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

Good Morning. Welcome to the 2024 third 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 Deepwater Gulf of Mexico to onshore refining centers. The 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 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.

Thanks, Dwayne. Good morning to everyone and thank you for listening to the call. As we mentioned in our earnings release this morning, we have always expected 2024 to be a transition year as we move closer and closer to the inflection point when we will complete our current major capital spending program, be a short time away from a notable step change in realized segment margin and most importantly be in position to generate cash from operations in excess of the cash costs of running and sustaining our businesses. Starting in the back half of 2025 and accelerating into 2026. I'm here today to reiterate my confidence in this central thesis. Having said that, we certainly did not reasonably expect 2024 to be as challenging as it has turned out to be. While our financial performance in the first three quarters of the year has been well below our original expectations, we believe a majority of what has impacted Genesis this year has been the result of onetime items and other factors outside of our control. Importantly, we expect most of these challenges will be remedied by year end, hopefully leading to a more constructive operating environment moving forward. We are in any event evaluating a number of cost cutting and efficiency opportunities to help offset these near term challenges. We believe the actions we are taking and will continue to take in the coming months and quarters not only reflect our full alignment with our stakeholders, but are also representative of our commitment to maximizing available cash flow in the years to come. We believe 2025 will deliver meaningful growth over 2024 in the financial performance of certain of our segments, driven by the midyear startup for our contracted offshore developments as well as getting a number of…

Thank you. [Operator Instructions] Our first question is from Michael Blum with Wells Fargo. Please proceed with your question.

Thanks. Good morning, everyone. I wanted to ask about 2025. Appreciate that you're looking for an inflection point in the back half of the year, but in the first half of the year it seems like things could be a little bit softer. You'll have elevated leverage. So should we assume that your point where you're going to begin to meaningfully raise the distribution could be delayed a bit here? Would you expect that to happen in 2025 or is it now more likely a 2026 event?

Michael, good question. I think it's a little bit premature to answer. Specifically, I would say that we are at a point in this fall. We are putting together our 2025 plan and the fundamental building blocks of that are really getting the updated producer profiles or production profiles from our producer customers in the Gulf of Mexico, which obviously drive things. And as I mentioned in the prepared remarks, certainly the excitement around the new facilities and the over performance relative to previous expectations is going to be part of that. But that's obviously that's a big driver of 2025. As we sit here today, only about 50% of our anticipated sodas. Sales of sodas in 2025 are at either a known price or a price that is subject to a known cap or collar. So we have a little bit of, we have some time and as you know, November and December is when we will in earnest set the prices for, with our customers for the early part of 2025. Obviously we believe that prices should increase as we go through 2025. And so it's our intent that we'll go as short term as possible. But again that's something that we're currently working on and as I made reference also to, we are keenly focused on ringing cost and operating expense again without safe compromising, safe operations and other things. And so that's an ongoing process. So a very long winded answer to I can't sit here today and give you our view of what 2025 is as we referenced it. We'll let you know that on the fourth quarter call. And how all that plays into the capital allocation program I think is going to be driven by what the result of that is as we go through this budgeting process and then have further discussions with the board in January.

Got it. Thanks, Grant. That's all I had.

Thank you.

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

Good morning everyone. Thank you all for taking my question. Just to expand maybe a little bit on, I think it was Michael's question before looking out to next year and beyond. I want to say it was last quarter you all sort of laid out a couple of maybe high level view on EBITDA 25 and 26. Just thinking about it really, just taking a step back. Any delta between your prior view and today, would it be fair to say that's mostly a function of what your change in view is on soda ash and the environment there with maybe, I don't know, maybe a 5% impact from offshore next year delays. Mostly it's dependent on the soda ash environment. Is that a fair way to think about it?

I would say that yes. The majority of the delta is going to be driven by, as I said in the prepared remarks that just literally within the last 90 days we've seen, I think I described it as being rather sloppy. Again, this is, we've been here before. This is soda ash market has been around since the 1860s and the natural producers have been, including ourselves who started the natural production in southwest Wyoming since around the early 1950s. We've been through this before and high cost producers are going to have to shut in because they can't cover their costs and ultimately prices will rise and those of us that have a cost advantage will benefit from that. But markets take time to work. But yes, I think that. And then also the interplay with the amount of cost that we are targeting or thinking about as we review our operations to maintain that cost competitive advantage, how much we can get out in light of, a slightly choppier or slightly more negative outlook, at least for the first part of 2025. So again, Wade, I can't, I don't want to get out over my skis as we're rolling all of this up with the data points that I referred to in my response to Michael was but, I think that, we are to get back to the central theme and thesis is we're going to hit the inflection point. It's a matter of when, not if. And depending upon the performance of the soda ash business relative to the recovery, overcoming the technical and operational issues in the gulf that we've been explicit about and then the performance and over performance out of the new growth coming from the Gulf of Mexico. We need to kind of roll all of that up and be able to better answer the question in January.

Understood. I appreciate that. Not the back end corner here, anything. But as I think about, if you think there's a normalization in soda ash in let's say the 26th timeframe, really the out [Indiscernible] shouldn't be all that affected. From your prior view, is that a fair statement or.

I think that's an absolute fair statement. I mean if we return to normalcy and keep our costs in line on the soda ash business in particular. Yes, we anticipate that everything should be annualized in the back half of 2025 and certainly into 2026 and beyond. Everything is 100% intact. So again, as I described, 2024 has turned out to be even more challenging than what we could have reasonably anticipated. And but especially in regards to the calculated leverage ratio that sticks with this on an LTM basis. And so having the denominator kind of low because of one time or non-recurring events is going to stick with us for a while. So the headline number is, or at least on the total funded debt adjusted EBITDA ratio is, that's going to stick with us for a while. But I agree with your hypothesis or your statement that this has no effect on late 2025 and 2026 and beyond assuming a normalization of financial results out of the soda ash business.

