WLKP Westlake Chemical Partners LP

• Declared quarterly distribution of $0.4714 per unit; 29th consecutive quarterly distribution

Westlake Chemical Partners LP (NYSE: WLKP) (the "Partnership") today reported net income attributable to the Partnership in the third quarter of 2021 of $12.8 million, or $0.36 per limited partner unit, a decrease of $5.7 million compared to third quarter 2020 net income attributable to the Partnership of $18.5 million. The decrease in net income was a result of reduced sales to Westlake attributable to a buyer deficiency fee from Westlake Chemical Corporation (“Westlake Chemical”) that was recognized in the third quarter of 2020 in connection with Hurricanes Laura and Delta as well as the commencement of the planned turnaround of Westlake Chemical OpCo LP's ("OpCo") Petro 2 facility and associated planned production outage for the turnaround of Petro 2. Cash flows from operating activities in the third quarter of 2021 were $99.5 million, a decrease of $17.7 million compared to third quarter 2020 cash flows from operating activities of $117.2 million. This decrease in cash flows from operating activities was primarily due to lower earnings. For the three months ended September 30, 2021, MLP distributable cash flow of $13.0 million decreased by $8.2 million from third quarter 2020 MLP distributable cash flow of $21.2 million. The decrease in operating cash flows and MLP distributable cash flow was primarily attributable to lower earnings at OpCo and higher maintenance costs.

Third quarter 2021 net income attributable to the Partnership of $12.8 million decreased by $12.3 million compared to second quarter 2021 net income attributable to the Partnership of $25.1 million. This decrease was primarily attributable to lower production at OpCo and lower third-party sales. Additionally, second quarter 2021 net income attributable to the Partnership benefited from a buyer deficiency fee associated with year-to-date lower planned production that was a result of Winter Storm Uri. Third quarter 2021 cash flows from operating activities of $99.5 million decreased by $32.2 million compared to second quarter 2021 cash flows from operating activities of $131.7 million. Third quarter 2021 MLP distributable cash flow of $13.0 million decreased by $12.5 million compared to second quarter 2021 MLP distributable cash flow of $25.5 million. This decrease in MLP distributable cash flow was primarily due to lower earnings at OpCo.

Net income attributable to the Partnership of $53.0 million, or $1.51 per limited partner unit, for the nine months ended September 30, 2021 increased by $1.9 million compared to the first nine months of 2020 net income attributable to the Partnership of $51.1 million. Cash flows from operating activities in the first nine months of 2021 were $386.6 million, an increase of $45.7 million compared to the first nine months of 2020 cash flows from operating activities of $340.9 million. This increase in cash flows from operating activities versus the prior-year period was primarily due to the receipt of a prior year receivable from Westlake Chemical. For the nine months ended September 30, 2021, MLP distributable cash flow of $54.8 million decreased by $1.6 million compared to the first nine months of 2020 MLP distributable cash flow of $56.4 million. The decrease in MLP distributable cash flow as compared to the prior-year period was primarily attributable to reduced earnings attributable to the planned turnaround of Petro 2 as well as increased maintenance costs and turnaround reserves.

On November 1, 2021, the Partnership announced that the Board of Directors of Westlake Chemical Partners GP LLC had approved a quarterly distribution for the third quarter of 2021 of $0.4714 per unit to be payable on November 29, 2021 to unitholders of record as of November 12, 2021, representing the 29th consecutive quarterly distribution to our unitholders. MLP distributable cash flow provided trailing twelve-month coverage of 1.06x the declared distributions for the third quarter of 2021.

"We are working diligently to complete the turnaround of our Petro 2 facility and expect to restart the facility in December. The Partnership continues to see strong consumer markets for construction materials and packaging, which drove downstream demand for ethylene," said Albert Chao, President and Chief Executive Officer. "As we look ahead we are seeing sustained strength in our business and the demand for downstream derivatives. The Partnership is well positioned to provide consistent cash flows while continuing to pay a healthy distribution. We are optimistic about the future and the value we can deliver 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.

The statements in this release and the related teleconference relating to matters that are not historical facts, such as those with respect to timing expectations regarding the restart of the Petro 2 facility following completion of the turnaround, the ability to provide consistent cash flow and pay a healthy distribution, and the expectation for sustained strength in the business 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, 2020, which was filed with the SEC in March 2021.

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 Chemical 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 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 2021 results will be held Tuesday, November 2, 2021 at 12:00 PM Eastern Time (11:00 AM 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 828 54 07.

