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Westlake Chemical Partners LP Announces Fourth Quarter and Full Year 2023 Results

2/20/2024
  • Declared quarterly distribution of $0.4714 per unit; 38th consecutive quarterly distribution

Westlake Chemical Partners LP (NYSE: WLKP) (the "Partnership") today reported net income attributable to the Partnership in the fourth quarter of 2023 of $14.3 million, or $0.41 per limited partner unit, a decrease of $2.5 million compared to fourth quarter 2022 net income of $16.8 million. The decrease in net income in the fourth quarter of 2023 when compared to the prior-year period was largely driven by higher interest expense. Cash flows from operating activities in the fourth quarter of 2023 were $107.7 million, a decrease of $14.9 million compared to fourth quarter 2022 cash flows from operating activities of $122.6 million, due to lower net income and less favorable working capital changes. For the three months ended December 31, 2023, MLP distributable cash flow was $16.4 million, a decrease of $3.9 million compared to fourth quarter 2022 MLP distributable cash flow of $20.3 million. The decrease in MLP distributable cash flow and associated trailing twelve-month coverage ratio was primarily due to lower net income and higher maintenance capital expenditures.

Fourth quarter 2023 net income attributable to the Partnership of $14.3 million increased by $1.1 million compared to third quarter 2023 net income of $13.2 million, primarily due to higher production and sales volume. Fourth quarter 2023 cash flows from operating activities of $107.7 million increased by $6.8 million compared to third quarter 2023 cash flows from operating activities of $100.9 million due to higher net income. Fourth quarter 2023 MLP distributable cash flow of $16.4 million increased by $2.8 million compared to third quarter 2023 MLP distributable cash flow of $13.6 million, primarily due to lower maintenance capital expenditures.

For the full year 2023, net income attributable to the Partnership of $54.3 million, or $1.54 per limited partner unit, decreased by $9.9 million compared to full year of 2022 net income attributable to the Partnership of $64.2 million. The decrease in net income attributable to the Partnership was primarily due to higher interest expense. Cash flows from operating activities for the full year of 2023 were $452.0 million, a decrease of $11.7 million compared to the full year of 2022 cash flows from operating activities of $463.7 million. This decrease in cash flows from operating activities was primarily due to higher interest expense and cash expenditures for the Calvert City, Kentucky, turnaround. For the year ended December 31, 2023, MLP distributable cash flow was $62.6 million, a decrease of $13.3 million compared to MLP distributable cash flow of $75.9 million for the year ended December 31, 2022.

"The Partnership performed well in 2023 as we successfully completed the maintenance turnaround at our Calvert City ethylene unit in May on schedule. We also maximized the margin on third-party ethylene volumes in 2023 by opportunistically timing our third-party sales," said Albert Chao, President and Chief Executive Officer. "We plan to perform a maintenance turnaround at our Petro 1 ethylene unit in the second half of 2024. Combined with our outlook for continued low third-party ethylene margins and elevated interest rates, the lost production during the Petro 1 turnaround may cause our coverage ratio to dip below 1.00x in 2024. However, after the turnarounds at Petro 2 in 2021, Calvert City in 2023 and Petro 1 in 2024, we should be positioned to run at full capacity, with a corresponding benefit to our coverage ratio in the following years."

On January 22, 2024, the Partnership announced that the Board of Directors of Westlake Chemical Partners GP LLC had approved a quarterly distribution for the fourth quarter of 2023 of $0.4714 per unit to be payable on February 20, 2024 to unitholders of record as of February 2, 2024, representing the 38th consecutive quarterly distribution to our unitholders. MLP distributable cash flow provided trailing twelve-month coverage of 0.94x the declared distributions for the fourth quarter of 2023, which was a decrease from the trailing twelve-month coverage ratio of 1.00x at the end of the third quarter of 2023.

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 results of our turnaround activities, including the Petro 1 turnaround, our future coverage ratio, our outlook for third-party ethylene margins, our expectations regarding future interest rates, the ability to deliver value, returns, predictable cash flows and distributions to unitholders, the expectation that strong distributions will continue, and the nature of the sales agreement with Westlake, 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, pandemic infectious diseases 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, 2022, which was filed with the SEC in March 2023, and Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, which was filed with the SEC in November 2023.

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' fourth quarter and full year 2023 results will be held Tuesday, February 20th, 2024 at 1:00 PM Eastern Time (12:00 PM Central Time). To access the conference call, please register at: https://register.vevent.com/register/BI4edd1a6cc9e749b585fb66878269ae6f. A dial-in will be provided upon registration.

The conference call will also be available via webcast at: https://edge.media-server.com/mmc/p/gwkvbr9r and the earnings release can be obtained via the Partnership web page at: https://investors.wlkpartners.com/corporate-profile/default.aspx.

WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

(In thousands of dollars, except per unit data)

Revenue

 

 

 

 

 

 

 

 

Net sales—Westlake Corporation ("Westlake")

 

$

255,306

 

 

$

322,868

 

 

$

1,026,655

 

 

$

1,342,910

 

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

 

 

41,967

 

 

 

43,971

 

 

 

164,136

 

 

 

250,237

 

Total net sales

 

 

297,273

 

 

 

366,839

 

 

 

1,190,791

 

 

 

1,593,147

 

Cost of sales

 

 

196,590

 

 

 

268,709

 

 

 

803,332

 

 

 

1,215,782

 

Gross profit

 

 

100,683

 

 

 

98,130

 

 

 

387,459

 

 

 

377,365

 

Selling, general and administrative expenses

 

 

7,867

 

 

 

2,854

 

 

 

29,751

 

 

 

29,678

 

Income from operations

 

 

92,816

 

 

 

95,276

 

 

 

357,708

 

 

 

347,687

 

Other income (expense)

 

 

 

 

 

 

 

 

Interest expense—Westlake

 

 

(6,632

)

 

 

(4,704

)

 

 

(26,501

)

 

 

(13,407

)

Other income, net

 

 

1,079

 

 

 

883

 

 

 

4,232

 

 

 

1,566

 

Income before income taxes

 

 

87,263

 

 

 

91,455

 

 

 

335,439

 

 

 

335,846

 

Provision for income taxes

 

 

206

 

 

 

195

 

 

 

813

 

 

 

1,017

 

Net income

 

 

87,057

 

 

 

91,260

 

 

 

334,626

 

 

 

334,829

 

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

 

 

72,758

 

 

 

74,476

 

 

 

280,343

 

 

 

270,656

 

Net income attributable to Westlake Partners

 

$

14,299

 

 

$

16,784

 

 

$

54,283

 

 

$

64,173

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Common units

 

$

0.41

 

 

$

0.48

 

 

$

1.54

 

 

$

1.82

 

 

 

 

 

 

 

 

 

 

Distributions declared per unit

 

$

0.4714

 

 

$

0.4714

 

 

$

1.8856

 

 

$

1.8856

 

 

 

 

 

 

 

 

 

 

MLP distributable cash flow

 

$

16,418

 

 

$

20,261

 

 

$

62,574

 

 

$

75,870

 

 

 

 

 

 

 

 

 

 

Distributions declared

 

 

 

 

 

 

 

 

Limited partner units—publicly and privately held

 

$

9,949

 

 

$

9,947

 

 

$

39,790

 

 

$

39,775

 

Limited partner units—Westlake

 

 

6,658

 

 

 

6,657

 

 

 

26,631

 

 

 

26,628

 

Total distributions declared

 

$

16,607

 

 

$

16,604

 

 

$

66,421

 

 

$

66,403

 

EBITDA

 

$

122,196

 

 

$

125,551

 

 

$

472,143

 

 

$

470,327

 

WESTLAKE CHEMICAL PARTNERS LP

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

December 31,

 

 

 

2023

 

 

 

2022

 

 

 

(In thousands of dollars)

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

58,619

 

 

$

64,782

 

Receivable under the Investment Management Agreement—Westlake

 

 

94,444

 

 

 

64,996

 

Accounts receivable, net—Westlake

 

 

49,565

 

 

 

90,965

 

Accounts receivable, net—third parties

 

 

18,701

 

 

 

20,030

 

Inventories

 

 

4,432

 

 

 

4,715

 

Prepaid expenses and other current assets

 

 

442

 

 

 

305

 

Total current assets

 

 

226,203

 

 

 

245,793

 

Property, plant and equipment, net

 

 

943,843

 

 

 

990,213

 

Other assets, net

 

 

146,796

 

 

 

135,973

 

Total assets

 

$

1,316,842

 

 

$

1,371,979

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities (accounts payable and accrued and other liabilities)

 

$

56,335

 

 

$

66,941

 

Long-term debt payable to Westlake

 

 

399,674

 

 

 

399,674

 

Other liabilities

 

 

4,583

 

 

 

1,656

 

Total liabilities

 

 

460,592

 

 

 

468,271

 

Common unitholders—publicly and privately held

 

 

473,513

 

 

 

480,643

 

Common unitholder—Westlake

 

 

48,993

 

 

 

53,859

 

General partner—Westlake

 

 

(242,572

)

 

 

(242,572

)

Total Westlake Partners partners' capital

 

 

279,934

 

 

 

291,930

 

Noncontrolling interest in OpCo

 

 

576,316

 

 

 

611,778

 

Total equity

 

 

856,250

 

 

 

903,708

 

Total liabilities and equity

 

$

1,316,842

 

 

$

1,371,979

 

WESTLAKE CHEMICAL PARTNERS LP

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Twelve Months Ended December 31,

 

 

 

2023

 

 

 

2022

 

 

 

(In thousands of dollars)

Cash flows from operating activities

 

 

 

 

Net income

 

$

334,626

 

 

$

334,829

 

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

 

 

 

 

Depreciation and amortization

 

 

110,203

 

 

 

121,074

 

Net loss on disposition and other

 

 

4,906

 

 

 

5,063

 

Other balance sheet changes

 

 

2,264

 

 

 

2,770

 

Net cash provided by operating activities

 

