Greetings and welcome to the Genesis Energy Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Karen Pape. Please go ahead.

Genesis 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 from the deepwater Gulf of Mexico to onshore refining centers. The sodium minerals 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, the Gulf Coast states and the Gulf of Mexico. 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 Web site 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, L.P.; Mr. Sims will be joined by Bob Deere, Chief Financial Officer; and Ryan Sims, Senior Vice President, Finance and Corporate Development.

Good morning, everyone. As we mentioned in this morning's earnings release 2020, was understandably a challenging year for our businesses due to the COVID-19 related demand destruction, lower refinery utilization and crude differentials as well as an unprecedented hurricane season. Despite these challenges, we were able to generate approximately 602 million of adjusted consolidated EBITDA as calculated under our senior secured credit facility hitting the midpoint of our previously announced guidance. In fact, we were able to pay down and otherwise reduced total adjusted debt by some $62 million despite paying approximately 45 million in financing fees associated with two unsecured refinances during the year and paying 50 million in the first quarter of this year that was actually associated with a quarterly distribution declared for the fourth quarter of 2019. While we expect 2021 to be somewhat a year of transition as our base businesses continued to recover and we move ever closer to the significant contribution from several contracted offshore projects, we are increasingly confident in the long-term fundamentals of our businesses and our significant operating leverage to the upside as the global economy continues to improve. Our offshore pipeline transportation segment was challenged in 2020 from an unprecedented hurricane season, but the outlook remains strong. While the downtime and non-recurring costs associated with the inspections and repairs to the Garden Banks 72 platform negatively impacted 2020 segment margin by some $40 million. The first quarter of 2021 remains on track to generate a more normalized earnings profile of approximately 85 million per quarter. Regarding the new administration's most recent executive order, which directs the Department of Interior to temporarily pause new oil and natural gas leasing on federal lands, in our estimation, it is very important to note that the targeted clause by the Department of Interior…

[Operator Instructions] Our first question today is coming from Shneur Gershuni from UBS.

Just start off Grant. Thank you for the thorough discussion on the Gulf of Mexico and putting the executive orders into context and sort of the expectations of why we'll still see Gulf of Mexico volumes for years to come. Just wanted to clarify, actually some of your commentary around the soda ash side. You sort of intimated and I'm wondering if you can expand on it that there might be a sizable ESG tailwind just with respect to the soda ash business. You talked about EV batteries and so forth. I was just wondering if you can talk about, how expand I guess on this renewable theme and will it be a driver of earnings for Genesis in 2022 and '23 and beyond, if you don't mind?

Yes, it is a good question. Thanks. Now, there's no doubt that, just starting with construction of solar panels, so to speak, that's very glass intensive and soda ash is used in the manufacturing of all glass components. And it has been since the late 1800s. Nobody's ever found a substitute for it in terms of glassmaking just on line, just remember that natural production doesn't compete with another chemical it competes with synthetically produced soda ash, which costs twice as much to manufacture. So that's clearly one. The other is in the battery components -- glass for -- to the extent that we retrofit old buildings with, more environmentally sound glass than obviously again from the glass manufacturing point of view. But importantly, the growth that we see on top of just the normal economic recovery and GDP growth is developing economies continue to approach more developed economies on a per capita consumption basis of soda ash is growth in the battery space. In round terms, it takes two parts of soda ash for one part of lithium to make lithium carbonate which is the building block for new generation batteries. And I might point to other third-party discussions about that from other public companies but Albemarle I think reported yesterday or the day before with their view of the tremendously and this one of the world's largest producers of lithium. But how the demand pole of the electrification of both transportation vehicles as well as battery storage capabilities for renewable energy, both solar as well as wind. And we live in Texas so we've had some issues with both of those this week. But certainly the storage and battery components would be helpful in terms of being able to manage that through the renewables through this crisis. So, there's third-party validation of the incremental growth. And then you look at the just the EV market, with everybody from Tesla to General Motors, switching to only EV vehicles. And admittedly, it's 10 or 15 years down the road, but that's going to generate tremendous incremental demand for soda ash to contribute to the electrification.

