Westlake Chemical Partners LP Announces Third Quarter 2022 Results

Company Release - 11/3/2022
  • Declared quarterly distribution of $0.4714 per unit; 33rd consecutive quarterly distribution

HOUSTON--(BUSINESS WIRE)-- Westlake Chemical Partners LP (NYSE: WLKP) (the "Partnership") today reported net income attributable to the Partnership in the third quarter of 2022 of $14.8 million, or $0.42 per limited partner unit, an increase of $2.0 million compared to third quarter 2021 of $12.8 million. Volatile downstream demand lowered planned offtake, resulting in a $13.9 million buyer deficiency fee from Westlake Corporation ("Westlake"). The difference in net income for the third quarter of 2022 as compared to the third quarter of 2021 was primarily due to higher production at Westlake Chemical LP's ("OpCo") Petro 2 facility in Lake Charles, Louisiana, where production was impacted in the prior-period by a planned turnaround in the second half of 2021 and the buyer deficiency fee. These increases were partially offset by lower margins on third party ethylene sales and higher interest expense. Cash flows from operating activities in the third quarter of 2022 were $115.5 million, an increase of $16.0 million compared to third quarter 2021 cash flows from operating activities of $99.5 million due to higher net income. For the three months ended September 30, 2022, MLP distributable cash flow was $16.7 million, an increase of $3.7 million compared to third quarter 2021 MLP distributable cash flow of $13.0 million. The increase in MLP distributable cash flow and associated trailing twelve-month coverage ratio was primarily attributable to higher production and net income at OpCo.

Third quarter 2022 net income attributable to the Partnership of $14.8 million decreased by $1.6 million compared to second quarter 2022 net income of $16.4 million, primarily due to lower third-party revenues and lower production partially offset by the buyer deficiency fee. Third quarter 2022 cash flows from operating activities of $115.5 million decreased by $5.4 million compared to second quarter 2022 cash flows from operating activities of $120.9 million due to lower production and net income. Third quarter 2022 MLP distributable cash flow of $16.7 million, decreased by $2.9 million compared to second quarter 2022 MLP distributable cash flow of $19.6 million. The decrease was primarily due to lower third-party revenues and lower production partially offset by the buyer deficiency fee.

"The Partnership's performance in the third quarter of 2022 reflects the ratable and long-term strength of our market position and the protective provisions of our sales agreement with Westlake. We are well positioned to continue to deliver solid distributions as a result of the sales agreement that provides a fixed margin on 95% of our production," said Albert Chao, President and Chief Executive Officer. "As we look ahead to 2023, we remain optimistic about the ethylene market and we will continue to benefit from the insulative attributes of the agreement with Westlake. These attributes should drive strong returns and predictable cash flows to our unitholders, providing a premium value as market conditions evolve."

On October 31, 2022, the Partnership announced that the Board of Directors of Westlake Chemical Partners GP LLC had approved a quarterly distribution for the third quarter of 2022 of $0.4714 per unit to be payable on November 28, 2022 to unitholders of record as of November 10, 2022, representing the 33rd consecutive quarterly distribution to our unitholders. MLP distributable cash flow provided trailing twelve-month coverage of 1.07x the declared distributions for the third quarter of 2022, which was an increase from the trailing twelve-month coverage ratio of 1.01x at the end of the second quarter of 2022.

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

The statements in this release and the related teleconference relating to matters that are not historical facts, such as those with respect to the ability to deliver value, returns, predictable cash flows and distributions to unitholders, optimism about the ethylene market, and the expectation that strong distributions will continue and provide premium value, 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 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, 2021, which was filed with the SEC in March 2022, and Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, which was filed with the SEC in August 2022.

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 Corporation'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 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 2022 results will be held Thursday, November 3, 2022 at 1:00 PM Eastern Time (12:00 PM Central Time). To access the conference call, please register at: https://register.vevent.com/register/BIf58da988154b49dea6b2903159febb3b. A dial-in will be provided upon registration.

A replay of the conference call will be available beginning two hours after its conclusion. The conference call and replay will be available via webcast at: https://edge.media-server.com/mmc/p/jcohy5gt.

WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2022

 

2021

 

2022

 

2021

 

 

 

 

 

 

 

 

 

 

 

(In thousands of dollars, except per unit data)

Revenue

 

 

 

 

 

 

 

 

Net sales—Westlake Corporation ("Westlake")

 

$

364,273

 

 

$

247,887

 

 

$

1,020,042

 

 

$

708,646

 

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

 

 

50,850

 

 

 

46,079

 

 

 

206,266

 

 

 

175,756

 

Total net sales

 

 

415,123

 

 

 

293,966

 

 

 

1,226,308

 

 

 

884,402

 

Cost of sales

 

 

324,629

 

 

 

218,038

 

 

 

947,073

 

 

 

589,746

 

Gross profit

 

 

90,494

 

 

 

75,928

 

 

 

279,235

 

 

 

294,656

 

Selling, general and administrative expenses

 

 

8,678

 

 

 

7,792

 

 

 

26,824

 

 

 

24,734

 

Income from operations

 

 

81,816

 

 

 

68,136

 

 

 

252,411

 

 

 

269,922

 

Other income (expense)

 

 

 

 

 

 

 

 

Interest expense—Westlake

 

 

(3,645

)

 

 

(2,190

)

 

 

(8,703

)

 

 

(6,650

)

Other income, net

 

 

618

 

 

 

24

 

 

 

683

 

 

 

52

 

Income before income taxes

 

 

78,789

 

 

 

65,970

 

 

 

244,391

 

 

 

263,324

 

Income tax provision (benefit)

 

 

484

 

 

 

(105

)

 

 

822

 

 

 

333

 

Net income

 

 

78,305

 

 

 

66,075

 

 

 

243,569

 

 

 

262,991

 

Less: Net income attributable to noncontrolling

 

 interests in Westlake Chemical OpCo LP ("OpCo")

 

 

63,548

 

 

 

53,285

 

 

 

196,180

 

 

 

209,956

 

Net income attributable to Westlake Partners

 

$

14,757

 

 

$

12,790

 

 

$

47,389

 

 

$

53,035

 

 

 

 

 

 

 

 

 

 

Net income per limited partners unit attributable to

 

Westlake Partners (basic and diluted)

 

 

 

 

 

 

 

 

Common units

 

$

0.42

 

 

$

0.36

 

 

$

1.35

 

 

$

1.51

 

 

 

 

 

 

 

 

 

 

Distributions declared per unit

 

$

0.4714

 

 

$

0.4714

 

 

$

1.4142

 

 

$

1.4142

 

 

 

 

 

 

 

 

 

 

MLP distributable cash flow

 

$

16,734

 

 

$

12,977

 

 

$

55,609

 

 

$

54,760

 

 

 

 

 

 

 

 

 

 

Distributions declared

 

 

 

 

 

 

 

 

Limited partner units—publicly and privately held

 

$

9,947

 

 

$

9,943

 

 

$

29,828

 

 

$

29,817

 

Limited partner units—Westlake

 

 

6,657

 

 

 

6,657

 

 

 

19,971

 

 

 

19,971

 

Total distributions declared

 

$

16,604

 

 

$

16,600

 

 

$

49,799

 

 

$

49,788

 

EBITDA

 

$

111,825

 

 

$

94,746

 

 

$

344,776

 

 

$

352,804

 

WESTLAKE CHEMICAL PARTNERS LP

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

September 30,
2022

 

December 31,
2021

 

 

 

 

 

 

 

(In thousands of dollars)

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

19,468

 

 

$

17,057

 

Receivable under the Investment Management Agreement—Westlake

 

 

135,863

 

 

 

106,243

 

Accounts receivable, net—Westlake

 

 

98,399

 

 

 

142,791

 

Accounts receivable, net—third parties

 

 

24,675

 

 

 

5,825

 

Inventories

 

 

5,359

 

 

 

8,898

 

Prepaid expenses and other current assets

 

 

458

 

 

 

396

 

Total current assets

 

 

284,222

 

 

 

281,210

 

Property, plant and equipment, net

 

 

1,006,633

 

 

 

1,043,539

 

Other assets, net

 

 

140,311

 

 

 

155,949

 

Total assets

 

$

1,431,166

 

 

$

1,480,698

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities (accounts payable and accrued and other liabilities)

 

$

77,657

 

 

$

106,796

 

Long-term debt payable to Westlake

 

 

399,674

 

 

 

399,674

 

Other liabilities

 

 

1,671

 

 

 

1,530

 

Total liabilities

 

 

479,002

 

 

 

508,000

 

Common unitholders—publicly and privately held

 

 

480,535

 

 

 

481,796

 

Common unitholder—Westlake

 

 

53,787

 

 

 

54,754

 

General partner—Westlake

 

 

(242,572

)

 

 

(242,572

)

Total Westlake Partners partners' capital

 

 

291,750

 

 

 

293,978

 

Noncontrolling interest in OpCo

 

 

660,414

 

 

 

678,720

 

Total equity

 

 

952,164

 

 

 

972,698

 

Total liabilities and equity

 

$

1,431,166

 

 

$

1,480,698

 

WESTLAKE CHEMICAL PARTNERS LP

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Nine Months Ended
September 30,

 

 

2022

 

2021

 

 

 

 

 

 

 

(In thousands of dollars)

