Ladies and gentlemen, thank you for standing by. And welcome to the Martin Midstream Partners Fourth Quarter 2019 Earnings Conference Call Webcast. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-question session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Sharon Taylor, Director of Finance and Investor Relations. Please go ahead, ma’am.

Thank you, Sydney. Good morning, everyone. And welcome to the Martin Midstream Partners conference call to discuss fourth quarter 2019 results. 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.

Thank you, Sharon. Good morning. As you saw in our press release issued yesterday we reset our per unit distribution to $0.25 annually, which equates to a quarter -- quarterly unit distribution of $6.25 per unit. Over the last 18 months, we have announced and executed on a number of strategic goals aimed at strengthening the balance sheet reducing leverage and increasing coverage. While we have made progress toward these targets, we are not where we want to need to be. Therefore, we are taking this step to ensure we meet our objectives in the not so distant future. In addition to resetting the distribution, we also have implemented a distribution policy, that quite simply states that the distribution remained where it is as long as our leverage exceeds four times. Further, once our leverage is below four times, we will not consider an increase unless our coverage is above 1.3 times calculated with the increase. Looking at our 2020 guidance, we currently expect to maintain the quarterly distribution at this level throughout the year. As a company, we are dedicated to optimizing our current assets to enhance profitability and provide safe reliable operations for our employees and our customers. We will continue to focus on capital discipline and seek out ways to maximize efficiencies to provide value to our unitholders and ensure that we have the ability to capitalize on opportunities such as those at our Harbor Island and Beaumont Terminals facilities. So now I will turn it over to Bob Bondurant to discuss our fourth quarter and 2019 results. Thank you.

Okay. Thanks, Ruben. I’d like to discuss our fourth quarter performance, which exceeded our adjusted EBITDA forecast by $3.4 million or 10.6%. Actual adjusted EBITDA was $35.5 million, compared to our adjusted forecast of $32.1 million.

Thanks, Bob. On December 31, 2019, the partnership balance sheet reflected long-term funded debt of $570 million plus short-term debt related to finance lease obligations of $7 million for a total of $577 million of debt net of an amortized debt issuance costs and unamortized issuance premium. Actual funded debt outstanding was $582 million, which is the reduction of $39 million from the third quarter.

And our first question comes from Kyle May with Capital One. Please proceed with your question.

Hi. Good morning.

Good morning.

So with a distribution cut, you indicated that Martin wants to improve the leverage ratio below 4 times and the coverage ratio above 1.3 times. Just wondering first, how you think about the balance between improving these two metrics? And then, secondly, when do you think Martin could reach these goals?

Could you repeat the first part of your question, Kyle, I am sorry.

Sure. No problem. So I will just repeat the whole thing. So you talked about improving the leverage ratio below 4 times and the coverage ratio above 1.3. So as we are thinking about, I guess, the balance between these two metrics, how do you think about balancing between improving leverage ratio and improving the coverage? And then, secondly, when do you think Martin will reach these goals?

So, first of all, I think, when we start looking at our 2020 numbers, you will see that the coverage ratio is going to be above 1.3 times -- substantially above 1.3 times. So we are focused still on the leverage ratio getting below 4 times. When we look out at our current forecast that occurs after ‘21, so around the first and second quarter of 2022, with the assets we own today and just that a stable cash flow,

No increase in cash flow rate, I guess?

Correct.

And I will say this, on the DCF coverage, roughly -- it’s going to be roughly $50 million of distributable cash from our distribution of $10 million. So roughly 5 times covered next year ballpark?

Okay. Got it. Okay. Good. That’s very helpful. And one of the things, hey, can -- I know you touched on the Marine Transportation business. Can you maybe go into a little bit more detail on what you are seeing between, I guess, the offshore and the inshore and kind of a mix between those two businesses in 2020?

Yeah. So this year our offshore business had, I will give you the rough numbers, cash flow of about $3 million roughly and the balance was inland. With this contract adjustments our offshore will be about $800,000 roughly and the inland will be, let me see the number here.

About $9.

About $9.5 million and that’s after unallocated SG&A of $5 million. So the numbers you -- the $9.5 had -- is applying the full $5 million of unallocated SG&A. So as a business unit, it’s $14 plus on inland and about $800,000 on offshore. And then there’s unallocated SG&A of $5 million to get it down to roughly the $10 million, $10 million or $11 million. So that’s the breakup. We just have one offshore unit. It is the M 6000 that works for the private company. And in the balances our inland roughly about a third of our cash flow from the Marine business comes from the private company, the General Partner.

Okay. Got it. That’s helpful. That’s all for me. Thank you.

Thank you, Kyle.

Thank you. And our next question comes from T.J. Schultz with RBC Capital. Please proceed with your question.