Completely appreciate that. And then maybe it's sort of a follow up and kind of more of a near term outlook, had some very strong cost performance, more of a near term outlook, you had some very strong cost performance in 2020. Just wondering, as we sort of think about '21, and maybe into early '22, how much of the cost reductions are you going to be able to permanently capture. And then also, as we're sort of thinking about the nearer term, you talked about the $85 million run rate out of the Gulf? Does that include the first quarter also, just given the timing of the startup [indiscernible] in [April 2] [ph], make up for dollars? Just wondering if you can give us some context around both of those items?

Yes. I think on the cost side, those were implemented, basically, starting in the third quarter of 2020. And so we're still ramping up in terms of realizing all of those, I think, starting probably in the second quarter of 2021, we should start realizing across all of our businesses, the 38 million or so of annual cost reductions that we implemented at that point in time. Obviously, we're looking at additional cost sides, primarily and learning to work remotely and what that means for the cost of office space and other things. So we intend to continue to keep a keen eye on the cost side, as we move forward throughout 2021 and beyond. Relative to your question on the offshore the 85 million week, for the first quarter of 2021 for the offshore, we feel very comfortable with that number. CHOPS reinitiated service on February 4, normalized service. And so, again, we're very comfortable that's the number and as we talked in the third quarter call, we think that's the way that the investment community and everyone in the capital structure should look at the business that it's quite capable of on a normalized basis of generating $80 million to $85 million a quarter. We've had some actually surprises to the upside, if you will, relative to some of the near term activity that I discussed in detail within the prepared remarks. So we're very comfortable with that kind of 320 to 340 plus on an annualized basis for 2022 coming out of the Gulf.

Your next question today is coming from Theresa Chen from Barclays.

First, as a follow-up to Shneur's question on soda ash and its participation in the renewable theme. Grant, thank you for the colorings given there and I was just wondering what percentage of the soda ash business today does that consist of -- have you thought about how much of the business it can grow into?

I don't have a good handle on the participation today. I think in -- Theresa, I think we gave a little bit of color on the third quarter call that and I haven't been able to cross check this and update it with some of the Albemarle projections which came out yesterday for lithium demand. But at least at that point, we were looking at the 2030, 2035 timeframe an incremental 6 million tons a year worldwide of soda ash demand strictly for the batteries from an EV point of view. So electric vehicle point of view, not the massive storage, battery farms that are going to have to be constructed in order to make a renewables of sour and win more satisfactory or more efficient. So, and to put that in perspective, Theresa, the total worldwide demand on a pre-pandemic level for soda ash was in round 255 million, 256 million tons. So that alone is driving a 10% annual increase from kind of pre-pandemic levels. And as I said that the thing to keep in mind, and I think we have some of this in our investor presentation, but the per capita consumption of soda ash and developing economies is currently around 25% or 30% of the more developed EU, Japan and North America economies. So that also provides a tailwind for incremental demand driving, driving prices and realizing the benefits of being the low cost soda ash producer in the world.

Got it. And then turning to 2021 guidance, I'm just curious what were the $30 million to $40 million of pro forma adjustments related to?

It's how we view it with our banks. And we have on Page 12 of the earnings release and footnote 2, there's a reconciliation of the adjusted EBITDA derived from the GAAP financial statements relative to the total adjusted EBITDA that we view in terms of complying with all of our existing covenants. So in essence, there's two components of it. At this point, I'll get into it really quickly. But one is, is the add back, at least through the second quarter of the one-time expenses that we took at the end of the second quarter of 2020 to reflect the cost associated with achieving the $38 million worth of annual cost savings that we discussed in the context of Shneur's earlier question. And we get to add that back as a one time non-recurring item for at least through the second quarter of 2021. At which point, we should have the full 38 million of anticipated savings reflected in our financial statements. The second is, is that on the growth capital that we're spending in the offshore, which is adding pumps and doing some other debottlenecking to increase capacity. We have investment grade take or pay agreements with various portfolio of customers that backup and have contracted for that incremental capacity. So we get pro forma credit as an incremental capacity. So we get pro forma credit, as we on a percent of completion as we spend the money than where you're -- the banks give us pro forma credit for the investment grade take or pay cash flows that are coming against that capital expenditure.

