Greetings, and welcome to Genesis Energy's Q1 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Dwayne Morley. Thank you. You may begin.

Welcome to the 2021 first quarter conference call for Genesis Energy. Genesis Energy has four 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 Mexico to onshore refining centers. The sodium minerals and sulfur services segment includes trona and trona-based exploring, mining, processing, producing, marketing, and selling activities as well as the processing of sour gas streams to remove sulfur at refining operations. The onshore facilities and transportation segment is engaged in the transportation, handling, blending, storage, and supply of energy products including crude oil and refined products. The marine transportation segment is engaged in the maritime transportation of primarily refined petroleum products. Genesis's operations are primarily located in Wyoming, the Gulf Coast states, and the Gulf of Mexico. During this 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 the 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 where a copy of the press release we issued today 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 Bob Deere, Chief Financial Officer; and Ryan Sims, Senior Vice President, Finance and Corporate Development.

Thanks, Dwayne. And good morning to everyone. As we mentioned in this morning's earnings release, the first quarter of 2021 demonstrated our market-leading businesses were impact-resilient, and our financial results were consistent with, if not slightly ahead of our internal expectations. As we look forward, we remain increasingly confident that improving macroeconomic conditions provide us significant operating leverage to the upside. In combination with our minimal capital requirements outside of our Granger soda ash expansion project, we believe we are poised to deliver significant value in future periods to all of our stakeholders. Our actions taken in early April to extend our senior secured credit facility, coupled with the tack-on offering to our senior unsecured notes due 2027, have positioned Genesis with no maturities of long-term debt until 2024 while providing ample liquidity and flexibility to deal with the trailing impacts of COVID-19 and the 2020 hurricane season. While we continue to expect 2021 to be a year of transition, the partnership is well-positioned for long-term success with a recovery in our soda ash business, significant additional free cash flow coming from our two contracted projects in the Gulf of Mexico, and first production from our fully expanded Granger soda ash facility in the back half of 2023. Now turning to our individual business segments. Our Offshore Pipeline Transportation segment performed in line with our expectations and achieved a more normalized earnings run rate during the first quarter. As we look forward, the second quarter is typically a heavy maintenance quarter for our producer customers in the Gulf of Mexico, and we would expect a certain level of planned downtime associated with these activities. Even with this expected downtime, we still anticipate achieving a quarterly Segment Margin in the second quarter of around $80 million. Our two large contracted offshore projects Argos and King's Quay continue to remain on track for first oil in the first half of 2022. BP and Murphy have both publicly reaffirmed their prospective project schedules for the first and second quarters of 2022, respectively. We continue to anticipate that these two fields, when fully ramped, will generate in excess of $25 million a quarter or over $100 million a year in additional Segment Margin and free cash flow net to Genesis. We remain in discussions with three separate new standalone deepwater production hubs in various stages of sanctioning, with anticipated first oils starting in the late-2024, 2025 timeframe, assuming they are sanctioned by the end of this year or early next year. We understand from our discussions with the producer community that drilling and development activity on our existing and valid leases in the Gulf of Mexico is continuing pretty much the same as it always has. The recent announcement of BP's Puma West prospect is yet another example of producers building around and leveraging their existing footprints and expertise in the Gulf of Mexico. Along with Equinor's Monument discovery and Beacon's Winterfell discovery, the opportunity set of future new developments, all of which more likely than not will need to access our existing infrastructure over the decades to come, continues to grow. We continue to believe that a large percentage of the economic acreage in the Gulf of Mexico that can be developed under current drilling technology has already been leased. This inventory of existing and valid leases should provide decades worth of drilling, development, and production opportunities regardless of when the statutorily mandated leasing programs in the Gulf resume. To further elaborate on my comments from last quarter, crude oil from the deepwater Gulf of Mexico remains some of the lowest carbon intensity barrels produced and refined in North America, if not in the world. Several large producers including supervisors such as BP and Chevron have recently indicated the Gulf of Mexico is core to their future carbon-neutral initiatives. The cash flow from these low carbon barrels will help fund and fuel their growing renewables initiatives to help them meet their emissions targets or net-zero goals. Recently BP's CEO, Bernard Looney said, and I quote, 'Hydrocarbon projects like Mad Dog 2 are crucially important in our new strategy. The cash flow these developments provide will drive our company's transformation.' These types of comments and the continued activity in and around our footprint further drive our confidence that the Gulf of Mexico will remain one of the leading North American basins for years to come. Now turning to Sodium Minerals and Sulfur Services. Our soda ash business continues to recover as demand for soda ash is steadily increasing as the world's economies reopen and trend towards pre-COVID levels. The global supply and demand dynamic for soda ash continues to tighten. We believe all-natural producers are sold out globally for 2021. Remember, we don't compete with an alternative product. We compete with synthetically produced soda ash, which costs nearly twice as much to produce and has a carbon and other environmental footprint far in excess of naturally produced soda ash. Listen, markets work. Low-cost and environmentally conscious natural soda ash production will be base loaded to meet the world's demand, and the market will swing on synthetic production, which given this cost basis will provide the backdrop for significantly improving pricing as the world's economies recover from the effects of the pandemic. Within China, against whom we primarily compete in Asia, certain synthetic production has come offline due to environmental restrictions while domestic demand for soda ash continues to increase, ultimately reducing the number of tons available to be exported outside of China. Lower export volumes from China and recent increases in container shipping rates are also driving up costs associated with Chinese synthetic production on a delivered basis to markets in Southeast Asia. In response to this dynamic, ANSAC announced a price increase for soda ash in early March for the second quarter on all of their non-contract sales of soda ash and on contracted sales