Westlake Chemical Partners LP Announces Fourth Quarter and Full Year 2019 Results

Westlake Chemical Partners LP Announces Fourth Quarter and Full Year 2019 Results

  • Record annual net income attributable to the Partnership of $61.0 million; record annual MLP distributable cash flow of $73.2 million
  • Record annual production at OpCo
  • Increased quarterly cash distribution in the fourth quarter by 1.5% sequentially, or 6% annualized, compared to the third quarter 2019 distribution, to $0.4714 per unit, the 20th consecutive quarterly increase in distributions

HOUSTON--(BUSINESS WIRE)--Feb. 18, 2020-- Westlake Chemical Partners LP (NYSE: WLKP) (the "Partnership") today reported net income attributable to the Partnership of $17.4 million, or $0.49 per limited partner unit, for the three months ended December 31, 2019, an increase of $5.5 million compared to fourth quarter 2018 net income attributable to the Partnership of $11.9 million. The increase in net income attributable to the Partnership was primarily due to the Partnership's increased ownership interest in Westlake Chemical OpCo LP ("OpCo") resulting from the acquisition of an additional 4.5% interest in OpCo in the first quarter of 2019 (the "Acquisition"), and higher third party sales margins. Cash flows from operating activities in the fourth quarter of 2019 were $115.7 million, an increase of $9.6 million compared to fourth quarter 2018 cash flows from operating activities of $106.1 million. This increase in cash flows from operating activities was primarily due to higher production volumes at OpCo and a decrease in working capital. For the three months ended December 31, 2019, MLP distributable cash flow of $18.8 million increased by $4.3 million from fourth quarter 2018 MLP distributable cash flow of $14.5 million. This increase was primarily due to the Acquisition and higher third party sales margins.

Fourth quarter 2019 net income attributable to the Partnership of $17.4 million increased by $2.5 million from third quarter 2019 net income attributable to the Partnership of $14.9 million, primarily due to increased production at OpCo and higher third party sales margins. Fourth quarter 2019 cash flows from operating activities of $115.7 million decreased by $5.8 million compared to third quarter 2019 cash flows from operating activities of $121.5 million, primarily due to an increase in working capital. Fourth quarter 2019 MLP distributable cash flow of $18.8 million decreased by $1.7 million compared to third quarter 2019 MLP distributable cash flow of $20.5 million, primarily due to higher maintenance capital spending, partially offset by higher third party sales margins and production volumes.

Net income attributable to the Partnership of $61.0 million, or $1.77 per limited partner unit, for the full year 2019 increased by $11.7 million compared to 2018 net income attributable to the Partnership of $49.3 million. The increase in net income attributable to the Partnership as compared to the prior year was primarily due to the Acquisition and higher third party sales margins, partially offset by higher interest expenses attributable to the Partnership. Cash flows from operating activities in the twelve months ended December 31, 2019 were $450.8 million, an increase of $14.6 million compared to 2018 cash flows from operating activities of $436.2 million, primarily due to a reduction in working capital. For the twelve months ended December 31, 2019, MLP distributable cash flow of $73.2 million increased by $13.2 million compared to 2018 MLP distributable cash flow of $60.0 million. The increase in MLP distributable cash flow versus the prior-year was primarily due to the Acquisition, record production at OpCo and higher third party sales margins, partially offset by maintenance capital expenditures.

"We are pleased with the Partnership's record operational and financial performance. In 2019, we completed the third dropdown of interest in OpCo into the Partnership and achieved record income and distributable cash flow. As we enter 2020, we continue to reap benefits of the investments made to grow our earnings, cash flows and production while continuing to strengthen the Partnership," said Albert Chao, President and Chief Executive Officer. "Anchored by a strong relationship with our sponsor, Westlake Chemical, we will continue to take steps to maximize long-term value to unitholders. This quarter we increased our distribution for the 20th consecutive quarter, sustaining our top-tier distribution growth rate while continuing to deliver on our objective of reducing our reliance on the equity markets to align with our future capital requirements. As we navigate evolving market conditions, we continue to evaluate potential opportunities via our four levers of growth, including organic expansions of our current ethylene facilities, continuation of periodic dropdowns of interest in OpCo, acquisitions of other qualified income streams and a higher fixed-margin in our Ethylene Sales Agreement with Westlake. We are excited about continuing to deliver growth and long-term value to our unitholders."

On January 27, 2020, the Partnership announced that the Board of Directors of Westlake Chemical Partners GP LLC had approved a quarterly distribution for the fourth quarter of 2019 of $0.4714 per unit to be payable on February 18, 2020 to unitholders of record as of February 3, 2020. The fourth quarter 2019 distribution increased by 1.5% compared to the third quarter 2019 distribution, or by 6.0% on an annualized basis. MLP distributable cash flow provided trailing twelve-month coverage of 1.13x the declared distributions for the fourth quarter of 2019.