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 9, 2021. To hear a replay, dial (855) 859-2056 or (404) 537-3406 for international callers. The replay passcode is 828 54 07.

The conference call will also be available via webcast at: https://edge.media-server.com/mmc/p/9ssoi6jp 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 September 30,

 

Nine Months Ended September 30,

 

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

 

 

(In thousands of dollars, except per unit data)

Revenue

 

 

 

 

 

 

 

 

Net sales—Westlake Chemical Corporation ("Westlake")

 

$

247,887

 

 

$

217,763

 

 

$

708,646

 

 

$

660,022

 

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

 

46,079

 

 

14,206

 

 

175,756

 

 

60,996

 

Total net sales

 

293,966

 

 

231,969

 

 

884,402

 

 

721,018

 

Cost of sales

 

218,038

 

 

131,578

 

 

589,746

 

 

427,049

 

Gross profit

 

75,928

 

 

100,391

 

 

294,656

 

 

293,969

 

Selling, general and administrative expenses

 

7,792

 

 

6,255

 

 

24,734

 

 

18,590

 

Income from operations

 

68,136

 

 

94,136

 

 

269,922

 

 

275,379

 

Other income (expense)

 

 

 

 

 

 

 

 

Interest expense—Westlake

 

(2,190

)

 

(2,320

)

 

(6,650

)

 

(9,701

)

Other income, net

 

24

 

 

17

 

 

52

 

 

725

 

Income before income taxes

 

65,970

 

 

91,833

 

 

263,324

 

 

266,403

 

Income tax provision (benefit)

 

(105

)

 

(15

)

 

333

 

 

408

 

Net income

 

66,075

 

 

91,848

 

 

262,991

 

 

265,995

 

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

("OpCo")

 

53,285

 

 

73,313

 

 

209,956

 

 

214,853

 

Net income attributable to Westlake Partners

 

$

12,790

 

 

$

18,535

 

 

$

53,035

 

 

$

51,142

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Common units

 

$

0.36

 

 

$

0.53

 

 

$

1.51

 

 

$

1.45

 

 

 

 

 

 

 

 

 

 

Distributions declared per unit

 

$

0.4714

 

 

$

0.4714

 

 

$

1.4142

 

 

$

1.4142

 

 

 

 

 

 

 

 

 

 

MLP distributable cash flow

 

$

12,977

 

 

$

21,188

 

 

$

54,760

 

 

$

56,380

 

 

 

 

 

 

 

 

 

 

Distributions declared

 

 

 

 

 

 

 

 

Limited partner units—publicly and privately held

 

$

9,943

 

 

$

9,933

 

 

$

29,817

 

 

$

29,800

 

Limited partner units—Westlake

 

6,657

 

 

6,658

 

 

19,971

 

 

19,972

 

Total distributions declared

 

$

16,600

 

 

$

16,591

 

 

$

49,788

 

 

$

49,772

 

EBITDA

 

$

94,746

 

 

$

120,076

 

 

$

352,804

 

 

$

353,871

 

WESTLAKE CHEMICAL PARTNERS LP

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

September 30, 2021

 

December 31, 2020

 

 

 

 

 

 

 

(In thousands of dollars)

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

18,647

 

 

$

17,154

 

Receivable under the Investment Management Agreement—Westlake

 

196,252

 

 

123,228

 

Accounts receivable, net—Westlake

 

57,020

 

 

108,028

 

Accounts receivable, net—third parties

 

12,168

 

 

11,029

 

Inventories

 

6,590

 

 

3,474

 

Prepaid expenses and other current assets

 

566

 

 

392

 

Total current assets

 

291,243

 

 

263,305

 

Property, plant and equipment, net

 

1,022,181

 

 

1,050,677

 

Other assets, net

 

47,138

 

 

42,506

 

Total assets

 

$

1,360,562

 

 

$

1,356,488

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities (accounts payable and accrued liabilities)

 

$

54,559

 

 

$

39,754

 

Long-term debt payable to Westlake

 

399,674

 

 

399,674

 

Other liabilities

 

1,510

 

 

1,923

 

Total liabilities

 

455,743

 

 

441,351

 

Common unitholders—publicly and privately held

 

474,062

 

 

471,701

 

Common unitholder—Westlake

 

49,576

 

 

48,270

 

General partner—Westlake

 

(242,572

)

 

(242,572

)

Total Westlake Partners partners' capital

 

281,066

 

 

277,399

 

Noncontrolling interest in OpCo

 

623,753

 

 

637,738

 

Total equity

 

904,819

 

 

