Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

WESTLAKE CHEMICAL PARTNERS LP

(WLKP)
  Report
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector news

WESTLAKE CHEMICAL PARTNERS LP : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

05/05/2021 | 02:06pm EDT
This Management's Discussion and Analysis of Financial Condition and Results of
Operations section should be read in conjunction with the accompanying
consolidated financial statements and the notes thereto and the consolidated
financial statements and notes thereto included in Westlake Chemical Partners
LP's annual report on Form 10-K for the fiscal year ended December 31, 2020 (the
"2020 Form 10-K"), as filed with the SEC on March 2, 2021. Unless otherwise
indicated, references in this report to "we," "our," "us" or like terms, refer
to Westlake Chemical Partners LP (the "Partnership"), Westlake Chemical OpCo LP
("OpCo") and Westlake Chemical OpCo GP LLC ("OpCo GP"). References to "Westlake"
refer to Westlake Chemical Corporation and its consolidated subsidiaries other
than the Partnership, OpCo GP and OpCo. The following discussion contains
forward-looking statements. Please read "Forward-Looking Statements" for a
discussion of limitations inherent in such statements.
Partnership Overview
We are a Delaware limited partnership formed by Westlake to operate, acquire and
develop ethylene production facilities and related assets. On August 4, 2014, we
closed our initial public offering (the "IPO") of 12,937,500 common units. In
connection with the IPO, we acquired a 10.6% interest in OpCo and a 100%
interest in OpCo GP, which is the general partner of OpCo. On April 29, 2015, we
purchased an additional 2.7% newly-issued limited partner interest in OpCo,
resulting in an aggregate 13.3% limited partner interest in OpCo, effective
April 1, 2015. The 12,686,115 subordinated units of the Partnership, all of
which were previously owned by Westlake, were converted into common units of the
Partnership on August 30, 2017. On September 29, 2017, we completed a secondary
public offering of 5,175,000 common units and purchased an additional 5.0%
newly-issued limited partner interest in OpCo, resulting in an aggregate 18.3%
limited partner interest in OpCo, effective July 1, 2017. On March 29, 2019, we
completed a private placement of 2,940,818 common units and used the net
proceeds to purchase an additional 4.5% interest in OpCo, effective January 1,
2019, resulting in us owning an aggregate 22.8% limited partner interest in
OpCo.
Our sole revenue generating asset is our 22.8% limited partner interest in OpCo,
a limited partnership formed by Westlake and us in anticipation of the IPO to
own and operate an ethylene production business. We control OpCo through our
ownership of its general partner. Westlake retains the remaining 77.2% limited
partner interest in OpCo as well as a significant interest in us through its
ownership of our general partner, 40.1% of our limited partner units (consisting
of 14,122,230 common units) and our incentive distribution rights. OpCo's assets
include (1) two ethylene production facilities ("Petro 1" and "Petro 2" and,
collectively, "Lake Charles Olefins") at Westlake's Lake Charles, Louisiana
site; (2) one ethylene production facility ("Calvert City Olefins") at
Westlake's Calvert City, Kentucky site; and (3) a 200-mile common carrier
ethylene pipeline (the "Longview Pipeline") that runs from Mont Belvieu, Texas
to Westlake's Longview, Texas facility.
How We Generate Revenue
We generate revenue primarily by selling ethylene and the resulting co-products
we produce. OpCo and Westlake have entered into an ethylene sales agreement (the
"Ethylene Sales Agreement") pursuant to which we generate a substantial majority
of our revenue. The Ethylene Sales Agreement is a long-term, fee-based agreement
with a minimum purchase commitment and includes variable pricing based on OpCo's
actual feedstock and natural gas costs and estimated other costs of producing
ethylene (including OpCo's estimated operating costs and a five-year average of
OpCo's expected future maintenance capital expenditures and other turnaround
expenditures based on OpCo's planned ethylene production capacity for the year),
plus a fixed margin per pound of $0.10 less revenue from co-products sales.
Pursuant to the Ethylene Sales Agreement, Westlake's obligation to pay for the
annual minimum commitment (95% of OpCo's budgeted ethylene production), which is
measured on an annual basis, is not reduced for the first 45 days of a force
majeure event, but is reduced for the portion of a force majeure event extending
beyond the 45th day. In the event of a force majeure event, we recognize buyer
deficiency fees representing fixed margin and unavoided operating and
maintenance capital expenditures and maintenance expenses associated with
ethylene that OpCo would have produced and is not expected to be produced based
on anticipated production. Payment for the buyer deficiency fee is scheduled to
be received by the Partnership after the conclusion of the year.
Westlake has an option to take 95% of volumes in excess of the minimum
commitment on an annual basis under the Ethylene Sales Agreement if we produce
more than our planned production. Under the Ethylene Sales Agreement, the price
for the sale of such excess ethylene to Westlake is based on a formula similar
to that used for the minimum purchase commitment, with the exception of certain
fixed costs. In addition, under the Ethylene Sales Agreement, if production
costs billed to Westlake on an annual basis are less than 95% of the actual
production costs incurred by OpCo during the contract year, OpCo is entitled to
recover the shortfall in such production costs (proportionate to the volume sold
to Westlake) in the subsequent year ("Shortfall"). The Shortfall is generally
recognized during the period in which the related operating, maintenance or
turnaround activities occur.
                                       13

