Business Wire | Aug 3, 2021 06:30AM EDT

Westlake Chemical Partners LP Announces Second Quarter 2021 Results

Aug. 03, 2021

HOUSTON--(BUSINESS WIRE)--Aug. 03, 2021--Westlake Chemical Partners LP (NYSE: WLKP) (the "Partnership") today reported record net income attributable to the Partnership in the second quarter of 2021 of $25.1 million, or $0.71 per limited partner unit, an increase of $10.2 million compared to second quarter 2020 net income attributable to the Partnership of $14.9 million. The increase in net income was a result of higher production, higher earnings on third-party sales as well as a buyer deficiency fee. The buyer deficiency fee of $8.7 million is a result of lower planned production in 2021 attributable to the impacts of the winter storm which occurred in the first quarter and an outage at Westlake Chemical OpCo LP ("OpCo") Petro 1 facility, which occurred on June 25, 2021. Cash flows from operating activities in the second quarter of 2021 were $131.7 million, an increase of $18.9 million compared to second quarter 2020 cash flows from operating activities of $112.8 million. For the three months ended June 30, 2021, MLP distributable cash flow of $25.5 million increased by $8.6 million from second quarter 2020 MLP distributable cash flow of $16.9 million. The increase in MLP distributable cash flow was primarily attributable to the higher production and resulting higher earnings at OpCo, partially offset by increased maintenance costs and turnaround reserves.

Record second quarter 2021 net income attributable to the Partnership of $25.1 million increased by $10.0 million compared to first quarter 2021 net income attributable to the Partnership of $15.1 million. This increase was primarily attributable to higher production at OpCo and increased earnings on third party sales. Second quarter 2021 cash flows from operating activities of $131.7 million decreased by $23.7 million compared to first quarter 2021 cash flows from operating activities of $155.4 million. This decrease in cash flows from operating activities was primarily due to the receipt of a receivable from Westlake Chemical Corporation ("Westlake Chemical") in the first quarter, partially offset by higher earnings during the quarter. Second quarter 2021 MLP distributable cash flow of $25.5 million increased by $9.3 million compared to first quarter 2021 MLP distributable cash flow of $16.2 million. This increase was primarily attributable to the higher production and earnings at OpCo.

Net income attributable to the Partnership of $40.2 million, or $1.14 per limited partner unit, for the six months ended June 30, 2021 increased by $7.6 million compared to the first six months of 2020 net income attributable to the Partnership of $32.6 million. The increase in net income attributable to the Partnership as compared to the prior-year period was due to higher earnings on ethylene sold to Westlake Chemical under the Ethylene Sales Agreement and third parties and a buyer deficiency of $18.4 million related to the winter storm that occurred in the first quarter of 2021, partially offset by lower ethylene production. Cash flows from operating activities in the first six months of 2021 were $287.1 million, an increase of $63.4 million compared to the first six months of 2020 cash flows from operating activities of $223.7 million. This increase was primarily due to the receipt of a prior year receivable from Westlake and higher earnings during the period. For the six months ended June 30, 2021, MLP distributable cash flow of $41.8 million increased by $6.6 million compared to the first six months of 2020 MLP distributable cash flow of $35.2 million. The increase in MLP distributable cash flow as compared to the prior-year period was primarily attributable to the Partnership's higher earnings at OpCo, partially offset by increased maintenance costs and turnaround reserves.

"The Partnership had a record second quarter driven by the strong consumer markets for PVC construction materials and polyethylene packaging, which drove the resulting demand for ethylene. The strong demand for ethylene and the resulting robust pricing environment drove higher margins in our second quarter 2021 third-party ethylene sales," said Albert Chao, President and Chief Executive Officer.

OpCo's Ethylene Sales Agreement with Westlake Chemical is designed to provide for stable and predictable cash flows. The agreement provides that 95% of OpCo's ethylene production is sold to Westlake Chemical for a cash margin of $0.10 per pound, net of operating costs, maintenance capital expenditures and reserves for future turnaround expenditures.

