Genesis Energy(GEL) - 2021 Q1 - Quarterly Report

Cover Page Information Registrant Information Genesis Energy, L.P. is a Delaware limited partnership engaged in midstream crude oil and natural gas, and natural soda ash production, filing all required reports as a large accelerated filer - Company name: GENESIS ENERGY, L.P.[2] - Jurisdiction of incorporation: Delaware[2] - Trading symbol: GEL (NYSE)[3] - Filing status: Large accelerated filer[4] Filing Details This report covers the quarter ended March 31, 2021, with all interactive data files submitted and Class A and B Common Units outstanding disclosed as of May 5, 2021 - Reporting period: Quarter ended March 31, 2021[2] - All interactive data files submitted: Yes[3] Outstanding Units (As of May 5, 2021) | Category | Quantity | | :--- | :--- | | Class A Common Units | 122,539,221 | | Class B Common Units | 39,997 | PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the company's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, partners' capital, and cash flows, with related notes, for the quarter ended March 31, 2021 Unaudited Condensed Consolidated Balance Sheets As of March 31, 2021, total assets slightly increased, while net fixed assets and partners' capital decreased, with a notable rise in net trade receivables and a reduction in inventory Key Balance Sheet Data (in thousands of dollars) | Metric | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $18,449 | $21,282 | | Restricted cash | $15,338 | $5,736 | | Accounts receivable - trade, net | $473,929 | $392,465 | | Inventories | $72,427 | $99,877 | | Total current assets | $644,143 | $580,169 | | Net fixed assets | $3,825,124 | $3,851,334 | | Total assets | $5,949,613 | $5,933,619 | | Total current liabilities | $454,094 | $383,411 | | Senior secured credit facility | $699,000 | $643,700 | | Senior unsecured notes, net | $2,671,262 | $2,750,016 | | Total liabilities | $4,247,934 | $4,183,462 | | Total partners' capital | $747,909 | $818,848 | - Total assets increased from $5,933,619 thousand as of December 31, 2020, to $5,949,613 thousand as of March 31, 2021[10] - Total partners' capital decreased from $818,848 thousand as of December 31, 2020, to $747,909 thousand as of March 31, 2021[10] Unaudited Condensed Consolidated Statements of Operations For the three months ended March 31, 2021, total revenue decreased, while total costs and expenses rose, leading to a significant decline in operating income and a shift from net income to net loss attributable to Genesis Energy, L.P Key Statements of Operations Data (in thousands of dollars, except per unit amounts) | Metric | For the three months ended March 31, 2021 | For the three months ended March 31, 2020 | | :--- | :--- | :--- | | Total revenue | $521,219 | $539,923 | | Total costs and expenses | $493,198 | $480,761 | | Operating income | $28,021 | $59,162 | | Net income (loss) attributable to Genesis Energy, L.P. | $(34,224) | $24,909 | | Basic and diluted net income (loss) per common unit | $(0.43) | $0.05 | - Total revenue decreased 3.46% year-over-year, from $539,923 thousand in Q1 2020 to $521,219 thousand in Q1 2021[12] - Operating income decreased 52.64% year-over-year, from $59,162 thousand in Q1 2020 to $28,021 thousand in Q1 2021[12] - Net income (loss) attributable to Genesis Energy, L.P. shifted from a $24,909 thousand profit in Q1 2020 to a ($34,224) thousand loss in Q1 2021[12] Unaudited Condensed Consolidated Statements of Comprehensive Income For the three months ended March 31, 2021, comprehensive income (loss) attributable to Genesis Energy, L.P. shifted from a profit to a loss, primarily driven by changes in net income (loss) Key Comprehensive Income Data (in thousands of dollars) | Metric | For the three months ended March 31, 2021 | For the three months ended March 31, 2020 | | :--- | :--- | :--- | | Net income (loss) | $(29,435) | $28,979 | | Comprehensive income (loss) attributable to Genesis Energy, L.P. | $(34,102) | $24,909 | - Comprehensive income (loss) attributable to Genesis Energy, L.P. shifted from a $24,909 thousand profit in Q1 2020 to a ($34,102) thousand loss in Q1 2021[16] Unaudited Condensed Consolidated Statements of Partners' Capital As of March 31, 2021, total partners' capital decreased due to net loss and cash distributions to partners and Class A convertible preferred unitholders Changes in Partners' Capital (in thousands of dollars) | Metric | January 1, 2021 | March 31, 2021 | | :--- | :--- | :--- | | Total partners' capital | $818,848 | $747,909 | | Net loss | — | $(34,224) | | Cash distributions to partners | — | $(18,387) | | Distributions to Class A convertible preferred unitholders | — | $(18,684) | - Total partners' capital decreased from $818,848 thousand as of January 1, 2021, to $747,909 thousand as of March 31, 2021[18] Unaudited Condensed Consolidated Statements of Cash Flows For the three months ended March 31, 2021, net cash flow from operating activities decreased year-over-year, but the ending balance of cash and cash equivalents increased, primarily due to reduced cash outflows from financing activities Key Cash Flow Data (in thousands of dollars) | Metric | For the three months ended March 31, 2021 | For the three months ended March 31, 2020 | | :--- | :--- | :--- | | Net cash from operating activities | $77,159 | $89,552 | | Net cash from investing activities | $(30,051) | $(30,880) | | Net cash from financing activities | $(40,339) | $(73,568) | | Ending balance of cash, restricted cash, and cash equivalents | $33,787 | $41,509 | - Net cash from operating activities decreased 13.84% year-over-year, from $89,552 thousand in Q1 2020 to $77,159 thousand in Q1 2021[21] - Net cash outflow from financing activities decreased 45.17% year-over-year, from ($73,568) thousand in Q1 2020 to ($40,339) thousand in Q1 2021[21] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and supplementary information for the company's financial statements, covering organization, accounting policies, revenue recognition, leases, inventory, fixed assets, equity investments, debt, partners' capital, derivatives, and fair value measurements, along with COVID-19 impacts and subsequent events 1. Organization and Basis of Presentation and Consolidation The company is a limited partnership focused on midstream crude oil and natural gas and natural soda ash production, operating through four reportable segments primarily in the U.S. Gulf Coast, Wyoming, and Gulf of Mexico, while monitoring COVID-19 impacts - The company's operations are primarily located in the Gulf Coast, Wyoming, and Gulf of Mexico regions[22] - The company manages its