Q2 2025 Genesis Energy LP Earnings Call

Dwayne Morley: Greetings and welcome to the GENESIS ENERGY LP Q4 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Dwayne Morley, Vice President of IR. Please.

Greetings and welcome to the Genesis energy. LP second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator systems, please press star zero on your telephone keypad

As a reminder, this conference is being recorded.

Grant Sims: Good morning and welcome to the 2025 second quarter conference call for GENESIS ENERGY. GENESIS ENERGY has three business segments. The offshore pipeline transportation segment is engaged in providing the critical infrastructure to move oil produced from the long-lived world-class reservoirs from the deepwater Gulf of America to onshore refining centers. The marine transportation segment is engaged in the maritime transportation of primarily refined petroleum products. The onshore transportation and services segment is engaged in the transportation, handling, blending, storage, and supply of energy products, including crude oil and refined products primarily around refining centers, as well as the processing of sour gas streams to remove sulfur at refining operations. GENESIS's operations are primarily located in the Gulf Coast states and the Gulf of America.

It is now my pleasure to introduce Dwayne Morley, vice president of ir, please.

Good morning and welcome to the 2025 second quarter conference call for Genesis Energy. Genesis Energy has three business segments. The Offshore Pipeline Transportation segment is engaged in providing the critical infrastructure to move oil produced from the long-lived, world-class reservoirs from the deepwater Gulf of Mexico to ensure refining centers. The Marine Transportation segment...

Engaged in the maritime transportation of primarily, a refined petroleum products.

The onshore transportation and services segment is engaged in the transportation, handling blending storage, and supply of Energy Products, including crude oil. And refined products primarily around our binding centers, as well as the processing of sour gas streams to remove sulfur at refining operations.

Grant Sims: 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 1934. The law provides safe harbor protection to encourage companies to provide forward-looking information. GENESIS intends to avail itself of those safe harbor provisions and directs you to its most recently filed and future filings with the Securities Exchange Commission. We also encourage you to visit our website at genesisenergy.com, where a copy of the press release we issued this morning is located. The press release also presents a reconciliation of non-GAAP financial measures to the most comparable GAAP financial measures. At this time, I would like to introduce Grant Sims, CEO of GENESIS ENERGY LP. Mr. Sims will be joined by Kristen Jeffolitis, Chief Financial Officer and Chief Legal Officer; Ryan Sims, President and Chief Commercial Officer; and Louis Nicholl, Chief Accounting Officer.

Genesis is operations are primarily located in the Gulf Coast states and the Gulf of America.

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 1934. The law provides safe harbor protection to encourage companies to provide forward-looking information.

Genesis intends to Avail itself of those Safe Harbor, provisions and directs you to its most recently filed and future filings of the Securities Exchange Commission.

We also encourage you to visit our website at Genesis Enoree, a copy of the press release. We issued this morning is located

The press release also presents, a Reconciliation of non-gaap financial measures to the most comparable gaap Financial measures.

Grant Sims: Good morning to everyone, and thanks for listening to the call. As we mentioned in our earnings release this morning, the second quarter was generally in line with our expectations. What is much more important from our perspective is looking ahead. And along those lines, I'm extremely excited to report the successful commissioning and startup of the Shenandoah production facility and its 120,000 barrels per day of main plate capacity, which just last week delivered first oil to our new sink pipeline lateral and then onto shore through our newly expanded shops pipeline. This is a tremendous milestone for our entire GENESIS team.

At this time, I would like to introduce Grant Sims CEO of generous energy, LP, Mr. Sims will be joined by Kristen Justice Chief Financial Officer and chief legal officer Ryan, Sims president and chief commercial officer in Louis Nichole, Chief accounting officer.

Good morning to everyone, and thanks for listening to the call.

As we mentioned in our earnings release this morning, the second quarter was generally in line with our expectations.

What is much more important from our perspective is looking ahead.

And along those lines. I'm extremely excited to report the successful commissioning and startup of the Shannon production facility.

And it's 120,000 barrels per day of name plate capacity, which just last week delivered, first oil to our new sink pipeline lateral.

And then onto Shore through our newly expanded chops pipeline.

Grant Sims: I want to publicly thank them for all the hard work and dedication over the last three-plus years during the design and construction phase, as well as the countless hours, day and night, put in by our operations folks offshore to bring these exciting new projects into full service. Despite initial production from Shenandoah being delayed, first by around six months because of an industrial mishap during construction in Korea, and then six weeks or so due to some commissioning challenges, primarily driven by abnormal loop currents in the cold, the operator successfully cleaned up the first of its four pre-drilled and completed wells last week. On Tuesday of this week, the operator began the cleanup of the second one, with such cleanup operations likely to continue through this weekend. The operator will then move to the third well, and then onto the fourth well.

This is a tremendous milestone for our entire Genesis team.

Phase as well as the countless hours day and night. Put in by our operations, folks. Offshore to bring these exciting new projects into full service.

Despite initial production from Shannon Doha being delayed first by around six months because of an industrial mishap during construction in Korea.