On August 2, 2021, the Partnership announced that the Board of Directors of Westlake Chemical Partners GP LLC had approved a quarterly distribution for the second quarter of 2021 of $0.4714 per unit to be payable on August 26, 2021 to unitholders of record as of August 12, 2021, representing the 28th consecutive quarterly distribution to our unitholders. MLP distributable cash flow provided trailing twelve-month coverage of 1.18x the declared distributions for the second quarter of 2021.

The statements in this release and the related teleconference relating to matters that are not historical facts, such as those with respect to cost recovery of expenses incurred in the second quarter of 2021, are forward-looking statements. These forward-looking statements are subject to significant risks and uncertainties. Actual results could differ materially, based on factors including, but not limited to, the COVID-19 pandemic and the response thereto; operating difficulties; the volume of ethylene that we are able to sell; the price at which we are able to sell ethylene; changes in the price and availability of feedstocks; changes in prevailing economic conditions; actions and commitments of Westlake Chemical Corporation; actions of third parties; inclement or hazardous weather conditions, including flooding, and the physical impacts of climate change; environmental hazards; changes in laws and regulations (or the interpretation thereof); inability to acquire or maintain necessary permits; inability to obtain necessary production equipment or replacement parts; technical difficulties or failures; labor disputes; difficulty collecting receivables; inability of our customers to take delivery; fires, explosions or other industrial accidents; our ability to borrow funds and access capital markets; and other risk factors. For more detailed information about the factors that could cause actual results to differ materially, please refer to the Partnership's Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC in March 2021.

This release is intended to be a qualified notice under Treasury Regulation Section 1.1446-4(b). Brokers and nominees should treat one hundred percent (100.0%) of the Partnership's distributions to non-U.S. investors as being attributable to income that is effectively connected with a United States trade or business. Accordingly, the Partnership's distributions to non-U.S. investors are subject to federal income tax withholding at the highest applicable effective tax rate.

Use of Non-GAAP Financial Measures

This release makes reference to certain "non-GAAP" financial measures, such as MLP distributable cash flow and EBITDA. For this purpose, a non-GAAP financial measure is generally defined by the Securities and Exchange Commission ("SEC") as a numerical measure of a registrant's historical or future financial performance, financial position or cash flows that (1) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") in the statement of income, balance sheet or statement of cash flows (or equivalent statements) of the registrant; or (2) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. We report our financial results in accordance with U.S. GAAP, but believe that certain non-GAAP financial measures, such as MLP distributable cash flow and EBITDA, provide useful supplemental information to investors regarding the underlying business trends and performance of our ongoing operations and are useful for period-over-period comparisons of such operations. These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the financial measures prepared in accordance with U.S. GAAP. We define MLP distributable cash flow as distributable cash flow less distributable cash flow attributable to Westlake's noncontrolling interest in OpCo and distributions attributable to the incentive distribution rights holder. MLP distributable cash flow does not reflect changes in working capital balances. We define EBITDA as net income before interest expense, income taxes, depreciation and amortization. MLP distributable cash flow and EBITDA are non-GAAP supplemental financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess our operating performance as compared to other publicly traded partnerships, our ability to incur and service debt and fund capital expenditures and the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities. Reconciliations of MLP distributable cash flow to net income and to net cash provided by operating activities and of EBITDA to net income, income from operations and net cash provided by operating activities can be found in the financial schedules at the end of this press release.

Westlake Chemical Partners LP

Westlake Chemical Partners is a limited partnership formed by Westlake Chemical Corporation to operate, acquire and develop ethylene production facilities and other qualified assets. Headquartered in Houston, the Partnership owns a 22.8% interest in Westlake Chemical OpCo LP. Westlake Chemical OpCo LP's assets consist of three ethylene production facilities in Calvert City, Kentucky, and Lake Charles, Louisiana and an ethylene pipeline. For more information about Westlake Chemical Partners LP, please visit http://www.wlkpartners.com.

