to remind you that a replay of this teleconference will be available two hours. After the call has ended we.
We will provide that number at the end of the call Amber we will now take questions.
Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press Star One line on your phone and wait for your name to be announced please standby, while we compile our roster.
Okay.
Our first question is from Michael Rehaut at Barclays.
Michael Your line is now open.
Great. Thanks, Good morning, guys.
Well first question.
High level, obviously, the world pretty volatile interest rates have moved up a lot could you maybe just flesh out a bit more just kind of how youre thinking about the distribution policy or thoughts around maybe potentially ultimately kind of growing distribution in light of everything else.
Yes, Mike it's Dave good good question.
As you have heard Albert outlined we've got really four levers that allow us to grow.
Kris and the ownership of Opco acquisition of other qualified income streams organic growth opportunities and negotiating that higher margin.
You can see the market and you noted the market is very volatile capital inflows into any equity markets have been more challenged and.
And we've seen through our third party sales that margins have been challenged in some of the ethylene markets, which was why we move those to occur in the first and the second quarter. This year to take advantage of those higher margins. So we certainly stand ready to look for opportunities to grow the distribution and more and conditions that are more conducive to.
Giving us the value of that that would bring.
So you can see from those four levers we stand ready. It's just market conditions I think that has been the challenge that we see in the current situations, but we certainly stand ready to make that make that happen when conditions proved to be more favorable.
Fair enough that makes sense.
Second I think this quarter had about a $14 million buyer deficiency. I think maybe you can just remind us or refresh us kind of how the buyer deficiency mechanics work between Westlake partners and what's the corporation.
Certainly and so there is a.
Obligation for Westlake to acquire 95% of the planned production in any given year and at any point in time should there be an unplanned outage or any adjustment to production.
Buyer deficiency, it makes up for any shortfall of production and so that buyer proficient buyer deficiency. Therefore provides that stable income stream to the partnership whether production was made as a result of an unplanned outage or any changes in production.
So that mechanic therefore works.
From a revenue recognition perspective, and then ultimately if they are unable to make up that production. During the course of any given year. There are paid that shortfall that buyer deficiency. Therefore.
Beginning of the new year.
Got it makes sense. Thank you.
Youre welcome.
At this time the Q&A session has now and then I'll turn the call 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 fourth quarter and full year 2022 results.
Thank you for participating in today's Westlake chemical partners.
Earnings Conference call.
This conference call for replay beginning two hours after the call has ended and.
And may be accessed until 11 59 PM Eastern time on Thursday November 10 2022.
The replay can be accessed via the partnership website, Thank you and goodbye.
The conference will begin shortly.
As Johan during Q&A, you can dial star one one.
[music].
Hmm.
Okay.
Yes.
[music].
Yes.
Okay.
[music].
Yes.
Yes.
Okay.
[music].
Okay.
Yes.
Mhm.
Okay.
[music].
Yes.
[music].
Yes.
Sure.
[music].
Okay.
[music].
Okay.
[music].
Sure.
Yes.
[music].
Okay.
[music].
Yeah.
Got it.
[music].
Thank you.
[music].
Okay.
Yes.
Yes.
[music].
Okay.
Okay.
Yes.
Okay.
[music].
Yes.
[music].
Yes.
Yes.
Okay.
[music].
Thank you.
Yes.
[music].
Okay.
Sure.
[music].
Okay.
[music].
Yes.
[music].
Okay.
Yes.
[music].
Okay.
Yes.
Okay.
Okay.
Yes.
Okay.
Thank you.
[music].
Okay.
Okay.
[music].
Got it.
Okay.
[music].
Okay.
Okay.
Okay.
Okay.
Okay.
Yes.
[music].
Okay.
[music].
Okay.
[music].
Sure.
Yes.
Okay.
Thanks.
Okay.
Yes.
Yes.
Yes.
Okay.
Yes.
Okay.
Okay.
Okay.
Yes.
Thanks.
Yes.
Yes.
Okay.
Okay.
Thank you.
Okay.
Yes.
Yes.
Okay.
Yes.
Yes.
Yes.
Okay.
Sure.
Yes.
Yes.
Okay.
Yes.
Okay.
Okay.
Thank you.
Okay.
Okay.
Yes.
Yes.
Okay.
Okay.
Okay.
[music].
Thank you.
[music].
Yes.
Okay.
Thank you.
Thanks.
Yes.
Okay.
Okay.
Yes.
Good afternoon. Thank you for standing by welcome to the Westlake Chemical partners third quarter 2022 earnings conference call. During the presentation, all participants will be in a listen only mode.