--------------------------------------------------------------------------------

Table of Contents


Operating Expenses, Maintenance Capital Expenditures and Turnaround Costs
Our management seeks to maximize the profitability of our operations by
effectively managing operating expenses, maintenance capital expenditures and
turnaround costs. Our operating expenses are comprised primarily of feedstock
costs and natural gas, labor expenses (including contractor services), utility
costs (other than natural gas) and turnaround and maintenance expenses. With the
exception of feedstock, including natural gas, and utilities-related expenses,
operating expenses generally remain relatively stable across broad ranges of
production volumes but can fluctuate from period to period depending on the
circumstances, particularly maintenance and turnaround activities. Our
maintenance capital expenditures and turnaround costs are comprised primarily of
maintenance of our ethylene production facilities and the amortization of
capitalized turnaround costs. These capital expenditures relate to the
maintenance and integrity of our facilities. We capitalize the costs of major
maintenance activities, or turnarounds, and amortize the costs over the period
until the next planned turnaround of the affected facility.
Operating expenses, maintenance capital expenditures and turnaround costs are
built into the price per pound of ethylene charged to Westlake under the
Ethylene Sales Agreement. Because the expenses other than feedstock costs and
natural gas are based on forecasted amounts and remain a fixed component of the
price per pound of ethylene sold under the Ethylene Sales Agreement for any
given 12-month period, our ability to manage operating expenses, maintenance
expenditures and turnaround cost may directly affect our profitability and cash
flows. The impact on profitability is partially mitigated by the fact that we
generally recognize any Shortfall as revenue in the period such costs and
expenses are incurred. We seek to manage our operating and maintenance expenses
on our ethylene production facilities by scheduling maintenance and turnarounds
over time to avoid significant variability in our operating margins and minimize
the impact on our cash flows, without compromising our commitment to safety and
environmental stewardship. In addition, we reserve cash on an annual basis from
what we would otherwise distribute to minimize the impact of turnaround costs in
the year of incurrence. The purchase price under the Ethylene Sales Agreement is
not designed to cover capital expenditures for expansions.
MLP Distributable Cash Flow and EBITDA
The body of accounting principles generally accepted in the United States is
commonly referred to as "GAAP." 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
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 use the
non-GAAP measures of MLP distributable cash flow and EBITDA to analyze our
performance. We define distributable cash flow as net income plus depreciation,
amortization and disposition of property, plant and equipment, less
contributions for turnaround reserves, maintenance capital expenditures and
mark-to-market adjustment on derivative contracts. 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. We use
each of MLP distributable cash flow and EBITDA to analyze our performance. Fees
for a buyer deficiency and Shortfall are included in net income in the periods
in which they are recognized. 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.
MLP distributable cash flow is not a substitute for the GAAP measures of net
income and net cash provided by operating activities. MLP distributable cash
flow has important limitations as an analytical tool because it excludes some
but not all items that affect net income and net cash provided by operating
activities. EBITDA is not a substitute for the GAAP measures of net income,
income from operations and net cash provided by operating activities. In
addition, it should be noted that companies calculate EBITDA differently and,
therefore, EBITDA as presented for us may not be comparable to EBITDA reported
by other companies. EBITDA has material limitations as a performance measure
because it excludes interest expense, depreciation and amortization, and income
taxes. Reconciliations for each of MLP distributable cash flow and EBITDA are
included in the "Results of Operations" section below.
                                       14