Westlake Chemical Partners LP Conference Call Information:

A conference call to discuss Westlake Chemical Partners' second quarter 2021 results will be held Tuesday, August 3, 2021 at 1:00 PM Eastern Time (12:00 PM Central Time). To access the conference call, dial (855) 765-5686 or (234) 386-2848 for international callers, approximately 10 minutes prior to the scheduled start time and reference passcode 321 65 79.

A replay of the conference call will be available beginning two hours after its conclusion until 11:59 p.m. Eastern Time on Tuesday, August 10, 2021. To hear a replay, dial (855) 859-2056 or (404) 537-3406 for international callers. The replay passcode is 321 65 79.

The conference call will also be available via webcast at: https://edge.media-server.com/mmc/p/go9q47ya and the earnings release can be obtained via the Partnership web page at: https://investors.wlkpartners.com/corporate-profile/default.aspx.

WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020



(In thousands of dollars, except per unit data)

Revenue

Netsales-WestlakeChemical $ 240,956 $ 227,431 $ 460,759 $ 442,259 Corporation("Westlake")

Net co-product,ethylene andother 81,273 11,069 129,677 46,790 sales-thirdparties

Total net sales 322,229 238,500 590,436 489,049

Cost of sales 191,200 148,470 371,708 295,471

Gross profit 131,029 90,030 218,728 193,578

Selling, generaland 8,269 6,139 16,942 12,335 administrativeexpenses

Income from 122,760 83,891 201,786 181,243 operations

Other income (expense)

Interest (2,224 ) (3,431 ) (4,460 ) (7,381 ) expense-Westlake

Other income, 21 123 28 708 net

Income before 120,557 80,583 197,354 174,570 income taxes

Income tax 263 206 438 423 provision

Net income 120,294 80,377 196,916 174,147

Less: Net incomeattributable tononcontrollinginterests in 95,195 65,517 156,671 141,540 WestlakeChemical OpCo LP("OpCo")

Net incomeattributable to $ 25,099 $ 14,860 $ 40,245 $ 32,607 WestlakePartners



Net income perlimited partnersunitattributable to WestlakePartners (basicand diluted)

Common units $ 0.71 $ 0.43 $ 1.14 $ 0.93



Distributionsdeclared per $ 0.4714 $ 0.4714 $ 0.9428 $ 0.9428 unit



MLPdistributable $ 25,538 $ 16,855 $ 41,783 $ 35,192 cash flow



Distributions declared

Limited partnerunits-publicly $ 9,938 $ 9,933 $ 19,874 $ 19,867 and privatelyheld

Limited partner 6,657 6,657 13,314 13,314 units-Westlake

Totaldistributions $ 16,595 $ 16,590 $ 33,188 $ 33,181 declared

EBITDA $ 151,483 $ 109,827 $ 258,058 $ 233,795

WESTLAKE CHEMICAL PARTNERS LP

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

June 30,2021

December 31,2020

(In thousands of dollars)

ASSETS

Current assets

Cash and cash equivalents

$

17,665

$

17,154

Receivable under the Investment Management Agreement-Westlake

222,249

123,228

Accounts receivable, net-Westlake

66,948

108,028

Accounts receivable, net-third parties

24,962

11,029

Inventories

4,929

3,474

Prepaid expenses and other current assets

61

392

Total current assets

336,814

263,305

Property, plant and equipment, net

1,030,016

1,050,677

Other assets, net

34,925

42,506

Total assets

$

1,401,755

$

1,356,488

LIABILITIES AND EQUITY

Current liabilities (accounts payable and accrued liabilities)

$

48,653

$

39,754

Long-term debt payable to Westlake

399,674

399,674

Other liabilities

1,670

1,923

Total liabilities

449,997

441,351

Common unitholders-publicly and privately held

476,076

471,701

Common unitholder-Westlake

51,103

48,270

General partner-Westlake

(242,572

)

