Greetings and welcome to the Genesis Energy L.P. Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dwayne Morley, Vice President of IR. Thank you, Dwayne. You may begin.

Good morning. Welcome to the 2024 Second Quarter conference call for Genesis Energy. Genesis Energy 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 deep water Gulf of Mexico to onshore refining centers. Soda 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 and primarily refined petroleum products. Genesis's 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 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'd like to introduce Grant Sims, CEO of Genesis Energy LP. 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 thank you for listening to the call. As we mentioned in our earnings release this morning, we continue to move closer and closer to the important inflection point when we will complete our current major capital spending program and be a short time away from a notable step change in earnings and cash flow. We have always viewed 2024 as kind of a transition year and have instead been more focused on '25 and beyond. As such, I thought it'd be most useful to comment further on the internal discussions that have been ongoing at the board level regarding capital allocation and strategic priorities for Genesis. As we have detailed in the past, and subject to certain assumptions, the current annual cash cost of running our businesses, including all cash interest payments, cash maintenance capital requirements, principal and interest on our alkalized senior secured notes, cash taxes, approximately $88 million worth of payments on the currently outstanding 11.24% coupon convertible preferred units, and roughly $73.5 million worth of cash payments based on the current common unit distribution of $0.60 per annum, all adds up to be approximately $620 million per year. That's the annual cash cost of running our businesses as currently capitalized. At this point, we have spent everything we anticipated to spend on our Granger expansion and the vast majority of the cash required on our offshore expansion projects has already been or soon will be spent. While a little of this expansion capital will slip into the first part of 2025 due to some previously disclosed producer delays, the billion plus dollars of growth capital we have deployed over the last several years should all be out the door by the end of the first quarter 2025. In advance of first production…

Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question is from Michael Blum with Wells Fargo. Please proceed with your question.

Thanks. Good morning, everyone. I wanted to ask on your capital allocation comments, can you give us like a rank order of your priorities and if there are any limitations in repurchasing debt early in terms of prepended penalties and the like?

As I said, I think our priorities are a little bit of all the above. I think starting with the increase in the distribution as well as what we perceive to be further increases in the distribution as we go through time at the same time of redeeming high priced or high coupon securities in the capital structure. So as we mentioned, we have expanded buckets and increased the amount of permitted investments under our senior secured facility to be able to periodically harvest, so to speak, the high priced coupons in the capital structure, all of which reduces the costs of running our business and therefore increases the amount of excess cash flow that we can either accelerate the redemption and harvesting of those high priced securities or have the flexibility to continue to increase the distribution or otherwise return capital to the equity holders.

Okay, great. Thanks for that. And then I just wanted to ask a little bit on the marine transportation business. First, can you give us a sense of the magnitude of increase in day rates you're seeing? And then just remind us the long term strategy for this business. Do you consider this to be like a core asset within the Genesis portfolio? Thanks.

Yes, I think that consistent with some of the other public commentary that came out today by other public companies, we would think that that's consistent that we're seeing day rates increase in the high single digits to mid teens, depending upon class of vessels. Utilization for us is a practical matter, 100% of available that is not being either in dry dock or other kind of maintenance required. So we think we have the ability to -- we will set a record this year of contributed or segment margin in a marine group and think that we have room to grow for that in '25. Also, as we've commented earlier that the only substantive way to kind of resolve the supply demand tightness in the marine world is the increase in Jones Act tonnage through new construction and that I think we would continue to believe that day rates need to go up 20% to 30% from here and be sustained at that level for a significant period of time before significant new build programs are undertaken. And so as a result, I think that we've used the next several years as a very good position to be in holding and maintaining a young fleet of Jones Act tonnage such as ours.

Thank you. Our next question is from Wade Suki with Capital One. Please proceed with your question.

Morning, everyone. Appreciate you taking my questions. Just offshore, really appreciate your commentary there, Grant, on the activity levels. I'm wondering if how we think about tiebacks and tie-ins, is this potentially more than offsetting sort of base declines that you're seeing in the system? Is that a fair way to think about it, the opportunity going forward, or is it really just sort of offsetting existing declines from the larger projects and base projects for that matter?

Yes, we see the cadence of infill drilling and subsea tiebacks in essence at least offsetting the declines that we see from our more mature fields and therefore these incremental opportunities such as Salamanca and Shenandoah and now Monument are kind of truly incremental. And in some cases, we do see the level of activity of subsea and tiebacks and stuff actually increasing our base load of business. So it's all a very good situation and that's why we like to be the one and only export pipeline off of these deep water facilities because you'll set up for decades long worth of geographic franchise.

Fantastic. Thank you for that. And just switch gears a little bit to soda ash. Would you mind maybe updating us on where you guys are in terms of kind of price certain volumes, open capacity so to speak, looking out to next year?

Into next year, around 40% to 45% of our anticipated sales volumes in '25 are either known with certainty as we sit here today or subject to very tight caps or callers. So basically 55% or so will be redetermined as typical in our business in the November-December time frame either under annual contracts or as short-term duration as we can get with our customers because we continue to believe that the market is balancing and that prices should continue to rise as we move through '25.

Fantastic. Thank you so much. Appreciate it.

[Operator Instructions] Thank you. There are no further questions at this time. I would like to hand the floor back over to Grant Sims for any closing comments.

Okay, well again, thanks everyone. We appreciate your interest in listening in and we look forward to continuing to create value for everybody in the capital structure. So thanks very much.

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