Q4 2023 Westlake Chemical Partners LP Earnings Call
Operator: Good afternoon. Thank you for standing by. Welcome to the Westlake Chemical Partners fourth quarter and full year 2023 earnings conference call. During the presentation, all participants will be in a listen-only mode.
Good afternoon.
Thank you for standing by.
Welcome to the Westlake Chemical partners fourth quarter and full year 2023 earnings conference call.
During the presentation, all participants will be in a listen only mode.
Operator: After the speaker's presentation, the audience will be invited to participate, and a question and answer session will be held at the end of the webinar. As a reminder, this conference is being recorded today, February 29th, 2021. 24.
After the Speakers' threat detection.
You will be invited to participate in a question and answer session.
A reminder, this conference is being recorded today February 20th.
2024.
Operator: I would now like to turn the call over to today's host. Jeff Holy, Vice President and Treasurer, sir. You may begin. Thank you, Daniel.
I would now like to turn the call over to today's host.
Jeff Holy Westlake Chemical Partners', Vice President and Treasurer, Sir you may begin.
Jeff Holy: Good afternoon, everyone, and welcome to the Westlake Chemical Partners fourth quarter and full year 2023 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 Corporation refer to our parent company, Westlake Industries. And references to OPCO refer to Westlake Chemical OPCO LP, a subsidiary of Westlake and a 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. 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 and information currently available to management. These forward-looking statements suggest predictions or expectations and thus are subject to risks or uncertainties.
Thank you Daniel good afternoon, everyone and welcome to the Westlake Chemical partners fourth quarter and full year 2023 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 L. P. A subsidiary of Westlake and the partnership which owns certain olefins assets. Additionally.
Additionally, when we refer to distributable cash flow, we are referring to Westlake chemical partners' MLP distributable cash flow.
Finishing 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.
That is based on management's beliefs as well as assumptions 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.
Jeff Holy: 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 fourth quarter and full year 2023 financial and operating results. This document is available in the press release section of our website at wlkpartners.com. 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 applies only as of today, February 20, 2024. And therefore, you are advised that time-sensitive information may no longer be accurate as of the time of any replay.
We encourage you to learn more about the factors that could beat 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 fourth quarter and full year 2023 financial and operating results. This document is available in the press release section of our webpage at W. L K partners Dot com.
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 February 22024, and therefore, you're advised that time sensitive information may no longer be accurate as of the time of any replay.
Jeff Holy: I would finally advise you that this teleconference call is being broadcast live through an internet webcast system that can be accessed on our webpage at wlkpartners.com. Now, I would like to turn the call over to Albert Chao.
I would finally advise you that this teleconference 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.
Albert Yuan Chao: Thank you, Jeff. Good afternoon, everyone. And thank you for joining us to discuss our fourth quarter and full year 2023 results. In this morning's press release, we reported Westlake Partners' full year 2023 net income of $54 million, or $1.54 per unit. Constructed net income, including OPCO, was $335 million for the full year 2023.
Thank you Chad good don't everyone and.
And thank you for joining us to discuss our fourth quarter.
And full year 2023 results.
In this morning's press release, we reported Westlake partners full year 2023, net income of $34 million or $1.34 per unit.
Consolidated net income including optical.
$335 million for the full year 2023.
Albert Yuan Chao: Westlake Partners Financial Results continue to demonstrate the stability generated from our fixed-margin ethylene sales agreement for 95% of annual plant production each year, insulating us from market volatility and other production risk. This structure, combined with our investment grade sponsor, Westlake, produces predictable earnings and stable cash flows. This was evident despite weak macroeconomic conditions in 2023, particularly for manufacturing and industrial demand, as we delivered solid results and sustained distributions to our unit holders. The stable fee-based cash flow generated by our fixed margin ethylene sales contract with Westlake forms the foundation for us to deliver long-term value to our unit holders. This quarter's distribution is the 38th consecutive quarterly distribution since our IPO in July of 2014 without any reductions. I would now like to turn our call over to Steve to provide more detail on the financial and operating results for the quarter. Steve. Thank you, Albert. And good afternoon, everyone.
Westlake Partners' financial results continues to demonstrate the stability generated from our fixed margin ethylene sales agreement for.
95% of annual planned production each year.
Insulating us from market volatility and other production risks.
This structure combined with our investment grade sponsor Westlake.
Produces predictable earnings and stable cash flows.
This was evident despite weak macroeconomic conditions in 2023.
