Westlake Chemical Partners LP Announces Third Quarter 2020 Results

  • Maintained quarterly distribution of $0.4714 per unit with a 1.13x trailing twelve-month distribution coverage; 25th consecutive quarterly distribution to our unitholders

HOUSTON--()--Westlake Chemical Partners LP (NYSE: WLKP) (the "Partnership") today reported net income attributable to the Partnership of $18.5 million, or $0.53 per limited partner unit, for the three months ended September 30, 2020. In connection with Hurricane Laura, which struck Lake Charles, Louisiana on August 27, 2020, Westlake Chemical OpCo LP ("OpCo") declared a force majeure event with respect to its Petro 1 and Petro 2 facilities located in Lake Charles under OpCo's ethylene sales agreement with Westlake Chemical Corporation ("Westlake Chemical"). Under this agreement, Westlake Chemical is obligated to purchase a defined amount of ethylene from OpCo each calendar year at cost plus a fixed price per pound. In the third quarter, Westlake Chemical was obligated to pay OpCo the fixed margin and certain other costs associated with ethylene that OpCo would have produced but could not as a result of this force majeure event. As a result of this agreement, net income in the third quarter of 2020 included a benefit of $41.3 million related to the fixed margin and certain other costs to which OpCo is entitled for the ethylene that it would have sold to Westlake Chemical had the force majeure event not occurred.

As a result of the impact from the force majeure event, which includes the benefit of the ethylene sales agreement and lower production costs, as well as lower third-party sales volumes and increased maintenance expense, net income attributable to the Partnership in the third quarter of 2020 of $18.5 million increased by $3.6 million compared to third quarter 2019 net income attributable to the Partnership of $14.9 million. Cash flows from operating activities in the third quarter of 2020 were $117.2 million, a decrease of $4.3 million compared to third quarter 2019 cash flows from operating activities of $121.5 million. This decrease in cash flows from operating activities was primarily due to an increase in working capital. For the three months ended September 30, 2020, MLP distributable cash flow of $21.2 million increased by $0.7 million from third quarter 2019 MLP distributable cash flow of $20.5 million. The increase in MLP distributable cash flow was primarily attributable to higher earnings and lower interest expense, partially offset by higher reserves for turnaround expense.

Third quarter 2020 net income attributable to the Partnership of $18.5 million increased by $3.6 million from second quarter 2020 net income attributable to the Partnership of $14.9 million. The increase in net income attributable to the Partnership was primarily due to the impact of the force majeure event and lower interest expense. Third quarter 2020 cash flows from operating activities of $117.2 million increased by $4.4 million compared to second quarter 2020 cash flows from operating activities of $112.8 million. The increase in cash flows from operating activities was primarily attributable to higher earnings and lower interest expense. Third quarter 2020 MLP distributable cash flow of $21.2 million increased by $4.3 million compared to second quarter 2020 MLP distributable cash flow of $16.9 million. The increase in MLP distributable cash flow was primarily due to higher earnings.

Net income attributable to the Partnership of $51.1 million, or $1.45 per limited partner unit, for the nine months ended September 30, 2020 increased by $7.5 million compared to the first nine months of 2019 net income attributable to the Partnership of $43.6 million. The increase in net income attributable to the Partnership was due to the impact of the force majeure event and lower interest expense, partially offset by lower ethylene production costs and lower third-party sales. Cash flows from operating activities in the first nine months of 2020 of $340.9 million increased by $5.7 million compared to the first nine months of 2019 cash flows from operating activities of $335.2 million due to the higher earnings during the current-year period. For the nine months ended September 30, 2020, MLP distributable cash flow of $56.4 million increased by $2.0 million compared to the first nine months of 2019 MLP distributable cash flow of $54.4 million. The increase in MLP distributable cash flow as compared to the prior-year period was primarily attributable to the Partnership's higher earnings and lower interest expense, partially offset by higher reserves for turnaround expense.