business through four segments: Offshore Pipeline Transportation, Sodium Minerals and Sulfur Services, Onshore Facilities and Transportation, and Marine Transportation[27] - The company continuously monitors the impact of the COVID-19 pandemic on market conditions and assesses potential impairment of long-lived assets, intangible assets, and goodwill[26][27][28] 2. Recent Accounting Developments The company early adopted SEC revisions to guarantor financial disclosure requirements, streamlining disclosures by incorporating summarized financial information into Management's Discussion and Analysis - The company early adopted SEC revisions to guarantor financial disclosure requirements, incorporating them into Management's Discussion and Analysis[29] 3. Revenue Recognition Revenue is recognized as performance obligations are satisfied, with timing varying by revenue stream, and detailed disclosures include revenue by major category and projected recognition for long-term contracts in future periods Revenue by Major Category (in thousands of dollars) | Revenue Category | For the three months ended March 31, 2021 | For the three months ended March 31, 2020 | | :--- | :--- | :--- | | Fee-based revenue | $129,109 | $181,765 | | Product sales | $369,601 | $330,134 | | Refinery services | $22,509 | $28,024 | | Total revenue | $521,219 | $539,923 | Projected Revenue Recognition for Future Periods (in thousands of dollars) | Period | Offshore Pipeline Transportation | Onshore Facilities and Transportation | | :--- | :--- | :--- | | Remainder of 2021 | $48,198 | $14,369 | | 2022 | $75,623 | $4,703 | | 2023 | $63,982 | — | | 2024 | $56,326 | — | | 2025 | $60,311 | — | | Thereafter | $97,761 | — | | Total | $402,201 | $19,072 | 4. Lease Accounting The company leases various transportation equipment, terminals, land, and facilities with terms ranging from short to long-term, and as a lessor, generated lease income from the M/T American Phoenix tanker and received payments from the sold NEJD pipeline direct financing lease Lease Revenue (in thousands of dollars) | Lease Item | For the three months ended March 31, 2021 | For the three months ended March 31, 2020 | | :--- | :--- | :--- | | M/T American Phoenix | $3,420 | $6,643 | | Free State Pipeline | — | $1,923 | - As of March 31, 2021, the company received $17.5 million from Denbury and has $52.5 million in receivables for the remaining payments on the previously held NEJD direct financing lease[40] 5. Inventories As of March 31, 2021, total inventory decreased to $72.427 million from December 31, 2020, primarily comprising petroleum products, crude oil, caustic soda, sodium hydrosulfide, and soda ash business raw materials, work-in-process, and finished goods Inventory Composition (in thousands of dollars) | Inventory Category | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Petroleum products | $2,584 | $5,840 | | Crude oil | $14,633 | $37,661 | | Caustic soda | $5,108 | $5,167 | | Sodium hydrosulfide | $7,736 | $9,101 | | Soda ash business raw materials | $6,492 | $7,120 | | Soda ash business work-in-process | $10,700 | $9,355 | | Soda ash business finished goods, net | $11,988 | $13,002 | | Soda ash business materials and supplies, net | $13,186 | $12,631 | | Total | $72,427 | $99,877 | - Total inventory decreased from $99,877 thousand as of December 31, 2020, to $72,427 thousand as of March 31, 2021[41] 6. Fixed Assets, Mineral Leaseholds, and Asset Retirement Obligations As of March 31, 2021, net fixed assets and mineral leaseholds slightly decreased, while asset retirement obligations (AROs) increased, with amortization expenses expected to continue in the coming years Net Fixed Assets (in thousands of dollars) | Metric | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Fixed assets, at cost | $5,206,508 | $5,173,475 | | Less: Accumulated depreciation | $(1,381,384) | $(1,322,141) | | Net fixed assets | $3,825,124 | $3,851,334 | Net Mineral Leaseholds (in thousands of dollars) | Metric | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Mineral leaseholds | $566,019 | $566,019 | | Less: Accumulated depletion | $(14,356) | $(13,444) | | Mineral leaseholds, net | $551,663 | $552,575 | Changes in Asset Retirement Obligations (AROs) (in thousands of dollars) | Metric | Amount | | :--- | :--- | | AROs liability balance as of December 31, 2020 | $176,852 | | Amortization expense | $2,584 | | Changes in estimates | $797 | | Settlements | $(2,017) | | AROs liability balance as of March 31, 2021 | $178,216 | 7. Equity Investees The company accounts for joint venture investments using the equity method, with increased earnings and distributions from equity investees for the three months ended March 31, 2021, notably from Poseidon Oil Pipeline Company, L.L.C Equity Investee Information (in thousands of dollars) | Metric | For the three months ended March 31, 2021 | For the three months ended March 31, 2020 | | :--- | :--- | :--- | | Genesis' share of operating earnings | $24,533 | $18,032 | | Amortization of excess purchase price | $(3,873) | $(3,873) | | Net equity earnings | $20,660 | $14,159 | | Distributions received | $29,516 | $20,565 | - Genesis' share of operating earnings increased 36.06% year-over-year, from $18,032 thousand in Q1 2020 to $24,533 thousand in Q1 2021[51] - Distributions received increased 43.53% year-over-year, from $20,565 thousand in Q1 2020 to $29,516 thousand in Q1 2021[51] 8. Intangible Assets As of March 31, 2021, net intangible assets slightly decreased, primarily comprising offshore contract intangibles and other intangibles, with a year-over-year reduction in amortization expense Intangible Asset Composition (in thousands of dollars) | Category | Book Value as of March 31, 2021 | Book Value as of December 31, 2020 | | :--- | :--- | :--- | | Offshore contract intangibles | $220 | $229 | | Offshore pipeline contract intangibles | $110,948 | $113,028 | | Other | $16,680 | $15,485 | | Total | $127,848 | $128,742 | Intangible Asset Amortization Expense (in thousands of dollars) | Period | Amortization Expense | | :--- | :--- | | For the three months ended March 31, 2021 | $2,600 | | For the three months ended March 31, 2020 | $4,116 | - Intangible asset amortization expense decreased 36.96% year-over-year, from $4,116 thousand in Q1 2020 to $2,600 thousand in Q1 2021[54] 9. Debt As of March 31, 2021, total long-term debt was $3.37 billion, a decrease from December 31, 2020, with the company redeeming some 2023 senior unsecured notes in Q1 and planning to issue additional 2027 notes post-period to repay its revolving credit facility Debt Composition (in thousands of