Thanks for that. Appreciate it. Just switch gears to offshore. You gave us some kind of good color on some of the operational technical issues impacting your producer customers. I think I heard there were a couple of different producers. There were three producers. Would you mind going through some of the technical issues one more time? Just better understand what's happening out there. And I totally appreciate it's all hitting at once, but just kind of curious.

Yes. And we got to be very careful because obviously, we're under NDAs with them. But I tried to give you a flavor for a couple of the types of instances which occurred. I mean in the process of drilling a brand-new development well, the drilling rig lost a joint of casing, which floated down 5,800 feet of water and landed on top of some existing flow lines and control umbilicals for some producing wells. So obviously, one has to go through the process of, a, removing that; and then b, going in and testing and making sure that no damage has occurred. So this is not like you back a truck up and start pulling tubing and stuff. Another instance was in a multi-zone completion well that had a pre-installed mechanical sleeve to be able to shut off the perfs in one of the zones. That zone started producing water. The sleeve couldn't be remotely moved to shut off that water. And as a result, they had to go in and do a workover. And when you're doing workovers in 7,000 feet of water on 27,000-foot wells, it's not the easiest and quickest overnight solution to do things. If you go back and once they published the prepared remarks, I gave a couple of other examples. So again, it's things that are totally beyond our control and quite frankly, they're pretty rare and unexpected from the producing community. And as I said, I've never seen a quarter or two where you have this many kind of fall on top of each other. So let's get it behind us and get on the stuff. As you can tell, if you look at the offshore performance in the first quarter, $97 million versus $72 million in the third quarter, I can unequivocally sit here and pound the table that that's not a decline in the production capability associated with the attached and known facilities. That is driven by something completely outside of our control and the operators' control.

Appreciate it. Thanks so much.

Thank you.

[Operator Instructions] Our next question is from Elvira Scotto with RBC Capital Markets. Please proceed with your question.

Hey good morning everyone. Thanks for taking my question. I guess I just wanted to follow up there on Wade's question. These onetime issues that we've seen, and granted they're rare. I mean what gives you the confidence that as we go into 2025, we're not going to see issues? Or are there protections in place? And I guess just from a broader perspective, when can we expect some, I guess, less volatility in the Offshore segment? Would that be like starting in the second quarter of 2025? Any help there would be appreciated.

Yes. Again, I would describe this as on the verge of being a calamitous coincident of things that kind of individually can happen from time to time, but all of them happening at once, especially at some of the, what I would call, high-valued fields from our perspective, is very unusual. Clearly, the producers and the operators have a greater economic incentive to not have these occur and, if they do occur, to fix them as soon as they can safely and responsibly do it. I mean they get $70 a barrel, we get a couple of dollars a barrel. So it's a bit unfortunate. But again, I kind of tie back a little bit to the comparison I just made to the first quarter, offshore margin being in the zip code of $97 million versus $72 million. That is not something that anybody anticipated. And even the second quarter was, I think, around $86 million or something, which was the beginning of the realization of some of these mechanical issues. So again, Elvira, all I can say is that in my 40 years of working in the Deepwater Gulf of Mexico, from an infrastructure point of view, I've never seen this much occur. I don't think it's indicative of things. I think everybody is prudent and doing what they can to do safe and responsible and economic operations. So hopefully, we get it behind us and we get to a more normalized rate. So if that kind of equates to $90 million to $95 million a quarter stabilized before you start seeing the ramp from Shenandoah, Salamanca, that's kind of how we view the world.

Okay. Great. Now, that's helpful. And then just switching gears here, can you talk a little bit about these issues at Westvaco that affected production? And then I don't know if you're able to, at this point, provide any more detail into kind of some of these remediation efforts and cost-cutting and streamlining efforts and if you're able to quantify like your goals there.

Yes. I mean it's a number of things at Westvaco, including things as simple as conveyor belts moving the ore from the subsurface mining operations to the ore pile upstairs, having kind of an unusual several months from a performance behavior point of view. And again, that's going back in perspective of 70-plus years of continuous mining to discovery of some structural issues in a mine shaft that, from a safety point of view, has to be immediately fixed because we're not going to take any risk on those types of important items. So again, we have our team focused. This is very unusual. I mean if you look kind of on a historical basis, we have been consistently improving our production statistics, again, not at the expense of maintaining safe operations, but again, 2024 has been kind of a rough year from an operational point of view. So again, we're stepping back. We've instructed and we have everybody sign off from the management team to step back, evaluate processes, what changes we need to make in order to address and reduce the number of incidences, which affect our production capabilities and, at the same time then, take a hard look at our overall fixed cost across the board and make a determination. If we tighten our belt, can we hit our production numbers and maintain safe and responsible operations and do it cheaper in future periods to, a, deal with the near-term realities of softness in prices. But as I also said, by doing so, then we will benefit even more as soon as we see the tightening and the turnaround in prices. So those are things that we can control at this point. And that's what we're focused on, dealing with what we can control and being in a position to benefit when the market allows us to do even better.

Great. That makes a lot of sense. And do you think this is something that, as you're going through this process, you can at least identify what changes you need to make? Is it something that you think you can do in the near term? Or is this going to be a year or multiyear type process?

We are focused on sprinting between now and the end of the year and having processes in place and steps identified and steps implemented to hit the ground running in 2025.

Okay, thank you very much.

Thank you.

Thank you. There are no further questions at this time. I'd like to hand the floor back over to Grant Sims for any closing comments.

Well, thanks again, everyone, for dialing in and listening, and we appreciate your interest in the Genesis story, and we'll talk soon. Thank you.

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