"In August, Southwest Louisiana was severely impacted by Hurricane Laura, resulting in significant damage to the power and utility infrastructure in the region as well as many of the homes of our employees. Hurricane Laura was one of the strongest hurricanes to hit the Gulf Coast in over 40 years. But due to the dedication of our employees at these facilities, we were able to quickly begin the process of resuming operations at our facilities. I would like to say a special thank you to these employees," said Albert Chao, President and Chief Executive Officer. "While the extensive damage to the infrastructure in the Lake Charles area led to production outages at our Petro 1 and Petro 2 facilities, our long-term ethylene sales agreement with Westlake Chemical enabled us to continue to deliver reliable earnings and cash flow for the quarter, which provides us the ability to deliver predictable distributions to our unitholders."

OpCo's Ethylene Sales Agreement with Westlake Chemical is designed to provide for stable and predictable cash flows. The agreement provides that 95% of OpCo's ethylene production is sold to Westlake Chemical for a cash margin of $0.10 per pound, net of operating costs, maintenance capital expenditures and reserves for future turnaround expenditures.

On October 30, 2020, the Partnership announced that the Board of Directors of Westlake Chemical Partners GP LLC had approved a quarterly distribution for the third quarter of 2020 of $0.4714 per unit to be payable on November 24, 2020 to unitholders of record as of November 9, 2020, representing the 25th consecutive quarterly distribution to our unitholders. MLP distributable cash flow provided trailing twelve-month coverage of 1.13x the declared distributions for the third quarter of 2020.

The statements in this release and the related teleconference relating to matters that are not historical facts, such as those with respect to future distributions, earnings and cash flow are forward-looking statements. These forward-looking statements are subject to significant risks and uncertainties. Actual results could differ materially, based on factors including, but not limited to, the COVID-19 pandemic and the response thereto; operating difficulties; the volume of ethylene that we are able to sell; the price at which we are able to sell ethylene; changes in the price and availability of feedstocks; changes in prevailing economic conditions; actions and commitments of Westlake Chemical Corporation; actions of third parties; inclement or hazardous weather conditions, including flooding, and the physical impacts of climate change; environmental hazards; changes in laws and regulations (or the interpretation thereof); inability to acquire or maintain necessary permits; inability to obtain necessary production equipment or replacement parts; technical difficulties or failures; labor disputes; difficulty collecting receivables; inability of our customers to take delivery; fires, explosions or other industrial accidents; our ability to borrow funds and access capital markets; and other risk factors. For more detailed information about the factors that could cause actual results to differ materially, please refer to the Partnership's Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC in February 2020 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

This release is intended to be a qualified notice under Treasury Regulation Section 1.1446-4(b). Brokers and nominees should treat one hundred percent (100.0%) of the Partnership's distributions to non-U.S. investors as being attributable to income that is effectively connected with a United States trade or business. Accordingly, the Partnership's distributions to non-U.S. investors are subject to federal income tax withholding at the highest applicable effective tax rate.

Use of Non-GAAP Financial Measures

This release makes reference to certain "non-GAAP" financial measures, such as MLP distributable cash flow and EBITDA. For this purpose, a non-GAAP financial measure is generally defined by the Securities and Exchange Commission ("SEC") as a numerical measure of a registrant's historical or future financial performance, financial position or cash flows that (1) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") in the statement of income, balance sheet or statement of cash flows (or equivalent statements) of the registrant; or (2) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. We report our financial results in accordance with U.S. GAAP, but believe that certain non-GAAP financial measures, such as MLP distributable cash flow and EBITDA, provide useful supplemental information to investors regarding the underlying business trends and performance of our ongoing operations and are useful for period-over-period comparisons of such operations. These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the financial measures prepared in accordance with U.S. GAAP. We define MLP distributable cash flow as distributable cash flow less distributable cash flow attributable to Westlake's noncontrolling interest in OpCo and distributions attributable to the incentive distribution rights holder. MLP distributable cash flow does not reflect changes in working capital balances. We define EBITDA as net income before interest expense, income taxes, depreciation and amortization. MLP distributable cash flow and EBITDA are non-GAAP supplemental financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess our operating performance as compared to other publicly traded partnerships, our ability to incur and service debt and fund capital expenditures and the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities. Reconciliations of MLP distributable cash flow to net income and to net cash provided by operating activities and of EBITDA to net income, income from operations and net cash provided by operating activities can be found in the financial schedules at the end of this press release.