 

451,999

 

 

 

463,736

 

Cash flows from investing activities

 

 

 

 

Additions to property, plant and equipment

 

 

(46,821

)

 

 

(54,118

)

Investments with Westlake under the Investment Management Agreement

 

 

(174,116

)

 

 

(319,884

)

Maturities of investments with Westlake under the Investment Management Agreement

 

 

145,000

 

 

 

362,000

 

Net cash used for investing activities

 

 

(75,937

)

 

 

(12,002

)

Cash flows from financing activities

 

 

 

 

Proceeds from debt payable to Westlake

 

 

209,250

 

 

 

32,000

 

Repayment of debt payable to Westlake

 

 

(209,250

)

 

 

(32,000

)

Distributions to noncontrolling interest retained in OpCo by Westlake

 

 

(315,805

)

 

 

(337,598

)

Distributions to unitholders

 

 

(66,420

)

 

 

(66,411

)

Net cash used for financing activities

 

 

(382,225

)

 

 

(404,009

)

Net increase (decrease) in cash and cash equivalents

 

 

(6,163

)

 

 

47,725

 

Cash and cash equivalents at beginning of the year

 

 

64,782

 

 

 

17,057

 

Cash and cash equivalents at end of the year

 

$

58,619

 

 

$

64,782

 

WESTLAKE CHEMICAL PARTNERS LP

 

RECONCILIATION OF MLP DISTRIBUTABLE CASH FLOW TO NET INCOME

AND NET CASH PROVIDED BY OPERATING ACTIVITIES

(Unaudited)

 

 

 

Three Months
Ended
September 30,

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

 

 

2023

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

(In thousands of dollars)

Net cash provided by operating activities

 

$

100,925

 

 

$

107,671

 

 

$

122,574

 

 

$

451,999

 

 

$

463,736

 

Changes in operating assets and liabilities and other

 

 

(20,072

)

 

 

(20,614

)

 

 

(31,314

)

 

 

(117,373

)

 

 

(128,907

)

Net income

 

 

80,853

 

 

 

87,057

 

 

 

91,260

 

 

 

334,626

 

 

 

334,829

 

Add:

 

 

 

 

 

 

 

 

 

 

Depreciation, amortization and disposition of property, plant and equipment

 

 

32,242

 

 

 

28,796

 

 

 

29,711

 

 

 

115,136

 

 

 

125,781

 

Less:

 

 

 

 

 

 

 

 

 

 

Contribution to turnaround reserves

 

 

(7,565

)

 

 

(7,682

)

 

 

(7,364

)

 

 

(29,520

)

 

 

(29,175

)

Maintenance capital expenditures

 

 

(22,862

)

 

 

(11,805

)

 

 

(7,077

)

 

 

(49,212

)

 

 

(45,249

)

Distributable cash flow attributable to noncontrolling interest in OpCo

 

 

(69,048

)

 

 

(79,948

)

 

 

(86,269

)

 

 

(308,456

)

 

 

(310,316

)

MLP distributable cash flow

 

$

13,620

 

 

$

16,418

 

 

$

20,261

 

 

$

62,574

 

 

$

75,870

 

WESTLAKE CHEMICAL PARTNERS LP

 

RECONCILIATION OF EBITDA TO NET INCOME, INCOME FROM OPERATIONS AND

NET CASH PROVIDED BY OPERATING ACTIVITIES

(Unaudited)

 

 

 

Three Months
Ended
September 30,

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

 

 

2023

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

(In thousands of dollars)

Net cash provided by operating activities

 

$

100,925

 

 

$

107,671

 

 

$

122,574

 

 

$

451,999

 

 

$

463,736

 

Changes in operating assets and liabilities and other

 

 

(20,072

)

 

 

(20,614

)

 

 

(31,314

)

 

 

(117,373

)

 

 

(128,907

)

Net income

 

 

80,853

 

 

 

87,057

 

 

 

91,260

 

 

 

334,626

 

 

 

334,829

 

Less:

 

 

 

 

 

 

 

 

 

 

Other income, net

 

 

1,272

 

 

 

1,079

 

 

 

883

 

 

 

4,232

 

 

 

1,566

 

Interest expense—Westlake

 

 

(6,437

)

 

 

(6,632

)

 

 

(4,704

)

 

 

(26,501

)

 

 

(13,407

)

Provision for income taxes

 

 

(222

)

 

 

(206

)

 

 

(195

)

 

 

(813

)

 

 

(1,017

)

Income from operations

 

 

86,240

 

 

 

92,816

 

 

 

95,276

 

 

 

357,708

 

 

 

347,687

 

Add:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

28,226

 

 

 

28,301

 

 

 

29,392

 

 

 

110,203

 

 

 

121,074

 

Other income, net

 

 

1,272

 

 

 

1,079

 

 

 

883

 

 

 

4,232

 

 

 

1,566

 

EBITDA

 

$

115,738

 

 

$

122,196

 

 

$

125,551

 

 

$

472,143

 

 

$

470,327

 

 

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

Source: Westlake Chemical Partners
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