Understood. And in terms of the onshore business, specifically, looking at the WCS differentials and the Scenic Station unloading volumes that you're seeing today. Can you give us a sense of where you see that trending or do you see that increasing too? And is this contingent on OPEC plus barrels coming back to market, [indiscernible], Venezuela et cetera? Or is it just based on the differential today? And can you also remind us, what is that threshold that the differential has to get to for the rail movements to make sense?

Yes. I think that quite frankly, if the world were not still in a COVID-19 world that we'd see substantially more volumes running is still a fact that, at least in the U.S., that retail gasoline sales and diesel sales were basically 10% or 11%, below where they were a year ago. Jet sells are probably 60% or 70%, below where they were a year ago. So the demand for refined products is still being dramatically affected by the effects of COVID-19. So currently, what we look at is and think about is the WCS in Hardisty, Alberta versus WCS in Houston, if that is kind of in the $12 to $15 range. Then, as I say that seems to support the movement by rail and our particular situation our customer, which happens to be ExxonMobil, built up credits, in essence, by paying for volumes that they didn't take or use in primarily the second and third quarters in 2020. And they have four quarters after each quarter to -- in essence, make it up. So, right now, they are moving trains, but we're not really getting anything because it's from a margin contribution, because it's they're really making up the prepaid volumes that they paid us in 2020. Now, the question is what happens in the back half of the year after that bank is used up and if the differentials continue to exist, and there's a recovery in refined product demand, which would therefore result in refinery utilization increasing and we can see that that would continue through the back half of the year and it would be a net positive to us in the back half of the year. Relative to, I mean, I think the viscosity is important to the Gulf Coast refineries represented by the heavier Canadian barrels in terms of optimally loading their FCCs and [cohors] [ph]. But again, all of that is kind of dependent upon dynamic associated with what's the refined product demand coming out of the back end of the refinery. So we're being basically in our in the guidance that we gave, we're basically kind of assuming that it's -- the volumetrically it's basically flat to what we're currently moving. But as we get to the back half of the year would be a net contributor whereas on the front half of the year, it's not really flowing through the financial results because of the bank of dollars that they are working off.

It's very helpful. And lastly, on the marine segment, so clearly, there's been some volatility, just quarter-over-quarter earnings there. And I understand that is partly a result of the lower refinery utilization on the England side, whereas American Phoenix, no, we saw its stepped down last quarter, and then it stepped up again recently. So as we look to 2021, what is like a rate of -- bull run rate from here?

Well, that's a good question. No, it was the American Phoenix, such a large portion of it, it's a lot of the movement from one quarter to another is directly a result of that. And I can't get into a lot of specific but it went off of, it's a good five year contract, at the end of September. And this is an anecdote of COVID-19. Everybody has one, but we were actually in March of last year, almost a year ago, we were very close to finalizing a deal -- new two or three year deal for the American Phoenix that numbers which were really very close within, call it 5% or 10% of that back contract. And we were going to finish it up when the guy got back from spring break. And we all know what happened when people went on spring break last year. So nonetheless, it went off of the five year contract, which was a very attractive contract and the end of September, went to one customer for the fourth quarter and the first quarter -- the fourth quarter was not in a very attractive rate. And the first quarter was even worse, but it's gone now, gone under with an investment grade customer, a new 12-month contract, which will start around April 1, which will be generally consistent with what it got in the fourth quarter that up from the bottom off of the first quarter. And then, the other as you said is pointed out, as we've tried to mention that in large part is going to be a function of our refinery runs and pad two and pad three, the Midwest and Gulf Coast recover. I just got a note from -- at a marine operations this morning at the beginning and brown utilization by the end of the day is going to be the highest and it's been in the last six months. So things are starting to improve. But that's really what's going to drive things back. But we anticipate as we continue to go through 2021 that the economy continues to recover as the demand for refined products returned somewhat maybe not all the way to normal but clearly if we get off of that we've seen refinery utilization kind of from the depths go in the low 70s to the kind of low to mid 80% range. And unfortunately, in a reality is that the Jones Act fleet whether or not it starts at the MR class and goes through the ocean going bluewater barges and then into the inland fleet, the Jones Act fleet is really designed for refineries in the U.S. to run in the mid 90% range. And when they're running in the mid 80% range, there's an excess supply of Jones Act tonnage. So the main barometer to watch for that as a recovery is refinery utilization.