Westlake Chemical Partners LP

Westlake Chemical Partners is a limited partnership formed by Westlake Chemical Corporation to operate, acquire and develop ethylene production facilities and other qualified assets. Headquartered in Houston, the Partnership owns a 22.8% interest in Westlake Chemical OpCo LP. Westlake Chemical OpCo LP's assets consist of three ethylene production facilities in Calvert City, Kentucky, and Lake Charles, Louisiana and an ethylene pipeline. For more information about Westlake Chemical Partners LP, please visit http://www.wlkpartners.com.

Westlake Chemical Partners LP Conference Call Information:

A conference call to discuss Westlake Chemical Partners' third quarter 2020 results will be held Tuesday, November 3, 2020 at 1:00 PM Eastern Time (12:00 PM Central Time). To access the conference call, dial (855) 765-5686 or (234) 386-2848 for international callers, approximately 10 minutes prior to the scheduled start time and reference passcode 778 75 68.

A replay of the conference call will be available beginning two hours after its conclusion until 11:59 p.m. Eastern Time on Tuesday, November 10, 2020. To hear a replay, dial (855) 859-2056 or (404) 537-3406 for international callers. The replay passcode is 778 75 68.

The conference call will also be available via webcast at: https://edge.media-server.com/mmc/p/3mq3evsr and the earnings release can be obtained via the Partnership web page at: http://investors.wlkpartners.com/CorporateProfile.

WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

 

 

(In thousands of dollars, except per unit data)

Revenue

 

 

 

 

 

 

 

 

Net sales—Westlake Chemical Corporation ("Westlake")

 

$

217,763

 

 

$

216,678

 

 

$

660,022

 

 

$

703,765

 

Net co-product, ethylene and other sales—third parties

 

 

14,206

 

 

33,247

 

 

60,996

 

 

115,308

 

Total net sales

 

 

231,969

 

 

249,925

 

 

721,018

 

 

819,073

 

Cost of sales

 

 

131,578

 

 

156,706

 

 

427,049

 

 

543,242

 

Gross profit

 

 

100,391

 

 

93,219

 

 

293,969

 

 

275,831

 

Selling, general and administrative expenses

 

 

6,255

 

 

6,822

 

 

18,590

 

 

21,434

 

Income from operations

 

 

94,136

 

 

86,397

 

 

275,379

 

 

254,397

 

Other income (expense)

 

 

 

 

 

 

 

 

Interest expense—Westlake

 

 

(2,320

)

 

(4,411

)

 

(9,701

)

 

(15,436

)

Other income, net

 

 

17

 

 

565

 

 

725

 

 

2,533

 

Income before income taxes

 

 

91,833

 

 

82,551

 

 

266,403

 

 

241,494

 

Income tax provision (benefit)

 

 

(15

)

 

72

 

 

408

 

 

509

 

Net income

 

 

91,848

 

 

82,479

 

 

265,995

 

 

240,985

 

Less: Net income attributable to noncontrolling interests in Westlake Chemical OpCo LP ("OpCo")

 

 

73,313

 

 

67,557

 

 

214,853

 

 

197,375

 

Net income attributable to Westlake Partners

 

$

18,535

 

 

$

14,922

 

 

$

51,142

 

 

$

43,610

 

 

 

 

 

 

 

 

 

 

Net income per limited partners unit attributable to Westlake Partners (basic and diluted)

 

 

 

 

 

 

 

 

Common units

 

$

0.53

 

 

$

0.42

 

 

$

1.45

 

 

$

1.27

 

 

 

