Westlake Chemical Partners LP Price & Performance (WLKP)

These forward looking statements suggest predictions or expectations and thus, are subject to risks or uncertainties. We encourage you to learn more about the factors that could lead our actual results to differ by reviewing the cautionary statements in our regulatory filings. Which are also available on our Investor Relations website. This morning, Westlake Partners issued a press release with details of our fourth quarter and full year 2024 financial and operating This document is available in the press release section of our Westlake at wlkpartners.com. A replay of today's call will be available beginning two hours after the conclusion of this call. This replay can be accessed via the Partnership website. Please note that information reported on this call speaks only as of today 02/24/2025, and therefore, you are advised that time sensitive information may no longer be accurate as of the time of any replay. I would finally advise you that this conference call is being broadcast live through an Internet web cast system that can be accessed on our webpage at wlkpartners.com. Now, I'd like to turn the call over to Jean Marc Gilson. Jean Marc? Thank you, Jean. Good afternoon, everyone, and thank you for joining us to discuss our fourth quarter and full year 2024 results.

In this morning's press release, we reported Westlake's Westlake full year 2024 net income of $62,000,000 or $1.07 $7 per unit. Consolidated net income including OpCo, was $369,000,000 for the full year 2024. Westlake Partners' financial results continue to demonstrate the stability generated from our fixed margin SLN sales agreement for 95% of annual plant production each year Insulating us from market volatility and other production risk. This structure combined with our investment grade sponsor, Westlake, produces predictable earnings and stable This was evident in 2024 as we delivered another year of solid results and sustained distributions, to our unitholders. The stable fee based cash flow generated by our fixed margin Etihad sales contract with Westlake forms the foundation for us to deliver long term value to our unit holders. This quarter's distribution is the forty seven forty second consecutive quarterly distribution since our IPO in July of twenty fourteen without any reductions. I would now like to turn our call over to Steve to provide more detail on the financial and operating results for the quarter, and full year. Steve?

Thank you, Jean Marc, and good afternoon, everyone.

In this morning's press release, we reported Westlake Partners fourth twenty twenty four net income of $15,000,000 or $0.43 per unit. Consolidated net income, including OpCo's earnings, was $87,000,000 on consolidated net sales of $290,000,000 The partnership had distributable cash flow for the quarter of $15,000,000 or $0.42 per unit. Fourth quarter twenty twenty four net income for Westlake Partners of $15,000,000 increased by $1,000,000 compared to the fourth quarter twenty twenty three partnership net income of $14,000,000 The higher net income was primarily driven by lower SG and A expense in the fourth quarter of twenty twenty four. Distributable cash flow of $15,000,000 for the fourth quarter twenty twenty four decreased by $1,000,000 compared fourth quarter of twenty twenty three distributable cash flow of 16,000,000 due primarily to higher turnaround reserve and maintenance capital contributions to support the planned Petro One turnaround.

For the full year of 2024, net income was $62,000,000 or $1.77 per unit, which increased by $8,000,000 compared to full year 2023 net income of $54,000,000 The increased net income attributable to the partnership was due to higher third party ethylene sales prices and margins.

Our full year 2024 MLP distributable [indiscernible] compared to MLP distributable cash flow of $63,000,000 for the full year of 2023 due to higher net income. Our distribution coverage for the full year of 2024 was 1.01x.

Turning our attention to the balance sheet and cash flows. At the end of the fourth quarter, we had consolidated cash and cash investments with Westlake through our investment management agreement totaling $193,000,000 Long term debt at the end of the quarter was $400,000,000 of which $377,000,000 was at the partnership and the remaining $23,000,000 In 2024, OpCo spent $49,000,000 on capital expenditures.

Maintained our strong leverage metrics with a consolidated leverage ratio below one On 01/27/2025, we announced a quarterly distribution of $0.4714 per unit, respect to the fourth quarter of twenty twenty four.

Since our IPO in 2014, the partnership has made 42 consecutive quarterly distributions to our unitholders and we have grown distribution 71 since the partnership's original minimum quarterly distribution The partnership's fourth quarter distribution will be paid on February 25, The unit holders of record 02/07/2025.