[Operator Instructions] Our next question today is coming from Kyle May from Capital One Securities.

Grant, as you pointed out, Genesis should generate $80 million to $110 million of free cash flow this year a lot of that will go to repaid debt. Just wondering if there's any other levers that you can pull to further accelerate improving the balance sheet?

Well, I mean, I think that clearly the free cash flow generation is the number one priority and the number one thing that we're thinking about. We continue to evaluate potential asset sales, as we demonstrated in 2020 and some of the effects of which will be realized and 2021 are included in that guidance so that we exited a non-core business, which was the CO2 pipeline business under a structured agreement with Denbury. So, I mean, I think as we progress through the year that we're very comfortable, where we are by being a net cash flow generator. And so we would continue to evaluate things on the cost side and potential assets cells to the extent that makes sense. And that's accretive and to both leverage as well as everybody else in the capital structure.

Got it. Thanks for that. And as my follow-up, you also mentioned that Genesis is capable of generating in the range of 700 million to 800 million of annual EBITDA. And I think one of the caveats you pointed out is returning to the soda ash pricing that we saw in 2018 and 2019, given it sounds like soda ash pricing may step down in 2021 versus last year, just wondering if you could talk about when you think we could see these pricing levels from 2018, 2019, again, and what it's going to take to get there?

Well, we've seen cyclicality if you will, in prices, and therefore, financial results in the past in this business. We haven't seen any of the volatility associated with this event, which was pure and simple, absolute demand destruction as the world dealt with COVID-19. So we've seen a rapid rebound things are very tight, or can be very tight. And as I pointed out, the important dynamic to remember is the market works, natural producers are all sold out, because they're the lowest cost manufacturers of this. And as the market demands, we're regardless of where it is, whether it's in the U.S. or in Japan or Indonesia or wherever, as the market demands an incremental time, it's going to be supplied by synthetic production from somewhere, which is twice as expensive. So that's the background for prices to increase. And so as we continue the economic recoveries, we get some of the start realizing some of the tailwind from the green initiatives that we discussed earlier in the remarks as well as on some of the questions that can result in market tightening very quickly, very rapidly and providing background for prices to rise. I don't have a crystal ball. We don't have a crystal ball other than, again, I can just say that things are -- as we progress even through 2021 and admittedly were a whopping six or seven weeks into the year but that the supply demand balance appears to be tightening even as we speak, which is a good precursor to having prices rise, or whether or not we get there in 2022, I'm not going to go out on a limb or it takes to a '23 or '24. But there's no doubt in our mind that the supply demand fundamentals and the cost advantage that we have and the fact that all of the natural producers are already sold out, there's no question that prices are going to rise and they can rise rapidly. And we intend to take advantage of that.

Thank you. We reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further or closing comments.

We thank everyone for participating and we give a shout out to the citizens of Texas and it's been a rough week on a lot of people, lot of us are have been more fortunate than others but Texas will get through it and we'll talk to everyone in another 90 days if not sooner. So thanks very much for participating.

Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.