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Greetings, and welcome to the Genesis Energy L.P. Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Dwayne Morley, Vice President of IR. Please...

Good morning, and welcome to the 2025 Second Quarter Conference Call for Genesis Energy. Genesis Energy has 3 business segments. The Offshore Pipeline Transportation segment is engaged in providing the critical infrastructure to move oil produced from the long-lived world-class reservoirs from the deepwater Gulf of America to onshore refining centers. The Marine Transportation segment is engaged in the maritime transportation of primarily refined petroleum products. The Onshore Transportation and Services segment is engaged in the transportation, handling, blending, storage and supply of energy products, including crude oil and refined products, primarily around refining centers as well as the processing of sour gas streams to remove sulfur at refining operations. Genesis' operations are primarily located in the Gulf Coast states and the Gulf of America. During this conference call, management may be making forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. The law provides safe harbor protection to encourage companies to provide forward-looking information. Genesis intends to avail itself of those safe harbor provisions and directs you to its most recently filed and future filings with the Securities and Exchange Commission. We also encourage you to visit our website at genesisenergy.com, where a copy of the press release we issued this morning is located. The press release also presents a reconciliation of non-GAAP financial measures to the most comparable GAAP financial measures. At this time, I would like to introduce Grant Sims, CEO of Genesis Energy L.P. Mr. Sims will be joined by Kristen Jesulaitis, Chief Financial Officer and Chief Legal Officer; Ryan Sims, President and Chief Commercial Officer; and Louie Nicol, Chief Accounting Officer.

