Westlake Chemical Partners(WLKP) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Westlake Partners reported a net income of $40 million, or$0.41 per unit, for Q2 2024, benefiting from higher production and sales volume compared to Q2 2023 [4][5] - Consolidated net income, including OpCo's earnings, was $88 million on consolidated net sales of$284 million, with distributable cash flows of $17 million, or$0.49 per unit [7][8] - The partnership's distributable cash flow increased by $2 million compared to Q2 2023, primarily due to higher production and sales volumes [8][9] Business Line Data and Key Metrics Changes - The partnership's performance was positively impacted by OpCo's higher production and sales volumes due to last year's Calvert City turnaround and higher third-party ethylene sales prices and margins [4][8] - The distribution for Q2 2024 was$0.4714 per unit, marking the 40th consecutive quarterly distribution since the IPO in July 2014, with a 71% increase since the original minimum quarterly distribution [9] Market Data and Key Metrics Changes - The company noted improvements in margins on ethylene sales to third parties, attributed to new industry-wide U.S. polyethylene capacity coming online [10] - The overall global macroeconomic environment remains unpredictable, but the ethylene sales agreement provides a predictable fee-based cash flow structure [11] Company Strategy and Development Direction - The company aims to grow distributions through four levers: increasing ownership interest in OpCo, acquiring other qualified income streams, organic growth opportunities, and negotiating a higher fixed margin in the ethylene sales agreement [7] - The management emphasizes a focus on safe operations and environmental stewardship as part of broader sustainability efforts [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of cash flows due to the fixed margin ethylene sales agreement, which minimizes market volatility [5][11] - The planned turnaround at the Petro 1 ethylene unit is expected to impact the distribution coverage ratio temporarily, but the costs have been reserved and funded [10] Other Important Information - At the end of Q2 2024, the company had consolidated cash balances totaling $160 million and long-term debt of$400 million [9] - The company has maintained a strong leverage ratio of approximately one times [9] Q&A Session Summary Question: Regarding the turnaround of Petro 1, should we assume approximately 30 days in the third quarter and 30 days in the fourth quarter? - Yes, the planned turnaround is expected to be split approximately half in each quarter, impacting earnings and production temporarily [14] Question: On the spot exposure to rising ethylene cracker margins, were you below the 5% maximum level in the first half of the year? - The company has been selling ethylene in advance due to elevated margins and expects to participate in the elevated ethylene margins for the rest of the year [14][15] Question: Has there been any spalling of MLP equity markets, or is there still interest in that area? - The company is exploring opportunities in the MLP equity markets, maintaining dialogue for potential value-driven opportunities [15]