The partnership's predictable fee based cash flow continues to to prove beneficial in today's economic environment, is differentiated by the consistency of our earnings and cash flows. Looking back since her IPO in July of twenty fourteen, we have maintained a cumulative distribution coverage ratio of and the partnership stability and cash flows, we were able to sustain our current distribution without the need to access the capital markets. For modeling purposes, we have one planned turnaround in 2025 at our PetroOne Ethylene Unit In Lake Charles, Louisiana.

This turnaround began at the January and is projected to last approximately sixty days. In prior years where we had a planned turnaround such as this one, the distribution coverage ratio is impacted for the period before recovering. And for this turnaround, we would expect a similar result. The cost of this turnaround has been included in the amount we charge to Westlake and has been fully reserved for and funded as we commence the turnaround. Now I'd like to turn the call back over to Jean Marc to make some closing comments. Jean Marc? Thank you, Steve. We are pleased with the partnership financial [indiscernible] operational performance. Through the fourth quarter, and the year as a whole. The stability of our business model and associated cash flows demonstrate the benefit that our ethylene sales agreement and its protective provisions provide the partnership to predictable long term earnings and cash flows. During 2024, North American spot ethylene prices and margins improved due to a tightening of industry supply demand conditions. Through OpCo, the partnership was able to benefit from these improving conditions through higher third party ethylene sales prices and margin. Thus far in 2025, third party Atelier sales prices and margins are again at relatively favorable levels.

Which would benefit our financial performance once again. Turning to our capital structure. We maintain a strong balance sheet with conservative financial and leverage metrics. As we continue to navigate market conditions, we will evaluate opportunities via our four levers of growth in the future. Including Increases of our ownership interest of OpCo acquisitions of other qualified income streams, organic growth opportunities such as expansions, of our current Italy and facilities and negotiation of a higher fixed margin in our Etilene sales agreement with Weslip. On our ability to continue to provide long term value and distributions. To our unitholders. As always, We will continue to focus on safe operations Along with being good stewards of the environment where we work, and live. As part of our broader sustainability efforts, Thank you very much for listening to our fourth quarter and full year 2024 earnings call. Now I will turn the call back over Thank you, Jean Marc. Before we begin taking questions, I would like to remind you that a replay of this teleconference will be available two hours after the call has ended. We will provide instructions to access the replay at the end of the call. Kevin, we will now take questions.

First question comes from Matthew Blair with TPH. Your line is open. Thank you. And On the parent call, the WLK call, there was some talk about incremental cost cuts targets in 2025. Would Westlake be interested in ending the MLP arrangement as a way to cut costs further?

So Matthew, it's Steve. I would say that as we look at opportunities for the partnership, we look at really the value proposition the partnership has brought forward. And while there are incremental administrative costs to administer the operations of partnership. As you look at the value the value proposition the partnership has provided to Westlake, it continues to provide a value from an from a multiple perspective when you look at the EV to EBITDA multiple. So therefore, while it is an administrative cost, the value proposition offsets that administrative cost. So for cost control reasons, that not be a consideration. Okay.

Thank you. And then you talk a little bit more about the expected financial impact from this sixty day planned turnaround. I think you mentioned that the coverage ratio would come down So is the way to think about this as a temporary headwind on things like earnings per unit and cash flow?

Yes. And so as you think about this historically, Matthew, coverage does take an impact from the loss of production during that period of course, from a capital perspective, we've already fully reserved have funded this upcoming turnaround. And as we speak today, we're in the midst of that turnaround to net right now. So I would expect the earnings impact, but as the unit comes back on stream after the end of this turnaround, coverage ought to fully recover. And so as we look forward into 2025 and beyond, I expect the coverage target that we have set being 1.1x, we should resume.

You go back over the many years, the ten years since this entity was formed back in 2014, We've had a number of turnarounds and this is the exact type of performance we have exhibited and I expect to continue this same kind of performance.

This is not an unusual turnaround and we expect it to have the same kind of performance with it recovering full production after the turnaround and earnings associated with that.

Great. Thank you very much. You're welcome. At this time, the Q and A session has now ended. I will now turn the call back over to John Zeller.

Thank you again for participating in today's call.

We hope you will join us for our next conference call to discuss our first quarter twenty twenty five results. As a reminder, this call will be available free play beginning two hours after the call has ended and may be accessed until 11:59PM Eastern Time on Monday, 03/03/2025. The replay can be accessed by can be accessed via the Partnership website Goodbye and have a wonderful day.