Good morning to everyone, and thanks for listening to the call. As we mentioned in our earnings release this morning, the second quarter was generally in line with our expectations. What is much more important from our perspective is looking ahead. And along those lines, I'm extremely excited to report the successful commissioning and start-up of the Shenandoah production facility and its 120,000 barrels per day of nameplate capacity, which just last week delivered first oil to our new sink pipeline lateral and then onto shore through our newly expanded CHOPS pipeline. This is a tremendous milestone for our entire Genesis team. I want to publicly thank them for all the hard work and dedication over the last 3-plus years during the design and construction phase as well as the countless hours day and night put in by our operations folks offshore to bring these exciting new projects into full service. Despite initial production from Shenandoah being delayed, first by around 6 months because of an industrial mishap during construction in Korea and then 6 weeks or so due to some commissioning challenges, primarily driven by abnormal loop currents in the Gulf, the operator successfully cleaned up the first of its 4 predrilled and completed wells last week. On Tuesday of this week, the operator began the cleanup of the second well, with such cleanup operations likely to continue through this weekend. The operator will then move to the third well and then on to the fourth well. Based upon initial results, it appears more likely than not that the initial wells will meet and/or exceed original predrill expectations. In fact, the operator and at least one of Shenandoah's nonoperating working interest owners have publicly affirmed that the initial phase should achieve 100,000 barrels a day of oil production from just these 4 wells, conceivably as early as the end of September. With first production flows through SYNC and CHOPS now underway, it is timely to discuss the tremendous potential in and around the Shenandoah Floating Production Unit, or FPU, and the currently identified and sanctioned developments, which will exclusively flow through our SYNC lateral and downstream on CHOPS, giving Genesis decades worth of anticipated throughput. After the first 4 wells are brought into full production, the Shenandoah FPU is expected to be debottlenecked and its capacity expanded to notionally 140,000 barrels of oil per day, targeted to be completed in advance of a fifth Shenandoah Phase 1 well that is slated for drilling and completion by mid-2026. Phase 2 of the Shenandoah development will add 2 additional wells and a subsea booster pump also in mid-2026. Beyond Shenandoah itself, the Monument discovery represents a further extension of the regional development and will entail 2 new producing wells developed by a 17-mile subsea tieback to the Shenandoah FPU slated for the fourth quarter of 2026. In addition to announcing first production from Shenandoah Phase 1 last week, the operator also confirmed the sanctioning of the Shenandoah South discovery located in Walker Ridge 95 -- Block 95 and water ranges depth ranging from 5,800 to 6,000 feet. Shenandoah South will be developed through a cost-efficient subsea tieback, utilizing a 3-mile oil flow line and a dedicated riser connection to the FPU. The project will include the drilling and completion of 2 wells with first production from the initial well targeted for the second [quarter] of 2028. This backlog of developments highlights Shenandoah's and our SYNC and CHOPS pipelines strategic role as a critical infrastructure that will facilitate the development of additional reserves within at least a 30-mile radius of the Shen FPU for many, many years ahead. Just these currently identified and sanctioned development projects represent almost 600 million barrels of oil equivalent reserves that will come -- all come through our 100% owned SYNC pipeline for further transportation to shore through our 64% owned and operated CHOPS pipeline. I would remind everyone that the total current nameplate capacity of the Shenandoah FPU represents only about 50% of the capacity of SYNC as well as only about half of the incremental capacity we have added on the CHOPS pipeline. The Salamanca development, which will flow exclusively through our 100% owned SEKCO pipeline for further transportation to shore through our 64% owned and operated Poseidon pipeline remains on track to achieve first oil by the end of the third quarter. The operator who has been largely dependent on some of the same support equipment and vessels that are currently working on Shenandoah has been progressing through their well completions and through safety checks and other pre-commissioning activities, including their subsea connection to our SEKCO pipeline lateral in advance of first production. Like Shenandoah, we expect Salamanca's production to ramp relatively quickly over the subsequent few months after first production to its initial peak design of 40,000 to 50,000 barrels of oil per day. Additionally, just like Shenandoah, we expect the Salamanca FPU will facilitate the development of additional reserves within at least a 30-mile radius for many, many years to come. These incremental volumes from Shenandoah and Salamanca are key to the Genesis story over the remainder of 2025 and certainly 2026 and beyond. This expected significant increase in our Offshore Pipeline Transportation segment margin driven initially by these new developments and sustained by the incremental identified and sanctioned opportunities I mentioned earlier as well as expected future exploratory successes and proximity to this expanded infrastructure is extraordinarily exciting for Genesis. Combined with the completion of our growth capital expenditures and the expected continued steady performance from our other businesses, we believe we are very well positioned to generate increasing amounts of free cash flow in excess of the cash cost of running our businesses starting in this -- the third quarter and which should grow and ultimately give us tremendous financial flexibility to be opportunistic and create long-term value for all of our stakeholders in future periods. With that, I'll go into a little more detail on each of our business segments. As mentioned in our earnings release, our Offshore Pipeline Transportation segment saw a sequential increase in volumes as a couple of the previously impacted offshore wells that have been down due to producer mechanical issues were brought back online and are now flowing again on our pipelines. While we continue to have several high-margin wells offline, we remain confident that producers are more incented than us and that they are actively working to restore these outages in conjunction with drilling new development wells that will also be tied into these existing production facilities. The remediation efforts have obviously been frustrating and slower than what we had originally been told, but we believe there continues to be no lasting impact on the underlying reservoirs. And regardless, we will ultimately transport every barrel produced from these fields on our offshore pipelines. Based upon what we have recently been told by the producers, we would reasonably expect the remaining wells will be fixed and back on production by and large, by the end of the third quarter, which should come close to restoring our base volume, so to speak, and allow the ramp in volumes from both Shenandoah and Salamanca to be mostly incremental. Our Marine Transportation segment performed in line with our expectations. Demand fundamentals for our inland or brown water fleet remain generally constructive. While the second quarter was a little sloppy as refinery crude slates, particularly in the Midwest, shifted and heavy to light differentials narrowed on the Gulf Coast, we have seen increased activity levels so far in the third quarter as refiners in the Gulf and Midwest begin their turnaround season, which has historically driven increased demand for our brown water equipment. It will be interesting to see if Gulf Coast refiners return to running Venezuelan heavies as the administration has just authorized a partial return to importing such highly viscous crude. This could widen the heavy to light differential and ultimately yield more "refining bottoms" along the Gulf Coast. Both would be expected to push demand for internal heater barges such as ours. Meanwhile, demand conditions in our blue water fleet have softened a little bit in recent months as we saw weaker demand to move clean products from the Gulf Coast to the Mid-Atlantic and New England. At the same time, certain large operators have relocated marine equipment away from the West Coast and into the Gulf Coast, which has increased the available supply of larger equipment in the markets in which we operate. While utilization rates in our blue water fleet have remained steady, these current market fundamentals have somewhat limited our ability to continue to drive day rates higher, especially as term charters come up for renewal. Ultimately, this new incremental equipment will find a home in the Gulf and East Coast trade. And while it might cause some sloppy periods in the interim, we do not believe it will contribute to any lasting structural changes. The long-term fundamentals in the marine world remain constructive, driven by effectively 0 net supply additions of our classes of Jones Act equipment and the significant cost and extended time line needed to construct a new vessel. As we have consistently mentioned in the past, even if an operator were to embark on such a new construction program today, it would be years before any new equipment was delivered. We, along with other industry participants, believe that day rates still need to rise another 20% to 30-plus percent and be expected to sustain at such higher levels for the next 5 to 8 years before anyone will undertake a significant newbuild program. All of this is to say, we continue to believe there remains structural support in the Jones Act world. Given our diversified and relatively young fleet, we continue to expect steady and likely growing financial contributions from our Marine Transportation segment for the foreseeable future. Switching briefly to our Onshore Transportation and Service segment. Our OTS segment performed in line with our expectations as we saw strong volumes through both our Texas system and Raceland terminal as refineries in both Texas City and South Louisiana increased their appetite for offshore barrels. We continue to believe we should see a modest increase in volumes through both our Texas City and Raceland terminals as new production from Shenandoah and Salamanca comes online and quickly ramps in the back half of the year. Our legacy refinery services business also performed in line with our expectations. As we highlighted last quarter, the lower and upper values in the range of our adjusted EBITDA guidance for the full year of 2025 were mostly dependent upon the timing around the resolution of the producer-related mechanical issues of certain high-margin offshore fields and the timing of first oil as well as the rate at which Shenandoah and Salamanca actually ramp to their anticipated initial production levels. As you can tell from our earnings release and our prepared remarks here today, the resolution of all of the producer mechanical issues has taken longer than we had previously been told and first oil from Shenandoah and subsequently Salamanca has been delayed a month or so from what we previously had expected. As a result for 2025, we expect to now come in at or near the low end of our previous guidance range. Having said that, the main takeaway from today is that none of the delays we have experienced in 2025, whether related to producer remediation efforts or the start of first production from both Shenandoah and Salamanca will have any significant, much less material impact on our ability to begin generating free cash flow starting this quarter nor have they altered our outlook for 2026 and beyond whatsoever. We remain committed to using our increased financial flexibility and liquidity to, first and foremost, make progress in seeing our bank calculated leverage ratio trend closer to our long-term targeted range of plus or minus 4 turns. In conjunction therewith, we remain committed to finding the highest and best use for future available dollars, whether that includes the further reduction of debt in absolute terms, the possible further redemption of our high-cost corporate preferred securities and/or the potential for increased distributions to our common unitholders in future periods. At the same time, we will remain disciplined and balanced, preserving the ability to evaluate and pursue incremental commercial opportunities that align with our long-term strategic objectives. Finally, I would like to say that the management team and the Board of Directors remain steadfast in our commitment to building long-term value for all of our stakeholders, regardless of where you are in the capital structure. We believe the decisions we are making reflect this commitment and our confidence in Genesis moving forward. I would once again like to recognize our entire workforce for their individual efforts and unwavering commitment to safe and responsible operations. I'm extremely proud to be associated with each and every one of you. With that, I'll turn it back to the moderator for questions.