when contracts allow. We believe this increasingly tight supply and demand dynamic will continue to support prices rising through the remainder of the year, especially towards the end of the year when we would otherwise re-determine most of our contract prices for the majority of our sales for 2022. In addition to rapidly recovering demand from the resumption of economic activity and longer-term demand growth from existing applications, we remain encouraged by increasing demand for soda ash from a variety of green initiatives around the world. Lithium producers utilize soda ash in a two-to-one ratio to support their production of lithium carbonate, which is also used to make lithium hydroxide, both of which are building blocks for new generation lithium-ion phosphate batteries that are placed in the exponentially growing electric vehicle and battery storage markets. Lithium batteries are the primary energy source for battery-operated vehicles, and based upon your assumption of EV penetration rates in the overall automobile market, we could see a meaningful impact on the demand for soda ash over the coming years. Soda ash is also a critical component in the glass manufacturing process and subsequently in the manufacturing process of solar panels. In fact, there are recent reports of up to five new glass float furnaces coming online in China to build more solar panels, all of which, importantly, will consume higher-cost Chinese synthetic soda ash, thus further reducing Chinese synthetic ash volumes available for export. The increasing demand to manufacture additional solar panels in both China and the United States, when combined with the increase in demand from the lithium producers and battery manufacturers should provide our soda ash business with increasing levels of participation and financial benefit from the various green initiatives around the world. Looking a couple of years ahead, we also have reason to believe that certain competitors are shelving or otherwise delaying their respective production expansions due to company-specific reasons. This dynamic could suggest our Granger expansion project remains the only material natural production expansion project in the world that will come online by late 2023. Once expanded and optimized, Granger's significantly reduced cost structure will allow its production to compete favorably in the global market, capturing just normal demand growth from GDP growth as well as renewables-driven demand or at a minimum displacing higher-cost synthetic soda ash production. Our legacy refinery services business performed in line with our expectations. During the quarter, we saw steady production levels combined with the strong demand from our copper mining customers and improving volumes from our pulp and paper customers. Copper prices remain at near decade-high levels driven by the tremendous demand for copper from the reopening of the world's economies, and the insatiable appetite for renewable and green initiatives around the world. While copper remains a foundational building block for many mainstream items in our lives, it is a critical component for the energy transition, particularly in wind and solar technology, energy storage, and electric vehicles. To provide some additional context, if you look at the amount of copper in a traditional internal combustion engine vehicle, it would require roughly 48 pounds of copper, while an electric vehicle requires approximately 3.8 times the amount of copper or up to 180 pounds per vehicle. We believe the demand for copper from various green initiatives will only continue to increase as we move forward, which should help provide steady and possibly increasing demand for our sodium hydrosulfide product in future years, if and when copper mining expansions come online. As you can surmise, our sodium minerals and sulfur services segment is well-positioned to benefit from various energy transition initiatives. Not only to directly and indirectly contribute to lowering carbon emissions but in fact to profit from the energy transition. We provide the picks and shovels or the mission-critical building blocks to both lithium producers and copper miners today as they continue to produce the raw materials needed to help drive the energy transition and future green initiatives around the world. As mentioned above, in early April, we successfully refinanced our senior secured credit facility receiving $950 million in total commitments consisting of a new $650 million revolver and a $300 million term loan, all held with a syndication of 13 banks. We proactively reduced the size, extended the tenor to March of 2024, and obtained certain additional flexibility to address any uncertainty of covenant compliance as we deal with the trailing impacts of COVID-19 and the 2020 hurricane season even as our businesses are rapidly recovering. In mid-April, we successfully priced a tack-on offering of additional 8% senior notes due 2027 at a premium of 103.75% and received net proceeds of approximately $256 million. The proceeds from this offering were used for general partnership purposes including repaying a portion of the borrowings under our recently extended revolver to further improve our liquidity position. As of March 31, pro forma for these transactions, we would have had approximately $150 million outstanding on our $650 million senior secured revolving facility. While our total adjusted debt was sequentially flat from last quarter, we did liquidate crude oil inventory that had been hedged in the contango market. We sold such barrels for approximately $22 million in March but did not receive the cash proceeds until April or after quarter-end. Had we received the proceeds in the first quarter, we would have sequentially reduced our total adjusted debt by $22 million during the quarter. I'll switch gears now and touch on our view for the remainder of 2021. We remain on track with our previously announced guidance for full-year adjusted consolidated EBITDA as defined in our senior secured credit agreement coming in a range of between $630 million and $660 million, which includes approximately $30 million to $40 million of pro forma adjustments. In addition, we continue to expect to generate free cash flow after all cash obligations in the range of $80 million to $110 million in 2021. That being said, given the anticipated cadence of the future spend on our Granger expansion project, we might choose to spend some of this or future period's free cash flow to fund portions over and above the $250 million minimum obligation for us to draw under our asset level preferred funding arrangement. This option does not take away from the fact we will continue to generate increasing amounts of free cash flow and our ability to accelerate our deleveraging plan remains on track, and we are steadfast on our commitment to achieving our long-term target leverage ratio of 4.0 times. I would like to once again recognize our entire workforce and especially our miners, mariners, and offshore personnel who live and work in close quarters during this time of social distancing. I'm extremely proud to say we have safely operated our assets on our own COVID-19 safety protocols and procedures with no impact on our business partners and customers, with limited confirmed cases among our 2,000 employees and no known workplace transmissions. It is an honor to have the opportunity to work alongside such quality folks. With that, I'll turn it back to the moderator for any questions.

