Good day, ladies and gentlemen, and welcome to the Martin Midstream Second Quarter 2019 Earnings Conference Call Webcast. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Ms. Sharon Taylor, Director of Investor Relations. Ms. Taylor, you may begin.

Good morning. Thank you, Josh. In the room with me is Ruben Martin, President and Chief Executive Officer; Bob Bondurant, Chief Financial Officer; Danny Cavin, Director of FP&A, and David Cannon, Director of Financial Reporting.

Good morning. Thanks, Sharon for joining the call. Thank you all for joining the call today. On June 28, we closed the previously announced sale of our natural gas storage assets for $215 million. The sale of these assets was the next step in our strategy to strengthen the balance sheet and refocus our operational efforts around our diversified legacy assets that provide specialty services in the midstream space. We have in the last 12 months through divestitures and the drop-down of Martin Transport Incorporated, received net proceeds of approximately $283 million, which were used to pay down debt under the revolving credit facility. Further because of that reduced debt, we will benefit from approximately $15.6 million in interest expense savings while only reducing annual EBITDA by approximately $3.5 million, or say it another way we have increased distributable cash flow by an estimated $12.1 million. We will continue to concentrate on capital discipline and remain focused on reducing leverage to below four times. And while dedicated to improving our balance sheet strength, we will look to grow our company through improved utilization and efficiency of our existing operational assets, capitalizing on current business segments with a stronger economic outlook and continuing to support strategic alliances at our Beaumont and Harbor Island terminals. Now I'll turn it over to Bob Bondurant to discuss the second quarter.

Okay. Thanks, Ruben. Now, I'd like to discuss our second quarter performance compared to guidance for both continuing and discontinued operations. From the second quarter, we had adjusted EBITDA of $30.7 million, compared to adjusted guidance of $37.5 million. The midst in adjusted guidance was primarily in our store-based terminals and in our butane and fertilizer businesses.

Thanks Bob. On June 30, 2019 the partnership's balance sheet reflected long-term funded debt of $596 million. Our balance sheet funded debt is shown net of unamortized debt issuance costs and unamortized issuance premiums as actual funded debt outstanding was $599 million. Reconciling this amount at quarter end, our revolving credit facility balance was $225 million and the notional number of senior unsecured notes was $374 million. Thus our total available liquidity on June 30 was $275 million based on our then $500 million revolving credit facility. For the quarter ended June 30, 2019, our bank compliant leverage ratios, defined as senior secured indebtedness to adjusted EBITDA and total indebtedness to adjusted EBITDA were 1.92 times and 5.12 times respectively compared to 2.59 times and 5.45 times on March 31. As a reminder, our total debt ratio is shown with adjustments from the working capital carve out supplement, which allows us to exclude certain debt directly attributed to our seasonal NGL inventory build. If those volumes are either forward sold or hedged. At June 30, 2019, the calculated debt related to our inventory build was $10 million. Accordingly, we excluded that amount from our total debt when calculating our total debt-to-EBITDA ratio. Without this carve out, our total debt-to-adjusted EBITDA would be 5.2 times at June 30, compared to 5.51 times at March 31. Our bank compliant interest coverage ratio as defined by adjusted EBITDA to consolidated interest expense was 2.78 times at June 30 compared to 2.59 times at March 31. And all on June 30, the partnership was in full compliance with all covenants banking or otherwise. On July 17, we announced the closing of an amended and extended revolving credit facility. The facility which is our primary source of liquidity was extended for over three years and now matures August of 2023 with a springing provision to 180 days ahead of the February 21 maturity of our senior notes, if the notes are not refinanced by that time. Our committed facility is $400 million compared to the previous level of $500 million. With fewer committed dollars, the partnership will benefit from paying less and used fees in the future and still retain enough liquidity based on our forecasted capital spending needs.

Thank you. Our first question comes from Kyle May with Capital One Securities. You may proceed with your question.

Good morning. I wanted to start with the Terminalling and Storage segment; can you walk us through the percentage of the business that went through contract renewals and then the length of those new contracts?

Well, the one area that we had a contract rollover was in our shore-based business. And while our minimum volume commitment remains the same, the pricing fell significantly. And this was a result of the -- really the lack of demand in the Gulf of Mexico. So that is the only real contract rollover we have had. And it is reflected in our guidance going forward; you'll see a decrease in our shore-based forecast guidance. This -- our original guidance, I think in this business was $10 million for the year. Our revised guidance is now $4.7 million.

And that contract had been in place for five years or so.

Well, yes.

Five or six years, it was just rolling over after five years. And like I said one-time there's 53 rigs out there. There's probably peaked at 60. Now there's anywhere from 18, I understand. It's up to 22% now. And our business we've always had a certain percentage of that business. And still -- but it's dropped to about those percentages.

