Ben Ederington - Vice President and Chief Administrative Officer Albert Chao - President and Chief Executive Officer Steve Bender - Senior Vice President and Chief Financial Officer.

Matthew Blair - Tudor, Pickering.

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Westlake Chemical Partners' Third Quarter 2016 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. After the speakers' remarks, you will be invited to participate in a question-and-answer session.

As a reminder, ladies and gentlemen, this conference call is being recorded today, November 8th, 2016. I would now like to turn the call over to today's host, Ben Ederington, Westlake Chemical Partners’ Vice President and Chief Administrative Officer. Sir, you may begin..

Thank you. Good morning, everyone, and welcome to the Westlake Chemical Partners third quarter 2016 conference call. I'm joined today by Albert Chao, our President and CEO; Steve Bender, our Senior Vice President and Chief Financial Officer, and other members of our management team.

The conference call will begin with Albert, who will open with a few comments regarding Westlake Chemical Partners performance in the third quarter, as well as a current outlook on our performance and opportunities. Steve will then provide a more detailed look at our financial and operating results.

Finally, Albert will add a few concluding comments and then we will open the call up to questions.

During this call, we refer to ourselves as Westlake Partners or the “Partnership” reference to Westlake Chemical refer to our parent company Westlake Chemical Corporation and references to OpCo refer to Westlake Chemical OpCo LP, a subsidiary of Westlake Chemical and the Partnership which owns certain olefin facilities.

Today, management is going to discuss certain topics that will contain forward-looking information that is based on management's beliefs as well as assumptions made by and information currently available to management. These forward-looking statements suggest predictions or expectations, and thus are subject to risks or uncertainties.

Actual results could differ materially based upon many factors, including 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 prevailing economic conditions, actual and proposed governmental regulatory actions, competitive products and pricing pressures, our ability to borrow funds and access capital market, and other risk factors discussed in our SEC filings.

This morning, Westlake Partners issued a press release with details of our third quarter financial and operating results. This document is available in the Press Release section of our webpage at wlkpartners.com.

A replay of today's call will be available beginning two hours after completion of this call until 11:59 PM Eastern Time on November 15th, 2016. The replay may be accessed by dialing the following numbers; domestic callers should dial 855-859-2056; international callers may access the replay at 404-537-3406. The access code is 96257816.

Please note that information reported on this call speaks only as of today, November 8th, 2016, 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 webcast system that can be accessed on our webpage at wlkpartners.com. Now, I’d like to turn the call over to Albert Chao.

Albert?.

Thank you, Ben. Good morning, ladies and gentlemen. And thank you for joining us on our earnings call to discuss our third quarter results. In this morning’s press release, reported consolidated net income including OpCo’s earnings of $76 million for the third quarter of 2016. Westlake Partners net income was $9 million.

We are pleased have completed the turnaround and expansion project at our Petro 1 facility in Lake Charles, Louisiana during the third quarter. This expansion added 250 million pounds of ethylene capacity which along with our plan to expand our Calvert City, Kentucky facility in the first quarter of 2017.

It will allow us to continue with our targeted annual low double digit growth rate of distributions. On October 31st, 2016, we announced an increase in distributions to our unit holders with respect to the third quarter of 2016.

This 2.9% increase in distributions is the seventh consecutive quarterly increase in distributions to our unit holders since our initial public offering in August of 2014.

In regard to the IRS proposed regulations governing qualifying income for Master Limited Partnership, we participated in the IRS hearing on this matter in October 2015, and had a number of subsequent meetings with the IRS and Treasury Department where we presented our view that our activities are clearly within the plain reading of the statute.

We believe that IRS interpretation of the law while issuing our private letter ruling was and still is correct, and we’ll continue to make at this point to the IRS and treasury. I would now like to turn our call over to Steve to provide more detail on the financial and operating results for the third quarter.

Steve?.

Thank you, Albert, and good morning, everyone. In this morning's press release, we reported consolidated net income including OpCo’s earnings of $76 million on consolidated sales of $229 million for the third quarter of 2016. Westlake Partners' net income was $9 million or $0.32 per limited partner unit.