Our first question comes from Kyle May with Capital One Securities. Please go ahead with your question.

Hi good morning, everyone. Grant, you mentioned some of the synthetic soda ash production in China was offline. Can you talk more about what's going on, I guess, with the environmental restrictions, perhaps how much global supply that represents, and any indication how long it could be offline?

It's a little bit of a dark space from our perspective, but that's the indications that we hear from consultants and other boots on the ground. But that's basically due to the environmental discharges associated with synthetic production. So, we don't know really the whole quantity or the duration of it. But it appears that in the first quarter of 2021, this is on somewhat of a lagging basis, the total exports out of China, which we can track, but again on a lagging basis were down about 10%, year-over-year.

Okay, got it, that's helpful. And then I guess, as we think about the ANSAC price increase and a better backdrop for soda ash pricing this year. Can you remind us if Genesis has much exposure to the better pricing or are you pretty much entirely contracted for the year?

In round terms, about half of our sales are domestically, and those are pretty much fixed for the remainder of 2021. About half of our export sales, or 25% of our total sales, are to Latin America through ANSAC, and those are typically also fixed for the period. So, the other half of exports which are 25% of our total sales, which are sales from ANSAC to Asian economies outside of China, are typically shorter duration, and the majority of them reprice on a quarterly basis. So during 2021, the only real uplift you're going to see from a move in pricing is on the 25% of the sales, but the mix within either of those portfolios can affect some of the pricing. But suffice it to say, it certainly feels that the market is rebalancing. And that the supply overhang and the continued demand running below a year earlier levels at the end of 2020 gave the backdrop for lower prices in 2021, but we see that reversing and the dynamic changing, and we would expect prices to recover in 2022.

Okay, that's very helpful. Thanks for taking the questions.

Our next question comes from the line of Theresa Chen with Barclays. Please proceed with your question.

Hi, Grant thanks for taking my questions. Wanted to follow-up on the pricing question just, when you boil all of that down in relation to the mix of your portfolios as far as what is contracted versus what is repricing quarterly? And the magnitude of the ANSAC price increases and also the mix of the portfolio of your 25% exports to Asia ex-China? What kind of quarter-to-quarter uplift should we expect near-term? And also looking to 2022 as you renegotiate contracts at the end of 2021, what kind of uplift should we expect just from the price movement alone there?