--------------------------------------------------------------------------------

Table of Contents


Significant Developments Affecting Industry Conditions and Our Business
COVID-19, Industry Conditions and Our Business
On March 11, 2020, the World Health Organization declared the ongoing
coronavirus (COVID-19) outbreak a pandemic and recommended containment and
mitigation measures worldwide. The pandemic has resulted in widespread adverse
impacts on the global economy and on our employees, customers and suppliers. We
have not experienced significant disruptions to our business operations and do
not expect to experience significant disruptions to our business operations
resulting from COVID-19, primarily due to the fact that 95% of our production is
sold to Westlake on a take-or-pay contract.
Our first priority in our response to this crisis has been the health and safety
of our operators, who are seconded to us by Westlake, and those of our customers
and vendors. Westlake has implemented preventative measures and developed
corporate and regional response plans to minimize unnecessary risk of exposure.
We and Westlake have modified certain business practices (including those
related to employee travel, employee work locations and employee work practices)
to conform to government restrictions and best practices encouraged by the
Center for Disease Control and Prevention, the World Health Organization and
other governmental and regulatory authorities. We and Westlake have implemented
strategies to reduce costs, increase operational efficiencies and lower capital
spending. We also deferred the planned turnaround at OpCo's Petro 2 ethylene
unit and associated maintenance cost from 2020 to the second half of 2021. The
turnaround is expected to last approximately 60 days.
February Winter Storm
In February 2021, large parts of the southern United States, including Louisiana
and Kentucky, experienced a severe winter storm. Due to the severe winter storm,
OpCo's ethylene production facilities in the region experienced disruption to
their operations, resulting in lost production and additional maintenance costs.
OpCo declared force majeure under the Ethylene Supply Agreement during February
and March 2021. As a result of the force majeure events, we recognized a buyer
deficiency fee of $5.5 million and a Shortfall of $4.2 million in the first
quarter of 2021 that are scheduled to be received by the Partnership after the
end of 2021. The buyer deficiency fee is associated with ethylene that OpCo
would have produced and is not expected to be produced in 2021 based on
anticipated production. OpCo's production facilities have since resumed
production.
                                       15

--------------------------------------------------------------------------------

Table of Contents

Results of Operations

Three Months Ended March 31,

                                                                               2021                  2020

                                                                               (dollars in thousands)
Revenue
Net sales-Westlake                                                      $       219,803          $ 214,828
Net co-product, ethylene and other sales-third parties                           48,404             35,721
Total net sales                                                                 268,207            250,549
Cost of sales                                                                   180,508            147,001
Gross profit                                                                     87,699            103,548
Selling, general and administrative expenses                                      8,673              6,196
Income from operations                                                           79,026             97,352
Other income (expense)
Interest expense-Westlake                                                        (2,236)            (3,950)
Other income, net                                                                     7                585
Income before income taxes                                                       76,797             93,987
Income tax provision                                                                175                217
Net income                                                                       76,622             93,770
Less: Net income attributable to noncontrolling interest in OpCo                 61,476             76,023
Net income attributable to Westlake Chemical Partners LP                $        15,146          $  17,747
MLP distributable cash flow (1)                                         $        16,245          $  18,337
EBITDA (2)                                                              $       106,575          $ 123,968
____________

(1) See "Reconciliation of MLP Distributable Cash Flow to Net Income and Net Cash Provided by Operating
Activities" below.
(2) See "Reconciliation of EBITDA to Net Income, Income from Operations and Net Cash Provided by Operating
Activities" below.


