Greetings, welcome to the Genesis Energy LP 3Q 2021 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Dwayne Morley, Vice President, Investor Relations. Thank you. You may begin.

Good morning. Welcome to the 2021 Third Quarter Conference Call for Genesis Energy. Genesis Energy has 4 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 business 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 call, management may be making forward-looking statements with the meanings 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 and 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 Bob Deere, Chief Financial Officer; and Ryan Sims, Senior Vice President, Finance and Corporate Development.

Good morning. As we mentioned in this morning's earnings release, the third quarter was generally in line with our expectations. But more importantly, we continue to make steady progress towards our goal of building long-term value for all of our stakeholders. As we look forward, we remain on track to see increasing volumes in the Gulf of Mexico in the first half of 2022 and improving market conditions in our soda ash business driven by the ongoing global economic recovery and the tailwinds associated with the energy transition. We're also now less than 2 years away from first soda ash on the belt from our expanded Granger facility, which is poised to benefit from these ongoing market trends. The next 24 to 36 months will confirm the longevity and resiliency of our world-class leading infrastructure in the Gulf of Mexico, the competitive strengths of our soda ash business and ultimately the earnings power of our market-leading businesses. Our Offshore Pipeline Transportation segment performed in line with our expectations despite a steady level of maintenance by our producer customers and longer-than-anticipated downtime associated with Hurricane Ida. We did not experience any damage to our assets nor did any of our producer customers, but the path of the storm greatly impacted the number of onshore facilities critical to the receipt and downstream movement of offshore oil and gas production. As a result, we did experience a longer-than-anticipated downtime during the quarter, primarily on our Poseidon pipeline, which was a direct result of the lack of power in certain third-party facilities and gas processing limitations onshore. Once our CHOPS pipeline resumes service, we were able to divert certain barrels that would otherwise flow on our Poseidon pipeline to our CHOPS pipeline, which allowed certain producer customers to restart their production earlier than they…

[Operator Instructions] Our first question comes from the line of Shneur Gershuni with UBS.

Grant, I was wondering if we can start off with some of the tailwinds potentially for next year. So you sort of talked about the soda ash pricing and so forth. Also, there's PPI inflators out there as well, too. Can you remind us how many contracts are up for renewal next year on soda ash? On my math, I think it's about 60%. And then secondly, if you have any PPI inflators with respect to your offshore pipelines?

Well, we're just now kicking off in earnest, as we've said, the pricing discussions for next year. And generally speaking, a portion of our domestic sales will come due every 3 or 4 years, which will get -- which will be what we would call a jump ball in terms of pricing in today's kind of price metrics on a prospective basis. The rest of our domestic sales are subject to longer-term contracts, which are -- have annual price redetermination and subject, generally speaking, to caps and collars. So those won't be moving up. And the vast majority of our export sales are under less than 1 year or less contracts. And so those will be available for discussions. But again, a repricing in today's market. But again, we have to be mindful of costs associated with everything in terms of shipping costs and other things. But the FOB pricing back to the Green River facility should benefit substantially in '22 as we get through the -- get through this pricing deal. Relative to PPI players, I mean, there are 2 major systems and all of our laterals are under proprietary systems. So they're not typical. They're not FERC-regulated, and therefore, don't have the typical escalation. Although newer generation contracts do. But oftentimes, that's capitalized negotiation at 2.5% to 3.5% per year. So we would expect some bump associated with that. Typically, those occur on an annual basis, either on the January time frame or July time frame in the future on the cycle of FERC regulation. So we'll get some benefit from that. But really, the story out of the Gulf of Mexico is the incremental volumes that we anticipate coming with the developments that we've talked about in the past.

If I can just clarify your comments on soda ash for a second before my second question. So basically, you said 50% is under contract for less than 1 year. And then 1/4 of the ANSAC would -- or roughly 1/4 of the ANSAC would come up, so that would be about 62.5%, should see a repricing throughout '22?

That's 1/4 of domestic prices -- domestic contracts should come up. And then basically, the majority of the 50% of ANSAC sales are 1 year -- or a vast majority are 1 year or less from a volumetric point of view. And so those would all come up for a redetermination. And in some cases, a short term is quarterly. So...