And then 6 weeks or so due to some commissioning challenges, primarily driven by abnormal Loop currents in the cold.

The operator successfully cleaned up the first of its 4 pre pre drilled and complete with Wells last week.

On Tuesday of this week, the operator began to clean up at the Second World War.

With such clean up operations, likely to continue through this weekend.

Grant Sims: Based upon initial results, it appears more likely than not that the initial wells will meet and/or exceed original pre-drill expectations. In fact, the operator, and at least one of Shenandoah's non-operating working interest owners, have publicly affirmed that the initial phase should achieve 100,000 barrels a day of oil production from just these four wells, conceivably as early as the end of September. With first production, flows through sink and shops now underway, it is timely to discuss the tremendous potential in and around the Shenandoah Floating Production Unit, their FPU, and the currently identified and sanctioned developments which will exclusively flow through our sink lateral and downstream on shops, giving GENESIS decades' worth of anticipated throughput.

The operator will then move to the third. Well, and then under the fourth. Well

Based upon initial results, it appears more likely than not that the initial wells will meet and or exceed original pre-drilled expectations.

In fact, the operator and at least 1 of Shannon do is non-operating working interest. Owners have publicly affirmed that the initial phase should achieve 100,000 barrels a day of oil production from just the these 4 Wells conceivably as early as the end of September

Grant Sims: After the first four wells are brought into full production, the Shenandoah FPU is expected to be de-bottlenecked and its capacity expanded to notionally 140,000 barrels of oil per day, targeted to be completed in advance of a fifth Shenandoah Phase One well that is slated for drilling and completion by mid-2026. Phase Two of the Shenandoah development will add two additional wells and a subsea booster pump also in mid-2026. Beyond Shenandoah itself, the Monument Discovery represents a further extension of the regional development and will entail two new producing wells developed by a 17-mile subsea tieback to the Shenandoah FPU slated for the fourth quarter of 2026. In addition to announcing first production from Shenandoah Phase One last week, the operator also confirmed the sanctioning of the Shenandoah South Discovery, located in Walker Ridge 95, Lot 95, and water ranges ranging from 5,800 to 6,000 feet.

with first production, those who sink and chops now underway, it is timely to discuss the tremendous potential in and around the Shannon, Doha floating production unit their FPU and the currently identified and sanctioned developments, which will exclusively flow through our sink lateral and downstream on shocks, giving Genesis decades worth of anticipated throughput

After the first 4, Wells are brought into full production.

The shadow of fbu is expected to be debottlenecking to notionally 140,000 barrels of oil per day.

Targeted to be completed in advance of a fifth Chenoa Phase. 1 will that is slated for drilling and completion by mid 2026.

Phase 2 of the sheno development will add 2 additional Wells, and a subsea booster pump also in mid 2026.

Beyond shanno itself. The monument Discovery represents a further extension of the regional development and will until 2 new producing Wells developed by a 17 Mi subzi tieback to the Shannon do FB the fourth quarter of 2026.

In addition to announcing first production from Shannon, do a phase 1 last week, the operator also confirmed the sanctioning of the Shannon South Discovery located in Walker Ridge 95.

Grant Sims: Shenandoah South will be developed through a cost-efficient subsea tieback utilizing a three-mile flow limit and a dedicated riser connection to the FPU. The project will include the drilling and completion of two wells, with first production from the initial well targeted for the second quarter of 2028. This backlog of developments highlights Shenandoah's and our sink and shops pipeline's strategic role as a critical infrastructure that will facilitate the development of additional reserves within at least a 30-mile radius of the Shen FPU for many, many years ahead. Just these currently identified and sanctioned development projects represent almost 600 million barrels of oil equivalent reserves that will all come through our 100% owned sink pipeline for further transportation to shore through our 64% owned and operated shops pipeline.

Block 95 and water depth ranges from 5,800 to 6,000 ft.

shanno is South will be developed through a cost efficient subzi, tieback utilizing a 3-mile flow line, and a dedicated Riser, connecting to the fbu

The project will include a Drilling and completion of 2 Wells. With first production from the initial will targeted for the second quarter of 2028.

This backlog of developments highlights. Like Shannon nois and our sink and chops Pipelines.

Strategic rules and is a critical infrastructure that will facilitate the development of additional reserves within at least a 30 Mi radius of the shin fbu for many, many years ahead.

Grant Sims: I would remind everyone that the total current nameplate capacity of the Shenandoah FPU represents only about 50% of the capacity of sink, as well as only about half of the incremental capacity we have added on the shops pipeline. The Salamanca development, which will flow exclusively through our 100% owned SACO pipeline for further transportation to shore through our 64% owned and operated Poseidon pipeline, remains on track to achieve first oil by the end of the third quarter. The operator, who has been largely dependent on some of the same support equipment and vessels that are currently working on Shenandoah, has been progressing through their well completions and through safety checks and other pre-commissioning activities, including their subsea connection to our SACO pipeline lateral in advance of first production.