Particularly for manufacturing and industrial demand.
We delivered solid results in sustained distributions to our unit holders.
The stable fee based cash flow.
January but our fixed margin ethylene sales contract with Westlake.
Forms the foundation for us to deliver long term value to our unit holders.
This quarters distribution is it 38th consecutive quarterly distribution.
Our IPO in July of 2014 without any reductions.
I would now like to turn our call, but its Steve right.
Provide more detail on our financial and operating results for the quarter Steve. Thank.
Thank you Robert and good afternoon, everyone. In this morning's press release, we reported Westlake Partners' fourth quarter 2023, net income of $14 million or <unk> 41 per unit.
Mark Steven Bender: In this morning's press release, we reported Westlake Partners' fourth quarter 2023 net income of $14 million, or 41 cents per unit. Consolidated net income, including OPCO's earnings, was $87 million on consolidated net sales of $297 million. The partnership had distributable cash flow for the quarter of $16,000,000, or $0.47 per unit. Fourth quarter 2023 net income for Westlake Partners of $14 million decreased by $3 million compared to fourth quarter 2022 partnership net income of $17 million. The lower net income was primarily driven by $2 million of higher interest expense.
Consolidated net income, including <unk> earnings was $87 million on consolidated net sales of $297 million.
The partnership had distributable cash flow for the quarter of 16 million or <unk> 47 per unit.
Fourth quarter 2023, net income for Westlake partners of $14 million decreased by $3 million compared to fourth quarter 2022 partnership net income of $17 million.
The lower net income was primarily driven by $2 million of higher interest expense.
Mark Steven Bender: The distributable cash flow of $16 million for the fourth quarter of 2023 decreased by $4 million compared to fourth quarter 2022 distributable cash flow of $20 million due primarily to higher maintenance capital spending and higher interest expense. For the full year of 2023, net income of $54 million, or $1.54 per unit, decreased by $10 million compared to full year 2022, net income of $64 million. The decrease in net income attributable to the partnership was due to a lower sales as a result of the maintenance turnaround at OPCO's Calvert City, Kentucky ethylene unit in May of 2023 and higher interest expense, a full year of 2000 full year of 2023 MLP distributable cash flow of 63 million dollars decreased by 13 million compared to MLP distributable cash flow of 76 million for the full year of 2022 due to a combination of higher maintenance capital spending in part as a result of the Calvert City turnaround and higher interest expense.
They just distribute Mr distributable cash flow of $16 million for the fourth quarter of 2023 decreased by 4 million.
Third to fourth quarter 2020 to distributable cash flow of $20 million due primarily to higher maintenance capital spending and higher interest expense for.
For the full year of 2023, net income of $54 million or $1.54 per unit decreased by $10 million compared to full year 2022, net income of $64 million.
The decrease in net income attributable to the partnership was due to lower sales as a result of the maintenance turnaround at op codes Calvert City, Kentucky ethylene unit in May of 2023 and higher interest expense.
A full year of 2000 and full year of 2023, MLP distributable cash flow of $63 million decreased by $13 million compared to MLP distributable cash flow of $76 million for the full year of 2022 due to a combination of higher maintenance capital spending in part.
As a result of the Calvert city turnaround and higher interest expense our distribution coverage for the 2023 year was <unk> 94 times.
Mark Steven Bender: Our distribution coverage for the 2023 year was 0.94 times. Turning our attention to the balance sheet and cash flows, at the end of the fourth quarter, we had a consolidated cash balance and cash investments with Westlake through our investment management agreement totaling $153 million. Long-term debt at the end of the quarter was $400 million, of which $377 million was at the partnership, and the remaining $23 million was at OPCO. In 2023, OPCO spent $47 million on capital expenditures.
Turning our attention to the balance sheet and cash flows at the end of the fourth quarter, we had consolidated cash balance and cash investments with Westlake through our investment management agreement totaling $153 million.
Long term debt at the end of the quarter was $400 million of which $377 million was at the partnership and the remaining 23 was that opco.
In 2023, Opco spent $47 million on capital expenditures.
Mark Steven Bender: We maintained our strong leverage metrics with a consolidated ratio of approximately one times. On January 22, 2024, we announced a quarterly distribution of $0.4714 per unit with respect to the fourth quarter of 2023. Since its IPO in 2014, the partnership has made 38 consecutive quarterly distributions to our unit holders, and we have grown distributions 71 percent since the partnership's original minimum quarterly distribution of 27.5 cents per unit. The partnership's fourth quarter distribution will be paid on February 20th to unit holders of record on February 2, 2024. Partnerships' predictable fee-based cash flow continues to prove beneficial in today's economic environment and is differentiated by the consistency of our earnings and cash flows.
