Greetings, and welcome to the Genesis Energy L.P. First Quarter 2024 Earnings Conference Call. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Dwayne Morley, Vice President of Investor Relations. Please go ahead.

Good morning. Welcome to the 2024 First Quarter Conference Call for Genesis Energy. Genesis Energy has 4 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 in the deepwater Gulf of Mexico to onshore refining centers. The Soda 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 marine transportation of primarily refined petroleum products. Genesis' operations are primarily located in Wyoming, the Gulf Coast states, and the Gulf of Mexico. During this conference call, management may be making forward-looking statements. 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 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'd 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. With that, I'll turn it over to Grant.

Good morning to everyone, and thank you for listening to the call. As we mentioned in our earnings release this morning, our financial results for the fourth quarter came in generally in line with our internal expectations. As we look ahead to the remainder of the year, we continue to view 2024 as a transition year as we move increasingly closer to the important inflection point when our current growth capital spending program is completed. De minimis growth capital spending in future years, combined with the contracted and/or expected increased financial performance from our Offshore, Marine, and Inorganic Chemical businesses over the coming years should provide us with the ability to generate significant amounts of cash in excess of all of the current cash obligations associated with running our businesses. In the aggregate, these current recurring cash obligations add up to approximately $600 million per year. This is comprised of roughly $320 million of cash interest expense, which includes interest and principal payments on our Alkali senior secured notes, approximately $120 million of cash maintenance capital expenditures, almost $90 million of preferred distributions, and approximately $74 million of common unit distributions at the current level of $0.60 per unit per annum. Going forward, we expect the dollars we generate above these recurring cash obligations will be used to return capital to our stakeholders in one form or another. As we redeem more preferred and/or pay down aggregate debt, these recurring costs will obviously go down, giving us even more flexibility to return capital to unitholders. We expect our coverage of these cash costs to accelerate as we move through next year. As we sit here today, we believe we should be able to sustain, if not grow, such coverage of our cash costs for many years ahead without requiring significant amounts of discretionary growth capital. As this important inflection point draws nearer, we continue to advance discussions at the Board level around how best to allocate this anticipated cash flow. I would expect to provide everyone with more details around our capital allocation priorities and strategy at some point later this year. This is undoubtedly an exciting time for Genesis, as we move closer and closer to the point on which we have been keenly focused over the last 4 years or so. Barring any unforeseen circumstances, we believe we have positioned the partnership with significant financial flexibility to manage our debt metrics and liquidity, further simplify our capital structure, return capital to our common unitholders in one form or another, and thereby create long-term value for everyone in the capital structure for many years ahead. Now I'll touch briefly on our individual business segments: Our Offshore Pipeline Transportation segment continued to perform in line with our expectations during the quarter. Despite certain fields underperforming relative to the original producer forecast we received late last year. This underperformance was a result of unscheduled downtime at a certain host facility, and another operator having to temporarily shut in some production due to some issues that arose as they were installing subsea equipment to be able to add additional wells to their production facility. Importantly, both items have since been resolved. During the quarter, we continued to see significant volumes from BP's Argos facility, which has recently exceeded 130,000 barrels per day and steady volumes from our other major host fields. First oil from the Winterfell development remains on schedule for the second quarter. And I'm happy to announce, we have recently executed new minimum volume commitment contracts with multiple investment-grade counterparties that further support the forecasted volumes on our CHOPS system. We also remain in active discussions with multiple producers regarding numerous additional infield, subsea, and/or secondary recovery development opportunities around our existing facilities. If sanctioned, these would turn into new production through our integrated infrastructure as early as later this year or certainly over the next few years. I think it is once again important to emphasize how unique our situation is in the Central Gulf of Mexico relative to other midstream opportunities, especially in high-profile onshore basins. Unlike most onshore situations where significant dollars are required to maintain or grow volumes by building out additional gathering facilities connecting each new well or a pad of wells to a main trunk liner terminal. The gathering in the Gulf of Mexico is done by the producers, them tying back wells to existing floating production facilities that are already and in almost every situation exclusively connected to one of our laterals or pipelines to shore. These floating production systems have a design and useful