dollars) | Debt Type | Net Value as of March 31, 2021 | Net Value as of December 31, 2020 | | :--- | :--- | :--- | | Senior secured credit facility | $699,000 | $643,700 | | 6.000% Senior unsecured notes due 2023 | — | $80,355 | | 5.625% Senior unsecured notes due 2024 | $338,386 | $338,172 | | 6.500% Senior unsecured notes due 2025 | $529,491 | $529,195 | | 6.250% Senior unsecured notes due 2026 | $355,805 | $355,610 | | 8.000% Senior unsecured notes due 2027 | $737,476 | $736,978 | | 7.750% Senior unsecured notes due 2028 | $710,104 | $709,706 | | Total long-term debt | $3,370,262 | $3,393,716 | - As of March 31, 2021, the company had $699 million borrowed under its $1.7 billion senior secured credit facility, with $999.7 million available for borrowing[57] - On January 19, 2021, the company redeemed the remaining $80.9 million of its 2023 senior unsecured notes, incurring a loss of approximately $1.6 million[61] - On April 8, 2021, the company entered into a new credit agreement extending the term of its existing credit facility, and on April 22, 2021, issued an additional $250 million of 2027 notes[58][62] 10. Partners' Capital, Mezzanine Capital and Distributions The company disclosed outstanding common and Class A convertible preferred units and distributions, with Class A preferred units classified as mezzanine capital and accounted for due to redemption features and an embedded interest rate reset option, while redeemable non-controlling interest increased from issuance and PIK distributions Common Unit Distributions (in thousands of dollars, except per unit amounts) | Distribution Quarter | Payment Date | Amount Per Unit | Total Amount | | :--- | :--- | :--- | :--- | | Q1 2020 | May 15, 2020 | $0.15 | $18,387 | | Q2 2020 | August 14, 2020 | $0.15 | $18,387 | | Q3 2020 | November 13, 2020 | $0.15 | $18,387 | | Q4 2020 | February 12, 2021 | $0.15 | $18,387 | | Q1 2021 | May 14, 2021 | $0.15 | $18,387 | Class A Convertible Preferred Unit Distributions (in thousands of dollars, except per unit amounts) | Distribution Quarter | Payment Date | Amount Per Unit | Total Amount | | :--- | :--- | :--- | :--- | | Q1 2020 | May 15, 2020 | $0.7374 | $18,684 | | Q2 2020 | August 14, 2020 | $0.7374 | $18,684 | | Q3 2020 | November 13, 2020 | $0.7374 | $18,684 | | Q4 2020 | February 12, 2021 | $0.7374 | $18,684 | | Q1 2021 | May 14, 2021 | $0.7374 | $18,684 | Changes in Redeemable Non-Controlling Interest (in thousands of dollars) | Metric | Amount | | :--- | :--- | | Balance as of December 31, 2020 | $141,194 | | Issuance of preferred units, net of issuance costs | $19,561 | | Payment-in-kind (PIK) distributions | $4,093 | | Accretion to redemption value | $698 | | Tax distributions | $(1,891) | | Balance as of March 31, 2021 | $163,655 | 11. Net Income (Loss) Per Common Unit For the three months ended March 31, 2021, basic and diluted net loss per common unit was $0.43, compared to net income of $0.05 in the prior year period, primarily influenced by net loss attributable to Genesis Energy, L.P. and Class A convertible preferred unit distributions Net Income (Loss) Per Common Unit Calculation (in thousands of dollars, except per unit amounts) | Metric | For the three months ended March 31, 2021 | For the three months ended March 31, 2020 | | :--- | :--- | :--- | | Net income (loss) attributable to Genesis Energy L.P. | $(34,224) | $24,909 | | Less: Cumulative distributions attributable to Class A convertible preferred units | $(18,684) | $(18,684) | | Net income (loss) attributable to common unitholders | $(52,908) | $6,225 | | Weighted-average common units outstanding | 122,579 | 122,579 | | Basic and diluted net income (loss) per common unit | $(0.43) | $0.05 | - In Q1 2021, basic and diluted net loss per common unit was $0.43, compared to net income of $0.05 in Q1 2020[78] - The assumed conversion of Class A convertible preferred units was anti-dilutive in Q1 2021 and thus excluded from diluted earnings per unit calculation[77] 12. Business Segment Information The company manages its business through four reportable segments, using Segment Margin as a key performance indicator, with total segment margin decreasing year-over-year for the three months ended March 31, 2021, but with varied performance across segments - The company's business is divided into four segments: Offshore Pipeline Transportation, Sodium Minerals and Sulfur Services, Onshore Facilities and Transportation, and Marine Transportation[82] Segment Margin (in thousands of dollars) | Segment | For the three months ended March 31, 2021 | For the three months ended March 31, 2020 | | :--- | :--- | :--- | | Offshore Pipeline Transportation | $84,269 | $85,246 | | Sodium Minerals and Sulfur Services | $43,720 | $36,941 | | Onshore Facilities and Transportation | $20,999 | $28,099 | | Marine Transportation | $7,109 | $19,002 | | Total Segment Margin | $156,097 | $169,288 | - Total segment margin decreased 7.79% year-over-year, from $169,288 thousand in Q1 2020 to $156,097 thousand in Q1 2021[81] 13. Transactions with Related Parties The company engages in related party transactions with Poseidon and ANSAC, with service and fee revenue from Poseidon increasing and product sales revenue to ANSAC decreasing for the three months ended March 31, 2021 Related Party Transactions (in thousands of dollars) | Transaction Type | For the three months ended March 31, 2021 | For the three months ended March 31, 2020 | | :--- | :--- | :--- | | Service and fee revenue from Poseidon | $3,786 | $3,147 | | Product sales revenue from ANSAC | $67,955 | $73,079 | | Aircraft usage fees paid to CEO | $165 | $165 | | Service fees from Poseidon | $240 | $254 | | Service fees from ANSAC | $178 | $832 | - Product sales revenue to ANSAC decreased 7.01% year-over-year, from $73,079 thousand in Q1 2020 to $67,955 thousand in Q1 2021[86][90] 14. Supplemental Cash Flow Information For the three months ended March 31, 2021, net changes in operating assets and liabilities resulted in a cash outflow, contrasting with a cash inflow in the prior year period, while interest and commitment fee payments increased Net Changes in Operating Assets and Liabilities Components (in thousands of dollars) | Component | For the three months ended March 31, 2021 | For the three months ended March 31, 2020 | | :--- | :--- | :--- | | Accounts receivable (increase/decrease) | $(99,504) | $101,405 | | Inventories (increase/decrease) | $27,450 | $(5,024) | | Accounts payable (increase/decrease) | $38,994 | $(62,365) | | Accrued liabilities (increase/decrease) | $22,561 | $(25,519) | | Net changes in operating assets and liabilities components | $(5,062) | $7,534 | - Interest and commitment fees paid in Q1 2021 were $35.4 million, up from $33.7 million in Q1 2020[93] 15. Derivatives The company uses commodity derivatives (futures, options, swaps) to hedge price risk, primarily for crude oil, fuel oil, and natural gas, and as of March 31, 2021, the embedded derivative for the Class A convertible preferred units' interest rate reset option had a fair value liability of $70.8 million, with an $18.4 million unrealized loss recognized this quarter - The company uses commodity derivatives (futures, options, and swaps) to hedge commodity price risk, primarily for crude oil, fuel oil, and natural gas[95][99] - As of March 31, 2021, the fair value of the embedded derivative for the Class A convertible preferred units' interest rate reset option was a $70.8 million liability[107] Impact of Derivatives on Operating Results (in thousands of dollars) | Derivative Type | Gain (Loss) for the three months ended March 31, 2021 | Gain (Loss) for the three months ended March 31, 2020 | | :--- | :--- | :--- | | Commodity derivatives - futures and call options | $(9,818) | $(646) | | Natural gas swap liability | $(67) | $(432) | | Preferred unit distribution interest rate reset option | $(18,438) | $32,545 | - In Q1 2021, the company recognized an $18.4 million unrealized loss from the preferred unit distribution interest rate reset option, compared to an $32.5 million unrealized gain in Q1 2020[108] 16. Fair-Value Measurements The company categorizes financial assets and liabilities into three fair value levels based on input observability, with the Class A convertible preferred units' interest rate reset option classified as a Level 3 liability, increasing to $70.81 million as of March 31, 2021 - The company categorizes financial assets and liabilities into three fair value levels: Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[109] Recurring Fair Value Measurements (in thousands of dollars) | Category | Fair Value as of March 31, 2021 | Fair Value as of December 31, 2020 | | :--- | :--- | :--- | | Commodity derivatives: Assets | $1,040 | $2,370 | | Commodity derivatives: Liabilities | $(1,397) | $(5,459) | | Preferred unit distribution interest rate reset option | $(70,810) | $(52,372) | - The preferred unit distribution interest rate reset option is classified as a Level 3 fair value measurement, with its fair value increasing from ($52,372) thousand as of December 31, 2020, to ($70,810) thousand as of March 31, 2021[112][113] - In Q1 2021, due to a decrease in discount yield and proximity to the coupon rate reset date, the company recorded an $18.4 million unrealized loss[114] 17. Commitments and Contingencies The company is subject to various environmental laws, regulations, litigation, and governmental agency reviews, but these matters are not currently expected to have a material adverse effect on its financial condition, results of operations, or cash flows - The company is subject to various environmental laws and regulations, with policies and procedures to monitor compliance[117] - The company faces litigation and regulatory reviews in the normal course of business, which are not expected to have a material impact on its financial condition[118] 18. Subsequent Events Subsequent to the reporting period, the company entered into a new $950 million senior secured credit agreement on April 8, 2021, and issued an additional $250 million of 2027 notes on April 22, 2021, to extend debt maturities and enhance liquidity - On April 8, 2021, the company entered into a new $950 million senior secured credit agreement, including a $300 million term loan and a $650 million revolving loan, maturing on March 15, 2024[119] - On April 22, 2021, the company issued an additional $250 million of 2027 notes, with net proceeds to be used for general partnership purposes, including repayment of the new revolving loan[120] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides a detailed analysis of the company's financial condition and operating results for the three months ended March 31, 2021, including discussions on net income, segment margin, cash flows, liquidity, capital resources, COVID-19 impacts, and future outlook Overview In Q1 2021, the company reported a $34.2 million net loss attributable to Genesis Energy, L.P., compared to a $24.9 million net income in the prior year, primarily due to decreased segment margin and an unrealized loss on preferred unit embedded derivatives, with available cash before reserves declining 33.2% - In Q1 2021, net loss attributable to Genesis Energy, L.P. was $34.2 million, compared to net income of $24.9 million in Q1 2020[123] - The net loss was primarily driven by a $13.2 million decrease in segment margin and an $18.4 million unrealized loss on preferred unit embedded derivatives[123] - Cash flow from operating activities in Q1 2021 was $77.2 million, down from $89.6 million in Q1 2020[124] - Available cash before reserves for common unitholders was $54.6 million, a 33.2% year-over-year decrease[125] COVID-19 and Market Update The company's operations were deemed critical and continued during COVID-19, experiencing demand and volume impacts in 2020 but showing economic recovery in Q1 2021, while focusing on deleveraging and successfully refinancing and extending its senior secured credit facility - The company's operations are considered critical and essential, continuing throughout the COVID-19 pandemic[129] - Demand and volumes declined in 2020 due to COVID-19 and commodity price volatility, but economic recovery began in Q1 2021[132] - The company continues to focus on deleveraging, successfully refinancing and extending its senior secured credit facility, and issuing additional 2027 notes, ensuring no scheduled long-term debt maturities before 2024[134] Results of Operations In Q1 2021, total revenue decreased and total costs and expenses increased, leading to a significant reduction in operating income, with overall segment margin declining despite growth in the Sodium Minerals and Sulfur Services segment, and various cost and expense items showing different trends Revenues and Costs and Expenses In Q1 2021, total revenue decreased 3% year-over-year, while total costs and expenses increased 3%, resulting in a $31.1 million net reduction in operating income, despite a 25% rise in crude oil prices, as the company mitigated direct commodity price risk through fee-based contracts and hedging - Total revenue decreased by $18.7 million (3%) year-over-year in Q1 2021, while total costs and expenses increased by $12.4 million (3%)[135] - Operating income