2026 Second Quarter
Results Conference Call
August 6, 2026
Notice: This transcript contains references to non-GAAP financial measures. A presentation
of the most directly comparable GAAP measures and reconciliations to non-GAAP financial
measures used in this presentation is available on our website at genlp.com and click on the
non-GAAP Reconciliations icon at the Investor Relations page.
Good morning and welcome to the 2026 Second Quarter Conference Call for Genesis
Energy. Genesis Energy has three business segments. The offshore pipeline transportation segment
is engaged in providing the critical infrastructure to move oil produced from the long-lived, worldclass reservoirs from the deepwater Gulf of America to onshore refining centers. The marine
transportation segment is engaged in the maritime transportation of primarily refined petroleum
products. The onshore transportation and services segment is engaged in the transportation,
handling, blending, storage and supply of energy products, including crude oil and refined products
primarily around refining centers, as well as the processing of sour gas streams to remove sulfur
at refining operations. Genesis’ operations are primarily located in the Gulf Coast States and the
Gulf of America.
During this conference 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 those safe harbor provisions and directs you to its
most recently filed and future filings with the Securities Exchange Commission. We also
encourage you to visit our website at genesisenergy.com where a copy of the press release we
issued this morning 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 is joined
by Kristen Jesulaitis, Chief Financial Officer and Chief Legal Officer, Ryan Sims, President and
Chief Commercial Officer and Louie Nicol, Chief Accounting Officer. And with that, I will now
turn the call over to Grant.
[Grant]
Good morning to everyone… and thanks for joining us today.
As noted in our earnings release this morning… the second quarter’s results were broadly
in line with… and in some respects… slightly ahead of… where we thought we would be
internally. Most importantly… we made additional progress…on rightsizing…simplifying… and
strengthening… our balance sheet.
In that regard, let me walk through what we accomplished on the capital structure during
the quarter… and so far in the first half of 2026. In early June… we sold certain non-core and
underutilized offshore natural gas assets to a third party for $95 million. That transaction did three
things for us… it simplified our offshore footprint… it eliminated future operating expenses we
were incurring on assets that were not profitable… nor core to us … and it pre-funded a portion of
the asset retirement obligations on certain related natural gas assets we retained in the transaction.
Then in late June… we closed on a $99.5 million… non-recourse… accounts receivable
securitization facility… priced at SOFR plus 137.5 basis points… or roughly 200 basis points
inside of where we would be charged today for any borrowings under our senior secured credit
facility. In addition… given the AR collateral… borrowings under said facility will not count as
funded debt under our bank calculated leverage ratio. This facility represented a new source of
relatively inexpensive liquidity…which we found attractive as we continue to focus on reducing
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the cash costs of the capital supporting our underlying businesses.
We used the net proceeds from these two transactions to repurchase approximately $83
million of our 11.24% Series A corporate preferred securities… in a negotiated transaction at 102%
of par. We also opportunistically purchased 250 thousand common units in the open market… at
a weighted average price of $14.57 per unit. We used the remainder to pay the then outstandings
under our committed $900 million senior secured credit facility down to zero by the end of the
quarter… with the balance held as cash in an interest-bearing account.
If we take a step back… and look at the first 6 months of 2026… you will see the tangible
progress we have made… on our balance sheet objectives.
Entering this year… we had
approximately $529 million of our Series A corporate preferred outstanding… paying a current
cash rate of 11.24%. That is…by a very wide margin…the most expensive…current pay paper
anywhere in our capital structure.
Since the beginning of the year, we have retired approximately $218 million of the high
cost preferred … roughly $135 million in the first quarter…and another $83 million as I just
mentioned… in the second quarter. That brings the remaining face amount down to approximately
$311 million… a reduction of about 40% in six months.
When you combine that with the refinancing transactions we completed in the first
quarter… the new $750 million six-and-three-quarter percent senior unsecured notes due
2034…and the tender for…and full redemption of… the higher-cost seven-and-three-quarter
percent notes due 2028… we estimate we have reduced the all-in… annual… run-rate cost of the
capital underlying our existing businesses… by approximately $25 million.
As we look ahead…and as I said on the call last quarter… we believe we have line of sight
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to another potential $50 to $60 million of annual cash savings we can realize over the next several
years… as we continue to right-size and optimize the balance sheet… through a combination of…
paying down debt in absolute terms…redeeming additional preferred… and/or…subject to future
market conditions…refinancing our then existing nearer-term… unsecured maturities… at
coupons in the same zip code as our most recent offering of our longest dated bonds due 2034.
Consistent with the all-of-the-above approach to capital allocation we have talked about
previously… and in addition to the common unit purchases I mentioned earlier … in mid-July our
board of directors declared a quarterly distribution of $0.20 per common unit... up from $0.18.
This is an 11% increase over the immediately previous quarter… a 21% increase over the second
quarter of last year… and a 33% increase over the same quarter just two years ago.
As we generate additional amounts of free cash flow in future periods, we will continue to
focus on… and execute… our three-pronged capital allocation strategy. First…continue reducing
debt in absolute terms… working towards our long-term leverage target of around 4 times.
Second, continue retiring the high-cost Series A corporate preferred with free cash flow and
available liquidity. And finally…look to further grow the common unit distribution…or purchase
undervalued equity…all while maintaining the financial flexibility to capitalize on organic and
inorganic opportunities as they may arise.