(242,572

)

Total Westlake Partners partners' capital

284,607

277,399

Noncontrolling interest in OpCo

667,151

637,738

Total equity

951,758

915,137

Total liabilities and equity

$

1,401,755

$

1,356,488

WESTLAKE CHEMICAL PARTNERS LP

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

June 30, December 31, 2021 2020



(In thousands of dollars)

ASSETS

Current assets

Cash and cash equivalents $ 17,665 $ 17,154

Receivable under the Investment Management 222,249 123,228 Agreement-Westlake

Accounts receivable, net-Westlake 66,948 108,028

Accounts receivable, net-third parties 24,962 11,029

Inventories 4,929 3,474

Prepaid expenses and other current assets 61 392

Total current assets 336,814 263,305

Property, plant and equipment, net 1,030,016 1,050,677

Other assets, net 34,925 42,506

Total assets $ 1,401,755 $ 1,356,488



LIABILITIES AND EQUITY

Current liabilities (accounts payable and $ 48,653 $ 39,754 accrued liabilities)

Long-term debt payable to Westlake 399,674 399,674

Other liabilities 1,670 1,923

Total liabilities 449,997 441,351

Common unitholders-publicly and privately held 476,076 471,701

Common unitholder-Westlake 51,103 48,270

General partner-Westlake (242,572 ) (242,572 )

Total Westlake Partners partners' capital 284,607 277,399

Noncontrolling interest in OpCo 667,151 637,738

Total equity 951,758 915,137

Total liabilities and equity $ 1,401,755 $ 1,356,488

WESTLAKE CHEMICAL PARTNERS LP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Six Months Ended June 30,

2021

2020

(In thousands of dollars)

Cash flows from operating activities

Net income

$

196,916

$

174,147

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

56,244

51,844

Other balance sheet changes

33,958

(2,272

)

Net cash provided by operating activities

287,118

223,719

Cash flows from investing activities

Additions to property, plant and equipment

(27,289

)

(20,595

)

Maturities of investments with Westlake under the Investment Management Agreement

83,000

181,000

Investments with Westlake under the Investment Management Agreement

(182,000

)

(190,000

)

Other

126

-

Net cash used for investing activities

(126,163

)

(29,595

)

Cash flows from financing activities

Quarterly distributions to noncontrolling interest retained in OpCo by Westlake

(127,258

)

(157,248

)

Quarterly distributions to unitholders

(33,186

)

(33,181

)

Net cash used for financing activities

(160,444

)

(190,429

)

Net increase in cash and cash equivalents

511

3,695

Cash and cash equivalents at beginning of period

17,154

19,923

Cash and cash equivalents at end of period

$

17,665

$

23,618

WESTLAKE CHEMICAL PARTNERS LP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Six Months Ended June 30,

2021 2020



(In thousands of dollars)

Cash flows from operating activities

Net income $ 196,916 $ 174,147

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 56,244 51,844

Other balance sheet changes 33,958 (2,272 )

Net cash provided by operating activities 287,118 223,719

Cash flows from investing activities

Additions to property, plant and equipment (27,289 ) (20,595 )

Maturities of investments with Westlake under 83,000 181,000 the Investment Management Agreement

Investments with Westlake under the Investment (182,000 ) (190,000 ) Management Agreement

Other 126 -

Net cash used for investing activities (126,163 ) (29,595 )

Cash flows from financing activities

Quarterly distributions to noncontrolling (127,258 ) (157,248 ) interest retained in OpCo by Westlake

Quarterly distributions to unitholders (33,186 ) (33,181 )

Net cash used for financing activities (160,444 ) (190,429 )

Net increase in cash and cash equivalents 511 3,695

Cash and cash equivalents at beginning of 17,154 19,923 period

Cash and cash equivalents at end of period $ 17,665 $ 23,618

WESTLAKE CHEMICAL PARTNERS LP

RECONCILIATION OF MLP DISTRIBUTABLE CASH FLOW TO NET INCOME

AND NET CASH PROVIDED BY OPERATING ACTIVITIES

(Unaudited)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

2021

2021

2020

2021

2020

(In thousands of dollars)