After the Speakers' remarks, you will be invited to participate in a question and answer session. As a reminder, this conference is being recorded today November three 2022.
I would like now to turn over the call to today's host Jeff.
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 third quarter 2022 conference call.
Joining today by Albert Chao, our president and CEO .
Steve Bender, our executive Vice President and CFO and other members of our management team.
During this call we refer to ourselves as Westlake partners or the partnership.
References to Westlake referred to our parent company Westlake Corporation and references to Opco referred to Westlake Chemical Opco LP.
The area of Westlake and the partnership which owns certain olefins assets.
Additionally, when we refer to distributable cash flow.
We are referring to Westlake chemical partners' MLP distributable cash flow.
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 and information currently available to management.
These forward looking statements suggest predictions or expectations, and thus are subject to risks or uncertainties.
We encourage you to learn more about the factors that could lead our actual results to differ by reviewing the cautionary statements in our regulatory filings, which are also available on our Investor Relations website.
This morning, Westlake partners issued a press release with details of our third quarter 2022 financial and operating results. This document is available in the press release section of our webpage at W. LK partners Dot com.
A replay of today's call will be available beginning two hours. After the conclusion of this call the.
A replay.
Can be accessed via the partnership's website.
Please note that information reported on this call speaks only as of today November three 2022.
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 being broadcast live through an internet webcast system that can be accessed on our webpage at W. L. K partners Dot Com now I would like to turn the call over to Albert Chao Albert Thank.
Thank you Jeff.
Good afternoon, everyone and thank you for joining us.
Our third quarter 2022 results.
In this morning's press release.
We reported Westlake Partners' third quarter 2022, net income of $15 million.
42 cents per unit.
Consolidated net income, including optical or $78 million for the third quarter of 2022.
Westlake partners', earning stability is consistently demonstrated.
Through our fixed margin ethylene sales agreement.
Which insulate us from market volatility and other production risks.
This contractual arrangement.
Continue to benefit us in the third quarter as we generated earnings and cash flow in line with our expectations.
Despite challenging industry conditions.
The associated high degree of stability in our cash flow.
Paired with predicted the predictability of our business.
This enabled us to deliver the long history of reliable distributions and coverage.
This quarter's distribution.
30, <unk> consecutive quarterly distribution since our IPO.
Which has grown by 71%.
Since the IPO.
<unk> being reduced or cut.
I would now like to turn our call over to Steve to provide more detail on our financial and operating results for the quarter Steve.
Thank you Albert and good afternoon, everyone.
In this morning's press release, we reported Westlake Partners' third quarter 2022, net income of $15 million or <unk> 42 per unit.
Net income, including up goes earnings was $78 million on net sales of $415 million.
The partnership had distributable cash flow for the quarter of $17 million or <unk> 48 per unit.
Compared to the third quarter of 2021 net income for Westlake partners increased by $2 million as <unk> benefited from higher production. Following the turnaround of Petro two in the second quarter of 2021 as well as they borrowed deficiency of approximately $14 million in the third quarter of 2022.
<unk>, resulting from lower planned offtake by Westlake of ethylene.
Pivotal cash flow of $17 million for the third quarter of 2022 increased $4 million compared to the third quarter of 2021 distributable cash flow of $13 million, resulting from the higher earnings at Opco.
Compared to the second quarter of 2022, our net income for the third quarter decreased by $2 million due.
Due to lower third party revenues as we optimize the benefits of our third party sales and margins by electing to complete these sales in a period of higher margins in the first and second quarters of 2022.
Distributable cash flow decreased $3 million compared to the second quarter of 2022 as a result of the timing of these third party sales and the recognition of the buyer a deficiency fee.
Turning our attention to the balance sheet and cash flows at the end of the third quarter, we had a consolidated cash balance and cash investments with Westlake to our investment management agreement totaling $155 million.
Consolidated debt at the end of the quarter was $400 million of which $377 million was at the partnership and the remaining $23 million.
No.
As I mentioned in last quarter's call in July of this year Opco in the partnership extended their revolving lines of credit Westlake per new five year term. This is another example of Westlake demonstrating support for the partnership by providing ample liquidity for future capital needs.
We maintained our strong leverage metrics with a consolidated leverage ratio below one times.
In the third quarter, Opco spent $13 million on capital expenditures.
On Monday, we announced a quarterly distribution of $47 14 per unit with respect to the third quarter of 2022.
Our IPO in 2014.
Since the IPO in 2014, the partnership has made 33 consecutive of quarterly distributions to our unit holders and we have grown distributions, 71% since the partnership's original minimum quarterly distribution of $27.05 per unit.