                                                                          

Three Months Ended March 31, 2021

Average

                                                                         Sales Price                 Volume

Product sales prices and volume percentage change from prior-year period

                                                                +22.2  %                -19.0  %

                                                                            

Three Months Ended March 31,

                                                                             2021                     2020
Average industry prices (1)
Ethane (cents/lb)                                                                  8.1                     4.7
Propane (cents/lb)                                                                21.2                     8.8
Ethylene (cents/lb) (2)                                                           45.1                    15.8


_____________
(1)Industry pricing data was obtained through IHS Markit ("IHS"). We have not
independently verified the data.
(2)Represents average North American spot prices of ethylene over the period as
reported by IHS.
                                       16

--------------------------------------------------------------------------------

Table of Contents


Reconciliation of MLP Distributable Cash Flow to Net Income and Net Cash
Provided by Operating Activities
The following table presents reconciliations of MLP distributable cash flow to
net income and net cash provided by operating activities, the most directly
comparable GAAP financial measures, for each of the periods indicated.
                                                                           Three Months Ended March 31,
                                                                              2021                  2020

                                                                              (dollars in thousands)
Net cash provided by operating activities                              $       155,408          $ 110,961
Loss from disposition of fixed assets                                           (1,359)               (97)
Changes in operating assets and liabilities and other                          (77,427)           (17,094)
Net Income                                                                      76,622             93,770

Add:

Depreciation, amortization and disposition of property, plant and equipment

                                                                   28,898             26,127
Mark-to-market adjustment gain on derivative contracts                               -             (2,491)

Less:

Contribution to turnaround reserves                                            (12,332)            (9,923)
Maintenance capital expenditures                                               (11,743)           (11,121)

Distributable cash flow attributable to noncontrolling interest in OpCo

                                                                        (65,200)           (78,025)
MLP distributable cash flow                                            $    

16,245 $ 18,337



Reconciliation of EBITDA to Net Income, Income from Operations and Net Cash
Provided by Operating Activities
The following table presents reconciliations of EBITDA to net income, income
from operations and net cash provided by operating activities, the most directly
comparable GAAP financial measures, for each of the periods indicated.
                                                                         Three Months Ended March 31,
                                                                            2021                  2020

                                                                            (dollars in thousands)
Net cash provided by operating activities                            $       155,408          $ 110,961
Loss from disposition of fixed assets                                         (1,359)               (97)
Changes in operating assets and liabilities and other                        (77,427)           (17,094)
Net Income                                                                    76,622             93,770
Less:
Other income, net                                                                  7                585
Interest expense                                                              (2,236)            (3,950)
Provision for income taxes                                                      (175)              (217)
Income from operations                                                        79,026             97,352
Add:
Depreciation and amortization                                                 27,542             26,031
Other income, net                                                                  7                585
EBITDA                                                               $       106,575          $ 123,968