life of 30 or 40 or even more years. Once Shenandoah and Salamanca are online and taking into account Argos and King's Quay, we will have added over 400,000 barrels per day of new production handling capacity to our pipeline systems in recent years. The incremental capacity in our new SYNC lateral, which extends into an increasingly active area of the Central Gulf of Mexico and the incremental capacity on our expanded CHOPS pipeline to shore, both are only roughly 50% contracted with these new fields. As a result, this positions us to capture the types of incremental opportunities I described earlier or even new stand-alone developments for many years to come with no incremental capital required to be spent by us. As we mentioned in the release, our team has made significant progress on our offshore expansion projects to date. We successfully laid the 105-mile SYNC pipeline last year and are currently awaiting the arrival of the Shenandoah floating production system to finalize the pipeline and riser connections. We have also continued to advance our CHOPS expansion project in parallel by successfully installing and commissioning new pumps on our High Island A5 platform. Furthermore, we successfully installed a new Garden Banks 72 deck on its newly reinforced jacket in mid-April. The GB-72 platform has been designed to service the receipt point for the new SYNC pipeline and provide additional pumping capabilities for all volumes on the expanded CHOPS system. These offshore expansion projects are fully underwritten by our contracted developments, and their combined almost 200,000 barrels of oil per day of incremental production handling capacity. We now anticipate both developments to start in the first half of 2025. These two developments alone will provide us with anticipated incremental segment margin per annum of approximately $90 million at the contracted take-or-pay level and upwards of $120 million at just 75% of the producers' respective forecast. These amounts could meaningfully exceed $120 million per annum to the extent that producers meet or exceed 100% of their respective forecast when they're fully ramped. Similar to other developments that have recently come online, we would expect both of these fields to ramp up very quickly and reach initial peak production within 3 to 6 months of their respective dates of first production. The combination of our steady and marginally increasing base production volumes, the contracted opportunities we have coming online over the next 12 months or so, and the backlog of potential incremental tieback and development opportunities positions us to deliver stable, steady, and growing cash flows from our Offshore Pipeline Transportation segment for many years and decades to come. Turning now to our Soda and Sulfur Services segment. Our soda ash business generally performed in line with our expectations despite some operational hiccups during the quarter, most of which have been resolved. The global macro conditions for soda ash remain relatively consistent with our previous commentary. Over the last nine months or so, the combination of slower economic growth outside of the United States and the anticipation of the global soda ash market having to absorb 5 million new tons of natural production from Inner Mongolia has contributed to what we believe is a trough export pricing environment in late 2023 and here into 2024. Despite these near-term challenges, we believe the market is starting to turn the corner and showing some signs of balancing. The 5 million tons of new natural production from Inner Mongolia looks to have been almost totally absorbed within China. The cost-competitive nature of this natural production will undoubtedly pressure Chinese synthetic producers. As a reminder, there were 25 synthetic soda ash production facilities in North America in 1948 when the trona deposits in Southwest Wyoming were discovered by our predecessor company. Today, there is only one. This same phenomenon is likely to play out in China. Synthetic producers with their higher cost structure and more objectionable environmental footprint relative to natural producers simply cannot compete over the long term, and yet they still supply almost 70% of the world's soda ash and their cost structure, in essence, ultimately determines the market clearing price of soda ash. We believe this pressure on synthetic production is happening in real time and/or the demand for soda ash within China is being underestimated. In recent months, we have seen the delivery of soda ash into China from natural producers in Turkey as well as from producers in the U.S. We have seen no significant increases in Chinese export volumes. We do have some indication that Chinese domestic soda ash prices have bottomed and actually increased in recent weeks. Internationally, we know that there has been some high-cost synthetic production taken offline in Europe and volumes are being pulled from certain Asian markets outside of China and are being redirected to higher-value markets; and therefore, reducing supply to Asian markets ex-China. The market data points I just mentioned, when combined with the expected end of the destocking of existing customer inventories, the expected return of normalized global economic growth, and the continuing increase in worldwide demand from various green initiatives, all lead us to believe the market should become increasingly more balanced as we move through the year. We continue to believe this backdrop should provide a tighter supply and demand environment, which in turn should provide support for stable domestic prices and an improvement in export prices as we start our negotiations for 2025 volumes towards the end of this year. I would be remiss not to mention the public comments of David Einhorn, who presented his one