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 potential future growth of cash flows and distributions, taking steps to maximize long-term value to unitholders, potential organic expansions of our current ethylene facilities, potential continuation of periodic dropdowns of OpCo into the MLP, potential acquisitions of other qualified income streams, a potential higher fixed margin in our Ethylene Sales Agreement with Westlake, and delivery of growth and long-term value to our unitholders 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, 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 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, 2018, which was filed with the SEC in March 2019.

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 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. generally accepted accounting principles ("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' fourth quarter 2019 results will be held Tuesday, February 18, 2020 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 567 93 02.

A replay of the conference call will be available beginning two hours after its conclusion until 11:59 p.m. Eastern Time on Tuesday, February 25, 2020. To hear a replay, dial (855) 859-2056 or (404) 537-3406 for international callers. The replay passcode is 567 93 02.

The conference call will also be available via webcast at: https://edge.media-server.com/mmc/p/riphu4nv 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 December 31,

 

Twelve Months Ended December 31,

 

 

2019

 

2018

 

2019

 

2018

 

 

(In thousands of dollars, except per unit data)

Revenue

 

 

 

 

 

 

 

 

Net sales—Westlake Chemical Corporation ("Westlake")

 

$

233,860

 

 

$

272,872

 

 

$

937,625

 

 

$

1,074,957

 

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

 

38,938

 

 

62,853

 

 

154,246

 

 

210,665

 

Total net sales

 

272,798

 

 

335,725

 

 

1,091,871

 

 

1,285,622

 

Cost of sales

 

169,201

 

 

242,096

 

 

712,443

 

 

908,463

 

Gross profit

 

103,597

 

 

93,629

 

 

379,428

 

 

377,159

 

Selling, general and administrative expenses

 

7,844

 

 

7,173

 

 

29,278

 

 

27,590

 

Income from operations

 

95,753

 

 

86,456

 

 

350,150

 

 

349,569

 

Other income (expense)

 

 

 

 

 

 

 

 

Interest expense—Westlake

 

(4,187

)

 

(5,381

)

 

(19,623

)

 

(21,433

)

Other income, net

 

563

 

 

715

 

 

3,096

 

 

2,457

 

Income before income taxes

 

92,129

 

 

81,790

 

 

333,623

 

 

330,593

 

Provision for income taxes

 

219

 

 

208

 

 

728

 

 

22

 

Net income

 

91,910

 

 

81,582

 

 

332,895

 

 

330,571

 

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

 

74,539

 

 

69,699

 

 

271,914

 

 

281,224

 

Net income attributable to Westlake Partners

 

$

17,371

 

 

$

11,883

 

 

$

60,981

 

 

$

49,347

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Common units

 

$

0.49

 

 

$

0.37

 

 

$

1.77

 

 

$

1.51

 

 

 

 

 

 

 

 

 

 

Distributions declared per unit

 

$

0.4714

 

 

$

0.4328

 

 

$

1.8391

 

 

$

1.6598

 

 

 

 

 

 

 

 

 

 

MLP distributable cash flow

 

$

18,752

 

 

$

14,524

 

 

$

73,181

 

 

$

60,024

 

 

 

 

 

 

 

 

 

 

Distribution declared

 

 

 

 

 

 

 

 

Limited partner units—public and privately held

 

$

9,934

 

 

$

7,845

 

 

$

38,746

 

 

$

30,077

 

Limited partner units—Westlake

 

6,657

 

 

6,112

 

 

25,972

 

 

23,439

 

Incentive distribution rights

 

 

 

 

 

 

 

733

 

Total distribution declared

 

$

16,591

 

 

$

13,957

 

 

$

64,718

 

 

$

54,249

 

EBITDA

 

$

123,254

 

 

$

113,837

 

 

$

460,566

 

 

$

460,868

 

WESTLAKE CHEMICAL PARTNERS LP

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

December 31,
2019

 

December 31,
2018

 

 

(In thousands of dollars)

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

19,923

 

 

$

19,744

 

Receivable under the Investment Management Agreement—Westlake Chemical Corporation ("Westlake")

 

162,773

 

 

148,956

 

Accounts receivable, net—Westlake

 

42,847

 

 

57,280

 

Accounts receivable, net—third parties

 

9,914

 

 

16,404

 

Inventories

 

2,484

 

 

4,388

 

Prepaid expenses and other current assets

 

470

 

 

370

 

Total current assets

 

238,411

 

 

247,142

 

Property, plant and equipment, net

 

1,102,995

 

 

1,148,265

 

Other assets, net

 

52,050

 

 

66,718

 

Total assets

 

$

1,393,456

 

 

$

1,462,125

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities (accounts payable and accrued liabilities)

 

$

38,849

 

 

$

48,772

 

Long-term debt payable to Westlake

 

399,674

 

 

477,608

 

Other liabilities

 

2,798

 

 

1,664

 

Total liabilities

 

441,321

 

 

528,044

 

Common unitholders—public and privately held

 

471,736

 

 

409,608

 

Common unitholder—Westlake

 

48,350

 

 

48,774

 

General partner—Westlake

 

(242,572

)

 

(242,572

)

Total Westlake Partners partners' capital

 

277,514

 

 

215,810

 

Noncontrolling interest in OpCo

 