decreased by $31.1 million net[135] - The average closing price for West Texas Intermediate crude oil (NYMEX) increased 25% to $57.84 per barrel in Q1 2021[138] - The company limits direct commodity price risk through fee-based contracts, back-to-back purchase and sale arrangements, and hedging[139] Segment Margin Total segment margin decreased 8% to $156.1 million in Q1 2021, with declines in Offshore Pipeline Transportation and Marine Transportation, but growth in Sodium Minerals and Sulfur Services, and a decrease in Onshore Facilities and Transportation Segment Margin Comparison (in thousands of dollars) | Segment | For the three months ended March 31, 2021 | For the three months ended March 31, 2020 | | :--- | :--- | :--- | | Offshore Pipeline Transportation | $84,269 | $85,246 | | Sodium Minerals and Sulfur Services | $43,720 | $36,941 | | Onshore Facilities and Transportation | $20,999 | $28,099 | | Marine Transportation | $7,109 | $19,002 | | Total Segment Margin | $156,097 | $169,288 | - Total segment margin decreased by $13.2 million (8%) year-over-year[143] Offshore Pipeline Transportation Segment In Q1 2021, offshore pipeline transportation segment margin decreased by $1 million (1%) year-over-year, primarily due to lower overall crude oil and natural gas pipeline system volumes, particularly the CHOPS pipeline shutdown from hurricane damage, partially offset by increased distributions from equity investments (Poseidon, SEKCO) - Offshore Pipeline Transportation segment margin decreased by $1 million (1%) year-over-year[152] - Volume decline was primarily due to the CHOPS pipeline being out of service until February 3, 2021[152] - Average daily volumes for the Poseidon crude oil pipeline increased from 279,181 barrels per day in Q1 2020 to 339,409 barrels per day in Q1 2021[150] Sodium Minerals and Sulfur Services Segment In Q1 2021, sodium minerals and sulfur services segment margin increased by $6.8 million (18%) year-over-year, driven by improved Westvaco facility productivity and cost efficiencies, despite lower domestic pricing and volumes, with the Granger facility expected to resume operations after expansion completion in late 2023 - Sodium Minerals and Sulfur Services segment margin increased by $6.8 million (18%) year-over-year[155] - The increase was primarily due to improved Westvaco facility productivity and cost efficiencies, offsetting lower domestic pricing and volumes[155] - Soda ash sales volumes decreased from 822,247 short tons in Q1 2020 to 762,820 short tons in Q1 2021[153] - The Granger facility is expected to resume operations after its expansion is completed in late 2023[155] Onshore Facilities and Transportation Segment In Q1 2021, onshore facilities and transportation segment margin decreased by $7.1 million (25%) year-over-year, primarily due to reduced volumes in onshore pipelines and rail logistics assets and the divestiture of the Free State pipeline, partially offset by $12.3 million in cash proceeds from the NEJD pipeline - Onshore Facilities and Transportation segment margin decreased by $7.1 million (25%) year-over-year[164] - The decrease was primarily due to reduced volumes in Louisiana rail unloading and pipeline assets, and the divestiture of the Free State pipeline[164] - Approximately $12.3 million in cash was received from Denbury for the previously owned NEJD pipeline[164] - Total onshore crude oil pipeline volumes decreased from 263,657 barrels per day in Q1 2020 to 167,368 barrels per day in Q1 2021[162] Marine Transportation Segment In Q1 2021, marine transportation segment margin decreased by $11.9 million (63%) year-over-year, primarily due to lower inland business utilization and day rates, and reduced rates for offshore barge operations, including the M/T American Phoenix tanker, with utilization and spot rates expected to remain under pressure - Marine Transportation segment margin decreased by $11.9 million (63%) year-over-year[168] - The decrease was primarily due to lower inland business utilization and day rates, and reduced rates for offshore barge operations[168] - Inland barge utilization decreased from 93.4% in Q1 2020 to 72.0% in Q1 2021[166] - Offshore barge utilization decreased from 99.4% in Q1 2020 to 95.7% in Q1 2021[166] Other Costs, Interest, and Income Taxes This section details changes in general and administrative expenses, depreciation, depletion, and amortization expense, net interest expense, and income tax expense for Q1 2021 compared to Q1 2020 General and administrative expenses In Q1 2021, total general and administrative expenses increased by $2.3 million year-over-year, primarily due to higher long-term incentive compensation expense, partially offset by lower corporate general and administrative expenses General and Administrative Expenses (in thousands of dollars) | Expense Category | For the three months ended March 31, 2021 | For the three months ended March 31, 2020 | | :--- | :--- | :--- | | Corporate general and administrative expenses | $9,421 | $10,793 | | Long-term incentive compensation expense | $1,080 | $(2,485) | | Total general and administrative expenses | $11,666 | $9,373 | - Total general and administrative expenses increased by $2.3 million year-over-year[170] Depreciation, depletion, and amortization expense In Q1 2021, total depreciation, depletion, and amortization expense decreased by $8.1 million year-over-year, mainly due to the impairment of rail logistics assets in Q2 2020 and the full amortization of the M/T American Phoenix contract intangible asset Depreciation, Depletion, and Amortization Expense (in thousands of dollars) | Expense Category | For the three months ended March 31, 2021 | For the three months ended March 31, 2020 | | :--- | :--- | :--- | | Depreciation and depletion expense | $63,614 | $70,205 | | Amortization expense | $2,672 | $4,152 | | Total depreciation, depletion, and amortization expense | $66,286 | $74,357 | - Total depreciation, depletion, and amortization expense decreased by $8.1 million year-over-year[172] Interest expense, net In Q1 2021, net interest expense increased by $2.9 million year-over-year, primarily due to higher interest expense on senior unsecured notes, partially offset by reduced interest expense on the senior secured credit facility Net Interest Expense (in thousands of dollars) | Expense Category | For the three months ended March 31, 2021 | For the three months ended March 31, 2020 | | :--- | :--- | :--- | | Senior secured credit facility interest expense | $7,431 | $10,745 | | Senior unsecured notes interest expense | $48,335 | $42,358 | | Net interest expense | $57,829 | $54,965 | - Net interest expense increased by $2.9 million year-over-year[174] - Interest expense on senior unsecured notes increased, primarily due to the issuance of 2028 and 2027 notes[174] - Interest expense on the senior secured credit facility decreased, primarily due to lower outstanding balances and LIBOR rates[175] Income tax expense The company's income tax expense is primarily related to the operations of its wholly-owned corporate subsidiaries and influenced by state and foreign income taxes, fluctuating as a percentage of pre-tax income or loss across periods - Income tax expense is primarily related to the operations of wholly-owned corporate subsidiaries[176] - The amount of income tax expense fluctuates as a percentage of pre-tax income or loss across periods[176] Liquidity and Capital Resources As of March 31, 2021, the company maintained a strong balance sheet and liquidity with $999.7 million available under its revolving credit facility, and subsequently refinanced and extended its senior secured credit facility and issued additional 2027 notes to ensure no scheduled long-term debt maturities before 2024 General As of March 31, 2021, the company had $999.7 million in remaining borrowing capacity, with primary liquidity sources including operating cash flow, credit facility borrowings, and equity/senior unsecured note issuances, and subsequently refinanced its senior secured credit facility to ensure no scheduled long-term debt maturities before 2024 - As of March 31, 2021, the company had $999.7 million in remaining borrowing capacity under its $1.7 billion senior secured revolving credit facility[177] - Primary cash needs include working capital, operating expenses, debt service, capital growth and maintenance projects, acquisitions, and quarterly cash distributions to preferred and common unitholders[182] - Subsequent to the period, the company entered into a new $950 million senior secured credit agreement and issued an additional $250 million of 2027 notes, ensuring no scheduled long-term debt maturities before 2024[178][179] Capital Resources As of March 31, 2021, total long-term debt was approximately $3.3703 billion, a $23.5 million decrease from December 31, 2020, with the company continuing to focus on deleveraging and funding the Granger optimization project through an agreement with GSO - As of March 31, 2021, total long-term debt was approximately $3.3703 billion, a $23.5 million decrease from December 31, 2020[181] - The estimated cost of the Granger Optimization Project (GOP) will be 100% funded by GSO's purchase of up to approximately $350 million in preferred units, with completion expected in late 2023[182] Shelf Registration Statement The company filed a new universal shelf registration statement (2021 Shelf) with the SEC, allowing for future issuance of an unlimited amount of equity and debt securities to meet future liquidity needs, including acquisitions and refinancing, with the statement expiring in April 2024 - The company filed a new universal shelf registration statement (2021 Shelf) allowing for the issuance of an unlimited amount of equity and debt securities[184] - This statement aims to meet future liquidity needs, including acquiring assets and businesses and refinancing[183] - The 2021 Shelf registration statement will expire in April 2024[184] Cash Flows from Operations In Q1 2021, net cash flow from operating activities was $77.2 million, down from $89.6 million in Q1 2020, primarily affected by decreased segment margin and changes in working capital items - Net cash flow from operating activities in Q1 2021 was $77.2 million, down from $89.6 million in Q1 2020[190] - Cash flows are affected by changes in working capital items, primarily inventory, accounts receivable, and accounts payable[185] Capital Expenditures, Distributions and Certain Cash Requirements The company primarily uses operating cash flow for operating expenses, working capital, debt service, acquisitions, organic growth projects, maintenance capital expenditures, and distributions to unitholders, with total capital expenditures increasing in Q1 2021, notably in maintenance capital - The company primarily uses cash generated from operating activities for operating expenses, working capital, debt service, acquisitions, organic growth projects, maintenance capital expenditures, and distributions to unitholders[191] - The company plans to use most excess cash flow to reduce outstanding balances under its revolving credit facility and opportunistically repurchase outstanding senior unsecured notes[191] Capital Expenditures In Q1 2021, total capital expenditures for fixed assets and intangible assets were $36.035 million, an increase from Q1 2020, with a significant rise in maintenance capital expenditures Capital Expenditures for Fixed Assets and Intangible Assets (in thousands of dollars) | Category | For the three months ended March 31, 2021 | For the three months ended March 31, 2020 | | :--- | :--- | :--- | | Total maintenance capital expenditures | $26,153 | $20,558 | | Total growth capital expenditures | $9,882 | $12,086 | | Total capital expenditures for fixed assets and intangible assets | $36,035 | $32,644 | - Total capital expenditures increased from $32,644 thousand in Q1 2020 to $36,035 thousand in Q1 2021[192] Growth Capital Expenditures In Q1 2021, total growth capital expenditures were $9.882 million, a decrease from the prior year period, with the Granger Optimization Project being the primary growth capital expenditure, funded by GSO's preferred unit investment and expected to be completed by late 2023 - Total growth capital expenditures in Q1 2021 were $9.882 million, down from $12.086 million in Q1 2020[192] - The Granger Optimization Project is the company's primary growth capital expenditure, funded by GSO's preferred unit investment, and is expected to be completed by late 2023[193] Maintenance Capital Expenditures In Q1 2021, total maintenance capital expenditures were $26.153 million, an increase from the prior year period, primarily focused on the soda ash business, offshore transportation segment, and marine transportation segment for equipment maintenance, upgrades, and pipeline repairs - Total maintenance capital expenditures in Q1 2021 were $26.153 million, up from $20.558 million in Q1 2020[192] - These expenditures primarily occurred in the soda ash business, offshore transportation segment, and marine transportation segment for equipment maintenance, upgrades, and pipeline repairs[195] Distributions to Unitholders The company will pay a distribution of $0.15 per common unit, totaling $18.4 million, on