Net cash provided by operating activities

$

155,408

$

131,710

$

112,758

$

287,118

$

223,719

Changes in operating assets and liabilities and other

(78,786

)

(11,416

)

(32,381

)

(90,202

)

(49,572

)

Net Income

76,622

120,294

80,377

196,916

174,147

Add:

Depreciation, amortization and disposition of property, plant and equipment

28,898

28,734

26,164

57,632

52,291

Mark-to-market adjustment loss (gain) on derivative contracts

-

-

704

-

(1,787

)

Less:

Contribution to turnaround reserves

(12,332

)

(12,463

)

(9,884

)

(24,795

)

(19,807

)

Maintenance capital expenditures

(11,743

)

(14,344

)

(8,228

)

(26,087

)

(19,349

)

Distributable cash flow attributable to noncontrolling interest in OpCo

(65,200

)

(96,683

)

(72,278

)

(161,883

)

(150,303

)

MLP distributable cash flow

$

16,245

$

25,538

$

16,855

$

41,783

$

35,192

WESTLAKE CHEMICAL PARTNERS LP

RECONCILIATION OF MLP DISTRIBUTABLE CASH FLOW TO NET INCOME

AND NET CASH PROVIDED BY OPERATING ACTIVITIES

(Unaudited)

Three Months Ended March Three Months Ended June 30, Six Months Ended June 30, 31,

2021 2021 2020 2021 2020



(In thousands of dollars)

Net cashprovided by $ 155,408 $ 131,710 $ 112,758 $ 287,118 $ 223,719 operatingactivities

Changes inoperatingassets and (78,786 ) (11,416 ) (32,381 ) (90,202 ) (49,572 ) liabilitiesand other

Net Income 76,622 120,294 80,377 196,916 174,147

Add:

Depreciation,amortizationanddisposition of 28,898 28,734 26,164 57,632 52,291 property,plant andequipment

Mark-to-marketadjustmentloss (gain) on - - 704 - (1,787 ) derivativecontracts

Less:

Contributionto turnaround (12,332 ) (12,463 ) (9,884 ) (24,795 ) (19,807 ) reserves

Maintenancecapital (11,743 ) (14,344 ) (8,228 ) (26,087 ) (19,349 ) expenditures

Distributablecash flowattributableto (65,200 ) (96,683 ) (72,278 ) (161,883 ) (150,303 ) noncontrollinginterest inOpCo

MLPdistributable $ 16,245 $ 25,538 $ 16,855 $ 41,783 $ 35,192 cash flow

WESTLAKE CHEMICAL PARTNERS LP

RECONCILIATION OF EBITDA TO NET INCOME, INCOME FROM OPERATIONS AND NET CASH

PROVIDED BY OPERATING ACTIVITIES

(Unaudited)

Three Months Ended March 31,

Three Months Ended June 30,

Three Months Ended March 31,

2021

2021

2020

2021

2020

(In thousands of dollars)

Net cash provided by operating activities

$

155,408

$

131,710

$

112,758

$

287,118

$

223,719

Changes in operating assets and liabilities and other

(78,786

)

(11,416

)

(32,381

)

(90,202

)

(49,572

)

Net Income

76,622

120,294

80,377

196,916

174,147

Less:

Other income, net

7

21

123

28

708

Interest expense

(2,236

)

(2,224

)

(3,431

)

(4,460

)

(7,381

)

Income tax provision

(175

)

(263

)

(206

)

(438

)

(423

)

Income from operations

79,026

122,760

83,891

201,786

181,243

Add:

Depreciation and amortization

27,542

28,702

25,813

56,244

51,844

Other income, net

7

21

123

28

708

EBITDA

$

106,575

$

151,483

$

109,827

$

258,058

$

233,795

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