                                       17

--------------------------------------------------------------------------------

Table of Contents

Summary

For the quarter ended March 31, 2021, net income was $76.6 million on net sales
of $268.2 million. This represents a decrease in net income of $17.2 million as
compared to net income of $93.8 million on net sales of $250.5 million for the
quarter ended March 31, 2020. Net income attributable to the Partnership for the
first quarter of 2021 was $15.1 million as compared to $17.7 million for the
first quarter of 2020, a decrease of $2.6 million. Net income and net income
attributable to the Partnership for the first quarter of 2021 as compared to the
first quarter of 2020 were lower primarily due to lower sales volumes to
Westlake and third parties and higher feedstock and conversion costs. The
decreases were partially offset by higher sales prices for ethylene sold to
Westlake per the terms of the Ethylene Sales Agreement and to third parties, as
well as the buyer deficiency fee of $5.5 million and the Shortfall of $4.2
million recognized in the first quarter of 2021 due to the force majeure events
in February and March 2021 resulting from the severe winter storm. Net sales for
the first quarter of 2021 increased by $17.7 million as compared to net sales
for the first quarter of 2020, mainly due to higher sales prices to Westlake per
the terms of the Ethylene Sales Agreement and to third parties, as well as the
buyer deficiency fee and the Shortfall recognized during the first quarter of
2021, partially offset by lower sales volumes to Westlake and third parties
during the first quarter of 2021. Income from operations was $79.0 million for
the first quarter of 2021 as compared to $97.4 million for the first quarter of
2020. Income from operations for the first quarter of 2021 decreased mainly as a
result of decreased sales volumes to Westlake and third parties, increased
selling, general and administrative costs and higher feedstock and conversion
costs, as compared to the first quarter of 2020, partially offset by higher
sales prices for ethylene sold to Westlake and third parties, as well as the
buyer deficiency fee and the Shortfall recognized during the period.
RESULTS OF OPERATIONS
First Quarter 2021 Compared with First Quarter 2020
Net Sales. Total net sales increased by $17.7 million, or 7.1%, to $268.2
million in the first quarter of 2021 from $250.5 million in the first quarter of
2020. The increase in net sales in the first quarter of 2021 was primarily due
to higher sales prices to Westlake per the terms of the Ethylene Sales Agreement
and to third parties, the buyer deficiency fee of $5.5 million and the Shortfall
of $4.2 million recognized during the period, partially offset by lower sales
volumes to Westlake and third parties during the first quarter of 2021. The
average sales price in the first quarter of 2021 contributed to a 22.2% increase
in net sales, primarily due to higher ethylene sales prices to Westlake per the
terms of the Ethylene Sales Agreement and to third parties. The lower sales
volume contributed to a 19.0% decrease in net sales in the first quarter of 2021
compared to the first quarter of 2020. The decrease in sales volumes for the
first quarter of 2021 was primarily due to the force majeure events as a result
of the severe winter storm that impacted OpCo's production facilities.
Gross Profit. Gross profit decreased to $87.7 million for the first quarter of
2021 from $103.5 million for the first quarter of 2020. The gross profit margin
in the first quarter of 2021 was 32.7%, as compared to 41.3% for the first
quarter of 2020. The first quarter 2021 gross profit margin was lower mainly due
to increased feedstock and conversion costs and lower sales volumes to third
parties, partially offset by higher prices for ethylene sold to Westlake and
third parties compared to the first quarter of 2020.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $2.5 million, or 40.3%, to $8.7 million in
the first quarter of 2021 as compared to $6.2 million in the first quarter of
2020. The increase in the first quarter of 2021 was mainly attributable to
higher service costs as compared to the first quarter of 2020.
Interest Expense. Interest expense decreased by $1.8 million to $2.2 million in
the first quarter of 2021 from $4.0 million in the first quarter of 2020,
largely due to a lower average interest rate on debt.
Other Income, net. Other income, net in the first quarter of 2021 decreased by
$0.6 million, primarily due to a decrease in interest income earned under the
Investment Management Agreement as a result of lower average interest rates.
MLP Distributable Cash Flow. MLP distributable cash flow decreased by $2.1
million to $16.2 million in the first quarter of 2021 from $18.3 million in the
first quarter of 2020. The decrease in the first quarter of 2021, as compared to
the prior-year period, was primarily attributable to the lower earnings at OpCo
resulting from the severe winter storm as well as contributions for turnaround
reserves.
EBITDA. EBITDA decreased by $17.4 million to $106.6 million in the first quarter
of 2021 from $124.0 million in the first quarter of 2020. The decrease, as
compared to the prior-year period, was primarily due to lower sales volumes to
Westlake and third parties as a result of lower production due to the severe
winter storm in February 2021 and higher feedstock and conversion costs,
partially offset by higher sales prices for ethylene sold to Westlake per the
terms of the Ethylene Sales Agreement and to third parties, as well as the buyer
deficiency fee and the Shortfall recognized in the first quarter of 2021.
                                       18