Great. Thanks. In the guidance for 2020 EBITDA of $117 million, does that make any assumptions on changes in contracts between MRMC and MMLP that would fully offset the impact from lower distributions to MRMC or is that something we need to consider?

That’s -- any contract changes with MRMC that we expect to occur in 2020 are already loaded into this guidance, as well as the distribution cut, when we talked about DCF. Right now, we are looking at MRMCs percentage of EBITDA or MMLPs percent of EBITDA associated with MRMC to be approximately 25%.

Got it. Okay. At Beaumont and Corpus, what’s the latest there? I know Harbor Island and Carlyle plan kind of fizzled out for the crude port or at least there is still some pushback from Port Aransas. So is something meaningful at Beaumont more likely just update there? Thanks.

Yeah. This is Ruben. I have had meetings over the last week and have two more scheduled between now and next week. We are visiting that facility. We have got all of the numbers. We have had some interest now relative to and I am talking about Corpus mainly right now. But we have had some interest and of course Beaumont we have got consistent interest in Beaumont and doing facilities there for a different -- a lot of different products. So, yeah, we have had a lot of interest lately. It’s very difficult to look at longer term contracts with dedicated crews basically with some of the pipeline in West Texas now loosening up, it’s tough to get people to come across with the longer -- long-term contracts, but what we have had some interest because I think the cost and things on the single point lowering is expensive relative to what we can do, we can do it a lot cheaper if we can get the port to originally dredge the 75-feet to do VLCC. So that’s why we are working. So it’s still going. I think Carlyle the JV that they had kind of distracted a lot of the talking at some point in time and diverted it now that that is kind of falling apart. People are back calling us.

Okay. Make sense. Just lastly on the debt refinancing, so are the distribution cut and the recent results here enough to get that done in your view or are there other liquidity measures you may have to consider whether that asset sales private capital just any more thoughts on that process as you enter the debt markets here?

Yeah. As we have been looking at this for a little while now, we are actually in the process of beginning what I would call the kickoff. We believe right now that what we have will allow us to access the public debt markets and we should be complete with that process before the end of the first quarter. And to any asset sales, we have spoken before about non-core asset sales, we still have some smaller assets that are either not in service at this time or outside of our refinery business and that we are concentrated on, so we might have some additional smaller asset sales still out there. Again, those won’t be moving the needle much, but every piece of that helps.

But I think to answer the question too is that the answer is, yes, we can get there with what we have done now. And any asset sales if we did decide to do any, we don’t have to, but if we did, it will just move that timeline up.

Got it. Make sense. Thanks, everyone.

Thank you. And our next question comes from Sunil Sibal with Seaport Global Securities. Please proceed with your question.

Yeah. Hi. Good morning, guys. Couple of questions on the balance sheet. My understanding is that as far as this secure revolver is concerned, you have a leverage limit of 2.75 on that. Can you confirm that and then where did you end up at the end of the year on that metrics?

Yes. That the senior secured leverage was 2.75. We were at 1.77 at the end of the year.

Okay. Then kind of related to that in terms of when you are looking at refinancing the senior unsecured, is there potential to kind of lessen that burden of the new by using some of this margin that you have on the secured side or is that something in the secured, which prohibits you from using this margin to say buyback unsecured bound in the market or something like that.

We are looking as I spoke to you for the note amount to be substantially similar to where we are today, which is $374 million. And to the last part of your question, there is nothing that would preclude us from moving around as needed.

Okay. Thanks for that. And then in terms of your sulfur margins or more so on the butane margins for the Q1. Is that margin pretty much has done I know you mentioned that you are pretty hedged going into the fourth quarter, but I was wondering how should we think about that for the first quarter?

Yes. We were significantly hedged going into the quarter. Based upon our inventory cost position as hedges, we feel very comfortable about our first quarter performance in the butane business and there is a potential to possibly exceed it.

Okay. And then last one for me, I think, you mentioned that, as far as contracts between MMLP and MMRC about 25% of the EBITDA is coming from MMRC in 2020. Could you remind us what was that. What that number has been historically closer to?

It’s very similar, plus or minus a few percentage points.

Okay. Got it. Thanks, guys. That’s all I had.

Thank you.

Thank you. And I am not showing any further questions at this time. I will now turn the call to Bob Bondurant for any further remark.

Okay. Thank you, Sydney. And thanks as well to everyone listening to the call this morning. I want to take the opportunity to emphasize once more that our targets remain the same. Leverage below 4 times and coverage greater than 1.3 times. Through continued emphasis on capital discipline and efficient management of our business, we will make progress toward those targets. In addition to improving the balance sheet management’s top priorities include, one, delivering on our 2020 guidance, two, identifying opportunities to provide value to our unitholders, business partners and employees, and three, positioning the company for the future. Thank you for your interest and investment in Martin Midstream Partners.

Ladies and gentlemen, this concludes today’s conference. Thank you for participating. You may now disconnect.