[Operator Instructions] Our first question is from Michael Blum with Wells Fargo.

I wanted to ask about the timing on Salamanca. I realize it's out of your control directly, but just wanted to get your confidence level in the latest time line. Are there any other kind of variables that could shift that? Or do you feel pretty good about the latest projection there?

I think we -- based upon our most recent conversations, we feel very good about the projected time line at initial production certainly by the end of the third quarter. This is the kind of starting to get into the peak season for named storms that can cause interruptions. But at least the long term or at least the 7- to 10- to 14-day forecast at this point is that there's no significant disruptive weather on the horizon. So we feel very good about it. I think the operator feels very good about it. And so we're looking forward to seeing that start.

Great. And then appreciate all your comments on capital return and the different avenues and constituents there. Just wondering, given the delays in the -- ramp of these offshore projects, should we think about all this capital return really starting in 2026? Or do you think possibly some of this could start in 2025?

Well, I think that as we said in our prepared remarks, our focus for the rest of this year as we hit our free cash flow numbers is to pay our revolving balance to 0 by the end of the year. We think that, that is an achievable outcome. And then -- but I would say that by the time we get to the fourth quarter in the context of distribution for the fourth quarter that we would expect to have 3 to 4-plus months worth of operating history under our belt, so to speak, for the 2 major fields that are coming on, and we may have at that point, we may have a discussion and the flexibility to do something in '25 as opposed to '26.

Our next question is from Wade Suki with Capital.

Not sure if I got cut off or not, but I'll give it a try anyway just in case -- I think I might have asked this on the last call, but just looking at new commercial opportunities, anything out there on the horizon right now you can sort of discuss or opine on?

No. We have nothing on the horizon other than to use -- it's almost football season. So blocking and tackling for purposes of seeing the ramp and fully placed into service the significant offshore expansion projects at this point. So no, there's nothing identified that we're working on in terms of additional capital expenditures. We are getting into the free cash flow world and having the high-class problem of being able to allocate that across everybody in the capital structure.

