Good morning, ladies and gentlemen, and welcome to the Genesis Energy Second Quarter 2023 Earnings Conference Call. After the prepared remarks, there will be an opportunity to ask questions. Instructions will be given at that time. And without further ado, I will now turn the program over to Dwayne Morley.

Thanks, Chris. Good morning. Welcome to the 2023 second 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 from the long-lived world-class reservoirs from the deepwater Gulf of Mexico to onshore refining centers. Sodium and Sulfur Services segment includes trona, trona-based exploring, mining, processing, producing, marketing and selling activities, as well as the processing of sour gas streams to remove sulfur at refining operations. The Onshore Facilities and Transportation segment is engaged in the transportation, handling, blending, storage and supply of energy products, including crude oil and refined products. The Marine Transportation segment is engaged in the maritime transportation of primarily refined petroleum products. Genesis’ operations are primarily located in Wyoming, Gulf Coast states and the Gulf of Mexico. During this 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 Kristen Jesulaitis, Chief Financial Officer and Chief Legal Officer; Ryan Sims, President and Chief Commercial Officer; and Louie Nicol, Chief Accounting Officer.

Good morning to everyone, and thanks for listening in. As we mentioned in our earnings release this morning, our financial results for the second quarter were slightly ahead of our internal expectations and once again demonstrated the resilient earnings power of our diversified market-leading businesses. Notably, because of steady production across our footprint, along with the continued ramp in volumes from BP's Argos facility, which achieved first production in April and has ramped quicker than we expected. Our Offshore Pipeline Transportation segment was able to overcome a slightly longer than anticipated plain producer downtime at one of our major host fields in the Gulf of Mexico. During the quarter, our soda ash business also returned to normal operating levels as rail service in and out of Green River, Wyoming, which restored to adequate levels. In addition, our Marine Transportation segment continued to exceed our expectations, driven in large part by continued tightness for Jones Act equipment. As we look ahead to the remainder of the year, our expectation of the continued strong performance from our offshore pipeline transportation, Marine Transportation segment will likely be somewhat offset by softer than previously expected soda ash prices, primarily in our export markets. slowing industrial activity worldwide, a slower reopening of China's economy than we had anticipated just three months ago as well as anticipated new natural soda ash production from the Baron facility in Inner Mongolia has driven many consumers with soda ash, especially in Asia and Latin America, to work down existing inventories and ultimately delay purchases in new soda ash volumes here in the back half of 2023. When existing customers delayed their purchasing activity or otherwise refused to take contracted volumes at the then contracted price. The most efficient option for us is to find a home for these potentially…

[Operator Instructions] And we'll turn to our first question, TJ Schultz. Your line is now open.

Great. Thanks. Hey, Grant, so to ask, I want to start there. You've bracketed with the expansion at a range of kind of $200 million in a down year, $240 million, call it, mid-cycle and $280 million to $300 million in a good year, so as you sit today, just given all the dynamics with the Mongolian production coming on and where you see demand trending? Is 2024 shaping up to be on the downside of that bracketed range or at the mid-cycle. I just want to understand a little bit better how you frame that $1 million downside and how some of your customers clearing their inventory before coming back for deliveries could direct you to that lower bound? Thanks.

It's a good question, TJ. I think it's -- obviously, it's a dynamic market. But as we sit here today, we would think that we're going to be at the midpoint of that range in 2024, given the given our contracted portfolio, the portion of our contracts are subject to caps and collars in essence, already known pricing for '24 as well as we have seen recently, and this is very recent, but what appears to be a bottoming of prices. So at this point, I think we view 24 as kind of being a mid-cycle outcome.

Okay. Makes sense. And then looking at 2025, clearly, an outlook for a step change to more meaningful free cash flow. If I can just kind of focus on CapEx, once you get past Inc and the shelf expansion, what are the material potential capital projects that may come up? Are there other Gulf projects you are pursuing that would take newbuild pipe, or is there any major spend into as you would expect to need beyond the Grainger expansion? Thanks.

Again, good question. No, there are absolutely no additional major capital expenditures anticipated or that we're working on or even on our radar screen at this point in time. I've said in the prepared remarks, the expansions and the construction of sync and the capacity associated with Sync as well as the expansion of the CHOP system in round terms, around 50% of the incremental capacity associated with Shannon that we're putting in is contracted for by the anchor tenant, so to speak. So we have we have prebuilt capacity to handle additional volumes that -- and we are in discussion on additional volumes, but that would not require additional capital from us, but would only access the existing thing. So -- and there are no additional significant growth capital expenditures from -- associated with Grainger. -- as I did reference in the prepared comments, Grainger is identical technology to our EDM facility at Westvaco, which is one of our 4 production facilities at our Westvaco facility, but originally it had a design capacity of 650,000 tons per year over 30 years with a little bit of money here a little bit there, and I'm talking one million or whatever, over the 30 years, we actually produced probably around 850,000 tons. So that's a type of small debottlenecking over a long period of time, opportunities. But that's a long-winded answer that the growth capital stops in call it, the third quarter, maybe some of the cash goes out the door in the fourth quarter of 24%, and we are in a position to reap the rewards from the investments that we have made.

