Genesis Energy(US:GEL)2021-08-03 16:00PART I. FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for Q2 2021, covering balance sheets, operations, and cash flows | Account | June 30, 2021 ($ in thousands) | December 31, 2020 ($ in thousands) | | :--- | :--- | :--- | | Total Assets | $5,963,487 | $5,933,619 | | Total current assets | $619,721 | $580,169 | | Net fixed assets | $3,874,647 | $3,851,334 | | Total Liabilities | $4,299,163 | $4,183,462 | | Senior Secured Credit Facility, net | $415,653 | $643,700 | | Senior Unsecured Notes, net | $2,927,489 | $2,750,016 | | Total Partners' Capital | $669,562 | $818,848 | | Metric | Three Months Ended June 30, 2021 ($ in thousands) | Three Months Ended June 30, 2020 ($ in thousands) | Six Months Ended June 30, 2021 ($ in thousands) | Six Months Ended June 30, 2020 ($ in thousands) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | 503,855 | 388,467 | 1,025,074 | 928,390 | | Operating Income (Loss) | 25,537 | (278,220) | 53,558 | (219,058) | | Net Loss | (35,780) | (322,565) | (65,215) | (293,586) | | Net Loss Attributable to Genesis Energy, L.P. | (41,682) | (326,714) | (75,906) | (301,805) | | Net Loss Per Common Unit (Basic and Diluted) | $(0.49) | $(2.82) | $(0.92) | $(2.77) | | Cash Flow Activity | Six Months Ended June 30, 2021 ($ in thousands) | Six Months Ended June 30, 2020 ($ in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | 188,184 | 152,162 | | Net cash used in investing activities | (94,365) | (56,098) | | Net cash used in financing activities | (74,549) | (106,968) | | Net increase (decrease) in cash | 19,270 | (10,904) | Note 1: Organization and Basis of Presentation and Consolidation Genesis Energy, L.P. operates as a master limited partnership in midstream crude oil, natural gas, and soda ash, across four segments - The company's operations are considered critical and essential, and have continued during the Covid-19 pandemic. Management actively monitors the situation and its potential impact on asset valuations2426 - The four reportable segments are: - Offshore pipeline transportation - Sodium minerals and sulfur services - Onshore facilities and transportation - Marine transportation25 Note 3: Revenue Recognition This note details revenue disaggregation by major category for each business segment and discloses remaining performance obligations Revenue by Category - Three Months Ended June 30, 2021 | Revenue Type | Offshore Pipeline Transportation ($ in thousands) | Sodium Minerals & Sulfur Services ($ in thousands) | Onshore Facilities and Transportation ($ in thousands) | Marine Transportation ($ in thousands) | Consolidated ($ in thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | | Fee-based revenues | 73,221 | — | 18,176 | 47,626 | 139,023 | | Product Sales | — | 212,434 | 127,745 | — | 340,179 | | Refinery Services | — | 24,653 | — | — | 24,653 | | Total | 73,221 | 237,087 | 145,921 | 47,626 | 503,855 | - The company has remaining performance obligations totaling $399.4 million, with the majority ($385.1 million) related to long-term offshore pipeline transportation contracts extending beyond 202533 Note 6: Fixed Assets, Mineral Leaseholds, and Asset Retirement Obligations This note details fixed assets, mineral leaseholds, and asset retirement obligations, including a significant impairment charge in Q2 2020 - In Q2 2020, the company recognized a $277.5 million impairment expense on its rail logistics assets within the onshore facilities and transportation segment due to declining demand and uneconomic conditions for crude-by-rail transportation43 Fixed Assets Composition | Asset Category | June 30, 2021 ($ in thousands) | December 31, 2020 ($ in thousands) | | :--- | :--- | :--- | | Crude oil pipelines and related assets | 2,821,996 | 2,811,030 | | Alkali facilities, machinery, and equipment | 641,619 | 622,598 | | Marine vessels | 1,011,171 | 998,553 | | Construction in progress | 260,742 | 170,740 | | Net fixed assets | 3,874,647 | 3,851,334 | Note 9: Debt This note details the company's