 

 

 

 

 

 

 

Distributions declared per unit

 

$

0.4714

 

 

$

0.4646

 

 

$

1.4142

 

 

$

1.3677

 

 

 

 

 

 

 

 

 

 

MLP distributable cash flow

 

$

21,188

 

 

$

20,452

 

 

$

56,380

 

 

$

54,429

 

 

 

 

 

 

 

 

 

 

Distributions declared

 

 

 

 

 

 

 

 

Limited partner units—publicly and privately held

 

$

9,933

 

 

$

9,787

 

 

$

29,800

 

 

$

28,812

 

Limited partner units—Westlake

 

 

6,658

 

 

6,561

 

 

19,972

 

 

19,315

 

Total distributions declared

 

$

16,591

 

 

$

16,348

 

 

$

49,772

 

 

$

48,127

 

EBITDA

 

$

120,076

 

 

$

113,643

 

 

$

353,871

 

 

$

337,312

 

WESTLAKE CHEMICAL PARTNERS LP

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

September 30,
2020

 

December 31,
2019

 

 

 

 

 

 

 

(In thousands of dollars)

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

23,331

 

 

$

19,923

 

Receivable under the Investment Management Agreement—Westlake

 

191,241

 

 

162,773

 

Accounts receivable, net—Westlake

 

56,237

 

 

42,847

 

Accounts receivable, net—third parties

 

5,144

 

 

9,914

 

Inventories

 

1,652

 

 

2,484

 

Prepaid expenses and other current assets

 

557

 

 

470

 

Total current assets

 

278,162

 

 

238,411

 

Property, plant and equipment, net

 

1,060,840

 

 

1,102,995

 

Other assets, net

 

43,280

 

 

52,050

 

Total assets

 

$

1,382,282

 

 

$

1,393,456

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities (accounts payable and accrued liabilities)

 

$

41,694

 

 

$

38,849

 

Long-term debt payable to Westlake

 

399,674

 

 

399,674

 

Other liabilities

 

2,082

 

 

2,798

 

Total liabilities

 

443,450

 

 

441,321

 

Common unitholders—publicly and privately held

 

472,556

 

 

471,736

 

Common unitholder—Westlake

 

48,900

 

 

48,350

 

General partner—Westlake

 

(242,572

)

 

(242,572

)

Total Westlake Partners partners' capital

 

278,884

 

 

277,514

 

Noncontrolling interest in OpCo

 

659,948

 

 

674,621

 

Total equity

 

938,832

 

 

952,135

 

Total liabilities and equity

 

$

1,382,282

 

 

$

1,393,456

 

WESTLAKE CHEMICAL PARTNERS LP

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

2020

 

2019

 

 

 

 

 

 

 

(In thousands of dollars)

Cash flows from operating activities

 

 

 

 

Net income

 

$

265,995

 

 

$

240,985

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization

 

77,767

 

 

80,382

 

Other balance sheet changes

 

(2,886

)

 

13,787

 

Net cash provided by operating activities

 

340,876

 

 

335,154

 

Cash flows from investing activities

 

 

 

 

Additions to property, plant and equipment

 

(29,170

)

 

(30,028

)

Maturities of investments with Westlake under the Investment Management Agreement

 

276,000

 

 

405,445

 

Investments with Westlake under the Investment Management Agreement

 

(305,000

)

 

(421,445

)

Other

 

 

 

46

 

Net cash used for investing activities

 

(58,170

)

 

(45,982

)

Cash flows from financing activities

 

 

 

 

Net proceeds from private placement of common units

 

 

 

62,661

 

Proceeds from debt payable to Westlake

 

 

 

123,511

 

Repayment of debt payable to Westlake

 

 

 

(201,445

)

Quarterly distributions to noncontrolling interest retained in OpCo by Westlake

 

(229,526

)

 

(229,260

)

Quarterly distributions to unitholders

 

(49,772

)

 

(45,736

)

Net cash used for financing activities

 

(279,298

)