We maintained our strong leverage metrics with a consolidated ratio of approximately one times.
On January 22024, we announced a quarterly distribution of 40 714 cents per unit with respect to the fourth quarter of 2023.
Since our IPO in 2014, the partnership has made 38 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.
The partnership's fourth quarter distribution will be paid on February 20th to unit holders of record February two 2024.
The partnership's predictable fee based cash flow continues to prove beneficial in today's economic environment and is differentiated by the consistency of our earnings and cash flows.
Mark Steven Bender: Looking back, since our IPO in July of 2014, we have maintained a cumulative distribution coverage ratio of nearly 1.1 times, and with the partnership's stability in cash flows, we were able to sustain our current distribution without the need to access the capital market. For modeling purposes, we have one planned turnaround in 2024 at our Petro One ethylene unit in Lake Charles, Louisiana. This turnaround is scheduled to begin in the second half of 2024 and is projected to last approximately 60 days. In prior years, where we have had a planned turnaround, such as this one, the distribution coverage ratio is impacted for the period, then recovering. And for this turnaround, we would expect a similar result.
Looking back since our IPO in July of 2014, we have maintained a cumulative distribution coverage ratio of nearly $1. One times in the partnership's stability in cash flows we were able to sustain our current distributions without the need to access the capital markets.
For modeling purposes, we have one planned turnaround in 2024 at our Petro one ethylene unit in Lake Charles Louisiana.
This turnaround is scheduled to begin in the second half of 2024 and is projected to last approximately 60 days.
In prior years, where we have had a planned turnaround such as this one the distribution coverage ratios impacted for the period and then recovering.
And for this turnaround and we would expect a similar result.
Albert Yuan Chao: The cost of this turnaround has been included in the amount we charge Westlake and has been fully reserved and funded as we commence the turnaround. And I'd like to turn the call back over to Albert to make some closing comments.
The cost of this turnaround has been included in the amount we charge Westlake and has been fully reserved and funded as we commenced the turnaround.
Now I'd like to turn the call back over to Albert to make some closing comments Albert.
Albert Yuan Chao: Thank you, Steve. We are pleased with the partnership's financial and operational performance through the fourth quarter and the year as a whole. The stability of our business model and associated cash flows demonstrate the benefit that our Etherlink sales agreement and its protective provisions provide a partnership with predictable long-term earnings and cash flows. However, increasing interest rates in 2023 as a result of the Federal Reserve's tightening of its monetary policy negatively impacted man and selling prices for ethylene. The Nature of Our Ethylene Seal Screaming With Westlake provides for a predictable fee-based cash flow structure for 95% of Opco's production. As a result, Opco's sales volumes, earnings, and cash flows were relatively insulated from the overall market weakness in 2023.
Thank you Steve.
We're pleased with the partnership's financial and operational performance through the fourth quarter and the year as a whole.
The stability of our business model and associated cash flows.
Inventory at the benefit that our ethylene sales agreement and its protective provisions provide a partnership with predictable long term earnings and cash flows.
While increasing interest rates in 2023 as a result of the federal reserve tightening of monetary policy.
Negatively impacting men and setting prices for ethylene.
The nature of our ethylene sales agreement with Westlake provide.
<unk> provides fully predictable fee based cash flow structure for 95% of op coast production.
As a result of coal sales volumes earnings and cash flows.
Relatively insulated from the overall market weakness in 2023.
Jeff Holy: According to our capital structure, we maintain a strong balance sheet with conservative financial and leveraged metrics, and as we continue to navigate market conditions, we will evaluate opportunities via our four levers of growth in the future, including increases in our ownership interest in gold, acquisitions of other qualified income streams, organic growth opportunities such as expansions of our current ethylene facilities, a negotiation of a higher fixed margin in our ethylene sales agreement with Westlake, and remain focused on our As always, we'll continue to focus on safe operations, along with being good stewards of the environment where we work and live, as part of our broader sustainability efforts. Thank you very much for listening to our fourth quarter and full year 2023 earnings call. Now, I'll turn the call back over to Jeff. Thank you, Albert.
