Greetings and welcome to the Genesis Energy L.P. First Quarter 2022 Earnings Call. At this time, all participants are in a listen-only. 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, Investor Relations for Genesis Energy. Thank you. You may begin.

Good morning. Welcome to the 2022 first quarter conference call for Genesis Energy. Genesis has four business segments. The Offshore Pipeline Transportation segment is engaged in providing the critical infrastructure to move oil produced about the long-lived, world-class reservoirs in 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 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 L.P. Mr. Sims will be joined by Bob Deere, Chief Financial Officer; and Ryan Sims, Senior Vice President, Finance and Corporate Development.

Thanks Dwayne and good morning to everyone and thanks for listening in. As we stated in our earnings release this morning, the first quarter of 2022 was an exciting quarter for Genesis as the performance of our market leading businesses exceeded our internal expectations. Strong demand for soda ash drove increased prices in all of our markets, especially the export market and we're starting to see activity levels in the Gulf of Mexico begin to ramp with first production from Murphy's King's Quay starting last month and first volumes from Argos just around the corner. We continue to see fundamentally driven momentum in our soda ash business, which when combined with expected ramp and volumes on our Gulf of Mexico infrastructure, will continue to drive earnings growth and improving leverage metrics over the remainder of 2022 and into the years ahead. I wanted to take this opportunity to provide an update on the new opportunities in the Gulf of Mexico that we've mentioned over the past several quarters. Today, I'm excited to announce that we have entered into definitive agreements to provide gathering and transportation services for 100% of the crude oil production associated with two brand new standalone deepwater upstream developments, with a combined production handling capacity of some 160,000 barrels of oil per day, with first oil from both expected in the late 2024 early to mid-2025 timeframe. In conjunction with these new upstream developments, we expect to spend approximately $500 million net to our ownership interest spread out over the next three years, expanding the capacity of the CHOP system, as well as building a new 100% owned approximately 105-mile 20-inch diameter pipeline, what we call the sink pipeline, to connect one of the upstream developments to our existing footprint. Both of these new upstream developments include…

Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Kyle May with Capital One Securities. Please proceed with your question.

Hi, good morning, everyone.

Hey Kyle.

Grant, I appreciate all the prepared remarks about the current state of the business. And maybe just to start things off, you indicated that Genesis is trending towards the high end of your guidance for the year. Just wondering if you can provide any additional insight into maybe which aspects of the business are performing better than expected and kind of where you were you seeing that outperformance shaking out?

I think clearly the soda ash business massively outperformed our expectations and in the first quarter and I think that certainly given our prepared remarks around our view of what pricing is for a second quarter and the rest of the year based upon fundamentals in the worldwide marketplace that we would expect that to continue. I mean, if you just look at the -- if you just annualized the first quarter results, I think you get to $575 million or so. And again, let's make sure that it excludes the $32 million gain. But as we continue to see the ramp in the Gulf of Mexico and get the operational mechanical hiccups behind this, I think that it's more likely than not, as we when we visit with you from 90 days from now, that we'll widen the range and increase the range as we proceed through the year. So, I think that, quite frankly, all of the businesses even after the operational mechanical hiccups in the first quarter in the offshore are exceeding our internal expectations and we hope to be able to share that with everyone as we progress through 2022.

That's helpful. And you also mentioned, I guess, looking more specifically at the offshore business that roughly the impact you noticed in the first quarter was about $8 million. So, yes, I think that would have put you closer to $80 million with a segment margin in the first quarter. How should we think about that cadence going forward to the balance of the year with the -- I guess, can you provide a more granular detail about the cadence with those new projects coming on?

Well, that's -- again, I think, Kyle, your analysis is correct that on a normalized basis prior to King's Quay and prior to Argos that we kind of, anticipated about an $80 million a quarter run rate as a normalized basis. And then obviously, we cut that back a little bit in the third quarter to take into account the potential interruptions from weather-related events in the Gulf of Mexico. So, with that we have, as we said, on April 12th, the Murphy achieved first oil, I think it's out in the public domain and our investor presentation and earnings release that the first two wells are doing about 30,000 barrels a day, 90%, of which 89% of which is oil. And remember, we get all of that because we take all the gas also, there's another, well eminent to come on, and then a number of oils in cadence to come on every 40 days, 45 days or so I think, again, based upon their public announcements this morning. So you can do a little bit of the cadence arithmetic associated with that, as it ramps up. And again, in the prepared remarks, we tried to explain the value chain of we get 100% on the Shenzi lateral and then it's split evenly between the sides and chops on the oil side. And then we get 100% of the gas and through Anaconda and then 26% as it goes to shore in round terms on the NATO system. So it's a -- that's a very important ramp for us throughout the year, and we're very excited about it. And at this point, I think it's I can't speak for Murphy, but it's meeting our expectations of the ramp the – then Argos. Argos has a lot of wells pre drilled. The data first delivery is we're not 100% certain, that's a better question for BP. But we -- given that they've pre drilled all of the wells, I think that we would anticipate a very rapid, very rapid ramp, and that, as we said, potentially even achieving design capacity within six months once, once, first of every start. That's a little bit of a an amorphous date. And we'll see when it all kind of shakes out and I would certainly think devise, the second quarter call will have a better idea of what the expected first date is and can give a little bit more granularity around that.