So if you look at the total Terminalling and Storage, our original guidance was $55 million for the year. Now as a whole, it's 48.7%. So it's all -- it's in the shore base business basically.

Okay, got it. And you had mentioned those contracts previously were in place for like five to six years, what's the length on the new contract?

It's – probably, it's just annually on that.

It’s just an annual contract.

It is definitely annually.

Okay got it. That helps.

It's got nowhere to go, but up.

So yeah I think all the -- there's really very little cash flow. If you look at the shore-based business, so I'll give you a little more clarity, we'll be at 4.7% guidance this year and the majority of that’s coming from lubricant sales. About -- only now about $1 million is coming from this throughput contract. So to the extent the Gulf of Mexico ever comes back, there will be upside in these numbers. I think basically and this is the remaining upstream exposure we have. And we've now based upon our current contract position there's no more real downside relative to upstream in our business anymore.

Okay got it. That's helpful. And then one other thing I wanted to ask about. You previously talked about potential non-core asset sales. Can you give us any details about those assets? And maybe an update on how that process is going?

So what we have said is that we don't want to give any detail about what we are looking at right now, but we are in the process and we expect that by year-end we'll be able to announce some future sales.

Okay, got it. That’s all for me. Thank you.

Thanks Kyle.

Thank you. Our next question comes from Selman Akyol with Stifel. You may proceed with your question.

Thank you. I guess, let me start out with, can you talk about just I guess thinking about hedging your butane and just your strategies there on a go-forward basis?

Well typically, what we do, as we get closer to the sales season and the market gets into contango that's when we will consider hedging. We had some hedges on here recently. And we took them off when we realized some profits. So there's some little bit of opportunism in our hedging at this point in the purchasing cycle. But as we get closer to the sales cycle, we will tend to hedge, especially as the market goes into contango. If it's flat or backward dated, it doesn't make sense to hedge that where you're just holding inventory and selling at a breakeven or a loss, so that's our strategy.

And we're in the things that we're buying now with the contracts, we're coming in at a number that's about 55% to less than 60% of where we were last year, so it's almost half of the values from last year. And crude is even pretty flat. So relative to crude, it's a substantial differential now. And so we're looking at that every single day to determine. And that product will start moving here in late September or early October, it will start moving. And it moves out pretty fast. So that's where there is a certain amount. But again, we're going in the storage a lot less. And there's a lot of different types of hedges, but it's just difficult sometimes in the advent market like that.

Okay. And then in transportation, I think you referenced sort of weaker demand on the chemical side. Can you talk just a little bit about in terms of how long you expect that to continue? Are you seeing or are you looking for any pickup anytime soon?

I think we expect to see some pick up more towards the back end of the year according to our business manager there. I don't really have any more details around that, but you can see with our transportation guidance. We have left it in the back half of the year, increased from the front half of the year. And we do have as Bob mentioned, contracts that started or starting within the next 30 days that support those out quarter numbers.

Are those contracts either I guess MDCS take-or-pays? Anything to think about result or volume related?

Yes, most of the contracts or the contracts for the transportation were the exclusive trailer on it. We actually have contracts where the customer pays, if it's a specialty trailer. The customer will pay for that trailer give us a return on capital on the trailer and pay us the freight rates that we require that are regular rights in the business. So that business as always can slow down due to certain things in the marketplace concerning the chemicals, but overall, it's pretty steady. And we saw some decrease due to the hurricane that came in. We shut down some plants. Of course, they got to catch back up. But overall, it's very, very steady.

All right. Thanks very much.

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Bob Bondurant for any further remarks.

Thank you, Josh. And I'd like to thank you all for joining the call today. Now over the last five quarters, we have faced headwinds in most of our business segments, but specifically in fertilizer and in butane. With our results were negatively impacted by and historically fast commodity price collapse or range in flooding throughout the U.S. during the planting season, we have not been distracted from our strategy to delever the balance sheet and strengthen the partnership for the future, even while dealing with factors not under our control. So what have we accomplished? First, we concentrated on strategic initiatives to lower our leverage. And while we have not gotten to our stated goal of below four times, we have made progress and will continue that progress. Next, we simplified our operations through non-core asset sales and have gotten back to our roots of diversified specialty services concentrated on the Gulf Coast region. Another benefit of these non-core asset sales besides refocusing is that we have limited up our upstream exposure, which truly only remains within our Shore-based terminal group. And though not popular, nor desirable, we cut our distribution in half ensuring that our annual coverage ratio will be above one times even when the operating environment is as challenging as the last year. Thank you for your interest in Martin Midstream and we will look forward to answering any follow-up questions you may have. Thank you.

Go ahead.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program and you may all disconnect. Everyone have a wonderful day.