Thank you for standing by. And welcome to the Third Quarter 2020 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. I would now like to hand the conference over to speaker today, Mr. Bob Bondurant, Chief Financial Officer. Thank you, sir. Please go ahead.

Thank you, Paulie. And good morning, everyone. On the call today we have Ruben Martin, President and CEO; Randy Tauscher, Chief Operating Officer. Also joining us is Danny Kevin, Director of Financial Planning and Analysis, and David Cannon, Director of Financial Reporting. One person missing today is Sharon Tyler, Director of Finance and Investor Relations. Sharon currently has a significant personal situation with her daughter Charlie, who was in a devastating head-on collision last week. Appropriately, Sharon will not be with us on the call today as she is being a mother to her daughter, who has had numerous surgeries over the past few days. Please pray for healing for Charlie and support comfort and peace for Sharon.

Your first question comes from the line of T J Schultz with RBC Capital.

Hey, thanks. Good morning. I think first, so I know in the past MRMCs relied in part on MLP dividends to support its capital structure. And now with the cut to the MLP dividend, what's the distribution? What's the expectation that contract terms or rates between the MLP and MRMC may need to change in order to support MRMC? And if you could just quantify what that cash flow impact could be to the MLP? Or if it would impact maybe MLP results at some point. Thank you.

Yes, when the distribution was cut back in April, there were contract adjustments then and that has been reflected in our guidance. And we anticipate no further contract adjustments at this time.

Okay. Appreciate that. And then on marine transport, I understand there's some hurricane impact in 3Q. And then you're pointing to 4Q utilization being similar, I think to 3Q levels. So I'm just kind of looking for what it takes for utilization in your mind to improve on inland marine there outside of kind of weather impacts. If you can speak to refinery utilization there and what may help see that business come back a bit. Thanks.

Sure. I'm going to ask Randy to address that question. Go ahead, Randy.

Sure. This is Randy. Yes, marine had a very up and down year this year, driven by COVID. And refinery utilization in the past dropped to even the high 60s and low 70s. It kind of worked its way back up to the summer to the 80% to 85%. As that happened, the rates and utilization were pretty decent in July and August. We had pretty good monsoon rain in September, after the hurricane hit in late August, and really did all that damage on Lake Charles. We saw refinery utilization drop again, even today, even with them coming back on in Lake Charles starting up this week, for example, we still see refinery utilization in the past was just under 70%. So as long as the refinery utilization is low, it certainly looks like if somebody is holding a lot of clean tows, hauling gasoline and diesel, that market, I'm not going to call non-existent. But there's not much demand for any spot tows in that particular market. In what we call the dirty market, which is the, I believe the asphalt anything that needs heated barges, it's a little bit better, but it's still well off of where it was early in the year say $1,000 a day for tows off from what and utilization as well. So we really put before the marine rates to start picking up we need utilization to pick up and for the utilization to pick up we need refineries to turn on harder than they are today. So any estimate on when that's going to improve for us is really tied to when we finally begin running harder.

The next question comes from the line of Selman Akyol with Stifel.

Thank you, a couple quick ones for me. So first of all, can you talk maybe a little bit about your expectations for the butane blending season? Obviously, maybe just thoughts relative to last year. I know you've already got two-thirds, which I guess why not have the other portion hedged as well? And then maybe if you could just talk a little bit about sort of what you expect between 4Q and 1Q.

Yes, go ahead, Randy.

So on the butane business; that is correct. We are two-thirds ahead, but we're working through October quickly and we're selling significant volumes in October. As we enter November 1, which is just next week, we will be significantly more hedged than the two-thirds. As the volumes move out in October, our hedge position will be much greater than the two-thirds. As we get to November 1, we still won't be 100% hedged; there's still upside and downside to us. But we will be significantly ahead at that point, and we'll have the ability to hedge more if we feel it's in our best interest at that time. Relative to last year, I think this year sits up very similarly to last year. When we think about our butane business, in the fourth quarter, we generally get about two-thirds of the value in the first quarter and about a third of the value in the winter months, especially the way it has worked over time. But that could change depending upon how the sales program ends up going.

Appreciate that. And then also just in terms of thinking about CapEx and understanding where you're coming in for this year in terms of expansion. But can you talk about what you're seeing next year?

Randy, go ahead.

You asking about maintenance or growth or?

Well, really, I was thinking about expansion capital.

This year, our expansion capital range was expected to be between $10 million and $12 million. However, we didn't invest as much as we had anticipated due to market conditions. While there were some planned investments we didn't make, we also took advantage of unexpected opportunities, like the Tampa tank project. For next year, I don't foresee us increasing our capital expenditures compared to 2020; in fact, it may be slightly lower than what we spent this year.

Got it. And then I know you have the right to ask the bondholders if you have cash in to take 25% of it and try to redeem some of those bonds. But they have no obligation to say yes, if I understood you correctly. So then my question is presuming you have this and this goal isn't just to build cash on the balance sheet.

We will use the cash generated by the company to pay down a revolving line of credit. You will observe a reduction in absolute debt over time, as that is where the cash will be allocated.

At this time, there are no further audio questions. We'll turn the conference back over to Mr. Bob Bondurant for closing remarks.

Thanks, Paulie. Overall, we were pleased with our third quarter adjusted EBITDA performance relative to our internal forecast, and certainly glad we have our bond exchange behind us. Now, regarding this morning's press release, I'm grateful for the confidence of our Board, and I'm very excited about my new role as CEO of the partnership beginning January 1 of next year. I would like to lay out my near-term vision for the company. First and foremost, we have to make our partnership attractive again to investors. How do we do that? Number one, we must continue to delever the partnership to our target leverage of 3.75x or less. Number two, we must be more consistent in delivering on expected cash flows, which will provide the fundamental path to meet our leverage goal. Number three, we also need to increase the utilization of our existing asset base through expanding existing commercial relationships and creating new commercial relationships. Number four, we need to become more cost-conscious throughout the entire organization. And finally, number five, we must identify and execute on low-risk organic growth opportunities, achieving returns significantly above our cost of capital. If we can execute this plan, I believe in the next 12 to 24 months, we can improve our current enterprise valuation multiple of 5.7x reflected in our current equity price. We can grow our valuation multiples to be more in line with our MLP small cap peer group, which trades around 7.8x, coupled with growing our equity value through absolute debt reduction. I believe we can deliver strong equity returns for our current unit holders based on our current unit price. Now, finally, I want to thank Ruben for his leadership of our partnership over the last 18 years. And I want to publicly let him know how much I appreciate his mentorship and friendship over the last 38 years. I know you will continue to bring value to our partnership through your business development role, and as Chairman of the Board. Ruben, would you like to share any closing comments?

Well, thank you, Bob, for those kind words, but I just thought that this was the right time to transition leadership since we recently completed our challenging, to say the least, bond exchange which sets MMLP up for future financial success. I will remain as President and Chief Executive Officer and as Chairman of the Board of MMLP. I will also be involved in business development for MMLP as I say this is very important given MRMC's significant ownership interest in MMLP. This means I'm not completely exiting the picture; I'm just turning over the leadership and strategic planning of MMLP to Bob; his vision can be the guiding light for MMLP's future. I'm excited for Bob and I think he's a great choice to lead MMLP into the future. With that I want to thank everyone for being on our call today. Anything else Bob?

No. Paulie, this concludes our call. Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Presenters, please hold one moment.