Well, the crystal ball is not as clear as sometimes it would appear to be. I mean I think, and let's go back and Theresa with a little bit of historical perspective. We had in late 2019 pre-pandemic, when we were setting prices for 2020, we were beginning to see a slowdown in worldwide economic activity, as well as an overhang of a potential trade war between the U.S. and China. So, there was a little bit of an overhang. So, 2020 prices actually started the year lower than they were in 2019, and then the pandemic hit. So, we went through 2020, with domestic prices and LATAM prices holding up because they were negotiated. And then, but Chinese - Asian prices ex-China continued to fall as we went through 2020 and we have that dynamic going in 2021. A long-winded answer is that we're not exactly sure how rapidly things are going to recover, although they are going to recover. If we could get back to - I would say it this way if we can get back to 2019 prices, which again I'm not claiming that we're going to get there in 2022, but certainly 2023 feels potentially that the business would recover, at order of magnitude back into the 160 to 180 run rate and that's before Granger comes on. And with those 2019 prices - the mid-2019 prices, when Granger comes on, we’d expect incremental segment margin contribution from optimized Granger to be in the $60 million range. So, again we're getting back to 220 to 240 kind of in a 2023, 2024 type timeframe certainly seems reasonable to us.

Understood, thank you. And then just turning to marine, a lot of moving parts in this segment as well, can you just still for us what the run rate should be assuming a more normalized quarter for drydocks and session as refining utilization continues to increase? And then also on the heels of the new American Phoenix contract?

Yes, the AP contract in the first quarter was the low watermark. It's gone under contract at probably in round terms $6,000 or $7,000 a day more than it got in the first quarter. So, that's on a prospective basis for a 12-month contract. Also in the first quarter due to various drydocks and other things, we more or less had one net blue water unit out of service during the entire quarter, which we think that’s kind of behind us. So, we should get a little bump in that. And then, importantly, once - in reality the winter storm which I think some people call it, Uri, I never knew what that meant, but once it caused some dislocations in refining along the Gulf Coast, our specific types of barges, black oil barges or internal new barges actually started to see a dramatic increase in utilization. And that is roughly - as you point out, Theresa, refinery runs continuing to inch their way higher. If the world can figure out what to do with the jet cut on crude barrels, we expect it to recover more. So, as we sit here today, our groundwater utilization is in the high 80% range. So, we've seen a fairly steady cadence of improvement in that as the refinery utilization has continued. So on a go-forward basis, I'm not sure what the good run rate is, because we're kind of stuck for 12 months in the fairly low pricing environment for the American Phoenix, which really moves the needle. But things are improving from a fundamental point of view rather rapidly for us.

Thank you, Grant.

Our next question comes from Shneur Gershuni with UBS. Please proceed with your question.

Hi good morning, everyone. I figured since soda ash is popular, I'll just continue with the questions there. Given the growing renewable initiatives, just kind of curious if it's possible for you to accelerate the timeline on Granger? And just also wondering if your customer base has expanded to include these green buyers? And if so, can you give us some examples?

Yes, I think there are certain circumstances where we can accelerate the Granger expansion. But we could always at some point within probably a four to six-month timeframe if prices supported it. So there was a dramatic recovery in primarily export prices because it doesn't make any sense to kind of bring it up and try to fight for market share. If something that's already contracted domestically, but if export prices got to the point where it made sense even on an efficient basis to resume the 550,000-ton annual production we can get out of Granger, we could probably put that back into service and call it four to six months at the outside if conditions warranted. But there is not all that much we can do to accelerate the overall expansion to the 1.2 million to 1.3 million ton range, so not a lot that we can do. Now, relative to your second question embedded in that. I mean obviously, companies like Albemarle, which is the world's largest lithium producer and others, we're seeing increased demand from those types of applications. And certainly as pointed out, both in the U.S., but especially in China, which again is our major competitor at the margin for export sales out of Wyoming, is dramatically increasing their demand for soda ash worldwide for solar panel manufacturing. So, I'm not going to go into the individual discussions with the individual customers, but suffice it to say that we are participating in those discussions and looking to be a supply chain partner with some of the leaders on other things that are the building blocks for the green initiatives.