 

(290,269

)

Net increase (decrease) in cash and cash equivalents

 

3,408

 

 

(1,097

)

Cash and cash equivalents at beginning of period

 

19,923

 

 

19,744

 

Cash and cash equivalents at end of period

 

$

23,331

 

 

$

18,647

 

WESTLAKE CHEMICAL PARTNERS LP

 

RECONCILIATION OF MLP DISTRIBUTABLE CASH FLOW TO NET INCOME

AND NET CASH PROVIDED BY OPERATING ACTIVITIES

(Unaudited)

 

 

 

Three Months
Ended June 30,

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2020

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

(In thousands of dollars)

Net cash provided by operating activities

 

$

112,758

 

 

$

117,157

 

 

$

121,482

 

 

$

340,876

 

 

$

335,154

 

Changes in operating assets and liabilities and other

 

(32,381

)

 

(25,309

)

 

(39,003

)

 

(74,881

)

 

(94,169

)

Net Income

 

80,377

 

 

91,848

 

 

82,479

 

 

265,995

 

 

240,985

 

Add:

 

 

 

 

 

 

 

 

 

 

Depreciation, amortization and disposition of property, plant and equipment

 

26,164

 

 

26,476

 

 

26,582

 

 

78,767

 

 

80,787

 

Mark-to-market adjustment loss (gain) on derivative contracts

 

704

 

 

1,572

 

 

7,195

 

 

(215

)

 

6,996

 

Less:

 

 

 

 

 

 

 

 

 

 

Contribution to turnaround reserves

 

(9,884

)

 

(9,890

)

 

(3,932

)

 

(29,697

)

 

(11,669

)

Maintenance capital expenditures

 

(8,228

)

 

(6,509

)

 

(5,568

)

 

(25,858

)

 

(28,613

)

Distributable cash flow attributable to noncontrolling interest in OpCo

 

(72,278

)

 

(82,309

)

 

(86,304

)

 

(232,612

)

 

(234,057

)

MLP distributable cash flow

 

$

16,855

 

 

$

21,188

 

 

$

20,452

 

 

$

56,380

 

 

$

54,429

 

WESTLAKE CHEMICAL PARTNERS LP

 

RECONCILIATION OF EBITDA TO NET INCOME, INCOME FROM OPERATIONS AND NET CASH

PROVIDED BY OPERATING ACTIVITIES

(Unaudited)

 

 

 

Three Months
Ended June 30,

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2020

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

(In thousands of dollars)

Net cash provided by operating activities

 

$

112,758

 

 

$

117,157

 

 

$

121,482

 

 

$

340,876

 

 

$

335,154

 

Changes in operating assets and liabilities and other

 

(32,381

)

 

(25,309

)

 

(39,003

)

 

(74,881

)

 

(94,169

)

Net Income

 

80,377

 

 

91,848

 

 

82,479

 

 

265,995

 

 

240,985

 

Less:

 

 

 

 

 

 

 

 

 

 

Other income, net

 

123

 

 

17

 

 

565

 

 

725

 

 

2,533

 

Interest expense

 

(3,431

)

 

(2,320

)

 

(4,411

)

 

(9,701

)

 

(15,436

)

Income tax benefit (provision)

 

(206

)

 

15

 

 

(72

)

 

(408

)

 

(509

)

Income from operations

 

83,891

 

 

94,136

 

 

86,397

 

 

275,379

 

 

254,397

 

Add:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

25,813

 

 

25,923

 

 

26,681

 

 

77,767

 

 

80,382

 

Other income, net

 

123

 

 

17

 

 

565

 

 

725

 

 

2,533

 

EBITDA

 

$

109,827

 

 

$

120,076

 

 

$

113,643

 

 

$

353,871

 

 

$

337,312

 

 

Contacts

(713) 585-2900
Investors—Steve Bender
Media—L. Benjamin Ederington

Contacts

(713) 585-2900
Investors—Steve Bender
Media—L. Benjamin Ederington