Turning to our capital structure, we maintain a strong balance sheet with conservative financial and leverage metrics.
As we continue to navigate market conditions.
We'll evaluate opportunities.
There are four levers of growth in the future, including increases our ownership interest of Opco acquisition shelf acquisitions of other qualified income streams.
Organic growth opportunities such as expansions of our current ethylene facilities.
And negotiation of a higher fixed margin in our air.
Selling sales agreement with Westlake.
We remain focused 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.
With being good stewards of the environment, where we work and live.
As part of our broader sustainability efforts.
Thank you very much for listening to our fourth quarter and full year 2023 earnings call.
Now I'll turn the call back over to Jeff. Thank.
Operator: Before we begin taking questions, I'd like to remind you that a replay of this teleconference will be available two hours after the call has ended. We'll provide that number again at the end of the call. Daniel, we will now take questions. Thank you. To ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Standby while we compile the Q&A, and our first question comes from Matthew Blair with TPH. Your line's now open. Hey, good morning, Albert and Steve. Wally, Matthew. Matthew.
Thank you Albert before we begin taking questions I'd like to remind you that a replay of this teleconference will be available two hours. After the call has ended.
We will provide that number again at the end of the call Daniel we will now take questions.
Thank you.
To ask a question. Please press star one one on your telephone and wait for your name to be announced.
To withdraw your question. Please press star one one again.
Please standby, while we compile the Q&A roster.
And our first question comes from Matthew Blair with T. P. H. Your line is now open.
Hey, good morning, Albert and Steve.
Volumetric Matthew.
Operator: So your current LTM coverage is down to 0.94 times, I believe, so below 1, is your overall target still around, like I think it is one? And is this going to require any sort of changes on your part to improve coverage, or is it, It's the normal course of business. Yeah, Matthew, with the turnaround that we had earlier this year at Calvert City, of course, it's going to have some impact on production and on coverage. We always see, and we will see this as we go through this, maintenance outages and impact on coverage, but our target remains 1.1 times, and on a cumulative basis, over many years, we've been able to maintain that target with these turnarounds over time. I would expect that to continue to be our target going forward, and as I mentioned in our prepared remarks, we have a turnaround of our Petro 1 unit later this year that will impact coverage in 2024, but I fully expect that to recover after we get this turnaround complete and we move forward into subsequent years. Sounds good! And then you highlighted the stability of the agreement with the parent company, Westlake. Did Westlake take all of the contracted volume? from OPCO in 2023, or was there any sort of shortfall that required a take or pay payment? No, it took all the contracted production that was planned for 2023, and there was no shortfall whatsoever.
So your current LTM coverage.
It was down 2.94 times I believe below one.
Is your overall target is still around like I think it's one one.
And is this going to require any sort of changes on your part to improve coverage or is it just.
Just the normal.
Course of business.
Okay.
Yes, Matthew with the turnaround that we had earlier this year at Calvert City of course, it's going to have some impact in production and.
Impacting coverage.
We always see and we will see this as we go through maintenance outages and impact on coverage, but our target remains one one times.
And on a cumulative basis over many years, we've been able to maintain that target with these turnarounds.
Overtime I would expect that to continue to be our target going forward and as I mentioned in our prepared remarks, we have a turnaround of our Petro one unit later this year that will impact the coverage in 2024, but I fully expect that to recover after we get this turnaround complete and we move forward into subsequent years.
Sounds good and then you highlighted the stability of.
Of the agreement with the parent Westlake.
Westlake take all of the contracted volumes from.
From Opco in 2023 or was there any sort of short haul the required a take or pay payment.
No. It took all of the contracted production network plan for 2023, and there is no shortfall at whatsoever.
Operator: Got it. Thank you. You're welcome. Thank you. I'm showing no further questions at this time. I would now like to turn it back over to Jeff Holy for closing.
Got it thank you.
Youre welcome.
Okay.
Thank you.
I'm showing no further questions at this time I would now like to turn it back over to Jeff Holly for closing remarks.
Jeff Holy: Thank you. Thanks again for participating in today's call. We hope you'll join us again for our next conference call to discuss our first quarter 2024 results. This concludes today's conference call. Thank you for participating. You may now disconnect, www.LRCgenerator.com
Thank you thanks again for participating in today's call.
We hope you'll join US again for our next conference call to discuss our first quarter 2024 results.
This concludes today's conference call.
Thank you for participating you may now disconnect.
Okay.
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