Thank you for standing by. Welcome to the Westlake Chemical Partners Third Quarter 2022 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 the question-and-answer session.

As a reminder, this conference is being recorded today, November 3, 2022. I would now like to turn the call over to today's host Jeff Holy, Westlake Chemical Partners' Vice President and Treasurer. Sir, you may begin..

Thank you. Good afternoon everyone, and welcome to the Westlake Chemical Partners third quarter 2022 conference call. I'm joined today by Albert Chao, our President and CEO; Steve Bender, our Executive Vice President and CFO and other members of our management team. During this call, we refer to ourselves as Westlake Partners or the Partnership.

References to Westlake refer to a parent company Westlake Corporation, and references to OpCo refer to Westlake Chemical OpCo LP, a subsidiary of Westlake and the Partnership which owns certain Olefins assets. Additionally, when we refer to distributable cash flow, we are referring to Westlake Chemical Partners' MLP distributable cash flow.

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.

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 third quarter 2022 financial and operating results.

This document is available in the Press Release section of our web page at wlkpartners.com. A replay of today's call will be available beginning 2 hours after the conclusion of this call. The replay can be accessed via the partnership’s website.

Please note that information reported on this call speaks only as of today, November 3, 2022, 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 web page at wlkpartners.com. Now I would like to turn the call over to Albert Chao.

Albert?.

Thank you, Jeff. Good afternoon everyone, and thank you for joining us to discuss our third quarter 2022 results. In this morning's press release, we reported Westlake Partners third quarter 2022 net income of $15 million or $0.42 per unit. Consolidated net income, including OpCo were $78 million for the third quarter of 2022.

Westlake Partners earnings stability is consistently demonstrated through our fixed margin ethylene sales agreement which insulates us from market volatility, and other production risks.

This contractual arrangement continued to benefit us in the third quarter as we generated earnings and cash flow in line with our expectations despite challenging industry conditions.

The associate a high degree of stability in our cash flow compared with the predictability of our business has enabled us to deliver the long history of reliable distributions and coverage. This quarters distribution is 33rd consecutive quarterly distribution since our IPO which has grown by 71% Since IPO and has never been reduced or cut.

I would now like to turn our call over to Steve to provide more detail on the financial and operating results for the quarter safe.

Steve?.

Thank you Albert and good afternoon, everyone. In this morning's press release we reported Westlake partners’ third quarter 2022 net income of $15 million or $0.42 per unit. Net income including OpCo was $78 million on net sales of $415 million. The partnership had distributable cash flow for the quarter of $17 million or $0.48 per unit.

Compared to the third quarter of 2021 net income for Westlake partners increased by $2 million as OpCo benefited from higher production following the turnaround of Petro 2 in the second quarter of 2021 as well as a buyer deficiency fee of approximately $14 million in the third quarter of 2022 resulting from lower planned offtake by Westlake distributable cash flow of $17 million for the third quarter of 2022 increased $4 million, compared to the third quarter of 2021 distributable cash flow of $13 million, resulting from a higher earnings at OpCo.

Compared to the second quarter of 2022 our net income for the third quarter decreased by $2 million due to lower third party revenues as we optimize the benefits for our third party sales and margins by electing to complete these sales in a period of higher margins in the first and second quarters of 2022.

Distributable cash flow decreased $3 million, compared to the second quarter of 2022 as a result of the timing of these third party sales, and the recognition of the buyer deficiency fee. Turning our attention to the balance sheet and cash flows at the end of the third quarter.

We had a consolidated cash balance and cash investments with Westlake through our Investment Management Agreement totaling $155 million. Consolidated debt at the end of the quarter was $400 million, of which $377 million was at the partnership and the remaining $23 million was at OpCo.

As I mentioned in last quarter’s call in July of this year OpCo in partnership extended their revolving lines of credit Westlake for a new five year term. This is another example of Westlake demonstrating support for the partnership by providing ample liquidity for future capital needs.

We maintained our strong leverage metrics with a consolidated leverage ratio below one times in the third quarter OpCo spent $13 million on capital expenditures. On Monday, we announced a quarterly distribution of $47.14 per unit with respect to the third quarter of 2022.

Our IPO in 2014 since the IPO in 2014 the partnership has made their 33 consecutive quarterly distributions to unitholders, we have grown distributions 71% since the partnerships original minimum quarterly distribution of $27.5 per unit.

Our distributable cash flow coverage for the 12 months ending September was 1.07 times, which is slightly below our 1.1 target as expected due to the timing of the plan turnaround Petra 2 at the end of last year. The partnerships third quarter distribution will be paid on November 28, 2022, to unit holders of record November 10, 2022.