--------------------------------------------------------------------------------

Table of Contents


CASH FLOW DISCUSSION FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
Operating Activities
Operating activities provided cash of $155.4 million in the first three months
of 2021 compared to cash provided by operating activities of $111.0 million in
the first three months of 2020. The $44.4 million increase in cash flows from
operating activities was mainly due to an increase in cash provided for working
capital, partially offset by a decrease in income from operations during the
three months ended March 31, 2021 as compared to the prior-year period. Changes
in components of working capital, which we define for the purposes of this cash
flow discussion as accounts receivable, net-Westlake, accounts receivable,
net-third parties, inventories, prepaid expenses and other current assets less
accounts payable-Westlake, accounts payable-third parties and accrued
liabilities, provided cash of $51.5 million in the first three months of 2021 as
compared to $8.7 million of cash used in the first three months of 2020,
resulting in an overall favorable change of $60.2 million. The favorable change
in working capital was mainly attributable to a favorable change in Westlake,
net accounts receivable due to the receipt of the buyer deficiency fee related
to the force majeure events in 2020 by the Partnership in January 2021,
partially offset by unfavorable changes in accounts receivable, net-third
parties, accounts payable and accrued and other liabilities.
Investing Activities
Net cash used for investing activities during the first three months of 2021 was
$76.6 million as compared to net cash used for investing activities of $11.0
million in the first three months of 2020, mainly due to increased net cash used
under the Investment Management Agreement in the first three months of 2021, as
compared to the prior-year period. Capital expenditures during the first three
months of 2021 and 2020 were primarily related to projects to improve production
capacity or reduce costs, maintenance and safety and environmental projects at
our facilities.
Financing Activities
Net cash used for financing activities during the first three months of 2021 was
$78.7 million as compared to net cash used by financing activities of $95.8
million in the first three months of 2020. The outflows during the first three
months of 2021 were related to the distribution of $62.1 million to Westlake and
of $16.6 million to other unitholders by the Partnership. The cash outflows
during the first three months of 2020 were related to the distribution of $79.2
million to Westlake and of $16.6 million to other unitholders by the
Partnership.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Financing Arrangements
Pursuant to the terms of the ATM Agreement, entered in October 2018 and amended
in February 2020, among the Partnership and various investment banks, the
Partnership may offer and sell the Partnership's common units from time to time
to or through the Managers, as the Partnership's sales agents or as principals,
having an aggregate offering amount of up to $50.0 million (the "ATM Program").
The Partnership intends to use the net proceeds of sales of the common units, if
any, for general partnership purposes, including the funding of potential
drop-downs and other acquisitions. No common units had been issued under the ATM
Program as of March 31, 2021.
Based on the terms of our cash distribution policy, we expect that we will
distribute to our partners most of the excess cash generated by our operations.
To the extent we do not generate sufficient cash flow to fund capital
expenditures, we expect to fund them primarily from external sources, including
borrowing directly from Westlake, as well as future issuances of equity and debt
interests.
The Partnership maintains separate bank accounts, but Westlake continues to
provide treasury services on our behalf under the Services and Secondment
Agreement. Our sources of liquidity include cash generated from operations, the
OpCo Revolver, the MLP Revolver and, if necessary and possible under then
current market conditions, the issuance of additional equity interests or debt.
We believe that cash generated from these sources will be sufficient to meet our
short-term working capital requirements and long-term capital expenditure
requirements and to make quarterly cash distributions. Westlake may also provide
other direct and indirect financing to us from time to time, although it is not
required to do so.
In order to fund non-annual turnaround expenditures, we cause OpCo to reserve an
amount for turnaround costs during each twelve-month period designed to cover
future turnaround activities. Each of OpCo's ethylene production facilities
requires turnaround maintenance approximately every five years. By reserving
additional cash annually, we intend to reduce the variability in OpCo's cash
flow. Westlake's purchase price for ethylene purchased under the Ethylene Sales
Agreement includes a component (adjusted annually) designed to cover, over the
long term, substantially all of OpCo's turnaround expenditures.
Westlake's credit facility and various indentures do not prevent OpCo from
making distributions to us.
                                       19