All right perfect. Maybe as a follow-up question, you had mentioned in your prepared remarks about the liquidation of some crude that generates a $22 million leverage benefit. Just want to understand, is that just a leverage benefit or is that something that we should be thinking about for the second quarter from an earnings perspective as well too? And how does this impact the securities buyback basket that you have currently outstanding?

No, whatever margin, if you will, that we earned associated with the contango market in play was reflected in the first quarter. So that is strictly a balance sheet item, and the cash is coming in post the end of the quarter. So, it doesn't fill up any of the baskets or relieve any pressure or relieve anything taking the kind of using any of the other baskets. So, it's not a net earnings effect, it's just a net cash and a reduction in total outstanding debts simply because we received the cash proceeds post the end of the quarter.

All right perfect. I have a few more questions, but I'll jump back in the queue. Thank you.

Thank you.

Our next question comes from T.J. Schultz with RBC Capital Markets. Please go ahead with your question.

Hey, good morning. So in the Gulf, just one question around your prepared commentary on the discussions with new standalone deepwater hubs that would hit maybe in the 2024, 2025 timeframe? Are those hubs where you have the natural system to get the volumes, what type of magnitude either volumes or to your segment margin are some of the discussions around those hubs? And are these low capital projects that just utilize some of your open capacity or do you invest in the new infrastructure?

We're probably not in a position under NDAs and other things to go into a lot more detail. I can give you - I'm comfortable that from a volume metric point of view, that some of it would be - some are arguably on peak production between 200,000 and 220,000 barrels a day of incremental production. Everything else is the same, it certainly feels and looks like that we are the logical trans-border to shore given the capacity configurations that we have on our systems and the capacity situations on competing systems. So that's about as far as I can go at this point. But again, indicative of - if you put it in context, I mean, Argos and King's Quay together, because Argos is quite a large system, but from a FPU, Floating Production Unit, those two are 210. So, right behind here kind of three additional ones that add up to about the same amount.

Okay great. Thank you. That's all I’ve got.

Thanks, T.J.

We have a follow-up question from Shneur Gershuni with UBS. Please go ahead with your question.

Hi, Grant. As promised I did say I had some more questions. Just out of curiosity when I think about this soda ash business. I imagine that there is a lot of fixed cost absorption within that business. I was wondering, in a constant pricing environment at this stage, what is the marginal ton due to your margin like, from - if you add an incremental ton at this point right now, does production that expand your margin even in the constant priced environment?

Yes, I mean that's the - in part, some of the financial results that we saw in 2020 were that we weren't even - even after we made the decision to temporarily mothball Granger, even at our Westvaco facility which notionally can produce 3.5 million tons of soda ash, because some of it goes into - either to make caustic or specialty products, it doesn't exactly match up to some of the volumes that we report. But we weren't even operating at 100%. And when you're not operating in such a massive industrial complex at 100%, you lose the fixed cost absorption benefit. So, in the fourth quarter, we got back to running 100% and we anticipate Westvaco and we anticipate running at 100% throughout. Our team led by Fred von Ahrens on the ground leading our soda ash business, we're always looking for ways to squeeze that incremental ton out because the variable operating expense is quite low relative to the average fixed cost. And so getting that incremental ton of ash on the belt as we like to say is very valuable to us. Yes, and the kind of the analogy, Shneur, is kind of Granger, and that is, Granger has the infrastructure and essence to fix cost almost to a 1.2 million to 1.3 million ton a year facility but because it had inadequate evaporate capacity for lack of a better description, it was only capable of producing 550,000 tons. So, it was kind of inefficient and by expanding it, we make the same economics as Westvaco, which we believe is the cheapest or among the cheapest producing facilities in the world. So, Granger will join that rank when it comes on an expanded basis.

Well that makes perfect sense. And one follow-up - you have a scheduled longwall move this year or next year. Just wondering if that's something that we just need to think about in terms of modeling?

We have just completed a longwall move. So, to the extent there is any effect, will show up in the second quarter. But we built up as much inventory in the ore pile as we could prior to doing that and continued to have more mining operations while we were doing the longwall move. So, we don't anticipate a significant effect. But it is behind us at this point. The team did a great job of getting it done safely and within schedule.

Perfect, thank you very much. That’s it from me.

Thank you.

And with that, ladies and gentlemen, we've reached the end of our question-and-answer session. I would now like to turn the call back over to management for any closing remarks.

Okay. Well, I think we appreciate everybody's attendance and hope to talk to you in 90 days, if not a little bit sooner. So, thanks, everyone.

This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation, and have a wonderful day.