debt structure, including a new senior secured credit facility and recent note issuances and redemptions - On April 8, 2021, the company entered into a new Fifth Amended and Restated Credit Agreement, providing a $950 million senior secured facility ($650 million revolver, $300 million term loan) maturing in March 202457 - In April 2021, the company issued an additional $250 million of its 8.00% senior unsecured notes due 2027. Net proceeds were used for general partnership purposes, including repaying revolving borrowings66 Total Long-Term Debt | Debt Instrument | Net Value as of June 30, 2021 ($ in thousands) | Net Value as of Dec 31, 2020 ($ in thousands) | | :--- | :--- | :--- | | Senior secured credit facility | 415,653 | 643,700 | | Senior unsecured notes | 2,927,489 | 2,750,016 | | Total long-term debt | 3,343,142 | 3,393,716 | Note 10: Partners' Capital, Mezzanine Capital and Distributions This note details the partnership's capital structure, including common and preferred units, distribution policies, and mezzanine equity - A quarterly distribution of $0.15 per common unit was declared for Q2 2021, to be paid on August 13, 202170 - A quarterly cash distribution of $0.7374 per Class A Convertible Preferred Unit was declared for Q2 202174 - GSO Capital Partners has committed up to $351.75 million in preferred units in the Alkali Holdings subsidiary to fund the Granger Optimization Project (GOP), which is anticipated to be completed in the second half of 202376 Note 12: Business Segment Information This note provides a breakdown of financial performance by the company's four reportable segments, including Segment Margin and asset allocation Segment Margin Performance | Segment | Three Months Ended June 30, 2021 ($ in thousands) | Three Months Ended June 30, 2020 ($ in thousands) | % Change | | :--- | :--- | :--- | :--- | | Offshore pipeline transportation | 83,106 | 75,148 | 11% | | Sodium minerals & sulfur services | 38,194 | 24,824 | 54% | | Onshore facilities & transportation | 22,368 | 21,215 | 5% | | Marine transportation | 8,468 | 18,138 | -53% | | Total Segment Margin | 152,136 | 139,325 | 9% | Total Assets by Segment | Segment | June 30, 2021 ($ in thousands) | December 31, 2020 ($ in thousands) | | :--- | :--- | :--- | | Offshore pipeline transportation | 2,152,939 | 2,187,083 | | Sodium minerals and sulfur services | 2,041,083 | 1,962,146 | | Onshore facilities and transportation | 1,011,805 | 1,035,662 | | Marine transportation | 710,870 | 711,058 | | Total consolidated assets | 5,963,487 | 5,933,619 | Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Q2 2021 financial results, covering segment performance, liquidity, capital resources, and non-GAAP measures - Reported Net Loss Attributable to Genesis Energy, L.P. was $41.7 million for Q2 2021, compared to a net loss of $326.7 million in Q2 2020. The 2020 loss was heavily impacted by a $277.5 million impairment charge on rail logistics assets129130 - Total Segment Margin for Q2 2021 was $152.1 million, an increase of 9% from $139.3 million in Q2 2020134 - The company declared a quarterly distribution of $0.15 per common unit and $0.7374 per Class A Convertible Preferred Unit for Q2 2021135 Results of Operations This subsection provides a detailed analysis of operating results for each of the four business segments, including segment margin changes and expense variations Segment Margin Comparison (Q2 2021 vs Q2 2020) | Segment | Q2 2021 Segment Margin ($ in thousands) | Q2 2020 Segment Margin ($ in thousands) | % Change | | :--- | :--- | :--- | :--- | | Offshore pipeline transportation | 83,106 | 75,148 | 11% | | Sodium minerals and sulfur services | 38,194 | 24,824 | 54% | | Onshore facilities and transportation | 22,368 | 21,215 | 5% | | Marine transportation | 8,468 | 18,138 | -53% | | Total Segment Margin | 152,136 | 139,325 | 9% | - General and administrative expenses decreased by $12.5 million in Q2 2021 compared to Q2 2020, primarily because the 2020 quarter included a one-time charge of approximately $13 million for severance and restructuring181 - Depreciation, depletion, and amortization expense decreased by $12.6 million in Q2 2021, mainly due to the impairment of rail logistics assets in 2020 and a fully amortized contract intangible for the M/T American Phoenix184 Liquidity and Capital Resources The company strengthened liquidity through a new credit facility and note issuance, reducing long-term debt and funding growth projects - As of June 30, 2021, the company had $530.5 million of available borrowing capacity under its new $950 million senior secured credit facility196 - Recent financing activities, including a new credit agreement and note offerings, have resulted in no scheduled maturities of long-term debt until 2024, except for term loan payments195 Capital Expenditures (Six Months Ended June 30, 2021) | Category | Amount ($ in thousands) | | :--- | :--- | | Maintenance capital expenditures | 49,917 | | Growth capital expenditures | 102,488 | | Total capital expenditures | 152,405 | Guarantor Summarized Financial Information This section provides summarized financial information for Genesis Energy, L.P. and its guarantor subsidiaries, which guarantee senior unsecured notes Guarantor Group Summarized Financials | Account | June 30, 2021 ($ in thousands) | Six Months Ended June 30, 2021 ($ in thousands) | | :--- | :--- | :--- | | Balance Sheet | | | | Current Assets | 368,126 | | | Non-current Assets | 3,908,699 | | | Current Liabilities | 381,264 | | | Non-current Liabilities | 3,694,962 | | | Statement of Operations | | | | Revenues | | 679,668 | | Operating Income | | 35,397 | | Net Loss | | (83,366) | Non-GAAP Financial Measures This subsection defines and reconciles non-GAAP financial measures, including Segment Margin and Available Cash before Reserves, used for performance assessment Reconciliation to Available Cash before Reserves | Item | Three Months Ended June 30, 2021 ($ in thousands) | Three Months Ended June 30, 2020 ($ in thousands) | | :--- | :--- | :--- | | Net loss attributable to Genesis Energy, L.P. | (41,682) | (326,714) | | Depreciation, depletion, amortization and accretion | 69,684 | 82,580 | | Impairment expense | — | 277,495 | | Plus (minus) Select Items, net | 47,440 | 40,809 | | Maintenance capital utilized | (13,300) | (9,900) | | Distributions to preferred unitholders | (18,684) | (18,684) | | Available Cash before Reserves | 49,554 | 50,390 | Quantitative and Qualitative Disclosures about Market Risk There have been no material changes to the company's quantitative and qualitative disclosures about market risk since its last Annual Report - There have been no material changes affecting the quantitative and qualitative disclosures about market risk as provided in the company's Annual Report251 Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The company's CEO and CFO have concluded that disclosure controls and procedures were effective as of the end of the period covered by this report252 - No material changes to the company's internal control over financial reporting occurred during the second quarter of 2021253 PART II. OTHER INFORMATION Legal Proceedings There have been no material developments in legal proceedings since the filing of the 2020 Annual Report on Form 10-K - There have been no material developments in legal proceedings since the filing of the 2020 Annual Report256 Risk Factors There has been no material change in the company's risk factors as previously disclosed in its 2020 Annual Report on Form 10-K - No material changes to risk factors have occurred since the 2020 Annual Report257 Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity securities were sold during the second quarter of 2021 - No unregistered equity securities were sold during the second quarter of 2021258 Exhibits This section lists the exhibits filed with the Form 10-Q, including supplemental indentures, certifications, and data files - Exhibits filed include supplemental indentures, CEO/CFO certifications, and mine safety disclosures263