Greetings and welcome to the Genesis Energy L.P. Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dwayne Morley, Vice President of IR. Thank you, Dwayne. You may begin.

Good morning. Welcome to the 2024 Second Quarter conference call for Genesis Energy. Genesis Energy has four business segments. The offshore pipeline transportation segment provides the critical infrastructure to move oil produced from the long-lived world-class reservoirs from the deep water 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 processing 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 involved in the maritime transportation, primarily of refined petroleum products. Genesis's operations are primarily located in Wyoming, the Gulf Coast states, and the Gulf of Mexico. During this conference call, management may make forward-looking statements within the meanings 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 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.

Good morning to everyone and thank you for listening to the call. As we mentioned in our earnings release this morning, we continue to move closer to the important inflection point when we will complete our current major capital spending program and be a short time away from a notable step change in earnings and cash flow. We have always viewed 2024 as kind of a transition year and have instead been more focused on '25 and beyond. As such, I thought it would be most useful to comment further on the ongoing internal discussions at the board level regarding capital allocation and strategic priorities for Genesis. As we have detailed in the past, and subject to certain assumptions, the current annual cash cost of running our businesses, including all cash interest payments, cash maintenance capital requirements, principal and interest on our alkalized senior secured notes, cash taxes, approximately $88 million worth of payments on the currently outstanding 11.24% coupon convertible preferred units, and roughly $73.5 million worth of cash payments based on the current common unit distribution of $0.60 per annum, all adds up to be approximately $620 million per year. That's the annual cash cost of running our businesses as currently capitalized. At this point, we have spent everything we anticipated to spend on our Granger expansion and the vast majority of the cash required on our offshore expansion projects has already been or soon will be spent. While a little of this expansion capital will slip into the first part of 2025 due to some previously disclosed producer delays, the billion plus dollars of growth capital we have deployed over the last several years should all be out the door by the end of the first quarter 2025. Looking out over the coming years, we have identified no growth capital projects and remain committed to not pursuing any meaningful growth capital projects in the near term. In essence, because we believe we have laid the foundation for meaningfully higher and sustainable adjusted EBITDA for the foreseeable future and really don't need to pursue anything. As we look ahead to the full year of 2025, assuming a mid-year startup for our contracted offshore developments, a marginal sequential recovery in our soda ash business, and steady to marginally increasing performance in our marine transportation segment, we believe Genesis should be able to generate approximately $800 million in adjusted EBITDA in 2025. We could be approaching and potentially exceeding $900 million of adjusted EBITDA in 2026, at least based on how we see our future world today. It is easy to figure out that upon completion of our capital spending program, coupled with the absence of any meaningful future growth capital requirements in the near term, we expect to be generating significant amounts of cash over the next several years and beyond. Looking at the balance sheet, the combination of our successful capital markets transactions, including our most recent bond offering in May, and the recent extension of our senior secured credit facility into 2028 that we announced a couple of weeks ago, has positioned the partnership with no near term debt maturities. Given the expansion of certain buckets and permitted investments recently agreed to in our senior secured credit facility, we have ensured the partnership has more than adequate financial flexibility and liquidity to continue to simplify and strengthen our capital structure by redeeming our high-cost convertible preferred and paying down debt in absolute terms. These actions should, in turn, lower our cost of capital and ultimately reduce the long-term annual cash costs of running our businesses, affording us over time even more flexibility and levers we can pull to maximize unit holder value. With this backdrop and given our confidence in this future cash flow, today we are announcing that the board of directors has approved an increase in our quarterly common unit distribution of $0.0150 per unit, starting with the third quarter distribution, which is scheduled to be paid in mid-November. This represents a 10% increase over the second quarter's distribution and only represents an incremental annual cash cost of approximately $7.3 million. The board believes this is an important first step and should signal to the market the confidence we have in the future performance of our businesses. Subject to future board deliberation and approval, we could envision this common unit distribution growth continuing in coming quarters and years as we realize increasing EBITDA and benefit from the reduced cash obligations to run our businesses resulting from the redemption of high coupon securities throughout our capital structure. By way of illustration, if we were to continue this level of quarterly distribution growth for, say, 10 quarters in a row, the quarterly distribution by the end of 2026 would double from where it currently is and yet would only represent an incremental annual cash cost of approximately $73.5 million per year. By 2027, we will likely have redeemed hundreds of millions of dollars of the high-cost convertible preferred and/or paid down meaningful amounts of debt and therefore would have reduced the cash cost of running our businesses. This, in turn, would result in even greater cash flow, everything else the same, and we would be able to accelerate the redemption of the remaining preferred, further reduce outstanding debt, as well as extend our flexibility to further increase the distribution and/or take other strategic steps to drive unit holder value. In summary, absent unforeseen circumstances, we believe we have positioned the partnership with more than adequate financial flexibility and a clear line of sight on robust commercial opportunities to create long-term value for everyone in the capital structure in the coming years. Now, I will touch briefly on our individual business segments. As mentioned in our earnings release, our offshore segment was negatively affected by what can be characterized as technical issues with a couple of large fields and a couple of months delay from our original expectations for the startup of several new subsea developments. I want to emphasize that the occasional technical issue offshore and/or delays in bringing new developments online are not uncommon. While the timing of the production might push back a little or even a few quarters, there are rarely any long-term impacts to the production profile or the reservoir. The oil will still be produced and ultimately flow through our pipelines. Our offshore expansion projects remain on schedule and we continue to expect to complete most of the construction work by the end of this year. We expect to finalize the connection of the new SYNC pipeline to the