May 14, 2021, and a quarterly cash distribution of $0.7374 per unit to Class A convertible preferred unitholders - The company will pay a distribution of $0.15 per common unit, totaling $18.4 million, to common unitholders on May 14, 2021[196] - A quarterly cash distribution of $0.7374 per unit will be paid to Class A convertible preferred unitholders[197] Guarantor Summarized Financial Information The company's $2.7 billion senior unsecured notes are unconditionally guaranteed by all wholly-owned domestic subsidiaries (guarantor subsidiaries), excluding certain entities like soda ash business subsidiaries, with this section providing consolidated summarized financial information for Genesis Energy, L.P. and the guarantor subsidiaries - The company's $2.7 billion senior unsecured notes are unconditionally and jointly and severally guaranteed by all wholly-owned domestic subsidiaries (guarantor subsidiaries)[198] - Guarantor subsidiaries exclude entities such as soda ash business subsidiaries, Genesis Free State Pipeline, LLC, and Genesis NEJD Pipeline, LLC[198] Genesis Energy, L.P. and Guarantor Subsidiaries Summarized Balance Sheet (in thousands of dollars) | Metric | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Current assets | $383,742 | $313,328 | | Fixed assets, net | $3,096,330 | $3,115,492 | | Non-current assets | $843,824 | $861,230 | | Current liabilities | $354,508 | $266,688 | | Non-current liabilities | $3,706,448 | $3,710,044 | | Class A convertible preferred units | $790,115 | $790,115 | Genesis Energy, L.P. and Guarantor Subsidiaries Summarized Statements of Operations (in thousands of dollars) | Metric | For the three months ended March 31, 2021 | | :--- | :--- | | Revenue | $351,527 | | Operating costs | $335,149 | | Operating income (loss) | $16,379 | | Loss before income taxes | $(40,856) | | Net loss | $(41,077) | | Net loss attributable to common unitholders | $(115,813) | Non-GAAP Financial Measure Reconciliations This section provides a reconciliation of the non-GAAP financial measure 'Available Cash before Reserves' to the most directly comparable GAAP financial measure, showing that available cash before reserves decreased from $81.78 million in Q1 2020 to $54.597 million in Q1 2021 Available Cash before Reserves Reconciliation (in thousands of dollars) | Metric | For the three months ended March 31, 2021 | For the three months ended March 31, 2020 | | :--- | :--- | :--- | | Net income (loss) attributable to Genesis Energy, L.P. | $(34,224) | $24,909 | | Income tax expense (benefit) | $222 | $(365) | | Depreciation, depletion, amortization, and accretion | $68,997 | $75,978 | | Add (subtract) specific items, net | $46,495 | $4,806 | | Maintenance capital utilized | $(12,850) | $(8,800) | | Cash taxes | $(150) | $(150) | | Distributions to preferred unitholders | $(18,684) | $(18,684) | | Redeemable non-controlling interest accretion to redemption value | $4,791 | $4,086 | | Available Cash before Reserves | $54,597 | $81,780 | - Available cash before reserves decreased from $81.78 million in Q1 2020 to $54.597 million in Q1 2021[204] Non-GAAP Financial Measures This section explains the company's use of non-GAAP financial measures, such as 'Available Cash before Reserves' and 'Segment Margin,' to assess business performance and make decisions, providing additional perspectives for management, lenders, analysts, and other market participants, which should be evaluated in conjunction with GAAP measures General The company uses non-GAAP financial measures like 'Available Cash before Reserves' and 'Segment Margin' to evaluate business performance and make decisions, aiming to provide the same financial information used by management, lenders, analysts, and other market participants, but these should not replace GAAP measures - The company uses non-GAAP financial measures "Available Cash before Reserves" and "Segment Margin" to evaluate its business[212] - These non-GAAP measures should not be considered substitutes for GAAP liquidity or financial performance measures[214] Segment Margin Segment Margin is the metric used by the company's chief operating decision maker to assess segment performance, defined as revenue less cost of products, operating expenses, and segment general and administrative expenses, adjusted for specific items, aiding in the evaluation of core operating performance - Segment Margin is the metric used by the company's chief operating decision maker to assess segment performance[215] - It is defined as revenue less cost of products, operating expenses, and segment general and administrative expenses, adjusted for specific items[215] Available Cash before Reserves Available Cash before Reserves is a quantitative standard for evaluating the company's financial performance, operating results, project feasibility, ability to meet non-discretionary cash needs, and make discretionary payments, with a modified disclosure format using 'Maintenance Capital Utilized' as a proxy for non-discretionary maintenance capital expenditures Purposes, Uses and Definition Available Cash before Reserves is a widely used quantitative standard in the investment community to evaluate asset financial performance, operating results, project feasibility, ability to meet non-discretionary cash needs, and make discretionary payments such as distributions and growth capital expenditures - Available Cash before Reserves is used to evaluate the financial performance and operating results of assets[217] - It is used to evaluate the feasibility of potential projects, including cash and total capital returns compared to other midstream energy companies[217] - It is used to evaluate the ability of assets to generate cash to meet non-discretionary cash needs, such as interest payments and certain maintenance capital requirements[217] - It is used to evaluate the ability to make discretionary payments, such as common and preferred unit distributions, growth capital expenditures, certain maintenance capital expenditures, and early debt repayment[217] Disclosure Format Relating to Maintenance Capital The company adopted a modified disclosure format using 'Maintenance Capital Utilized' as a proxy for non-discretionary maintenance capital expenditures to address significant variations in the nature, timing, and amount of maintenance capital expenditures, providing clearer information to users - The company uses a modified disclosure format because maintenance capital expenditures vary significantly in nature, timing, and amount[218] - "Maintenance Capital Utilized" serves as a proxy for non-discretionary maintenance capital