best value investment idea at the Sohn Conference in mid-April. Mr. Einhorn's analyses and comments were specific to a large, but not pure-play soda ash producer that happens to have operations adjacent to ours in Wyoming. His long-term bullish thesis for soda ash is consistent with and, in fact, very similar to a lot of what we have said on recent calls and we discuss with investors over the last few quarters. It's actually quite an informative presentation in general, and I would encourage anyone who's interested to find and watch the video to learn more about the fundamentals of the soda ash market and the possible implications for our future financial performance. As we stated in the release, we continue to work through typical commissioning-type challenges with our Granger expansion project. I'm happy to report that we have recently received and installed certain replacement parts, the originals of which did not perform as designed and expected. We have proactively worked with the vendor to ensure we have an adequate number of spare component parts on site in case we run into similar challenges in the future. We expect this warranty-type work to be completed by the end of this month. Despite running Granger suboptimally for the first four months of the year, we have clearly demonstrated that the expanded Granger production facility is more than capable of achieving the original design capacity of 1.2 million to 1.3 million tons per year. In fact, we are quite confident we have a path to exceed the original design capacity, just like we did with the world's first commercial solution mine soda ash plant, our ELDM facility in Westvaco. ELDM was originally designed in the mid-90s to be able to produce 625,000 tons per year, and yet we have averaged about 850,000 tons per year for the last decade. These incremental tons will both increase our volumes available for sale, but importantly, will lower our average operating cost per ton at Granger and throughout our entire soda ash operations. Regardless of the ultimate timing of soda ash margins returning to or exceeding mid-cycle levels, we remain confident in the long-term soda ash thesis. We believe we are very well positioned to deliver increasing financial performance from this market-leading business for many decades to come. Our Sulfur Services business performed in line with our expectations during the quarter. Our Marine Transportation segment continues to meet or exceed our expectations as market conditions and demand fundamentals remain very favorable. As mentioned in the release, we continue to operate with utilization rates at or near 100% of practical available capacity for all classes of our vessels, as the supply and demand outlook for Jones Act tankage remains structurally tight. These market dynamics continue to be driven by a combination of steady and robust demand, a heavy maintenance cycle, the continued retirements of older equipment, and effectively zero new construction of our types of marine vessels. In fact, according to a leading industry participant in the inland market in particular, and I quote, 'If you look at the last three years, we have seen the lowest amount of new construction activity within the last 20 years. And on top of that, there are still another 500 barges that are over 30 years old in our candidates for retirement.' So the supply side of the equation looks pretty good going forward. This lack of new marine tonnage combined with steady increase in demand from our customers continues to drive spot day rates and longer-term contracted rates in our inland and offshore fleets to record levels. In fact, the market fundamentals we are enjoying today are some of the most promising and on par with some of the best times we have ever experienced in the marine business. Furthermore, the same leading industry participant has stated that the contract rates need to rise upwards of 40% from here in order to rationalize the new construction of comparable marine equipment. This is driven by the increased cost of steel, extended construction timelines, lack of available shipyard space, and the increased cost of capital. We are, therefore, not alone in thinking that these market fundamentals could last upwards of an additional 3 to 5 years, all of which lead me to believe our Marine Transportation segment is well positioned to deliver record and growing earnings over the coming years. As I have mentioned in the past and will reiterate again today, the value proposition for Genesis remains unchanged and totally intact. We have line of sight to the end of our current growth capital program later this year and look forward to increased financial performance next year, driven primarily by offshore growth and expected improvement in soda ash pricing and margins and an increasing contribution from our Marine group. Absent unforeseen circumstances, we continue to anticipate being able to generate roughly $250 million to $350 million or more of cash per year in excess of all of the current cash requirements to run our businesses, we think it's actually quite a large number, especially for a company our size. We will continue to evaluate the various levers we can pull to return this capital to our stakeholders, including paying down debt, repurchasing additional amounts of our corporate preferred security, raising our common distribution, and purchasing what we view as mispriced publicly traded securities. We will do all of this while maintaining an appropriate level of liquidity and, of course, while maintaining a focus on our long-term leverage ratio. Finally, I'd like to say 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, and we believe the decisions we are making reflect this commitment and our confidence in Genesis going 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.