Distributable cash flow coverage for the 12 months ending September was 1.07 times, which is slightly below our one one target as expected due to the timing of the planned turnaround of Petro two Andy at the end of last year.
The partnerships third quarter distribution will be paid on November 28, 2022 to unit holders of record November 10 2022.
We continue to evaluate our distribution policy and outlook, while remaining mindful of the more volatile equity market conditions and looking to drive the value of the partnership provides us to provide to our unit holders.
Since our IPO in July of 2014, we have maintained a cumulative distribution coverage ratio in excess of one one times and with a partner stability in cash flows we are able to sustain our current distributions without the need to access capital markets.
As a reminder for modeling purposes, we have no turnarounds planned for the fourth quarter of 2022, and our next planned maintenance outage is at our Calvert City ethylene facility in Calvert City, Kentucky, which is currently planned for the first half of 2023.
I'd like to turn the call back over to Albert to make some closing comments Albert.
Thank you Steve.
Despite the currently challenging macro.
Economic backdrop.
The partnerships financial performance for the year this called <unk> with a stable fee based cash flows. It is designed to produce.
Looking into 'twenty 2023.
While the global economy faces headwinds.
Remain optimistic about the fundamentals of our business.
Our insulative ethylene sales agreement provides a predictable fee based cash flow structure.
Our contract with Westlake for 95% of op cost production.
Which delivered stable and consistent cash flows.
And insulate us from potential volatility in the market.
We maintain a strong balance sheet with call services financial and leverage metrics.
Hence we continue to navigate market conditions.
We'll evaluate opportunities via our four levers of growth in the future, including increases our ownership interest of Opco.
Acquisitions of other qualified income streams.
Organic growth opportunities such expansions of our current ethylene facilities.
And negotiations of a higher fixed margin.
Ethylene sales agreement with Westlake.
We remained focus on our ability to continue to provide long term value and distributions to our unit holders.
As always we will continue to focus on safe operations.
Along with being good stewards of it.
Diamond, where we work and live.
Thank you very much for listening to our third quarter earnings call now I'll turn the call back over to Jeff.
Thank you Albert.
Before we begin taking questions I would like to remind you that a replay of this teleconference will be available two hours. After the call has ended we.
We will provide that number at the end of the call Amber we will now take questions.
Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press Star One line on your phone and wait for your name to be announced.
Please standby, while we compile our roster.
Okay.
Our first question is from Michael Rehaut at Barclays.
Michael Your line is now open.
Great. Thanks, Good morning, guys.
Well first question.
High level, obviously, the world pretty volatile interest rates have moved up a lot.
Maybe just flesh that out a bit more just kind of how youre thinking about the distribution policy or thoughts around maybe potentially ultimately kind of growing distribution in light of everything else.
Yes, Mike It's Dave Good. Good question as you have heard Albert outlined we've got really four levers that allow us to grow.
And the ownership of Opco acquisition of other qualified income streams organic growth opportunities negotiating that higher margin.
As you can see the market and you noted the market is very volatile capital inflows into any equity markets have been more challenged.
And we've seen through our third party sales that margins have been challenged in some of the ethylene markets, which was why we move those to occur in the first and second quarter. This year to take advantage of those higher margins. So we certainly stand ready to look for opportunities to grow the distribution and more and conditions that are more conducive to.
Giving us the value of that that would bring.
So you can see from those four levers we stand ready. It's just market conditions I think that has been the challenge that we see in the current situations, but we certainly stand ready to make that make that happen when conditions proved to be more favorable.
Fair enough that makes sense.
Second I think this quarter had about a $14 million Bard efficiency I think maybe you can just remind us or refresh us kind of how the buyer deficiency mechanics work between Westlake partners.
Operations.
Certainly and so there is a.
Obligation for Westlake to acquire 95% of the planned production in any given year and at any point in time should there be an unplanned outage or any of the adjustment to production that buyer deficiency makes up for any shortfall of production.
So that buyer proficient buyer deficiency. Therefore provides the stable income stream to the partnership whether production was made as a result of an unplanned outage or any changes in production.
And so that mechanic therefore works.
From a revenue recognition perspective, and then ultimately if they are unable to make up that production. During the course of any given year. There are paid that shortfall that buyer deficiency. Therefore.
Beginning of the new year.
Got it makes sense. Thank you.
Youre welcome.
At this time the Q&A session has now ended.
Turn the call 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 fourth quarter and full year 2022 results.
Thank you for participating in today's Westlake chemical partners.
Earnings Conference call as a reminder, this conference call for replay beginning two hours after the call has ended and.
And may be accessed until 11 59 PM Eastern time on Thursday November 10 2022.
The replay can be accessed via the partnership website, Thank you and goodbye.