Cash flows from operating activities

 

 

 

 

Net income

 

$

243,569

 

 

$

262,991

 

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

 

 

 

 

Depreciation and amortization

 

 

91,682

 

 

 

82,830

 

Net loss on disposition and other

 

 

8,788

 

 

 

2,629

 

Other balance sheet changes

 

 

(2,877

)

 

 

38,127

 

Net cash provided by operating activities

 

 

341,162

 

 

 

386,577

 

Cash flows from investing activities

 

 

 

 

Additions to property, plant and equipment

 

 

(45,458

)

 

 

(38,490

)

Maturities of investments with Westlake under the Investment Management Agreement

 

 

247,000

 

 

 

203,000

 

Investments with Westlake under the Investment Management Agreement

 

 

(276,000

)

 

 

(276,000

)

Other

 

 

 

 

 

126

 

Net cash used for investing activities

 

 

(74,458

)

 

 

(111,364

)

Cash flows from financing activities

 

 

 

 

Quarterly distributions to noncontrolling interest retained in OpCo by Westlake

 

 

(214,486

)

 

 

(223,941

)

Quarterly distributions to unitholders

 

 

(49,807

)

 

 

(49,779

)

Net cash used for financing activities

 

 

(264,293

)

 

 

(273,720

)

Net increase in cash and cash equivalents

 

 

2,411

 

 

 

1,493

 

Cash and cash equivalents at beginning of period

 

 

17,057

 

 

 

17,154

 

Cash and cash equivalents at end of period

 

$

19,468

 

 

$

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,

 

 

2022

 

2022

 

2021

 

2022

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands of dollars)

Net cash provided by operating activities

 

$

120,857

 

 

$

115,495

 

 

$

99,459

 

 

$

341,162

 

 

$

386,577

 

Changes in operating assets and liabilities and other

 

 

(36,418

)

 

 

(37,190

)

 

 

(33,384

)

 

 

(97,593

)

 

 

(123,586

)

Net income

 

 

84,439

 

 

 

78,305

 

 

 

66,075

 

 

 

243,569

 

 

 

262,991

 

Add:

 

 

 

 

 

 

 

 

 

 

Depreciation, amortization and

 

  disposition of property, plant and

 

equipment

 

 

31,469

 

 

 

30,349

 

 

 

26,958

 

 

 

96,070

 

 

 

84,590

 

Less:

 

 

 

 

 

 

 

 

 

 

Contribution to turnaround reserves

 

 

(7,284

)

 

 

(7,323

)

 

 

(10,795

)

 

 

(21,811

)

 

 

(35,590

)

Maintenance capital expenditures

 

 

(10,372

)

 

 

(14,348

)

 

 

(15,346

)

 

 

(38,172

)

 

 

(41,433

)

Distributable cash flow attributable

 

to noncontrolling interest in OpCo

 

 

(78,668

)

 

 

(70,249

)

 

 

(53,915

)

 

 

(224,047

)

 

 

(215,798

)

MLP distributable cash flow

 

$

19,584

 

 

$

16,734

 

 

$

12,977

 

 

$

55,609

 

 

$

54,760

 

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,

 

 

2022

 

2022

 

2021

 

2022

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands of dollars)

Net cash provided by operating activities

 

$

120,857

 

 

$

115,495

 

 

$

99,459

 

 

$

341,162

 

 

$

386,577

 

Changes in operating assets and liabilities and other

 

 

(36,418

)

 

 

(37,190

)

 

 

(33,384

)

 

 

(97,593

)

 

 

(123,586

)

Net income

 

 

84,439

 

 

 

78,305

 

 

 

66,075

 

 

 

243,569

 

 

 

262,991

 

Less:

 

 

 

 

 

 

 

 

 

 

Other income, net

 

 

90

 

 

 

618

 

 

 

24

 

 

 

683

 

 

 

52

 

Interest expense

 

 

(2,859

)

 

 

(3,645

)

 

 

(2,190

)

 

 

(8,703

)

 

 

(6,650

)

Income tax benefit (provision)

 

 

(175

)

 

 

(484

)

 

 

105

 

 

 

(822

)

 

 

(333

)

Income from operations

 

 

87,383

 

 

 

81,816

 

 

 

68,136

 

 

 

252,411

 

 

 

269,922

 

Add:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

31,009

 

 

 

29,391

 

 

 

26,586

 

 

 

91,682

 

 

 

82,830

 

Other income, net

 

 

90

 

 

 

618

 

 

 

24

 

 

 

683

 

 

 

52

 

EBITDA

 

$

118,482

 

 

$

111,825

 

 

$

94,746

 

 

$

344,776

 

 

$

352,804

 

 

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

Source: Westlake Chemical Partners