915,137

 

Total liabilities and equity

 

$

1,360,562

 

 

$

1,356,488

 

WESTLAKE CHEMICAL PARTNERS LP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

2021

 

2020

 

 

 

 

 

 

 

(In thousands of dollars)

Cash flows from operating activities

 

 

 

 

Net income

 

$

262,991

 

 

$

265,995

 

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

 

 

 

 

Depreciation and amortization

 

82,830

 

 

 

77,767

 

 

Other balance sheet changes

 

40,756

 

 

 

(2,886

)

 

Net cash provided by operating activities

 

386,577

 

 

 

340,876

 

 

Cash flows from investing activities

 

 

 

 

Additions to property, plant and equipment

 

(38,490

)

 

 

(29,170

)

 

Maturities of investments with Westlake under the Investment Management Agreement

 

203,000

 

 

 

276,000

 

 

Investments with Westlake under the Investment Management Agreement

 

(276,000

)

 

 

(305,000

)

 

Other

 

126

 

 

 

—

 

 

Net cash used for investing activities

 

(111,364

)

 

 

(58,170

)

 

Cash flows from financing activities

 

 

 

 

Quarterly distributions to noncontrolling interest retained in OpCo by Westlake

 

(223,941

)

 

 

(229,526

)

 

Quarterly distributions to unitholders

 

(49,779

)

 

 

(49,772

)

 

Net cash used for financing activities

 

(273,720

)

 

 

(279,298

)

 

Net increase in cash and cash equivalents

 

1,493

 

 

 

3,408

 

 

Cash and cash equivalents at beginning of period

 

17,154

 

 

 

19,923

 

 

Cash and cash equivalents at end of period

 

$

18,647

 

 

 

$

23,331

 

 

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,

 

 

2021

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands of dollars)

Net cash provided by operating activities

 

$

131,710

 

 

$

99,459

 

 

$

117,157

 

 

$

386,577

 

 

$

340,876

 

Changes in operating assets and liabilities and other

 

(11,416

)

 

(33,384

)

 

(25,309

)

 

(123,586

)

 

(74,881

)

Net Income

 

120,294

 

 

66,075

 

 

91,848

 

 

262,991

 

 

265,995

 

Add:

 

 

 

 

 

 

 

 

 

 

Depreciation, amortization and disposition of property, plant

and equipment

 

28,734

 

 

26,958

 

 

26,476

 

 

84,590

 

 

78,767

 

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

 

—

 

 

—

 

 

1,572

 

 

—

 

 

(215

)

Less:

 

 

 

 

 

 

 

 

 

 

Contribution to turnaround reserves

 

(12,463

)

 

(10,795

)

 

(9,890

)

 

(35,590

)

 

(29,697

)

Maintenance capital expenditures

 

(14,344

)

 

(15,346

)

 

(6,509

)

 

(41,433

)

 

(25,858

)

Distributable cash flow attributable to noncontrolling interest in

OpCo

 

(96,683

)

 

(53,915

)

 

(82,309

)

 

(215,798

)

 

(232,612

)

MLP distributable cash flow

 

$

25,538

 

 

$

12,977

 

 

$

21,188

 

 

$

54,760

 

 

$

56,380

 

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,

 

 

2021

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands of dollars)

Net cash provided by operating activities

 

$

131,710

 

 

$

99,459

 

 

$

117,157

 

 

$

386,577

 

 

$

340,876

 

Changes in operating assets and liabilities and other

 

(11,416

)

 

(33,384

)

 

(25,309

)

 

(123,586

)

 

(74,881

)

Net Income

 

120,294

 

 

66,075

 

 

91,848

 

 

262,991

 

 

265,995

 

Less:

 

 

 

 

 

 

 

 

 

 

Other income, net

 

21

 

 

24

 

 

17

 

 

52

 

 

725

 

Interest expense

 

(2,224

)

 

(2,190

)

 

(2,320

)

 

(6,650

)

 

(9,701

)

Income tax benefit (provision)

 

(263

)

 

105

 

 

15

 

 

(333

)

 

(408

)

Income from operations

 

122,760

 

 

68,136

 

 

94,136

 

 

269,922

 

 

275,379

 

Add:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

28,702

 

 

26,586

 

 

25,923

 

 

82,830

 

 

77,767

 

Other income, net

 

21

 

 

24

 

 

17

 

 

52

 

 

725

 

EBITDA

 

$

151,483

 

 

$

94,746

 

 

$

120,076

 

 

$

352,804

 

 

$

353,871

 

 

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