Great. Thanks. I'll leave it there.

Thank you.

Okay. Next up, we have Michael Blum. Your line is now open. Michael just disappeared. It looks like Michael's line actually disconnected, so we'll go to [indiscernible] back in. So next, we’ll got to [indiscernible]

Good morning everyone. Thank you for taking my question. Last quarter, you all gave us a little color on sort of the various areas of end market demand. I think you pointed to on the soda ash business that is, I think you pointed to some weakness in consumer related. Can you give us a little more color on what you're seeing on that front?

Yes. I said a little bit of the consumer is pulling in discretionary expenditures under the circumstances, for the first time, we're seeing a decline in demand for container glass. Maybe people are drinking less or whatever that's indicative of perhaps, obviously, a little bit of a slowdown in general construction spending, and that's really what's the main driver in the weakening or the less than robust the recovery in the Chinese economy is the real-estate sector and construction sector is lagging behind given uncertainties and other things. So that's really where the pressure points are, if you will, on the demand side and generally speaking. But again, somewhat tempering that is -- and that's not unique to China. I mean other economies are slowing down a little bit, but a little bit of the offset that is happening is the dramatic increase in demand for soda ash for the construction of solar panels. And certainly, you read a bunch of the headlines about lithium production and a number of lift even here in the US as well as internationally increased lithium production to meet the demand for electric vehicles, all of which requires soda ash in usually in one form or another. So that's kind of where the -- where it is, because definitely, as we said in the remarks and in the release that it's a dynamic situation, and there's -- it's a much more balanced market than it was in 2022. But it's a cyclical market and we're very comfortable with where we're at.

Wonderful. Thank you. That's very helpful. Just switching gears a little bit. I'm wondering if you might be able to remind us or refresh us of, I guess, capital allocation plans as you look out the next couple of years, you've got obviously a big falloff in spending next year and the year after. Maybe if you could bracket for us timing, what your capital allocation priorities are? And what do you think ultimately you might start thinking about increased shareholder returns in one way, shape or form? That's all I've got. Thank you.

Yeah, it's a good question. I mean, I think that -- it's going to be -- and we are very excited, as we said, have the high-class problem with what do we do with $200 million, $300 million, $400 million a year, no matter how you slice and dice it, discretionary cash flow. I think, first and foremost, we're committed to maintaining a leverage ratio consistent with how our banks look at the world, which is the only covenant that we have in our capital structure around four times. And then with that, then we have the flexibility to either simplifying the capital structure in terms of perhaps calling them or redeeming some of the existing convertible preferred and/or look at returning capital to the common equity holders, so all while maintaining that targeted leverage ratio. So I can't sit here today. It's something that the Board will consider as we go forward. But is certainly we have a lot of flexibility to return capital to everyone in the structure and all while maintaining a very conservative debt profile for the company.

Awesome. Thank you very much.

Thank you.

All right. Next up, we are going to Michael Blum. [Operator Instructions] And next up we have Michael Blum. Your line is now open.

Thanks. Good morning, everyone. Wanted to just one point of clarification for the balance of 2023 on soda ash, so have you now effectively locked in prices for the balance of the year? Is there still some potential movement this year?

There's -- as we have a portion of our portfolio is still subject to negotiation of price for the fourth quarter. But we've taken into account where we think that, that's going to come out as we sit here kind of halfway through the third quarter. And based upon what we see, we've taken that into account in providing the range that we gave you.

Okay. Perfect. Thanks. And then, Grant, you made some -- in relation to the sulfur business, you talked a little bit about you're going to take some steps to get that kind of back to its normal kind of run rate cash flow. Can you talk a little bit about what those steps may be?

It's basically we think that, it was beyond our control, what has happened to a number of our host refineries. One of our locations, actually half of the crude oil processing capacity, and therefore, sulfur handling requirement has been converted to biofuels. So that's -- there's nothing we can do about that structural thing other than try to increase production from some of our other facilities. So we believe that the operating upsets that occurred by a number of our host refineries are behind them. We're seeing a return to normal operating rates here in the third quarter and hopefully accelerated into the fourth, and based upon our daily discussions with the host refineries, because we want to be consistent and ready to help them as they ramp up that we think that 2024 will be a much better production year from our other locations that we experienced in 2023.

Got it. Makes sense. Thanks for the time.

Thanks.

At this time, there are no further questions in queue.

Okay. Well, thanks, everybody, for joining. And we look forward to continuing a dialogue with each and every one of you. Thank you.

Ladies and gentlemen, that does conclude your call. You may now disconnect your lines. And thank you again for joining us today.