Good afternoon. Thank you for standing by. Welcome to the Westlake Chemical Partners Fourth Quarter and Full Year 2023 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. After the speakers’ presentation, you will be invited to participate in the question-and-answer session.

As a reminder, this conference is being recorded today, February 20, 2024. 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, Daniel. Good afternoon, everyone, and welcome to the Westlake Chemical Partners fourth quarter and full year 2023 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 our 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. Definitions of these terms are available on the Partnership’s website.

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 and our regulatory filings, which are also available on our Investor Relations website.

This morning, Westlake Partners issued a press release with details of our fourth quarter and full year 2023 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 two 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, February 20, 2024. 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 teleconference 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?.

Good afternoon, everyone and thank you for joining us to discuss our fourth quarter and full year 2023 results. In this morning’s press release, we reported Westlake Partners full year 2023 net income of $54 million or $1.54 per unit. Consolidated net income, including OpCo was $335 million for the full year 2023.

Westlake Partners’ financial results continues to demonstrate the stability generated from our fixed margin ethylene sales agreement for 95% of annual planned production each year, insulating us from market volatility and other production risks.

This structure, combined with our investment-grade sponsor, Westlake, produces predictable earnings and stable cash flows. This was evident despite weak macroeconomic conditions in 2023, particularly for manufacturing and industrial demand, as we delivered solid results and sustained distributions to our unitholders.

The stable fee-based cash flow generated by our fixed margin ethylene sales contract with Westlake, forms the foundation for us to deliver long-term value to our unitholders. This quarter’s distribution is the 38th consecutive quarterly distribution since our IPO in July of 2014, without any reductions.

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

Steve?.

Thank you, Albert. And good afternoon everyone. In this morning’s press release, we reported Westlake Partners’ fourth quarter 2023 net income of $14 million or $0.41 per unit. Consolidated net income, including OpCo’s earnings was $87 million on consolidated net sales of $297 million.

The partnership had distributable cash flow for the quarter of $16 million or $0.40 per unit. Fourth quarter 2023 net income for Westlake Partners of $14 million decreased by $3 million compared to fourth quarter 2022 partnership net income of $17 million. The lower net income was primarily driven by $2 million of higher interest expense.

This distributable cash flow of $16 million for the fourth quarter of 2023 decreased by $4 million compared to fourth quarter 2022 distributable cash flow of $20 million due primarily to higher maintenance capital spending and higher interest expense.

For the full year of 2023, net income of $54 million or $1.54 per unit decreased by $10 million compared to full year 2022 net income of $64 million.

The decrease in net income attributable to the partnership was due to lower sales as a result of the maintenance turnaround at OpCo’s Calvert City, Kentucky ethylene unit in May of 2023 and higher interest expense.

Our full year of 2023 MLP distributable cash flow of $63 million decreased by $13 million compared to MLP distributable cash flow of $76 million for the full year of 2022 due to a combination of higher maintenance capital spending, in part as a result of the Calvert City turnaround and higher interest expense.

Our distribution coverage for the 2023 year was 0.94 times. Turning our attention to the balance sheet and cash flows, at the end of the fourth quarter, we had consolidated cash balance and cash investments with Westlake through our Investment Management Agreement totaling $153 million.

Long-term 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. In 2023, OpCo spent $47 million on capital expenditures. We maintained our strong leverage metrics with a consolidated ratio of approximately one times.

On January 22, 2024, we announced a quarterly distribution of $0.4714 per unit with respect to the fourth quarter of 2023. Since our IPO in 2014, the partnership has made 38 consecutive quarterly distributions to our unitholders and we have grown distributions 71% since the Partnership’s original minimum quarterly distribution of $0.275 per unit.

The Partnership’s fourth quarter distribution will be paid on February 20 to unitholders of record February 2, 2024. The Partnership’s predictable fee-based cash flow continues to prove beneficial in today’s economic environment and is differentiated by the consistency of our earnings and cash flows.

Looking back since our IPO in July of 2014, we have maintained a cumulative distribution coverage ratio of nearly 1.1 times and the Partnership’s stability in cash flows, we were able to sustain our current distribution without the need to access the capital markets.

For modeling purposes, we have one planned turnaround in 2024 at our Petro 1 ethylene unit in Lake Charles, Louisiana. This turnaround is scheduled to begin in the second half of 2024 and is projected to last approximately 60 days.

In prior years, where we have had a planned turnaround such as this one, the distribution coverage ratio is impacted for the period and then recovering, and for this turnaround, we would expect a similar result.

The cost of this turnaround has been included in the amount we charge Westlake and has been fully reserved and funded as we commence the turnaround. Now, I’d like to turn the call back over to Albert to make some closing comments.

Albert?.

Thank you, Steve. We’re pleased with the partnership’s financial and operational performance through the fourth quarter and the year as a whole.

The stability of our business model and associate cash flows demonstrate a benefit that our ethylene sales agreement and its protective provisions provide a partnership with predictable long-term earnings and cash flows.

While increasing interest rates in 2023, as a result of the Federal Reserve’s tightening of monetary policy negatively impact demand and setting prices for ethylene. The nature of our ethylene sales agreement with Westlake provides for a predictable fee based cash flow structure for 95% of OpCo’s production.

As a result, OpCo’s sales volumes, earnings and cash flows were relatively insulated from the overall market weakness in 2023. Turning to our capital structure, we maintain a strong balance sheet with conservative financial and leverage metrics.

As we continue to navigate market conditions, we’ll evaluate opportunities via our four levers of growth in the future, including increases of our ownership interest OpCo, acquisitions of other qualified income streams, organic growth opportunities such as expansions of our current ethylene facilities, and negotiation of a higher fixed margin in our ethylene sales agreement with Westlake.

We remain focused on ability to continue to provide long-term value and distributions to our unitholders. As always, we’ll continue to focus on safe operations along with being good stewards of the environment where we work and live as part of our broader sustainability efforts.

Thank you very much for listening to our fourth quarter and full year 2023 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 again at the end of the call. Daniel, we will now take questions..

Thank you. [Operator Instructions] And our first question comes from Matthew Blair with TPH. Your line is now open..

Hey, good morning, Albert and Steve..

Good morning, Matthew..

Hi, Matthew..

So your current LTM [ph] coverage is down to 0.94x, I believe, so below 1x. Is your overall target still around like, I think it’s 1.1x.

And is this going to require any sort of changes on your part to improve coverage, or is this just the normal course of business?.

Yes. Matthew, with the turnaround that we had earlier this year at Calvert City, of course, it’s going to have some impact in production and impacting coverage.

We always see and we will see this as we go through maintenance outages and impact on coverage, but our target remains 1.1 times and on a cumulative basis, over many years, we’ve been able to maintain that target with these turnarounds over time. I would expect that to continue to be our target going forward.

And as I mentioned in our prepared remarks, we have a turnaround of our Petro 1 unit later this year that will impact the coverage in 2024, but I fully expect that to recover after we get this turnaround complete and we move forward into subsequent years..

Sounds good. And then you highlighted the stability of – of the agreement with the parent, Westlake.

Did Westlake take all of the contracted volumes from OpCo in 2023? Or was there any sort of shortfall that required a take-or-pay payment?.

No, it took all the contracted production that we planned for 2023, and there was no shortfall whatsoever..

Got it. Thank you..

You are welcome..

Thank you. I’m showing no further questions at this time. I would now like to turn it back over to Jeff Holy for closing remarks..

Thank you. Thanks again for participating in today’s call. We hope you’ll join us again for our next conference call to discuss our first quarter 2024 results..

This concludes today’s conference call. Thank you for participating. You may now disconnect..