Perfect. And you talked about the fact that you've got fuel pass-throughs in your cost structure with certain charges and so forth. I was just wondering just on the other side of some of the inflation in terms of costs that we've been seeing. If I recall, but maybe I don't recall correctly, you do have a settled union contract, and so we should only see previously negotiated wage increases at the soda ash business? Or is this whole PPI factor going on potentially change that?

We’re in the second year at this point of a 5-year collective bargaining agreement with our union employees in the soda ash business. And I believe that has an annual escalator at 3.5% per annum in that contract. So we have some amount of cost control yet a fair bargain arrangement with the workforce.

[Operator Instructions] Our next question comes from the line of Theresa Chen with Barclays.

Grant, I'd love to follow up on your comments about the Granger facility possibly restarting a little earlier than anticipated. Just curious, if you were to elect a restart in the first quarter 2023, at what point in 2022 would you have to make that decision? How quickly can you do it? And what would be the cost of that?

The -- ultimately, the cost of starting up is going to be absorbed anyway because the cost of the margin is going to be hiring the personnel and training the personnel to operate the expanded or the old Granger facility as the case may be. So it's just a matter of -- and again, I don't want to get out too in front, but I mean it's -- we have to hire. We're going to be very safe and trained and go forward. But really at the margin, it's just an acceleration of the cost that we're going to incur anyway. And that's making the decision to hire and train the personnel to operate the facility. And obviously, we have the ability to move people around from our other facilities. Because on an expanded basis, it is identical to one of our facilities from a technology point of view that we currently operate the LDM facility on our Westvaco facility or our Westvaco footprint. So I think that we could probably do it certainly within the, I would think, 90-day, plus or minus, once we pulled the trigger and made that decision to go forward.

Got it. And then in terms of the onshore segment, I was hoping if you could provide some clarity around what the true run rate earnings power is here. And going forward, clearly, quarter-over-quarter, we saw some volumes decline. Was that a result of hurricane impacts and then nonetheless, segment margin increase quarter-over-quarter stripping out the Denbury payment? Just wanted to understand from your perspective, what is the true run rate of this segment?

Well, I think that, Theresa, we would rather -- when we roll out kind of '22 guidance in our fourth quarter call, I think that we'll have a better idea of what the -- or be able to communicate to everyone what the earnings power is. We've had some gains that we didn't kind of expect in the third quarter. So I'm not sure that I would necessarily use that as the arithmetic of backing out the Denbury payment to look for the fourth quarter. But I think that we're burning through some of the existing credits that were built up, and we would hope that -- and we're also in the process of amending and extending the agreements with some of our customers onshore, specifically in and around the Baton Rouge area. So I think we'll have a much better idea as we get through those discussions. And hopefully, that's by the end of the year, and we'll be able to talk about that on the fourth quarter call.

Okay. I hear you on the 2022 outlook. I guess maybe just in terms of third quarter results, do you have an idea how much the gains were that were onetime in nature?

I don’t off the top of my head. We can work to get that to you. I mean order of magnitude, I would say, around $3 million.

Our next question comes from the line of Michael Blum with Wells Fargo.

I just wanted to understand a little bit better in the soda ash business your exposure to spot natural gas prices and just exactly how that works. I guess, are you saying that you leave 1/3 of your exposure unhedged or that you do hedge? And then of that 1/3 that is unhedged at least as of now, are you able to pass all of that cost increase on to your customers? Just wanted to better understand how that piece of it all works.

Yes. The – basically, we directly and indirectly get some of our thermal requirements from coal under long-term fixed-price contracts. And so basically, based upon our approach to managing the overall energy input expense, that kind of 1/3 of it is – of the total requirements is subject to the fluctuations in the spot price – or current month price of natural gas. So within that 1/3, that’s where we employ other hedging type mechanisms as well as have the mechanics in place to pass on the, at the margin, the incremental costs associated with those fluctuations directly to the customers.

Ladies and gentlemen, we have reached the end of the question-and-answer session. I will now turn the call over to Grant Sims for closing remarks.

Well, thanks, everyone, for participating. And I appreciate your time. I know it’s busy during the earnings season, but we’ll talk in 90 days, if not sooner. So thanks again.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.