Just these currently identified and sanctioned development projects. Represent, almost 600 million, barrels of oil, equivalent reserves that will come all come through. Our 100% of sync pipeline, for further transportation to shore through our 64% owned and operated shops. Bye.

I would remind everyone that the total current name plate capacity of the Shannon Doha fbu represents only about 50% of the capacity of sink as well as only about half of the incremental capacity. We have added on the chops pipeline

The Salamanca development which will flow exclusively through our 100% on psycho pipeline for further transportation to shore through our 64% owned and operated Poseidon pipeline.

Remains on track to achieve first oil by the end of the third quarter.

The operator who has been largely dependent on some of the same support equipment and vessels that are currently working on Shannon Doha

Grant Sims: Like Shenandoah, we expect Salamanca's production to ramp relatively quickly over the subsequent few months after first production to its initial peak design of 40,000 to 50,000 barrels of oil per day. Additionally, just like Shenandoah, we expect the Salamanca FPU will facilitate the development of additional reserves within at least a 30-mile radius of it for many, many years to come. These incremental volumes from Shenandoah and Salamanca are key to the GENESIS story over the remainder of 2025 and certainly 2026 and beyond. This expected significant increase in our offshore pipeline transportation segment margin, driven initially by these new developments and sustained by the incremental identified and sanctioned opportunities I mentioned earlier, as well as expected future exploratory successes in proximity to this expanded infrastructure, is extraordinarily exciting for GENESIS.

Has been progressing through their well completions and through safety checks and other pre-commissioning activities including their subsidy connection to our Seiko pipeline lateral and advanced in advance of first production.

Like San Antonio, we expect salamanca's production to ramp relatively quickly over the subsequent few months. After first production to its initial Peak design on a 40 to 50,000 barrels of oil per day.

The Salamanca fbu will facilitate the development of additional reserves within at least a 30 mile radius of it for many, many years to come.

These incremental volumes from Shannon do and salamaca are key to the Genesis story over the remainder of 2025 and certainly 2026 and Beyond.

This expected significant increase in our offshore pipeline Transportation, segment margin.

driven initially by these new developments and sustained by the incremental identified and sanctioned opportunities I mentioned earlier.

Grant Sims: Combined with the completion of our growth capital expenditures and the expected continued steady performance from our other businesses, we believe we are very well positioned to generate increasing amounts of free cash flow in excess of the cash costs of running other businesses, starting in this the third quarter, and which should grow and ultimately give us tremendous financial flexibility to be opportunistic and create long-term value for all of our stakeholders in future periods. With that, I'll go into a little more detail on each of our business segments. As mentioned in our earnings release, our offshore pipeline transportation segment saw a sequential increase in volumes, as a couple of the previously impacted offshore wells that have been down due to producer mechanical issues were brought back online and are now flowing again on our pipelines.

As well as expected future. Exploratory successes in proximity to this expanded infrastructure is extraordinarily exciting for Genesis.

Combined with the completion of our growth Capital expenditures and the expected continues.

Steady performance from our other businesses.

We believe we are very well positioned to generate increasing amounts of free cash flow in excess of the cash cost of running our businesses. Starting in this the third quarter and which should grow. And ultimately, give us tremendous Financial flexibility to be opportunistic and create long-term value for all of our stakeholders and future periods.

With that, I'll go into a little more detail on each of our business segments.

Grant Sims: While we continue to have several high-margin wells offline, we remain confident that producers are more incented than us and that they are actively working to restore these outages in conjunction with drilling new development wells that will also be tied into these existing production facilities. The remediation efforts have obviously been frustrating and slower than what we had originally been told, but we believe there continues to be no lasting impact on the underlying reservoirs. And regardless, we will ultimately transport every barrel produced from these fields on our offshore pipelines.

As mentioned in our earnings release our offshore pipeline Transportation segment. Saw a sequential increase in volumes as a couple of the previously impacted offshore oils that have been down due to producer mechanical issues were brought back online and are now flowing again on our Pipelines.

While we continue to have several high margin Wells offline. We remain confident, the producers are more incentive than us, and that they are actively working to restore these outages in conjunction with drilling new development Wells, that will also be tied into these existing production facilities.

Grant Sims: Based upon what we have recently been told by the producers, we would reasonably expect the remaining wells will be fixed and back on production by and large by the end of the third quarter, which should come close to restoring our base volume, so to speak, and allow the ramp in volumes from both Shenandoah and Salamanca to be mostly incremental. Our marine transportation segment performed in line with our expectations. Demand fundamentals for our inland or brown water fleet remain generally constructive. While the second quarter was a little sloppy, as refinery crude slates, particularly in the Midwest, shifted and heavy to light differentials narrowed on the Gulf Coast, we have seen increased activity levels so far in the third quarter since refiners in the Gulf and Midwest began their turnaround season, which has historically driven increased demand for our brown water equipment.

The remediation efforts have obviously been frustrating and slower than what we had originally been told, but we believe there continues to be no lasting impact on the underlying reservoirs and regardless we will ultimately transport every barrel produced from these Builds on our offshore Pipelines.