expenditures, considering the relationship between maintenance capital expenditures, operating expenses, and depreciation[218][222] Maintenance Capital Requirements Maintenance capital expenditures are capitalized costs required to maintain the service capability of existing assets, categorized as non-discretionary (mandatory) and discretionary (non-mandatory), with discretionary maintenance capital expenditures increasing as the business expands, requiring more detailed review and analysis - Maintenance capital expenditures are capitalized costs required to maintain the service capability of existing assets, including replacing worn or obsolete system components or equipment[219] - Maintenance capital expenditures can be categorized as non-discretionary (mandatory) and discretionary (non-mandatory)[219][221] - As non-pipeline businesses expand, discretionary maintenance capital expenditures increase, requiring more detailed review and analysis[222] Maintenance Capital Utilized Maintenance Capital Utilized is the company's quarterly maintenance capital requirement metric used to calculate Available Cash before Reserves, defined as the portion of previously incurred maintenance capital expenditures utilized in the relevant quarter, allocated proportionally over the useful life of the project/component - Maintenance Capital Utilized is the company's quarterly maintenance capital requirement metric used to calculate Available Cash before Reserves[223] - It is defined as the portion of previously incurred maintenance capital expenditures utilized in the relevant quarter, allocated proportionally over the useful life of the project/component[223] Commitments and Off-Balance Sheet Arrangements The company has not experienced significant changes in commitments and contingent liabilities and has no other off-balance sheet arrangements, special purpose entities, or debt or equity triggers based on unit or commodity prices, beyond the contractual obligations and commercial commitments disclosed in its annual report Contractual Obligations and Commercial Commitments There have been no significant changes in the company's contractual obligations and commercial commitments since the annual report disclosure - There have been no significant changes in the company's contractual obligations and commercial commitments since the annual report disclosure[225] Off-Balance Sheet Arrangements The company has no off-balance sheet arrangements, special purpose entities, or financing partnerships, nor any debt or equity triggers based on unit or commodity prices - The company has no off-balance sheet arrangements, special purpose entities, or financing partnerships[226] - The company has no debt or equity triggers based on unit or commodity prices[226] Forward Looking Statements This report contains forward-looking statements regarding the company's expected future activities, events, or developments, including business growth plans, capital expenditures, competitive advantages, and financial performance, which involve risks, uncertainties, and assumptions, and actual results may differ materially from expectations - This report contains forward-looking statements regarding the company's expected future activities, events, or developments[227] - Forward-looking statements involve risks, uncertainties, and assumptions, and actual results may differ materially from expectations[227] - Risk factors include fluctuations in commodity demand and prices, ability to execute business strategies, service interruptions, changes in laws and regulations, availability of capital resources, natural disasters, and cyberattacks[229][231] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section refers to the market risk disclosures in the company's annual report, noting no material changes since its filing, and directs to Note 15 of the financial statements for additional discussion on derivative instruments and hedging activities - There have been no material changes in the quantitative and qualitative disclosures about market risk since the annual report filing[232] - Additional discussion regarding derivative instruments and hedging activities can be found in Note 15 to the financial statements[232] Item 4. Controls and Procedures The company has evaluated and confirmed the effectiveness of its disclosure controls and procedures and internal controls, ensuring timely recording, processing, summarization, and reporting of required information in this quarterly report, with no significant changes to internal controls this quarter - The company has evaluated and confirmed the effectiveness of its disclosure controls and procedures and internal controls[233] - There were no material changes to internal controls this quarter[234] PART II. OTHER INFORMATION Item 1. Legal Proceedings There have been no material developments in legal proceedings since the filing of the annual report on December 31, 2020 - There have been no material developments in legal proceedings since the filing of the annual report on December 31, 2020[237] Item 1A. Risk Factors There have been no material changes to the risk factors disclosed in the company's annual report on December 31, 2020 - There have been no material changes to the risk factors disclosed in the company's annual report on December 31, 2020[238] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the first quarter of 2021 - There were no unregistered sales of equity securities in Q1 2021[239] Item 3. Defaults upon Senior Securities There were no defaults upon senior securities during this quarter - There were no defaults upon senior securities this quarter[240] Item 4. Mine Safety Disclosures Information regarding mine safety and other regulatory actions for the company's Green River and Granger mines in Wyoming is included in Exhibit 95 of this Form 10-Q - Mine safety disclosure information is included in Exhibit 95 of Form 10-Q[241] Item 5. Other Information No other information required disclosure this quarter - No other information required disclosure this quarter[242] Item 6. Exhibits This section lists all exhibits filed with Form 10-Q, including articles of incorporation, credit agreements, certification documents, and mine safety disclosures - Exhibits include articles of incorporation, credit agreements, CEO and CFO certifications, and mine safety disclosures[244] SIGNATURES Signature This report was formally signed by Robert V. Deere, Chief Financial Officer of Genesis Energy, LLC, the general partner of Genesis Energy, L.P., on May 5, 2021 - Signatory: Robert V. Deere, Chief Financial Officer[246] - Date of signature: May 5, 2021[246]