With that… I will go into a little more detail on each of our business segments.
Our offshore pipeline transportation segment performed slightly below our expectations
during the quarter… as certain operators experienced operational challenges and unplanned
downtime at several of the key fields connected to our offshore infrastructure. Despite us
providing our producer customers with over 99% uptime availability across our pipeline systems
during the quarter…we were not immune to fluctuations in production volumes that are entirely
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beyond our control… mainly resulting from… changes in the timing of new wells coming online… or wells needing intervention or remediation. Any of these items by themselves are not
overly impactful or uncommon… but to the extent we have multiple instances occurring at highmargin fields within the same reporting period… the financial impact to us can be notable.
Having said that…let’s keep all of this is perspective. Midstream operations focused on
the deepwater Gulf is a long-term business…not at all like the treadmill of chasing drilling rigs all
over the place in onshore shale plays. Quarter to quarter… or year to year for that matter…means
little to us…and I’ll tell you why.
Short term blips…generally speaking… just means we’ll get paid for that barrel…or some
other barrel…somewhere down the road. Today… in round terms… 250 thousand barrels of oil
per day flows through our pipelines from deepwater production facilities that started operations
between 20 and 30 years ago… around 250 kbd from facilities that started up between 10 and 20
years ago…and around 250 thousand barrels a day from facilities that started in the last 10 years.
These are multi-decade, if not multi-generational plays…and once our initial investment is
made…it takes no additional capital by us to capture these long-term…in essence… annuity
like…cash flows.
A good example of this is the expansion activity that BP just announced at its Atlantis
production facility… which actually started its initial operations some 19 years ago. Contractually,
all production that ever…ever… comes across it…is dedicated to go to shore through our CHOPS
pipeline.
BP… along with its partners Chevron and Woodside… announced adding two new
subsea water injection wells… to help increase the pressure of target reservoirs… unlocking
additional barrels to be recovered from the original oil in place… and extending the producing life
of one of BP’s flagship U.S. offshore assets. This project is expected to add approximately 10,000
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barrels of oil equivalent per day of gross peak annualized average production… and adds tens of
millions of barrels of additional ultimate recoveries…and once again…requires no capital from
us.
As an aside, water floods…whether mechanical… as in the case at Atlantis…or naturally
occurring…as is the case at Shenandoah that we discussed last quarter…are very good from our
perspective. They expand and extend the annuity payment to us… as the exclusive conduit to
shore for the millions and millions of additional barrels.
Taking the proper…long-term…perspective…we remain extremely encouraged with the
pace and sanctioning of additional activity around our infrastructure in the deepwater Gulf of
America. The broader cadence of additional activity remains on track… with multiple wells
anticipated to come on-line over the next several quarters … which provides us with a good line
of sight into strong volumes not only over the remainder of the year… but for many years to come.
Putting aside the near-term noise production nuances… the longer-term story in our offshore
pipeline transportation segment remains fully intact.
Our marine transportation segment delivered results largely in line with our expectations.
As we mentioned in our earnings release… the second of our two largest units… and the final unit
in our 2026 dry docking program… left the shipyard last week and is now back at work. While
this last unit’s time in the yard will weigh somewhat on third quarter results… we have returned
to full capacity and expect our marine segment to show improving quarterly results for the
remainder of the year… and a cleaner… more normalized run rate going forward.
On the market itself… demand for both our inland and blue water remains relatively
constructive. Operationally, we continue to run at or near 100% of available capacity across all
vessel classes. Demand is being supported by strong Gulf Coast refinery runs… healthy crack
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spreads… and the recovery in heavy crude runs…most notably from the Gulf, Venezuela and
Canada… as heavy differentials remain persistent. On the supply side… the story has not
changed… there is essentially no net…new construction… of comparable Jones Act tonnage…
multi-year shipyard lead times remain… even if someone were to start today… and what is getting
built is…in our estimation…is not even filling in for the continued retirement of older equipment.
That is a favorable structural setup…and we expect this market dynamic to persist.
Our Onshore Transportation and Services segment had a solid quarter… as we again saw
steady volumes through both our Texas City and Raceland terminals as well as their associated
pipeline systems… largely supported by increasing offshore production volumes moving onshore.
During the quarter we took advantage of certain market dislocations caused by the conflict in
Iran… which allowed us to capture incremental, but likely non-recurring, margin opportunities.
Our legacy sulfur services business performed in-line with our expectations as we saw strong
demand from our pulp and paper customers and had steady operating performance at our largest
host refinery…which allowed us to optimize our NaHS supply chain.
In closing… I would remind you not to lose sight of the fact that the long-term story for
Genesis is firmly intact… and in several important respects… is much better than it was six months
ago. While performance across our segments will continue to vary some in any given quarter…
there is increasing visibility to a multi-year ramp in offshore volumes… underpinned by wells that
are already drilled or being drilled… on acreage that is already contractually dedicated to us…
and…flowing through our infrastructure, all that requires no additional capital.
This gives rise to increasing free cash flow and the financial flexibility to continue
rightsizing and optimizing the balance sheet… and to keep delivering value to everyone in the
capital structure… all …while preserving the ability to pursue attractive organic and inorganic
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opportunities… if and when they present themselves.
Finally, I would like to say that 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. 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 am extremely proud to be associated with each and every one of you.
With that, I’ll turn it back to the moderator for questions.
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