Based on on what we have. Recently been told by The Producers, we were reasonably expect the remaining wells, will be fixed and back on production by and large by the end of the third quarter.

We should come close to restoring our base volume so to speak and allow the rampant volumes from both Shannon know and Salamanca to be mostly incremental.

Our marine Transportation segment performed in line with our expectations.

Demand fundamentals for our Inland or brown Water. Fleet remain generally. Constructed.

Grant Sims: It will be interesting to see if Gulf Coast refiners return to running Venezuelan heavies as the administration has just authorized a partial return to importing such highly viscous crude. This could widen the heavy to light differential and ultimately yield more "refining bottoms" along the Gulf Coast. Both would be expected to push demand for internal heater barges such as ours. Meanwhile, demand conditions in our blue water fleet have softened a little bit in recent months as we saw weaker demand to move clean products from the Gulf Coast to the Mid-Atlantic and Newfoundland. At the same time, certain large operators have relocated marine equipment away from the West Coast and into the Gulf Coast, which has increased the available supply of larger equipment in the markets in which we operate.

While the second quarter was a little sloppy and is refining crude slates particularly in the midwest shifted? And having the light differentials narrowed on the Gulf Coast, we have seen increased activity levels so far in the third quarter as refiners in the gulf and Midwest begin. Their turnaround season, which is has historically, driven increased demand for our brown Water equipment.

It will be interesting to see if Gulf Coast refineries return to running Venezuelan heavies.

As the administration is, just authorized a partial return to importing. Such highly viscous crew.

This could widen the heavy delay, differential. And ultimately yield more quote. Unquote refining bottoms along the Gulf Coast

Both would be expected to push demand for internal heater heater barges such as ours.

Grant Sims: While utilization rates in our blue water fleet have remained steady, these current market fundamentals have somewhat limited our ability to continue to drive day rates higher, especially as term charges come up for renewal. Ultimately, this new incremental equipment will find a home in the Gulf and East Coast trade. And while it might cause some sloppy periods in the interim, we do not believe it will contribute to any lasting structural changes. The long-term fundamentals in the marine world remain constructive, driven by effectively zero net supply additions of our Classes of Jones Act equipment and the significant costs and extended timeline needed to construct a new vessel. As we have consistently mentioned in the past, even if an operator were to embark on such a new construction program today, it would be years before any new equipment was delivered.

Meanwhile demand conditions in our Blue Water. Fleet have softened a little bit in recent months as we saw a week or demand to move clean products from the Gulf Coast to the Mid-Atlantic and New England. At the same time, certain large operators. Have relocated Marine equipment away from the west coast and into the Gulf Coast, which is increasing the available supply of larger equipment in the markets, in which we operate

While utilization rates in our Blue Water, Fleet have remained steady these current market, fundamentals have somewhat limited. Our ability to continue to drive day rates, higher, especially as turn Charters, come up for Renewal ultimately. This new incremental, equipment will find a home in the gulf and East Coast trade and while it might cause some sloppy periods in the interim, we do not believe it will contribute to any lasting structural changes.

The long-term fundamentals in the Marine World remain constructive driven to buy effectively zero net Supply. Editions of our classes at Jones act equipment and a significant cost of extended timeline needed to construct a new vessel.

As we have consistently mentioned in the past.

Grant Sims: We, along with other industry participants, believe that day rates still need to rise another 20 to 30-plus percent and be expected to sustain at such higher levels for the next five to eight years before anyone will undertake a significant new build program. All of this is to say we continue to believe there remains structural support in the Jones Act world. Given our diversified and relatively young fleet, we continue to expect steady and likely growing financial contributions from our marine transportation segment for the foreseeable future. Switching briefly to our onshore transportation and service segment, our OTS segment performed in line with our expectations as we saw strong volumes through both our Texas system and Raceland terminal, as refineries in both Texas City and South Louisiana increased their appetite for offshore barrels.

Operator were to embark on such a new construction program today, it would be years before any new equipment was delivered.

And be expected to sustain in such higher levels for the next 5 to 8 years before, anyone will undertake a significant new bill program.

All of this is to say we continue to believe their remains structural support in the Jones act world.

Given our Diversified and relatively young Fleet, we continue to expect steady and likely growing Financial contributions from our marine Transportation statement for the foreseeable future.

Switching briefly to our onshore transportation and service sector.

Grant Sims: We continue to believe we should see a modest increase in volumes through both our Texas City and Raceland terminals as new production from Shenandoah and Salamanca comes online and quickly ramps in the back half of the year. Our legacy refinery services business also performed in line with our expectations. As we highlighted last quarter, the lower and upper values in the range of our adjusted EBITDA guidance for the full year of 2025 were mostly dependent upon the timing around the resolution of the producer-related mechanical issues at certain high-margin offshore fields and the timing of first oil, as well as the rate at which Shenandoah and Salamanca actually ramped to their anticipated initial production levels. As you can tell from our earnings release and our prepared remarks here today, the resolution of all of the producer mechanical issues has taken longer than we had previously been told.

