Westlake Chemical Partners(US:WLKP)2020-05-05 04:06Financial Data and Key Metrics Changes - Consolidated net income for Q1 2020 was $94 million, with Westlake Partners' net income at $80 million, reflecting strong operational performance [13][14] - Westlake Partners' net income increased by $3 million compared to Q1 2019, primarily due to increased production and higher third-party sales margins [15] - Distributable cash flow for Q1 2020 was $18 million, consistent with Q1 2019, but decreased by $1 million from Q4 2019 due to higher maintenance capital spending [16][21] Business Line Data and Key Metrics Changes - Ethylene facilities operated well above industry rates, contributing to solid financial performance [13] - The ethylene sales agreement helped insulate the company from commodity price risks, ensuring predictable cash flows [13][23] Market Data and Key Metrics Changes - The company maintained strong leverage metrics with a consolidated leverage ratio below 1x and a net debt to capitalization ratio below 25% [19] - The decision to defer the turnaround of the Petro 2 ethylene unit until 2021 was made due to its strong performance [20] Company Strategy and Development Direction - The company aims to leverage four growth levers: increasing ownership interest in OpCo, acquiring other income streams, organic growth through facility expansions, and negotiating higher fixed margins in sales agreements [25] - The predictable fee-based cash flow structure is viewed as an attractive investment thesis in the current uncertain economic environment [23][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of cash flows despite the challenges posed by COVID-19 and low interest rates [23] - The company is prepared to navigate evolving market conditions and is optimistic about returning to normalized market operations [25] Other Important Information - The company announced a distribution of $0.4714 per unit for Q1 2020, a 6% increase from Q1 2019, maintaining a consistent distribution policy [22] - The partnership has made 23 consecutive quarterly distributions since its IPO in 2014, with a total growth of 71% since the original minimum distribution [22] Q&A Session Summary Question: Distribution growth considerations - Management indicated that the decision to maintain or grow distributions depends on capital market conditions and operational metrics, emphasizing the importance of a stable market for effective decision-making [30][31] Question: Risk of falling below contract minimums - Management reassured that the ethylene sales agreement outlines planned production, mitigating risks associated with short-term demand fluctuations [33][34] Question: Interest in raising capital through the Partnership - Management confirmed interest in utilizing the Partnership for capital raising, contingent on market conditions and effective valuation of assets [36][37] Question: Impact of deferred turnaround on earnings - Management noted that deferring the Petro 2 turnaround would allow continued production and earnings, as the plant was performing effectively [40] Question: Factors offsetting reduced spot ethane cracking - The strength of the ethylene sales agreement and hedging strategies were highlighted as key factors offsetting the impact of reduced spot ethane cracking [41]