--------------------------------------------------------------------------------

Table of Contents


On May 3, 2021, the board of directors of Westlake Chemical Partners GP LLC, our
general partner, approved a quarterly distribution of $0.4714 per unit payable
on May 27, 2021 to unitholders of record as of May 13, 2021, which equates to a
total amount of approximately $16.6 million per quarter, or approximately $66.4
million per year in aggregate, based on the number of common units outstanding
on March 31, 2021. We do not have a legal or contractual obligation to pay
distributions on a quarterly basis or any other basis at our minimum quarterly
distribution rate or any other rate.
Capital Expenditures
Westlake has historically funded expansion capital expenditures related to Lake
Charles Olefins and Calvert City Olefins. Total capital expenditures for the
three months ended March 31, 2021 and 2020 were $12.7 million and $12.0 million,
respectively. No funding was required by OpCo to fund capital expenditures
during the three months ended March 31, 2021 and 2020. We expect that Westlake
will loan additional cash to OpCo to fund its expansion capital expenditures in
the future, but Westlake is under no obligation to do so.
Cash and Cash Equivalents
As of March 31, 2021, our cash and cash equivalents totaled $17.3 million. In
addition, we have cash invested under the Investment Management Agreement (as
described below) and a revolving credit facility with Westlake available to
supplement cash if needed, as described under "Indebtedness" below.
In August 2017, the Partnership, OpCo and Westlake executed the Investment
Management Agreement that authorized Westlake to invest the Partnership's and
OpCo's excess cash with Westlake for a term of up to a maximum of nine months.
Per the terms of the Investment Management Agreement, the Partnership earns a
market return plus five basis points and Westlake provides daily availability of
the invested cash to meet any liquidity needs of the Partnership or OpCo. The
Partnership had $187.2 million of cash invested under the Investment Management
Agreement at March 31, 2021.
Indebtedness
OpCo Revolver
In connection with the IPO, OpCo entered into a $600.0 million revolving credit
facility with Westlake, as amended in August and December 2017 and March 2020
(the "OpCo Revolver") that may be used to fund growth projects and working
capital needs. The OpCo Revolver is scheduled to mature on September 25, 2023.
As of March 31, 2021, outstanding borrowings under the OpCo Revolver totaled
$22.6 million and bore interest at the LIBOR rate plus 2.0%, which is accrued in
arrears quarterly.
MLP Revolver
In 2015, we entered into a senior, unsecured revolving credit agreement with an
affiliate of Westlake (the "MLP Revolver"). The MLP Revolver has a borrowing
capacity of $600.0 million and is scheduled to mature in 2023. On March 29,
2019, the Partnership borrowed $123.5 million under the MLP Revolver to
partially fund the purchase of an additional 4.5% interest in OpCo. On March 19,
2020, the Partnership entered into an amendment to the MLP Revolver, to extend
the maturity date to March 19, 2023 and add a phase-out provision for LIBOR,
which is to be replaced by an alternate benchmark rate. Borrowings under the MLP
Revolver bear interest at a variable rate of either (a) LIBOR plus 2.0% or, if
LIBOR is no longer available, (b) Alternate Base Rate plus 1.0%. The MLP
Revolver provides that we may pay all or a portion of the interest on any
borrowings in kind, in which case any such amounts would be added to the
principal amount of the loan. The MLP Revolver requires that we maintain a
consolidated leverage ratio of either (1) during any one-year period following
certain types of acquisitions (including acquisitions of additional interests in
OpCo), 5.50:1.0 or less, or (2) during any other period, 4.50:1.00 or less. The
MLP Revolver also contains certain other customary covenants. The repayment of
borrowings under the MLP Revolver is subject to acceleration upon the occurrence
of an event of default. As of March 31, 2021, outstanding borrowings under the
MLP Revolver totaled $377.1 million and bore interest at the LIBOR rate plus
2.0%, which is accrued in arrears quarterly. We intend to use the MLP Revolver
to purchase additional limited partnership interests in OpCo in the future, in
the event OpCo desires to sell such additional interests to us, for other
acquisitions and for general corporate purposes.
Off-Balance Sheet Arrangements
None.
                                       20

--------------------------------------------------------------------------------

Table of Contents


FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this report are forward-looking
statements. All statements, other than statements of historical facts, included
in this report that address activities, events or developments that we expect,
project, believe or anticipate will or may occur in the future are
forward-looking statements. Forward-looking statements can be identified by the
use of words such as "believes," "intends," "may," "should," "could,"
"anticipates," "expects," "will" or comparable terminology, or by discussions of
strategies or trends. Although we believe that the expectations reflected in
such forward-looking statements are reasonable, we cannot give any assurances
that these expectations will prove to be correct. Forward-looking statements
relate to matters such as:
•the amount of ethane that we are able to process, which could be adversely
affected by, among other things, operating difficulties;
•the volume of ethylene that we are able to sell;
•the price at which we are able to sell ethylene;
•industry market outlook, including prices and margins in third-party ethylene
and co-products sales;
•widespread outbreak of an illness or any other communicable disease, or any
other public health crisis, including the COVID-19 pandemic and efforts to
contain its transmission;
•our plans and Westlake's plans to respond to the challenges presented by the
COVID-19 epidemic, as well as the timing and deferral of the planned turnaround
at OpCo's Petro 2 ethylene unit;
•the parties to whom we will sell ethylene and on what basis;
•volumes of ethylene that Westlake may purchase, in addition to the minimum
commitment under the Ethylene Sales Agreement;
•timing, funding and results of capital expenditures;
•our intended quarterly distributions and the manner of making such
distributions;
•our ability to meet our liquidity needs;
•timing of and amount of capital expenditures;
•the Partnership's At-the-Market program and the use of any net proceeds from
any sales under that program;
•potential loans from Westlake to OpCo to fund OpCo's expansion capital
expenditures in the future;
•expected mitigation of exposure to commodity price fluctuations;
•turnaround activities and the variability of OpCo's cash flow;
•receipt of any buyer deficiency fee under the Ethylene Sales Agreement;
•compliance with present and future environmental regulations and costs
associated with environmentally related penalties, capital expenditures,
remedial actions and proceedings, including any new laws, regulations or
treaties that may come into force to limit or control carbon dioxide and other
greenhouse gas emissions or to address other issues of climate change;
•our ability to receive indemnification from Westlake for environmental and
other losses; and
•effects of pending legal proceedings.
                                       21