Our OTS segment performed in line with our expectations. As we saw strong volumes through both our Texas system and racism terminal as a refineries in both Texas city and south Louisiana, increase our appetite for offshore bureaus.

We continue to believe, we should see a modest increase in volume through both, our Texas city and race and terminals as new production from Shannon do and Salamanca comes online and quickly ramps in the back half of the year.

Our Legacy Refinery Services business also performed in line with our expectations.

As we highlighted last quarter.

The lower and upper values in the range of our adjusted. Heba dog guidance for the full year of 2025. We're mostly dependent upon the timing around the resolution of the producer related mechanical issues at certain high margin offshore fields and the timing of first oil as well as the rate at which Shannon do and Salamanca actually ran to their anticipated.

Initial production levels.

As you can tell, from our earnings release and our prepared remarks here today.

Grant Sims: And first oil from Shenandoah and subsequently Salamanca has been delayed a month or so from what we previously had expected. As a result, for 2025, we expect to now come in at or near the low end of our previous guidance range. Having said that, the main takeaway from today is that none of the delays we've experienced in 2025, whether related to producer remediation efforts or the start of first production for both Shenandoah and Salamanca, will have any significant, much less material, impact on our ability to begin generating free cash flow starting this quarter, nor have they altered our outlook for 2026 and beyond whatsoever. We remain committed to using our increased financial flexibility and liquidity to first and foremost make progress in seeing our bank-calculated leverage ratio trend closer to our long-term targeted range of plus or minus four turns.

The resolution of all of the producer mechanical issues has taken longer than we had previously been told. First of all, the updates from Shannon Knowin and subsequently Salomon have been delayed about a month from what we previously expected.

as a result for 2025,

we expect to now come in at or near the low end of our previous guidance rate.

Having said that?

The main takeaway from today is that none?

Of the delays we've experienced in 2025 whether related to producer remediation efforts or the start of first production for both Shannon. Noah salamaca will have any significant much less material impact on our ability to begin generating free cash flows. Starting this quarter nor have they altered our outlook for 2026 and Beyond whatsoever.

Grant Sims: In conjunction therewith, we remain committed to finding the highest and best use for future available dollars, whether that includes the further reduction of debt in absolute terms, the possible further reduction of our high-cost corporate preferred securities, and/or the potential for increased distributions to our common unit holders in future periods. At the same time, we will remain disciplined and balanced, preserving the ability to evaluate and pursue incremental commercial opportunities that align with our long-term strategic objectives. Finally, I would like to say that the management team and the board of directors remain steadfast in our commitment to building long-term value for all of our stakeholders, regardless of where you are in the capital structure. We believe the decisions we are making reflect this commitment and our confidence in GENESIS moving forward.

We remain committed to using our increase Financial flexibility and liquidity to first and foremost, make progress and seeing our bank. Calculated leverage ratio, turn closer to our long-term, targeted range of plus or minus 4 turns

In conjunction there with we remain committed to finding the highest and best use.

For future available dollars whether that includes the further reduction of debt and absolute terms the possible further. Redemption of our high-cost corporate Preferred Securities, Andor the potential for increased distributions to our climate unit orders in future periods.

At the same time, we will remain disciplined and balanced.

Preserving the ability to evaluate and pursue incremental commercial opportunities that align with our long-term strategic objectives.

Finally, I would like to say that the management team and the board of directors remained steadfast in our commitment to building long-term value for all of our stakeholders, regardless of where you are in the capital structure.

Grant Sims: I would once again like to recognize our entire workforce for their individual efforts and unwavering commitment to safe and responsible operations. I'm extremely proud to be associated with each and every one of you. With that, I'll turn it back to the moderator for questions.

We believe the decisions. We are making reflect this commitment in our confidence in Genesis moving forward. I would once again like to recognize our entire Workforce

For the individual efforts, and unwavering commitment to save and responsible operations. I'm extremely proud to be associated with each and every 1 of you.

With that, I'll turn it back to the moderator for questions.

Dwayne Morley: We'll now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question is from Michael Bloom with Wells Fargo.

Will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the, in the question queue. You may press star 2 to remove your question from the queue. For participants using speaker equipment, and may be necessary to pick up your handset. Before pressing the star Keys 1 moment, please while we pull for questions.

Michael Blum: Good morning, everyone. I wanted to ask about the timing on Salamanca. I realize it's out of your control directly, but just wanted to get your confidence level in the latest timeline. Are there any other kind of variables that could shift that, or do you feel pretty good about the latest projection there?

Our first question is from Michael bloom with Wells Fargo.

Grant Sims: I think we, based upon our most recent conversations, we feel very good about the projected timeline at initial production, certainly by the end of the third quarter. This is the, you know, kind of starting to get into the peak season for nape storms that can cause interruptions, but at least the long term, or at least the 7 to 10 to 14-day forecast at this point is that there's no significant disruptive weather on the horizon. So we feel very good about it. I think the operator feels very good about it. And so we're looking forward to seeing that start.

