Earnings call: Genesis Energy LP optimistic amid transition year

Genesis Energy LP (NYSE:GEL) has conveyed a positive outlook for its future financial performance during the First Quarter 2024 Earnings Conference Call. CEO Grant Sims highlighted the company’s anticipation of significant cash generation as it approaches the completion of its growth capital spending program.

With steady volumes in the offshore pipeline transportation segment and promising developments in the soda and sulfur services segment, Genesis Energy LP expects to begin reaping the benefits of its expansion projects by the first half of 2025. Despite some challenges with the Granger expansion project, the company remains confident in its ability to exceed original design capacity and generate substantial cash in excess of its current obligations.

Key Takeaways

• Genesis Energy LP is in a transition year, nearing the completion of its growth capital spending program.
• The company expects to generate significant cash, potentially $250 million to $350 million or more annually, in excess of its $600 million yearly obligations.
• Offshore pipeline transportation and soda and sulfur services segments are performing in line with expectations.
• Offshore expansion projects are fully underwritten and projected to add $90 million in annual margin starting in the first half of 2025.
• The soda ash market is expected to balance, with stable domestic prices and improved export prices.
• The marine transportation segment is outperforming due to tight supply and demand dynamics.
• The company is considering various options to return capital to stakeholders.

Company Outlook

• Genesis Energy LP is confident in the long-term performance of the soda ash business.
• The company is well-positioned to deliver increasing financial performance.
• They anticipate significant growth in the marine transportation business in 2025.

Bearish Highlights

• The Granger expansion project faced challenges, requiring replacement parts and warranty work.

Bullish Highlights

• The company received positive comments from David Einhorn regarding the soda ash market.
• Despite initial challenges, the Granger facility is expected to exceed its original design capacity.

Misses

• The company had to recover from a $30 million loss in the first half of the year.

Q&A highlights

• The company provided historical financial performance data for the Soda and Sulfur Services segment.
• In low and high commodity cycles, margins could range from $40 to $60 per ton, respectively.
• Growth projects could lead the business to be in the $350 million to $400 million range.

Genesis Energy LP’s first quarter call has set a positive tone for the year ahead, with CEO Grant Sims acknowledging the hard work of their workforce and promising to provide more details on cash flow allocation later in the year. The company plans to reconvene for another earnings call in about 90 days.

InvestingPro Insights

Genesis Energy LP (GEL) has recently shared an optimistic financial outlook, and a closer look at the company’s metrics on InvestingPro provides further context to this perspective. With a market capitalization of $1.44 billion, Genesis Energy stands as a notable player in its sector. The company’s P/E ratio, based on the last twelve months as of Q4 2023, is 54.1, which may suggest it is trading at a high earnings multiple, an InvestingPro Tip that could indicate investor confidence in its future earnings potential.

The company’s commitment to its shareholders is also evident through its dividend payments, with a notable dividend yield of 4.9%, and a history of maintaining these payments for 28 consecutive years, another InvestingPro Tip that underscores its reliability in returning value to investors. This is particularly relevant to those seeking steady income streams from their investments.

Additionally, Genesis Energy’s revenue growth over the last twelve months as of Q4 2023 stood at 13.91%, a solid indicator of its expansion and ability to increase its market share. This aligns with the company’s outlook on its offshore pipeline transportation and soda and sulfur services segments.

For readers interested in gaining more detailed insights and tips on Genesis Energy LP, InvestingPro offers additional tips. By using the coupon code PRONEWS24, users can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing access to a comprehensive set of tools and data to make informed investment decisions. To explore these tips and more, visit https://www.investing.com/pro/GEL.

Full transcript – Genesis Energy LP (GEL) Q1 2024:

Operator: Greetings and welcome to the Genesis Energy LP First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] 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.

Dwayne Morley: Good morning. Welcome to the 2024 first quarter conference call for Genesis Energy Genesis Energy has four 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 maritime transportation of primarily refined petroleum products. Genesis’ operations are primarily located in Wyoming, Gulf Coast states and the Gulf of Mexico. During this call, management may be making forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act 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 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 would like to introduce Grant Sims, CEO of Genesis Energy LP. 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.

nd then obviously if we get to exceed that the both on a volume basis as well as a margin basis on their soda ash business that’s going to drive for you to kind of above cycle. And if you look at some of the forecasts and prognostications by other soda ash producers the worldwide demand for soda ash going from in round terms around 65 million metric tons per year to 80 million metric tons per year by the end by the end of this decade. And that’s going to put price pressure on prices and increase margins to us. So that’s why we’re very comfortable about that range. And we think that there’s more bias to the upside than there is to the downside.

Michael Blum: Thanks, Grant.

Operator: And our next question comes from the line of Wade Suki with Capital One. Please proceed.

Wade Suki: Hi. Good morning, everyone. Thank you for taking my questions. Just on Shenandoah you mentioned — I am sorry that you mentioned a $6 million impact later in the year fourth quarter if some of us were including that in a full year 2025 estimate. I mean can you give us a better sense what’s that might be next year? And is it as simple as multiplying that by five or in some kind of offset from additional tie-in opportunities? Any color you could give on that?

Grant Sims: Yeah. I mean I think it’s — everything else the same. Yeah, it will somewhat affect the 2025 simply, although, we haven’t given any guidance on 2025, but it will some somewhat affect 2025, because if we start in and a May timeframe instead of the full year than we don’t have it. A couple of things can fill that hole. First of all, I’d like to comment that that doesn’t go away. It’s just delayed. I mean we’re still going to get that whether or not your numbers $30 million or whatever we’re still going to get that. So it’s not a big deal that can be offset by a number of things including, as I said even within Cal 2025, in the event that instead of kind of running at 75% they hit 100% of their forecast and that that more than makes up for missing that you have calculated $30 million in the front half of the year. Also and we believe that we’re going to have significant upside at least on a standalone basis in the Marine business in 2025 versus a record year in 2024. So I mean there’s ways to fill that gap. So I’m not a while. It’s disappointing. It doesn’t affect one way or the other from our perspective the long term or intermediate term financial performance of the Company.