Genesis Energy(GEL) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Genesis Energy, L.P. as of September 30, 2023, and for the three and nine months then ended Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (unaudited) | (In thousands) | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total current assets | $1,091,545 | $853,047 | | Net fixed assets | $4,322,632 | $4,096,573 | | TOTAL ASSETS | $6,938,442 | $6,365,992 | | Total current liabilities | $1,023,713 | $709,107 | | Total long-term debt | $3,604,106 | $3,464,154 | | Total liabilities | $5,186,769 | $4,590,530 | | Total partners' capital | $911,978 | $883,553 | | TOTAL LIABILITIES, MEZZANINE CAPITAL AND PARTNERS' CAPITAL | $6,938,442 | $6,365,992 | Unaudited Condensed Consolidated Statements of Operations Statements of Operations Highlights (unaudited) | (In thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $807,618 | $721,248 | $2,402,892 | $2,074,920 | | Operating income | $111,694 | $75,095 | $263,859 | $223,351 | | Net income | $66,782 | $8,573 | $125,848 | $82,537 | | Net income attributable to Genesis Energy, L.P. | $58,070 | $3,385 | $105,770 | $33,482 | | Net income (loss) per common unit (Basic and Diluted) | $0.29 | $(0.12) | $0.30 | $(0.18) | Unaudited Condensed Consolidated Statements of Cash Flows Statements of Cash Flows Highlights (unaudited) | (In thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $396,364 | $252,595 | | Net cash used in investing activities | $(375,992) | $(254,212) | | Net cash provided by (used in) financing activities | $(7,034) | $1,110 | | Net increase (decrease) in cash | $13,338 | $(507) | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail the company's organization, accounting policies, and specific financial items, including business consolidation, debt structure, and a new common unit repurchase program - The company operates through four reportable segments: Offshore pipeline transportation, Soda and sulfur services, Onshore facilities and transportation, and Marine transportation[21][24] - On January 1, 2023, Genesis became the sole member of American Natural Soda Ash Corporation (ANSAC), which is now a wholly-owned subsidiary[29][30] - In January 2023, the company issued $500 million of 8.875% senior unsecured notes due 2030 and used the proceeds to repurchase its existing 2024 notes and repay borrowings under its credit facility[59] - In February 2023, the company entered into a new Sixth Amended and Restated Credit Agreement, providing for an $850 million senior secured revolving credit facility maturing in February 2026[55] - A common equity repurchase program was announced on August 8, 2023, authorizing the repurchase of up to 10% of outstanding Class A Common Units; during Q3 2023, 114,900 units were repurchased for $1.0 million[63] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion provides an overview of Q3 2023 financial results, detailing segment performance, liquidity, capital resources, and non-GAAP measures Overview Q3 2023 vs Q3 2022 Financial Highlights | Metric | Q3 2023 | Q3 2022 | Change | | :--- | :--- | :--- | :--- | | Net Income Attributable to Genesis Energy, L.P. | $58.1 million | $3.4 million | +$54.7 million | | Segment Margin | $207.9 million | $196.2 million | +$11.7 million (6%) | | Cash flow from operating activities | $141.0 million | $94.3 million | +$46.7 million | - The increase in Net Income was driven by higher Segment Margin, a decrease in depreciation expense, and $12.3 million in unrealized gains on commodity derivatives, compared to unrealized losses in the prior-year quarter[131] Results of Operations The company's operating income increased in Q3 2023 due to strong performance in Offshore Pipeline and Marine Transportation, partially offset by a decline in Soda and Sulfur Services Segment Margin by Segment (in thousands) | Segment | Q3 2023 | Q3 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Offshore pipeline transportation | $109,267 | $91,402 | +20% | | Soda and sulfur services | $61,957 | $80,067 | -23% | | Onshore facilities and transportation | $9,547 | $9,442 | +1% | | Marine transportation | $27,126 | $15,279 | +78% | | Total Segment Margin | $207,897 | $196,190 | +6% | - Offshore segment margin increased by $17.9 million (20%) due to higher volumes from the King's Quay and Argos Floating Production Systems[152] - Soda and sulfur services segment margin decreased by $18.1 million (23%) primarily due to lower export pricing in the Alkali Business and reduced NaHS sales volumes and pricing[156] - Marine transportation segment margin increased by $11.8 million (78%) due to higher day rates for both inland and offshore vessels, including a new favorable contract for the M/T American Phoenix[168] Liquidity and Capital Resources The company strengthened its liquidity through refinancing activities and a new credit agreement, with capital expenditures focused on key growth projects - Entered into a new $850 million senior secured revolving credit facility, maturing in February 2026[181] - Issued $500 million of 8.875% senior unsecured notes due 2030 to refinance existing 2024 notes[180] - Available borrowing capacity under the senior secured credit facility was $642.1 million as of September 30, 2023[185] - Key growth projects include the Granger Optimization Project (GOP), expected to complete in Q4 2023, and two deepwater developments requiring approximately $550 million in net capital expenditures for pipeline construction and expansion, expected to be completed in late 2024 or 2025[199][200] Non-GAAP Financial Measures This section defines and reconciles the non-GAAP financial measures of 'Available Cash before Reserves' and 'Segment Margin' Available Cash before Reserves Reconciliation (in thousands) | | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net income attributable to Genesis Energy, L.P. | $58,070 | $3,385 | | Income tax expense | $574 | $660 | | Depreciation, depletion, amortization and accretion | $71,099 | $76,301 | | Plus (minus) Select Items, net | $(767) | $45,583 | | Maintenance capital utilized | $(17,200) | $(14,400) | | Cash tax expense | $(200) | $(250) | | Distributions to preferred unitholders | $(22,612) | $(18,684) | | Available Cash before Reserves | $88,964 | $92,595 | - The company defines Segment Margin as revenues less product costs, operating expenses, and segment G&A, adjusted for certain select items[220] - Available Cash before Reserves is presented as a supplemental measure to assess financial performance, operating performance, and the ability to make discretionary payments like distributions[222] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company states that there have been no material changes to the quantitative and qualitative disclosures about market risk since its last Annual Report - There have been no material changes to the market risk disclosures provided in the company's Annual Report[238] Item 4. Controls and Procedures Management evaluated the company's disclosure controls and procedures, concluding they were effective with no material changes to internal control over financial reporting - The CEO and CFO have determined that the company's disclosure controls and procedures are effective as of September 30, 2023[239] - No changes occurred during the third quarter of 2023 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[240] PART II. OTHER INFORMATION Item 1. Legal Proceedings There have been no material developments in legal proceedings since the company's last Annual Report - No material developments in legal proceedings have occurred since the filing of the Annual Report on Form 10-K for the year ended December 31, 2022[243] Item 1A. Risk Factors The company reports no material changes to its risk factors as previously disclosed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2022 - There has been no material change in the company's risk factors from those disclosed in the 2022 Annual Report on Form 10-K[245] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity securities were sold during Q3 2023, and the company repurchased 114,900 Class A Common Units under its new program Class A Common Unit Repurchases (Q3 2023) | Period | Total units repurchased | Average price per unit | | :--- | :--- | :--- | | August 2023 | 104,900 | $8.96 | | September 2023 | 10,000 | $10.15 | | Total | 114,900 | | Item 3. Defaults upon Senior Securities The company reports no defaults upon senior securities Item 4. Mine Safety Disclosures Information regarding mine safety at the company's Wyoming mines is included in Exhibit 95 of the Form 10-Q Item 5. Other Information The company reports no other information for this item Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, credit agreements, and certifications by the CEO and CFO