Shenandoah floating production system once it arrives at its final location in the Gulf of Mexico, with such work likely slipping over into the first quarter of 2025. Both the Shenandoah and Salamanca developments, along with their combined almost 200,000 barrels a day of incremental production handling capacity, remain on schedule to be online in the second quarter of 2025. As we have mentioned in the past, these two developments alone will provide us with an anticipated incremental annual segment margin of approximately $90 million at the contract and take-or-pay level, and upwards of $120 million at 75% of the producers' respective forecasts. These amounts could approach $160 million per annum net to us to the extent the producers meet or exceed 100% of the respective forecasts when fully ramped. We continue to expect both these fields to ramp very quickly and reach initial peak production within three to six months of their respective dates of first production. These two new floating production facilities are also expected to serve as host platforms for additional future subsea developments or tieback opportunities, which could sustain or increase these cash flows to us for years to come. In fact, a group of producers led by Beacon has recently made a final investment decision on the Monument field, which will be developed as a 17-mile subsea tieback to the new Shenandoah floating production unit. The Shenandoah FPU has been expanded to accommodate an additional 20,000 barrels per day from Monument starting in mid to late 2026. We would expect to finalize agreements to move these volumes through our SYNC Lateral and onto shore through the CHOPS Pipeline under terms and conditions generally consistent with those for Shenandoah. Monument is the first example of what is likely a broader set of incremental opportunities that have been identified but are not fully sanctioned by the producers involved in the geographic vicinity of our new SYNC Pipeline as well as around our existing pipeline infrastructure in the central Gulf of Mexico. Importantly, our ongoing discussions around the connection of additional infield, subsea, and/or secondary recovery development opportunities would not require any incremental capital on our part and could turn production as early as next year and certainly over the next few years. We remain advantageously positioned in the central Gulf of Mexico and believe our steady and marginally increased invasive volumes transported, combined with these new developments coming online in mid-2025 and 2026, plus the potential for additional subsea tieback and development opportunities, give us the opportunity to deliver significantly higher and sustainable cash flows from our offshore transportation segment for many years to come. Turning now to our soda and sulfur services segment. Our soda ash business generally performed in line with our expectations despite some lingering production challenges at our Westvaco operations, as well as not having a full quarter's worth of production from Granger due to the need to replace the defective component parts we discussed last quarter. With these items now behind us, we expect the back half of the year to be more representative of the true production capabilities of our soda ash operations. The global macro conditions for soda ash continue to show signs of bottoming. The market dynamics within China so far this year continue to be strong, as evidenced by year-to-date export totals of soda ash from China being down 56% year-over-year, whilst imports into China were up 266% for the same period. Furthermore, third-party research indicates that apparent demand for soda ash within China has grown by 28% year-to-date, with the large drivers being the steady production of lithium carbonate, EV production, and solar glass, which are all up year-over-year through the end of June. We also continue to see changes in the flow of physical volumes around the globe, most notably with natural soda ash tons that were moving to Asia last year, and are now moving into Europe to displace high-cost synthetic soda ash or to fill the holes left by the shuttering of high-cost synthetic production facilities in the region. This is supported by third-party research, indicating that exports of natural soda from Turkey to Asia, excluding China, during the first five months of the year were down 17% year-over-year. At the same time, Turkish exports to Europe and the Middle East and Africa were up 16% and 14% year-over-year, respectively, through May. We believe these changes in physical flows and the steady demand for soda ash within China, combined with recent increases in certain transportation costs and some supply disruptions from other U.S. producers in the second quarter, have yet to fully trickle into the export markets. All should lead to continued tightness in our traditional export markets and the potential for soda ash prices to improve over the balance of the year, notably in advance of our contract negotiations for our open volumes in 2025. Regardless of these real-time dynamics, there is no doubt that over time markets work. Physical volumes always flow to the highest valued markets. The market data points I mentioned, the expected continued return of normalized global economic growth, and the continued increase in worldwide demand from various low carbon transition initiatives all lead us to believe that the market is indeed rebalancing and is poised to become increasingly balanced, which in turn should provide support for higher prices and a sequential improvement in the financial performance of our soda ash business over the coming quarters and years ahead. 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. We continue to operate with utilization rates at or near 100% of the practical available capacity for all classes of our vessels and expect the progression of day rates to be commensurate with those underlying fundamentals as our existing term and spot charters renew over the remainder of the year and into 2025. These fundamentals, combined with the completion of most of our previously scheduled dry docking work, should drive segment improvement in the second half of this year and continue into next year. As I have mentioned in the past and will reiterate today, the value proposition for Genesis remains unchanged and totally intact. We have a clear line of sight to the end of our current growth capital program in the next few quarters. As we sit here today, we look forward to the increase in financial performance of our businesses next year and accelerating into 2026, driven primarily by identified and contracted growth in our offshore transportation, a lighter dry docking schedule, and a full year of day rates at historically high levels driving improved performance in our marine transportation segment and, additionally, a likely sequential improvement in soda ash pricing resulting in an improvement in the financial results from our soda ash operations. I want to emphasize again that Genesis is not and never has been a 2024 story. Instead, it's a '25 and '26 story where we reasonably expect to ultimately generate upwards of $250 million to $350 million or more of excess cash per year and sustain around those levels for many years to come. This will allow us to simplify our capital structure, lower our overall cost of capital, maintain proven leverage, and opportunistically drive long-term value for our unit holders. 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 our stakeholders, regardless of where you are in the capital structure. We believe the decisions we are making reflect this commitment and our confidence in Genesis moving 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.