We also reported MLP distributable cash flow of $7 million for the third quarter. Third quarter net income for Westlake Partners decreased by $7 million, or $0.05 per limited partner unit when compared to the third quarter 2015. MLP distributable cash flow of $7 million was $2 million lower than the third quarter 2015.

This decreased net income and MLP distributable cash flow was primarily due to the plan turnaround and expansion project of OpCo’s Petro 1 unit which was completed in July 2016. The partnership’s third quarter 2016 net income of $9 million was $683,000 or $0.02 per limited partner unit, lower than second quarter 2016 net income.

MLP distributable cash flow was $3 million greater than second quarter MLP distributable cash flow. This increase in MLP distributable cash flow was a result of higher operating rates at our Calvert City facility and the increased production at our Petro 1 unit as we ramped up production starting in July.

The benefit from our long-term ethylene sales agreement with our sponsor Westlake Chemical is the stable fee-based cash flow. This contract represents 95% of our ethylene sales and protects the partnership’s cash flows from marching volatility that can be associated with the ethylene business.

This ethylene contract which is structured to generate a margin of $0.10 per pound of ethylene along with the take or pay provisions incentivizes us to continue to look for opportunities to increase capacity in operating rates.

Along with the recently completed 250 million pound ethylene expansion of our Petro 1 plant at our Lake Charles facility, we also preparing for the expansion of our Calvert City facility, which we have schedule for the first quarter of 2017.

This outage to complete the expansion has plan for approximately three weeks and will in addition to other incremental capacity increases bring our annual ethylene capacity at Calvert City to 730 million pounds.

While the expansion of our Petro 1 facility led to a temporary lower coverage ratio this quarter of 0.75 times, we expect the additional capacity drive higher production in grow earnings and cash flows later this year and in the next year which is expected to bring our coverage ratio back to the target level of 1.1 times for the fourth quarter.

Beginning in the second quarter of 2016 we experienced an outage at OpCo's Calvert City facility which was a force measure event under the ethylene sales agreement with West Lake Chemicals.

As such if OpCo is not able to make up the loss production throughout the remainder of the year, Westlake will be obligated to pay for 95% of the incremental cost incurred as well as the $0.10 margin on the production in which OpCo’s unable to make up.

For the third quarter of 2016, OpCo spent $100 million in capital expenditures as we completed the expansion of our Petro 1 plant. As Albert stated, this 250 million pound expansion began in mid-April and was completed at the end of July.

At the end of the third quarter, we had a consolidated cash balance of $75 million dollars of which $71 million was held at OpCo and $4 million at the partnership level. Long term debt was $595 million of which $460 million was at OpCo and $135 million was at the partnership.

On October 31, 2016 we declared a quarterly distribution to unit holders of $33.53 per unit. This increase in distributions of $0.94 per unit represents a 2.9% increase from the second quarter of 2016 and continues us down the path to deliver consistent quarterly increases targeting an annualized low double-digit growth rate.

The excess of distributions over distributable cash for this quarter will be funded from cash currently on hand at the MLP. Now I’d like to turn the call back over to Albert to make some closing comments.

Albert?.

Thank you, Steve. The stable fee-based cash flow generated by our fixed margin ethylene sales contract with Westlake Chemicals forms the foundation for us to deliver long-term value to our unit holders.

This enables us to successfully pursue dropdown transactions, organic growth and third party acquisition opportunities to increase distributions to our unit holders. Looking forward, we’re preparing for the upcoming expansion of our Calvert City facility in the first quarter of 2017.

The additional 250 million pounds of ethylene capacity already achieved through the recently completed Lake Charles expansion along with the planned 100 million pounds expansion Calvert City will allow us to continue our targeted low double digit growth rate in distributions.

We will continue to assess future growth opportunities that will allow us to grow MLP distributable cash flow. Thank you very much for listening to our third quarter earnings call this morning. Now, I’ll turn the call back over to Ben.

Ben?.