Good morning, uh, everyone. Um, wanted to ask about, uh, the timing on Salamanca, uh, realize, it's it's out of your control directly, but just want to get your confidence level in the latest, uh, timeline. Are there any other kind of variables that could shift that or do you feel pretty good about uh, the latest, uh, projection there?

Michael Blum: Great. Thanks for that, Grant. And then I appreciate all your comments on capital return and the different avenues and constituents there. Just wondering, given the, you know, delays and the ramp of these offshore projects, should we think about all of this capital return really starting in 2026, or do you think possibly some of this could start in 2025? Thanks.

Most recent conversations. We feel very good about the projected timeline that initial production certainly, uh, by the end of the third quarter. Uh, this is, uh, the, you know, kind of starting to get into the peak season for, uh, named storms that, uh, that can cause interruptions. But, uh, at least the long term, or at least the 7 to 10, to 14 day forecast, at this point, is that there's no, uh, significant, uh, disruptive weather on the horizon. So we feel very good about it. I think the operator feels very good about it and so we're looking forward to, uh, seeing that start.

Grant Sims: Well, I think that as we said in our prepared remarks, our focus for the rest of this year is we hit our free cash flow numbers is to pay our revolving balance to zero by the end of the year. We think that that is an achievable outcome. And then, but I would say that, you know, by the time we get to the fourth quarter and in the context of distribution for the fourth quarter, that we would expect to have three to four-plus months' worth of operating history under our belt, so to speak, for the two major fields that are coming on. And we may have, at that point, we may have a discussion and the flexibility to do something in '25 as opposed to '26.

Great. Uh, thank you for that Grant. And then, um, appreciate all your comments on on Capital, uh, return and, and the different Avenues and constituents there, um, just wondering given the, you know, the delays and the, the ramp of these offshore projects. Should we think about all this Capital return really starting in 2026? Or do you think uh, possibly some of us could start in 2025? Thanks.

uh, I think that is we said in our prepared remarks, our our Focus, uh, for the rest of this year is we hit our free cash flow, uh numbers as to pay our revolving malice to uh, Zero by the end of the year, we think that that is an achievable uh,

Outcome and then, uh, but I would say that, uh, you know, by the time we get to the fourth quarter and and the context of uh uh distribution for the fourth quarter, that we would would expect to have 3 to 4 plus months worth of uh operating history under our belt. So to speak for the for the 2, major fields that are coming on. And we may have at that point, we may have a discussion and the flexibility to do something in 25 as opposed to 26.

Dwayne Morley: Thank you. Our next question is from Wade Suki with Capital.

Thank you. Our next question is from Wade, Suki with capital.

Wade Suki: Good morning, everyone. I'm not sure if I got cut off or not, but I'll give it a try anyway, just in case. I think I might have asked this on the last call, but you know just looking at new commercial opportunities, anything out there on the horizon right now you can sort of discuss or opine on?

Good morning everyone. Um,

Grant Sims: No. We have nothing on the horizon other than, you know, to use, it's almost football season, so blocking and tackling for purposes of seeing the ramp in the and fully placed into service the significant offshore expansion projects at this point. So no, there's nothing identified that we're working on in terms of additional capital expenditures. We are intent of getting into the free cash flow world and having the high-class problem of being able to allocate that across everybody in the capital structure.

Not sure if I got cut off or not but, um, I'll give it a try. Anyway, just in case I think I might have asked this on, uh, on the last call, but, you know, just just looking at new commercial, uh, opportunities. Um, anything out there on the horizon right now you can sort of discuss or opine on

Uh, no, we are. We have nothing, uh, on the horizon other than, uh, you know, to use. So, it's almost football season, so blocking and tackling, uh, for purposes of, uh, seeing the ramp in the.

And and fully placed into Service uh the significant offshore expansion projects at this point. So no there's nothing uh identified the that we're working on in terms of additional

Wade Suki: Thanks, Grant. I appreciate that. Love the love the analogy there. Just I guess in terms of the portfolio, kind of as it sits today, are y'all pretty happy with where it is? Any inorganic opportunities or maybe even a divestiture candidate out there that might be material or meaningful?

Capital expenditures, we are intent of getting into the free cash flow world and uh and having the the high class problem of being being able to allocate that across everybody in the capital structure.

Thanks for that. I appreciate that. Love, love the uh, love the analogy there. Um,

Grant Sims: You know, I think that we think that you could tell from our prepared remarks that the underlying macro fundamentals for all of our businesses are as good as they've been in many, many, many years. So we're very comfortable with where we are, and we look forward to continuing to deliver increasing financial results in a positive macro backdrop for our businesses. So the short answer is we like where we're at, and we intend on harvesting cash from where we have and look forward to, at some point in the future, having the financial flexibility to be opportunistic. But I don't see us stepping outside of our current lines of businesses whatsoever, just focusing on our preeminent positions that we've worked very hard to build.

Just I guess in terms of the portfolio kind of as it sits today y'all pretty happy with where it is any any inorganic opportunities or or maybe even a Devastator candidate out there that might be uh, material or meaningful.