Okay, great. Appreciate the additional color there. I'll turn it back.

Thank you. Our next question comes from line of TJ Schultz with RBC Capital Markets. Please proceed with your question.

Great. Hey, Grant. For the chalk expansion and sink pipeline, what's the cadence on the $500 million spin and when does the take-or-pay begin?

The cadences, there'll be a little bit front loaded in terms of when the it's kind of a bimodal spin, TJ, because there'll be a little bit of capital in the front end as you as you acquire the materials, but the installation itself will occur, like towards the end of the construction period in the late 2023, 2024 type timeframe. So, it's not necessarily linear, but a little bit less a little bit more upfront and a little bit back loaded. And the take-or-pay is basically begin in late 2024 top timeframe. But under our credit agreement, or our discussion with the banks, we get project completion credit relative to that amount of take-or-pay that we have. So in other words, if the point that we spend 10% of the $500 million we get 10% of the value of the take-or-pay coming in is performing EBITDA so to speak, in terms of calculating or compliance and where we are on the pricing grid under this senior secured facility.

Okay. Make sense. And then, on soda ash, you mentioned the market is tighter than you expected, given in part to the fact that China capacity was running I think 83%, 84% at the beginning of the year. So is the expectation that this continues to run lower than called the 90% range heading into your redeterminations and that's supporting the view on the $10 to $15 per tonne improvements. I guess, I'm just really looking for what's mainly driving outlook on – on the market remain tight is it – is it more supply contraction or is it a demand growth story? Thanks.

Yes. I mean, it's a little combination of both. And as we said, even with a slight reduction or a reduction in economic activity in the back half of the year, we think that it's really primarily a supply story that is extremely tight, inventories have been depleted, there's been a couple of force majeure events by some of the domestic producers in the first half of the first four or five months of the year, that have, again, reduced available inventories. And so we think it's really primarily driven on a supply basis that things are extremely, extremely tight. And as a result, we believe that things are going to grind tighter and that these conditions will stay around. And it really the $10 to $15 a ton in 2023, that reflects the fact that we have a number of multi-year contracts that "can't" go up more than $5 or $10 in any annual redetermination period. So, I mean, if everything we're able to reprice to current market or spot market, then it would be even more significant increase across all of our cuts.

Okay, make sense. If I can squeeze one more in just on marine really quickly. We did see like the refining cracks really materialized higher rate in the first quarter. And there's clearly as you know, a lot of focus to move products into the East Coast. So as we think about your fleet and the ability to capture this tighter market, should we expect some type of step change higher than what the segment can contribute? Or was the first quarter a pretty good indication of a run rate there? Thanks.

Yes. That's a very good question. And I would say that, at least internally, we're looking at the potential of a step change. And it really is being driven by the market dynamics in large part that you pointed out. There are vis-à-vis Gulf Coast and mid-Atlantic and especially in New York Harbor, on refined products is blown out, given a lot of geopolitical events, as well as the behavior of demand for transportation fuels out of Gulf Coast refiners to go to Latin America, primarily is really opened up and dramatically increase the demand for ocean going vessels capable of moving refined products from USGC to mid-Atlantic. So we're clearly at 100% utilization. We are seeing rates that above what we saw in 2015 on a direct basis in that business. And then -- so we anticipate that continuing. We're not seeing what's fundamentally going to change that for quite some time. I think that we're also seeing even demand within our inland fleet, again, because of the refinery utilization in PADD 3 and PADD 2 are trying to take advantage of these crack spreads that the refiners are seeing were -- as all practical matters we're at or close to 100% on the -- on our inland fleet, we are seeing rates, do the arithmetic real quick, some 30% up over the -- spot rates up over the last three or four months. So I think quite frankly, that marine is could be very active to helping us achieve and exceed the previously provided guidance.

Okay. Thanks, Grant.

Thank you. [Operator Instructions] It seems there are no other questions at this time. I'll turn the floor back to Mr. Sims for any final comments.

Well, thanks very much. And again, thanks, everyone for dialing in and we look forward to visiting with you in another 90 days or so. So, thanks very much.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.