Thank you, Albert. Before we begin taking questions, I would like to remind you that a replay of this teleconference will be available starting two hours after we conclude the call. We will provide that number again at the conclusion of our call. Katie, we are now prepared to take questions..

[Operator Instructions] Our first question comes from the line of Matthew Blair with Tudor, Pickering. Your line is open..

Good morning, Albert and Steve..

Good morning..

Good morning..

Steve, if the IRS is proposed interpretation, could you just outlined the various options that the Westlake LP would have going forwards. And then firstly, could you go over, I think there's an option to increase your depreciation to defer some taxes. So if you could just explain that that will be very hopeful. Thank you..

Sure. Well there are a variety of outcomes, so should the IRS stay right where they are, let's say we've been told through their proposed regulations that we'd be granted a 10 year grandfather provision. So we'd have a 10 year period to assess all options.

Among those options are variety of range of options, I won’t explore all of those but one of those that you mentioned this morning the call is what I would call a taxable partnership structure which is really a C-Corp structure that gives us the same shield provision the same shield mechanics as an MLP provision to an investor and allows us to continue to make distributions in a manner that is consistent mechanically and from a tax perspective as we do today.

That's one option that will certainly consider during this time period when we enjoy the grandfather should that arise..

Okay.

And in any idea on how long the tax yield would last on top of the 10 year grace period?.

We believe we have a very long shield so that I get into the math of this I think you'll find that if you look at the remedial shield that we have that it's a very long lasting shield..

Okay. Okay and then thanks for the additional details on that cover for the expansion next year. I guess just in terms of financing this expansion, so this would be incremental debt coming into the partnership.

Could you just give us an idea of how much new debt coming in and whether it would be at OpCo level or whether it would also move down to the Westlake LP levels?.

Yeah. The investment is going to occur at the OpCo level. And so OpCo has a line of credit with Westlake Chemical. It used part of that line of credit as it expanded our Lake Charles, Petro 1 unit this year. And, so certainly as we have higher production, certainly the opportunity to repay that bonus is available to OpCo.

So certainly this would just be another draw on that facility to complete this Calvert City expansion both in because the expenditures are occurring both 2016 and to be completed in 2017..

Okay. And then just wrap up.

Overall, fair to say that you have less turnaround activity in 2017 compared to 2016?.

It is fair, because the expansion in 2017, we expect to be a much shorter outage to the guidance we've given three weeks. And that's the only ethylene expansion or outage we have in 2017..

Great, thank you very much..

You're welcome..

Thank you [Operator Instructions] Our next question comes from the line of [indiscernible]. Your line is open..

Yeah. I thank you. I've read the commentary for the IRS ended back in August of last year and I'm just frankly perplexed that why it's taken so long for them to come up with a final decision on this. Have you got any thoughts on that yourself and have you any fresh dialog with them that would give you any sense of when we might expect a final ruling..

Yeah. We have had regular dialog with both Treasury and the IRS and most recent public comment is consistent with what they're telling us also privately.

Curt Wilson who is Associate General Counsel of the IRS made a public comment back in DC at the Master Limited Partnerships Association Conference about 45 days ago, and he said that he believed regulations would be issued within the calendar year 2016.

There are obviously a series of reviews that have to be held between now and when those regulations are released, but he felt that they would be released in the calendar year. And so we are hopeful that they are..

Great. Thank you..

You're welcome..

Thank you. And at this time I'm showing no further questions. I'd like to turn the call back to Mr. Ederington for closing remarks..

Great. Thank you, Katie. Thank you for participating in today's call. We hope you'll join us for our next conference call to discuss our full year and fourth quarter results. Have a good day..

Thank you for participating in today's Westlake Chemical Partners third quarter 2016 earnings conference call. As a reminder, this call will be available for replay beginning two hours after the call has ended. It may be accessed until 11:59 PM Eastern Time on November 15th, 2016.

The reply can be accessed by calling the following numbers; domestic callers should dial 855-859-2056, international callers may access the replay at 404-537-3406. The access code is 96257816..