674,621

 

 

718,271

 

Total equity

 

952,135

 

 

934,081

 

Total liabilities and equity

 

$

1,393,456

 

 

$

1,462,125

 

WESTLAKE CHEMICAL PARTNERS LP

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Twelve Months Ended December 31,

 

 

2019

 

2018

 

 

(In thousands of dollars)

Cash flows from operating activities

 

 

 

 

Net income

 

$

332,895

 

 

$

330,571

 

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

 

 

 

 

Depreciation and amortization

 

107,320

 

 

108,842

 

Other balance sheet changes

 

10,592

 

 

(3,262

)

Net cash provided by operating activities

 

450,807

 

 

436,151

 

Cash flows from investing activities

 

 

 

 

Additions to property, plant and equipment

 

(43,707

)

 

(39,862

)

Maturities of investments with Westlake under the Investment Management Agreement

 

515,445

 

 

372,050

 

Investments with Westlake under the Investment Management Agreement

 

(529,445

)

 

(384,000

)

Net cash used for investing activities

 

(57,707

)

 

(51,812

)

Cash flows from financing activities

 

 

 

 

Net proceeds from common unit offering

 

62,661

 

 

 

Proceeds from debt payable to Westlake

 

123,511

 

 

3,648

 

Repayment of debt payable to Westlake

 

(201,445

)

 

 

Quarterly distributions to noncontrolling interest retained in OpCo by Westlake

 

(315,564

)

 

(341,888

)

Quarterly distributions to unitholders

 

(62,084

)

 

(53,363

)

Net cash used for financing activities

 

(392,921

)

 

(391,603

)

Net increase (decrease) in cash and cash equivalents

 

179

 

 

(7,264

)

Cash and cash equivalents at beginning of the year

 

19,744

 

 

27,008

 

Cash and cash equivalents at end of the year

 

$

19,923

 

 

$

19,744

 

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,

 

 

2019

 

2019

 

2018

 

2019

 

2018

 

 

(In thousands of dollars)

Net cash provided by operating activities

 

$

121,482

 

 

$

115,653

 

 

$

106,147

 

 

$

450,807

 

 

$

436,151

 

Changes in operating assets and liabilities and other

 

(39,003

)

 

(23,743

)

 

(24,565

)

 

(117,912

)

 

(105,580

)

Net Income

 

82,479

 

 

91,910

 

 

81,582

 

 

332,895

 

 

330,571

 

Add:

 

 

 

 

 

 

 

 

 

 

Depreciation, amortization and disposition of property, plant and equipment

 

26,582

 

 

27,048

 

 

27,922

 

 

107,835

 

 

110,691

 

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

 

7,195

 

 

(5,695

)

 

62

 

 

1,301

 

 

62

 

Less:

 

 

 

 

 

 

 

 

 

 

Contribution to turnaround reserves

 

(3,932

)

 

(3,961

)

 

(4,238

)

 

(15,630

)

 

(16,840

)

Maintenance capital expenditures

 

(5,568

)

 

(11,327

)

 

(9,297

)

 

(39,940

)

 

(31,481

)

Incentive distribution rights

 

 

 

 

 

 

 

 

 

(733

)

Distributable cash flow attributable to noncontrolling interest in OpCo

 

(86,304

)

 

(79,223

)

 

(81,507

)

 

(313,280

)

 

(332,246

)

MLP distributable cash flow

 

$

20,452

 

 

$

18,752

 

 

$

14,524

 

 

$

73,181

 

 

$

60,024

 

WESTLAKE CHEMICAL PARTNERS LP

 

RECONCILIATION OF EBITDA 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,

 

 

2019

 

2019

 

2018

 

2019

 

2018

 

 

(In thousands of dollars)

Net cash provided by operating activities

 

$

121,482

 

 

$

115,653

 

 

$

106,147

 

 

$

450,807

 

 

$

436,151

 

Changes in operating assets and liabilities and other

 

(39,003

)

 

(23,743

)

 

(24,565

)

 

(117,912

)

 

(105,580

)

Net Income

 

82,479

 

 

91,910

 

 

81,582

 

 

332,895

 

 

330,571

 

Less:

 

 

 

 

 

 

 

 

 

 

Other income, net

 

565

 

 

563

 

 

715

 

 

3,096

 

 

2,457

 

Interest expense

 

(4,411

)

 

(4,187

)

 

(5,381

)

 

(19,623

)

 

(21,433

)

Provision for income taxes

 

(72

)

 

(219

)

 

(208

)

 

(728

)

 

(22

)

Income from operations

 

86,397

 

 

95,753

 

 

86,456

 

 

350,150

 

 

349,569

 

Add:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

26,681

 

 

26,938

 

 

26,666

 

 

107,320

 

 

108,842

 

Other income, net

 

565

 

 

563

 

 

715

 

 

3,096

 

 

2,457

 

EBITDA

 

$

113,643

 

 

$

123,254

 

 

$

113,837

 

 

$

460,566

 

 

$

460,868

 

 

Source: Westlake Chemical Partners LP

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

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