Uh, you know, I think that we are we we think that this you can tell from our prepared remarks that the underlying uh macro fundamentals for all of our businesses are as good as they've been and and many many, many years.

Wade Suki: Understood. I hear that loud and clear. Thank you. Just one more, if I could squeeze it in. Is Monument sort of the next chunky development coming online after Salamanca?

And so we're very comfortable with where we are and we look forward to uh, continuing to uh, deliver increasing Financial results in a, in a positive macro backdrop for our businesses. So, uh, the short answer is, uh, we like where we're at and, uh, we intend on, uh, on harvesting cash from where we have and, and look forward to at some point, uh, in the future, uh, having the financial flexibility to be opportunistic, but I don't see us, uh, stepping out of our current lines of businesses whatsoever. Just focusing on, uh, on our primitive positions that we've worked very hard to build.

Uh, chunky Development coming online after Salamanca.

Grant Sims: Yeah. It's a combination of, as we said, you know, phase one of Shenandoah, represented by the first four wells, is anticipated to achieve about 100,000 barrels a day of oil flows with a de-bottlenecking both whether or not it's, you know, phase two or Monument. You know, we would expect that we would see additional volumes come up through the expanded Shenandoah FPU in the back half of '26, if not into early '27. But that should, you know, again, that costs us nobody whatsoever. And so we look forward to their continued success in bringing the wells on and as they tie in the incremental facilities or incremental reserves to the Shenandoah FPU is a great thing for us.

uh yeah, it's a combination of uh, as we said, uh, you know, Phase 1 of Shannon Doha

Wade Suki: Fantastic. Thanks again. Appreciate it.

Represented by the first 4 Wells is anticipated to achieve about 100,000 barrels, a day of oil flows, uh, with a dybala necking, uh, both whether or not, it's uh, you know, Phase 2 or uh, or monument. Uh, you know, we would expect uh, that uh, we would see additional volumes come up with through the expanded shinano FPU and the back half of 26, if not in early 27, but uh, that should, uh, you know, again that cost us no money whatsoever. And, uh, so we look forward to their continued success and, uh, bringing the Wells on and, and uh, as a tie in the incremental facilities, or incremental reserves to the shinano, fbu is a great thing for us.

Fantastic. Thanks again. I appreciate it.

Dwayne Morley: Our next question is from Elvira Scotto with RBC Capital Market.

Elvira Scotto: Yeah. Hi. Good morning, everyone. Can you talk a little bit or elaborate a little bit on some of these trends that you noted in the marine transportation segment and just the impact to, you know, your ability to raise day rates? What are your expectations here kind of going forward? I think you mentioned it's going to be a little sloppy, but what are we thinking here? Like quarters into next year, just any incremental detail there. Thanks.

Our next question is from Elvira scada with RBC Capital Market.

Grant Sims: Well, I mean, I think that the second quarter was a little sloppier than the third quarter, at least for the brown or inland barges. I mean, we still achieved the inland barge utilization rate for the quarter in excess of 98%. And that's adjusted for scheduled dry dockings and other issues which wouldn't allow us to otherwise use the equipment. So that's a pretty high utilization rate, but we anticipate that to be even higher in the third quarter. So really, the sloppiness we saw in the inland side, we think, is behind us. What we're dealing with on the blue water side and the larger barges, ATBs, and the wireline units, you know, as you're aware, we have nine of those.

Good morning, everyone. Um, can you talk a little bit or elaborate a little bit on some of these trends that you noted in the Marine Transportation segment and just the impact to, um, you know, your ability to raise day rates. Um, uh, what are your expectations here? Kind of going forward? You you I think you mentioned. It's going to be a little sloppy. But what are we thinking here, like quarters into next year. Just any any incremental detail there.

Yeah, I mean, I think that the second quarter was a little sloppier than the third quarter, at least for the brown. Uh, our Inland barges. I mean, we still achieved the the alen bar utilization rate for the for the quarter of, in excess of 98%.

Uh, and that's adjusted for scheduled, dry dockings, and and other issues which wouldn't allow us to otherwise use the, the equipment. Uh, so that's a, that's a pretty high utilization rate. Uh, but, uh, we anticipate that to be even higher in the third quarter. So really the sloppiness that we saw in the Inland side, we think is behind us.

Grant Sims: We have seen some equipment that had previously been in the West Coast trade that, due to some emission restrictions, new emission restrictions in the Republic of California, primarily, they are leaving the West Coast trade and coming to the Gulf Coast. So we've seen a little bit of, but our utilization continues to be 97%, which means, you know, we have a substantial amount of money for a longer-term contract and not so much of a spot business. But we, as I said in the prepared remarks, we think that that will ultimately find a home and everything will kind of settle down. And given those utilization rates that are in the high 90% approaching 100%, that's the necessary condition for being able to ultimately raise rates.

