Westlake Chemical Partners(WLKP) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited consolidated financial statements for Westlake Chemical Partners LP, detailing financial position, operational results, and cash flows for the period ended June 30, 2025 Item 1. Financial Statements This section presents the unaudited consolidated financial statements, including balance sheets, statements of operations, and cash flows, for the period ended June 30, 2025 Consolidated Balance Sheets Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :--- | :--- | :--- | | Total current assets | 156,524 | 240,926 | | Total assets | 1,307,187 | 1,287,956 | | Total current liabilities | 72,906 | 55,372 | | Long-term debt payable to Westlake | 399,674 | 399,674 | | Total liabilities | 476,022 | 458,642 | | Total equity | 831,165 | 829,314 | Consolidated Statements of Operations Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | Total net sales | 297,119 | 284,168 | 534,748 | 568,841 | | Gross profit | 97,532 | 101,232 | 151,613 | 203,412 | | Income from operations | 91,232 | 93,627 | 137,839 | 188,730 | | Net income | 85,795 | 88,026 | 128,104 | 177,672 | | Net income attributable to Westlake Chemical Partners LP | 14,558 | 14,427 | 19,506 | 29,260 | | Net income per limited partner unit (basic and diluted) | $0.41 | $0.41 | $0.55 | $0.83 | Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | 54,852 | 226,461 | | Net cash provided by (used for) investing activities | 49,664 | (19,951) | | Net cash used for financing activities | (126,253) | (199,130) | | Net increase (decrease) in cash and cash equivalents | (21,737) | 7,380 | | Cash and cash equivalents at end of period | 36,579 | 65,999 | Notes to Consolidated Financial Statements - The Partnership was formed to operate ethylene production facilities, holding a 22.8% limited partner interest in Westlake Chemical OpCo LP ("OpCo") and consolidating OpCo's financial results as the primary beneficiary, with Westlake Corporation owning the remaining 77.2% interest[23][24][27] - A quarterly cash distribution of $0.4714 per common unit for Q2 2025 was declared on July 30, 2025, payable on August 27, 2025[39] - The Partnership has significant related-party transactions with Westlake, its major customer, with sales to Westlake accounting for approximately 86.0% of the Partnership's net sales for the six months ended June 30, 2025[50][70] - As of June 30, 2025, the Partnership had $399.7 million in long-term debt payable to Westlake, comprising borrowings under the OpCo Revolver and the MLP Revolver[71] - The Partnership operates as a single reportable segment, OpCo, encompassing its ethylene production operations[85] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial performance and condition of the Partnership, highlighting decreased net income and operating cash flow due to a planned maintenance turnaround Partnership Overview and Revenue Generation - The Partnership's primary asset is its 22.8% limited partner interest in OpCo, which owns and operates three ethylene production facilities and a pipeline[90][91] - Revenue is primarily generated through a long-term, fee-based Ethylene Sales Agreement with Westlake, including a minimum purchase commitment of 95% of budgeted production and a fixed margin of $0.10 per pound, ensuring stable cash flows[93] Results of Operations - Q2 2025 vs Q2 2024: Net income decreased by $2.2 million to $85.8 million, driven by higher feedstock and natural gas costs, partially offset by higher ethylene sales prices and a $13.6 million buyer deficiency fee from the Petro 1 turnaround[109][111][112] - H1 2025 vs H1 2024: Net income decreased by $49.6 million to $128.1 million, primarily due to lower sales volumes from the Petro 1 turnaround and higher feedstock and natural gas costs[110][118][119] Non-GAAP Financial Measures Reconciliation | Metric ($ thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income | 85,795 | 88,026 | 128,104 | 177,672 | | MLP distributable cash flow | 15,007 | 17,135 | 19,721 | 34,027 | | EBITDA | 124,391 | 123,199 | 199,412 | 247,630 | Cash Flow and Liquidity - Cash from operating activities decreased by $171.6 million in H1 2025 compared to H1 2024, falling to $54.9 million, mainly due to Petro 1 turnaround costs and lower income from operations[125] - Sources of liquidity include cash from operations, a $600 million OpCo Revolver, a $600 million MLP Revolver, and an Investment Management Agreement with Westlake; cash and cash equivalents were $36.6 million, with an additional $43.9 million invested with Westlake as of June 30, 2025[130][136][137] - Total debt outstanding as of June 30, 2025, was $399.7 million, entirely owed to Westlake through the OpCo and MLP revolvers[138][139][148] - Capital expenditures for H1 2025 were $40.3 million, an increase from $20.0 million in H1 2024, primarily due to the Petro 1 turnaround[126][135] Item 3. Quantitative and Qualitative Disclosures about Market Risk The Partnership's primary market risk is interest rate exposure on variable-rate debt, while commodity price risk is mitigated by a fee-based sales agreement - Direct exposure to commodity price risk is limited as the Ethylene Sales Agreement with Westlake provides for cost-plus based pricing and a minimum purchase commitment[147] - The main market risk is interest rate risk on $399.7 million of variable-rate debt, where a 1% (100 basis points) increase in the average interest rate would increase annual interest expense by approximately $4.0 million[148] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - Management concluded that the company's disclosure controls and procedures are effective as of the end of the period covered by the report[149] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[150] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, other information, and a list of exhibits filed with the report Item 1. Legal Proceedings The Partnership is involved in various legal proceedings but does not anticipate any material adverse effects, with Westlake Corporation providing indemnification for certain liabilities - The Partnership does not believe that any ongoing legal proceedings will have a material adverse effect on its financial condition, results of operations, or cash flows[154] - Westlake has agreed to indemnify the Partnership for certain environmental liabilities existing before August 4, 2014, and for liabilities related to services performed under the Services and Secondment Agreement[153] Item 1A. Risk Factors No material changes have occurred from the risk factors previously disclosed in the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - There have been no material changes from the risk factors disclosed in the 2024 Form 10-K[155] Item 5. Other Information No director or officer of the Partnership's general partner adopted or terminated a Rule 10b5-1 trading arrangement during the second quarter of 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the second quarter of 2025[156] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents and officer certifications - The report lists various exhibits filed, including the CEO and CFO certifications under Rule 13a-14(a) and Section 1350[158]