We continue to evaluate our distribution policy and outlook while remaining mindful of the more volatile equity market conditions and looking to drive the value the partnership provides us to our provides her unit holders.

Since our IPO in July of 2014, we've maintained a cumulative distribution coverage ratio in excess of 1.1 times and with a partner stability in cash flows, we're able to sustain our current distribution without the need to exit to access capital markets.

As a reminder, for modeling purposes, we have no turnaround plan for the fourth quarter of 2022 and our next planned maintenance outage is at our Calvert city, ethylene facility in Calvert city, Kentucky, which is currently planned for the first half of 2023.

I'd like to turn the call back over to Albert to make some closing comments, Albert?.

Thank you, Steve. Despite a currently challenging macro economic backdrop, the partnership's financial performance for the year is consistent with a stable fee based cash flows. It is designed to produce.

Looking to 22,023 while the global economy faces headwinds, we remain optimistic about the fundamentals of our business as our insulative etherlink sales agreement provides a predictable fee based cash flow structure from our contract with the Westlake for 95% up close production, which delivers stable and consistent cash flows and insulate us from potential volatility in the market.

We maintain a strong balance sheet with conservative financial and leverage metrics. Westlake continue to navigate market conditions will evaluate opportunities.

There are four levers of growth in the future, including increases of ownership interest OpCo, acquisitions of other qualified income streams, organic growth opportunities, such expansions of our current etherlink facilities, and negotiations of a higher fixed margin in our etherlink sales agreement with Westlake will remain focus on our the ability to continue to provide long term value and distributions to unitholders.

As always, we'll continue to focus on safe operations, along with being good stewards of the environment where we work and live. Thank you very much for listening to our third quarter earnings call. Now I'll turn the call back over to Jeff..

Thank you, Albert. Before we begin taking questions, I'd like to remind you that a replay of this teleconference will be available two hours after the call has ended. We'll provide that number at the end of the call. Amber, we will now take questions..

Thank you. At this time, we will conduct the question and answer session. Our first question is from Michael Leithead at Barclays. Michael, your line is now open..

Great, thanks. Good morning guys. First question morning, just a high level obviously the world pretty volatile interest rates have moved up a lot.

Can you maybe just flush out a bit more just kind of how you're thinking about the distribution policy or thoughts around maybe potentially ultimately kind of growing distribution in light of everything else?.

Yea. Mike, it's Steve. Good question. As you have heard, Albert outline we've got really four levers that allow us to grow as increasing the ownership of OpCo acquisition of other qualified income streams, organic growth opportunities and negotiating that higher margins. As you can see the market and you noted the market is very volatile.

Capital inflows into any equity markets have been more challenged. And we've seen through our third party sales, that margins have been challenged in some of the early markets, which was why we moved those to occur in the first in the second quarter this year, to take advantage of those higher margins.

So we certainly stand ready to look for opportunities to grow the distribution in more , in conditions that are more conducive to giving us the value that that would bring. So you can see from those four levers, we stand ready, it's just market conditions.

I think that has been the challenge that we see in the current situation but we certainly stand ready to make that happen, like conditions proved to be more favorable. .

Fair enough, that makes sense. And then, second, I think this quarter had about a $14 million buyer deficiency fee.

I think maybe you can just remind us a refresh is kind of how the buyer deficiency mechanics work between Westlake partners and Westlake corporation?.

Certainly, and so there is a obligation for Westlake to acquire 95% of the plan production in any given year. And at any point in time, should there be an unplanned outage or any adjustment to production, that buyer deficiency makes up for any shortfall of production.

And so that buyer proficient buyer deficiency, therefore provides that stable income stream to the partnership, whether production was made as a result of an unplanned outage or any changes in production. And so that mechanic therefore works from a revenue recognition perspective.

And then ultimately, if they're unable to make up that production during the course of any given year, they're paid that shortfall that buyer deficiency, therefore, at the beginning of the new year. .

Got it. Makes sense. Thank you..

You're welcome..

At this time, the Q&A session has now ended. I will now turn the call back over to Jeff Holy. .

Thank you again for participating in today's call. We hope you'll join us for our next conference call to discuss our fourth quarter and full year 2022 results..

Thank you for participating in today's Westlake Chemical Partner Quarter Third Earnings Conference Call. As a reminder, this call will available for replay beginning two hours after the call has ended. And maybe access until 11:59 pm Eastern time on Thursday, November 10, 2022. The replay can be accessed via the Partnership website.

Thank you and goodbye..