What we're dealing with on on the Blue Water side and the, you know, the larger barges atbs and W line units. And you as you're aware we don't. We have 9 of those. But we have seen some equipment that uh, had previously been in the west coast trade that due to some uh, emission restrictions a new emission restrictions in the Republic of California.

Uh, primarily they are, uh, uh, leaving the West Coast trade and coming to the Gulf Coast. So we've seen a little bit of, but our utilization continues to be, uh, 97%, uh, which means, uh, you know, we have a substantial amount of under longer term contract, and not so much of a spot business. But, uh, uh, we as I said, in the prepared remarks, we think that, uh,

Grant Sims: So some short-term speed bumps along the way that have no significant impact on the long-term fundamentals in the Jones Act tonnage world from our perspective.

Elvira Scotto: Great. Thanks. And then, can you just remind us of the timeline to reach that leverage ratio of four times? And how do you plan to balance shareholder returns with your focus on kind of reducing leverage and improving the balance sheet?

That will ultimately, uh, find a home and, uh, everything will kind of settle down. And given those utilization rates that are in the high 90% approaching 100%, that's the necessary condition for being able to ultimately raise rates. So, uh, some short-term, uh, speed bumps along the way that have no significant impact on the long-term fundamentals, uh, in the, in the Jones act tonnage World from our perspective,

Great, thanks. And then um the uh can you just remind us of the timeline uh to reach that leverage ratio of a 4 4 times? And

Grant Sims: Oh, yeah. I think, again, we'll probably get into a further discussion of '26 later in the year and certainly the first part of '26. And again, driven primarily just as our range for the '25 is driven by the performance of these two significant incremental economic opportunities for us represented by Shen and Salamanca that we'll have more clarity as we go through the year and enter '26. So we can give you a more concise answer on that. But you know, again, I think that the total distribution to common unit holders is an order of magnitude, what, $78 million or something in that regard. So 10% increases in distribution is less than $8 million. And so that's not a significant heroic cost of beginning a return to unit holders, but that's something that we will consider as we move through the year.

How do you plan to balance shareholder returns with your focus on kind of reducing leverage and improving the balance sheet.

Uh you know, I think again uh we'll probably get into a further discussion of uh 26 uh lighter in the year and certainly the first part of 26. And again driven primarily just as our range, this for the 25 was driven by the performance of these 2 significant incremental.

Grant Sims: And you know, given Michael's comments or question earlier, how I responded to that, you know, it's something that I think that we can potentially consider beginning as early as the fourth quarter or as we progress through '26.

Elvira Scotto: Great. And then just my last one. You know, given the timing of Salamanca and Shenandoah and some of the remediation work, you are now guiding to the low end of your previous adjusted EBITDA guidance. Do you think, given the line of sight that you have now and visibility, are you pretty confident that you can, at the very least, hit that low end?

Uh, the Total distribution to uh common unit holders is order of magnitude, what 78 million or something that that regard. So uh, you know, 10 10% increases in uh, distribution is less than 8 million dollars. And so that's not a significant heroic, uh, uh, cost of beginning a return to, uh, to unit holders. But that's something that we will consider as so as we move through the year and, uh, you know, given Michael's comments or question earlier. How I responded to that, you know, something that I think that we can potentially consider, uh, uh, beginning as early as the fourth quarter or or as we progress through 26,

Great. And then just my last 1, um, you you, you know, given the timing of Salamanca and Shannon Doha, and some of the remediation uh, uh, work. You, you are now guiding to the low end of your, your previous adjusted e. But the guidance, um, do you think given the line of sight that you have now and visibility? Um, do you are, are you pretty confident that you can at the very least, hit that low end?

Grant Sims: You know, you never say never. What, you know, at this red-hot moment, we have two wells out of what are seven slash eight pre-drilled or pre-completed wells on. So again, as I said, based upon early analysis, it certainly appears to be meeting or exceeding our pre-drill expectations. So you know, time will tell, but we're in the very early stages, and but we're very excited, as you can tell, from where we are at this point.

uh you know, you never say, never what you know is that this red hot moment we have uh

2 Wells, uh, out of, uh,

Elvira Scotto: Great. Thank you very much.

Grant Sims: Thank you.

What what are 78 uh, pre-drilled or pre-comp completed Wells on. So, again as I said based upon early analysis that certainly it appears to be meeting or exceeding our pre-drilled expectations. Uh, so uh, you know, time will tell but uh, we're we're in the very early stages. And but we're we're very excited. As you can tell from where we are at this point.

Great, thank you very much.

Thank you.

Dwayne Morley: As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. Thank you. This does conclude our question and answer session. If you'd like, I would now like to pass the floor back over to management for any closing comments.

as a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad,

Thank you. This does conclude our question and answer session if you'd like

Grant Sims: Okay. Well, thanks, everyone, for listening to the call, and we look forward to discussing better things as we continue through 2025 and into 2026. Thanks very much.

I would now like to pass the floor back over to management for any closing comments.

Okay well thanks everyone for listening to the call and we look forward to uh discussing uh a better things as we continue through 2025 and into 2026. Thanks very much.

Dwayne Morley: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.