Thank you. We'll now be conducting a question-and-answer session. Thank you. Our first question is from Michael Blum with Wells Fargo. Please proceed with your question.

Thanks. Good morning, everyone. I wanted to ask on your capital allocation comments, can you give us a rank order of your priorities and if there are any limitations in repurchasing debt early in terms of prepayment penalties and the like?

As I said, I think our priorities are a little bit of all the above. I think starting with the increase in the distribution, as well as what we perceive to be further increases in the distribution as we go through time at the same time of redeeming high-priced or high-coupon securities in the capital structure. So as we mentioned, we have expanded buckets and increased the amount of permitted investments under our senior secured facility to be able to periodically harvest, so to speak, the high-priced coupons in the capital structure, all of which reduces the costs of running our business and therefore increases the amount of excess cash flow that we can either accelerate the redemption and harvesting of those high-priced securities or have the flexibility to continue to increase the distribution or otherwise return capital to the equity holders.

Okay, great. Thanks for that. And then I just wanted to ask a little bit about the marine transportation business. First, can you give us a sense of the magnitude of increase in day rates you're seeing? And then just remind us of the long-term strategy for this business. Do you consider this to be a core asset within the Genesis portfolio? Thanks.

Yes, I think that consistent with some of the other public commentary that came out today by other public companies, we would think that it's consistent that we're seeing day rates increase in the high single digits to mid-teens, depending upon the class of vessels. Utilization for us is practically 100% of available vessels that are not being either in dry dock or in some other kind of maintenance. So we think we will set a record this year for contributed segment margin in our marine group, and we believe that we have room to grow for that in '25. Also, as we've commented earlier, the only substantive way to resolve the supply-demand tightness in the marine world is to increase Jones Act tonnage through new construction. We would continue to believe that day rates need to go up 20% to 30% from here and remain sustained at that level for a significant period of time before significant new build programs are undertaken. As a result, we are in a very good position holding and maintaining a young fleet of Jones Act tonnage such as ours.

Thank you. Our next question is from Wade Suki with Capital One. Please proceed with your question.

Morning, everyone. Appreciate you taking my questions. Just offshore, I really appreciate your commentary there, Grant, on the activity levels. I'm wondering if how we think about tiebacks and tie-ins—does this potentially more than offset the sort of base declines that you're seeing in the system? Is that a fair way to think about it? Or is it really just offsetting existing declines from the larger projects and base projects for that matter?

Yes, we see the cadence of infill drilling and subsea tiebacks essentially offsetting the declines that we see from our more mature fields. Therefore, these incremental opportunities such as Salamanca, Shenandoah, and now Monument are truly incremental. In some cases, we see the level of activity from subsea tiebacks and such actually increasing our base load of business. It's all a very good situation, and that's why we prefer to be the one and only export pipeline off of these deep-water facilities because we are set up for decades worth of geographic franchise.

Fantastic. Thank you for that. And just switch gears a little bit to soda ash. Would you mind updating us on where you guys are in terms of pricing certain volumes, open capacity, so to speak, looking out to next year?

Into next year, around 40% to 45% of our anticipated sales volumes in '25 are either known with certainty as we sit here today or subject to very tight caps or collars. So basically, around 55% or so will be re-determined as typical in our business in the November-December time frame, either under annual contracts or as short-term duration as we can negotiate with our customers because we continue to believe that the market is balancing and that prices should continue to rise as we move through '25.

Fantastic. Thank you so much. Appreciate it.

Thank you. There are no further questions at this time. I would like to hand the floor back over to Grant Sims for any closing comments.

Okay, well again, thanks everyone. We appreciate your interest in listening in and we look forward to continuing to create value for everybody in the capital structure. So thanks very much.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.