--------------------------------------------------------------------------------

Table of Contents


We have based these statements on assumptions and analysis in light of our
experience and perception of historical trends, current conditions, expected
future developments and other factors we believe were appropriate in the
circumstances when the statements were made. Forward-looking statements by their
nature involve substantial risks and uncertainties that could significantly
impact expected results, and actual future results could differ materially from
those described in such statements. These statements are subject to a number of
assumptions, risks and uncertainties, including those described under "Risk
Factors" in the 2020 Form 10-K and the following:
•general economic and business conditions;
•the cyclical nature of the chemical industry;
•the availability, cost and volatility of raw materials and energy;
•low crude oil prices reducing the cost advantage of ethane-based ethylene
producers;
•uncertainties associated with the United States and worldwide economies,
including those due to political tensions and unrest in the Middle East and
elsewhere;
•uncertainties associated with pandemic infectious diseases, particularly
COVID-19;
•current and potential governmental regulatory actions in the United States and
regulatory actions and political unrest in other countries, including
environmental regulations;
•industry production capacity and operating rates;
•the supply/demand balance for our products;
•competitive products and pricing pressures;
•instability in the credit and financial markets;
•access to capital markets;
•terrorist acts;
•operating interruptions (including leaks, explosions, fires, weather-related
incidents, mechanical failure, unscheduled downtime, labor difficulties,
transportation interruptions, spills and releases and other environmental
risks);
•changes in laws or regulations;
•technological developments;
•our ability to integrate acquired businesses;
•foreign currency exchange risks;
•our ability to implement our business strategies; and
•creditworthiness of our customers.
Many of these factors are beyond our ability to control or predict. Any of the
factors, or a combination of these factors, could materially affect our future
results of operations and the ultimate accuracy of the forward-looking
statements. These forward-looking statements are not guarantees of our future
performance, and our actual results and future developments may differ
materially from those projected in the forward-looking statements. Management
cautions against putting undue reliance on forward-looking statements or
projecting any future results based on such statements or present or prior
earnings levels. Every forward-looking statement speaks only as of the date of
the particular statement, and we undertake no obligation to publicly update or
revise any forward-looking statements.
                                       22

--------------------------------------------------------------------------------

Table of Contents

© Edgar Online, source Glimpses

All news about WESTLAKE CHEMICAL PARTNERS LP
05/28WESTLAKE CHEMICAL PARTNERS LP  : WLKP IR Presentation 1Q 2021
PU
05/06Deutsche Bank Adjusts Price Target for Westlake Chemical Partners to $30 From..
MT
05/06WESTLAKE CHEMICAL PARTNERS LP  : Tudor Pickering Adjusts Price Target on Westlak..
MT
05/05WESTLAKE CHEMICAL PARTNERS LP  : Management's Discussion and Analysis of Financi..
AQ
05/04WESTLAKE CHEMICAL PARTNERS LP  : Q1 Profit Falls, Net Sales Rise
MT
05/04WESTLAKE CHEMICAL PARTNERS LP  : • Ethylene sales agreement benefits Westla..
PU
05/04WESTLAKE CHEMICAL PARTNERS LP  : Results of Operations and Financial Condition (..
AQ
05/04WESTLAKE CHEMICAL PARTNERS : Q1 Earnings Snapshot
AQ
05/04WESTLAKE CHEMICAL PARTNERS LP  : Earnings Flash (WLKP) WESTLAKE CHEMICAL PARTNER..
MT
05/04WESTLAKE CHEMICAL PARTNERS LP  : Announces First Quarter 2021 Results
BU
More news