And our first question comes from the line of Michael Blum with Wells Fargo.

So just a couple of questions. One, you noted you might be able to make up some of the volumes on Granger this year. Is that already reflected within the guidance range? And if not, how much upside would that represent?

I think as we stated, that the operational issues at both Westvaco as well as the start-up commissioning issues at Granger probably dinged margin by around $8 million in the first quarter. If we have the opportunity to make up volumes, it would serve in the back half of the year to make up some of that, Michael. So I mean, at this point, there's no guarantees, but we're pretty excited about the efficiency that we're seeing at Granger. And once we get the component parts replaced, we feel comfortable that we will, as I referenced earlier, exceed the design capacity of the expansion.

Okay. Perfect. And then the $250 million to $350 million of cash flow after all the obligations that you referenced today and in the press release. Is that a number you would expect to materialize in 2025? Or is this more of a 2026 goal? And how much improvement in soda ash pricing or segment earnings would this assume?

Yes. We are projecting a run rate for the next 12 months, and while we don't expect to reach these numbers in 2025, we anticipate hitting this run rate by mid-2025. This expectation is contingent on remaining in a lower margin range for soda ash. If we are at the low end of that range, we could reach the upper end if the market returns to mid-cycle conditions, which we estimate could result in cash flow between $250 million and $350 million or more. This improvement will depend on two main factors. First, if offshore producers can reach or exceed full capacity instead of the 75% we have used in our guidance, we could see significantly better performance from the offshore operations. Secondly, if we exceed both volume and margin expectations in the soda ash business, that would drive further growth. Additionally, forecasts from other soda ash producers predict global demand will rise from around 65 million metric tons per year to 80 million metric tons by the end of the decade, which will likely put upward pressure on prices and improve our margins. Therefore, we are confident about this range and believe there is more potential for upside than downside.

Our next question comes from the line of Wade Suki with Capital One.

On Shenandoah, you mentioned a $6 million impact later in the year fourth quarter. If some of us were including that in a full year '25 estimate, I mean, can you give us a better sense what that might be next year? Is it as simple as multiplying that by 5 or some kind of offset from additional tie-in opportunities? Any color you could give on that?

Yes, I don't believe it will have a significant impact. Everything else remains unchanged. It will have some effect on 2025, although we have not provided guidance for that year yet. Starting in May rather than for the full year means we miss out on some revenue. However, this delay does not eliminate the revenue; it is simply postponed. We will still receive that amount, whether it is $30 million or something else, so it's not a major concern. There are several factors that could compensate for this gap, including if we achieve 100% of the forecast in California for 2025, which could more than offset the missed $30 million in the first half of the year. Additionally, we expect significant growth in the Marine business standalone compared to a record year in 2024. So while it is disappointing, it doesn't impact our long-term or intermediate financial performance outlook for the company.

That's great. Now, turning our attention to Soda and Sulfur Services. Last year, you provided us with useful benchmarks to consider Soda and Sulfur Services on a normalized basis. Could you update us on those ranges as they currently stand? Additionally, looking ahead to next year when Granger is fully operational.

Yes, we considered the Granger situation when planning our rollout. Historically, over the last 17 to 18 years, we saw that in a low commodity cycle, we could expect around a $40 per ton margin. This year, that might be slightly less because we’re not producing the 4.8 million tons we anticipated due to the ramp-up at Granger and some operational issues at Westvaco in the first quarter. Generally, $40 per ton is on the lower end of the cycle, while we exceeded $60 per ton in '22 and '23 significantly. Over the 18-year period, an average of $50 seems appropriate. If we reach 4.8 million tons of production capacity in sales, combining Westvaco and a fully operational Granger, we’re looking at a $240 million run rate. If we hit the $60 mark, that brings us close to $300 million. Considering the growth projects, which will cost at least $1,000 per ton to install, they would need to achieve margins of $100 just for a simple 10% return on investment. If they have a slight cost advantage of $20 or $30 per ton, we’re potentially looking at margins of $70 to $80 per ton. For us, this could raise the business to the $350 million to $400 million range. This reinforces our belief in the robust long-term prospects for soda ash, despite the current pricing environment where the 65 million metric ton market had to accommodate an additional 5 million tons of production. However, we are optimistic that things will improve over time.

That's perfect. Very helpful. Appreciate it.

Thank you. There are no further questions at this time. Mr. Sims, back to you.

Thank you very much, and I appreciate everybody listening in and good questions, and we'll talk in another 90 days or so, if not sooner. So, thanks very much.

This concludes today's conference. You may now disconnect your lines. Enjoy the rest of your day.