I appreciate that. Love the analogy there. Just, I guess, in terms of the portfolio kind of as it sits today, are you all pretty happy with where it is? Any inorganic opportunities or maybe even a divestiture candidate out there that might be material or meaningful?

I think that we are -- we think that as you could tell from our prepared remarks that the underlying macro fundamentals for all of our businesses are as good as they've been in many, many, many years. And so we're very comfortable with where we are, and we look forward to continuing to deliver increasing financial results in a positive macro backdrop for our businesses. So the short answer is, we like where we're at, and we intend on harvesting cash from where we have and look forward to, at some point in the future, having the financial flexibility to be opportunistic, but I don't see us stepping outside of our current lines of businesses whatsoever, just focusing on our preeminent positions that we've worked very hard to build.

Understood. I hear that loud and clear. Just one more, if I could squeeze it in. Is Monument sort of the next chunky development coming online after Salamanca?

Yes, it's a combination of, as we said, Phase 1 of Shenandoah represented by the first 4 wells is anticipated to achieve about 100,000 barrels a day of oil flows. With the debottlenecking, both whether or not it's Phase 2 or Monument, we would expect that we would see additional volumes come up with -- through the expanded Shenandoah FPU in the back half of '26, if not into early '27. But that should -- again, that cost us no money whatsoever. And so we look forward to their continued success in bringing the wells on and as they tie in the incremental facilities or incremental reserves to the Shenandoah FPU is a great thing for us.

Our next question is from Elvira Scotto with RBC Capital Markets.

Can you talk a little bit or elaborate a little bit on some of these trends that you noted in the Marine Transportation segment and just the impact to your ability to raise day rates? What are your expectations here kind of going forward? I think you mentioned it's going to be a little sloppy, but what are we thinking here like quarters into next year? Just any incremental detail there?

Yes. I mean I think that the second quarter was a little sloppier than the third quarter, at least for the brown our inland barges. I mean we still achieved the inland barge utilization rate for the quarter in excess of 98% and that's adjusted for scheduled dry dockings and other issues, which wouldn't allow us to otherwise use the equipment. So that's a pretty high utilization rate, but we anticipate that to be even higher in the third quarter. So really, the sloppiness we saw in the inland side, we think is behind us. What we're dealing with on the blue water side and the larger barges, ATBs and wireline units, as you're aware, we have 9 of those. We have seen some equipment that had previously been in the West Coast trade that due to some emission restrictions -- new emission restrictions in the Republic of California, primarily, they are leaving the West Coast trade and coming to the Gulf Coast. So we've seen a little bit of -- but our utilization continues to be 97%, which means we have a substantial amount of under longer-term contract and not so much in the spot business. But we -- as I said in the prepared remarks, we think that, that will ultimately find a home and everything will kind of settle down. And given those utilization rates that are in the high 90%, approaching 100%, that's the necessary condition for being able to ultimately raise rates. So some short-term speed bumps along the way that have no significant impact on the long-term fundamentals in the Jones Act tonnage world from our perspective.

Great. And then the -- can you just remind us of the time line to reach that leverage ratio of 4x? And how do you plan to balance shareholder returns with your focus on kind of reducing leverage and improving the balance sheet?

I think, again, we'll probably get into a further discussion of '26 later in the year and certainly the first part of '26. And again, driven primarily just as our range for the '25 is driven by the performance of these 2 significant incremental economic opportunities for us represented by Shen and Salamanca that we'll have more clarity as we go through the year and enter '26, so we can give you a more concise answer on that. But again, I think that the total distribution to common unitholders is order of magnitude, what $78 million or something in that regard. So 10% increases in distribution is less than $8 million. And so that's not a significant heroic cost of beginning a return to unitholders, but that's something that we will consider as we move through the year. And given Michael's comments or question earlier, how I responded to that, it's something that I think that we can potentially consider beginning as early as the fourth quarter or as we progress through '26.

Great. And then just my last one. Given the timing of Salamanca and Shenandoah and some of the remediation work, you are now guiding to the low end of your previous adjusted EBITDA guidance. Do you think given the line of sight that you have now and visibility, are you pretty confident that you can, at the very least, hit that low end?

You never say never -- at this red hot moment, we have 2 wells out of what are 7/8 predrilled or pre-completed wells on. So again, as I said, based upon early analysis, it certainly -- it appears to be meeting or exceeding our predrill expectations. So time will tell, but we're in the very early stages, but we're very excited, as you can tell from where we are at this point.

[Operator Instructions] This does conclude our question-and-answer session. If you'd like -- I would now like to pass the floor back over to management for any closing comments.

Well, thanks, everyone, for listening to the call, and we look forward to discussing better things as we continue through 2025 and into 2026. Thanks very much.