Ladies and gentlemen, thank you for standing by. And welcome to the MMLP Fourth Quarter 2020 Earnings Call. At this time, all participants’ lines are in a listen-only mode . 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, Chief Financial Officer. Thank you. Please go ahead.

Thank you, and good morning, everyone. I am joined by Bob Bondurant, President and CEO; Randy Tauscher, Chief Operating Officer; David Cannon, Controller and Danny Kevin, Director of FP&A Before we get started with our comments, I'll remind you that management may be making forward-looking statements as defined by the SEC. Such statements are based on our current judgments regarding the factors that could impact the future performance of Martin, including facts and assumptions related to the impact of the COVID-19 pandemic, but actual outcomes could be materially different. You should review the risk factors and other information discussed in our SEC filings and form your own opinions about Martin's future performance.

First, I'd like to comment on last week's weather event in Texas and the impact it may have on our business in the first quarter. Generally, I'm very optimistic about the first quarter, but know this weather event will have some negative financial impact to our Q1 cash flow. This currently is hard to quantify, but will impact us financially in our land transportation segment due to iced roads and downtime from our refinery customers. Additionally, I want to commend our employees for their can-do attitude of working to see that our assets operated as best as they could during this weather event, focusing on safety and the health of all of our affected employees. Job well done to all. Now I want to start off by acknowledging that fourth quarter cash flow did not meet our internal forecast. The lower performance was primarily in two areas, one expected and one unexpected. We expected reduced cash flow performance in marine transportation due to the impact of the COVID-19 pandemic on refinery utilization. But the other significant negative impact to our cash flow was in our butane logistics business, which was not expected when we had our last earnings call in October. Primarily as a result of the weakness in these two areas, our fourth quarter adjusted EBITDA was $17.4 million compared to $35.5 million in the fourth quarter of 2019. For the year, our adjusted EBITDA was $94.9 million, compared to $108.3 million in 2019, primarily due to the negative impact of COVID-19 on refinery utilization and on the overall U.S. economy. Let me begin the discussion by focusing on our natural gas services business. For the fourth quarter this segment had adjusted EBITDA of $2 million, compared to $11.4 million a year ago. The significant majority of that difference was in our butane logistics business. And the most significant portion of this miss occurred in December. Three things happened in December that converged to negatively impact our butane logistics business. Number one, there were significant backwardation in the market. Number two, this caused refineries to slow their butane purchases in hopes of getting a much cheaper price in January compared to December. And number three, the reduced amount of butane volume we sold to our refinery customers because of this backwardation meant there was not enough physical sales volume to cover our existing hedge position.

Thanks, Bob. I have just a few brief comments on balance sheet metrics, liquidity and capital allocation before I move to our 2021 guidance. At year-end, the total of our long-term debt outstanding was $526 million. That consisted of $148 million drawn on our $300 million revolving credit facility, $3 million in capital leases and $375 million of $1.5 million and second lien notes due 2024 and 2025, respectively. We also had $29 million of short-term senior unsecured notes that mature this February, which we redeemed using revolver availability. During the quarter we repaid $57 million of revolver outstanding. Of that amount approximately $22 million was from proceeds related to the sale of our Mega Lubricants assets in late December. However, our adjusted leverage ratio increased quarter-over-quarter as our trailing four quarter EBITDA now contains a majority of quarters, where earnings have been negatively impacted by the COVID-19 pandemic. So while debt has been reduced, so has EBITDA and as a result, leverage increased to 5.36 times.

Thank you. Your first question comes from Selman Akyol with Stifel. Please go ahead.

Hi guys, this is Will on for Selman. Hope all is going well, following the weather in Texas, and Bob congrats on officially stepping into the new role. First question is just around guidance. Besides, you guys specifically mentioned vaccine distribution, the economy continuing to open, can you share any other meaningful drivers that could put you toward the high end or opposite -- the low end of the range?

Well, I'll comment first and open up to others if they would like to comment. I think as we saw in the fourth quarter, there is variability in our butane business. And so that that is sometimes a bit hard to predict. And if we have a more normal -- to a better than normal butane here, compared to historical I think we'll be at the high end of the range. The other will be when does marine really kind of kick in cash flowing, does it really begin in the second quarter, the third quarter, our vision is more in the third quarter, more in the summer range. So to the extent that can improve, and there is a little bit of hope there and I'll just leave it at that, that it could improve quicker. That would be the other driver to be at the higher end of the range. I think everybody’s shaking their head in agreement with me. So those are the two areas probably.

Okay, that's helpful. Can you guys share just where you are percentage wise in terms of your hedge volumes for '21?

Yeah, for '21, Randy, do have that kind of figured, I think what we're going to sell versus what's left on our hedges?

Yeah, we didn't have many hedges in January, and the price settled in January at $0.88. So January, looks like that's going to be a very strong month. We do have quite a few hedges on in February, anticipated sales, somewhere around 60% to 70% of our anticipated sales. We have hedge, but we put those hedges on, primarily in January, the prices had already moved up. Because we had removed our February hedges that we had earlier in the year at a much lower price.

Got it, okay. And then last question, how do you guys view your portfolio going forward? Are there any more non-core type assets that you guys may try to capitalize or monetize on?

Yes. So we are still looking as you know to delever our balance sheet as quickly as possible. So to the extent that we do have a non-core asset that we receive a good multiple for, we are still looking at opportunities like that.

Okay. And then any specific -- within any specific segment, that you guys might be looking toward spinning off?

Just anything that's not directly related to refinery services. We really made a push toward moving our company that way. So if it isn't directly tied to refinery services, those would be more apt to be considered.

All right, thank you very much. Have a good day.

Thank you.

Thank you.

Your next question comes from Patrick Fitzgerald with Baird. Please go ahead.

Hi, guys. How much -- just a clarification, how much is Mega Lubricants, how much EBITDA was in that 2020 numbers.

So for 2020, we actually had guided around $1.1 million, just for the Mega Lubricant assets. That came in at about $315,000. I do want to quantify that -- or clarify that a piece of our mega lubricants business resides within our land transportation and our marine transportation. So that number that I gave you did not include that piece.

Okay, so you sold that $315,000 in EBITDA this year for $21 million roughly.

It would be higher because of because the cash flow that was thrown off in the Marine business and the MTR, not Martin transport trucking business. There's roughly $3 million of EBITDA that we sold, on historical .

Okay. And then some of that was inventory, right?

Yes. Of the sales proceeds, I think it was roughly a little over $3 million of inventory. Am I right?

Yes.

Okay. All right. And then, are there any other -- previous caller asked a similar question. But are there any other deleveraging asset sales that could potentially help you with you're getting somewhat tight on your maintenance covenants, especially after the third quarter of this year? So I guess, is anything like that on the horizon? And how do you plan to deal with that if refinery utilization isn't quite as robust as you have modeled out here?

For the first part of your question, we are having ongoing discussions related to asset sales that will help with the deleveraging process and we really don't want to get into more detail around that. To your second question, we have a very supportive Bank Group. As we move through the first quarter, and see how butane sales go as far as moving from fourth quarter to first quarter, as we deal with this winter event. And then as we look to the vaccinations being rolled out quicker and the economy recovering faster, we're monitoring those covenant levels and we would address it with our bank if we believe we need to do that.

Okay. Thank you for that. And then, just -- I’ll have to go back through the call to try to understand the explanation on the butane business in the fourth quarter. But I guess one thing I kind of took away was maybe unhedged. It would have been $10 million higher in the fourth quarter. Is that fair?

That's probably pretty close. It will probably high single digits higher if we wouldn’t have had hedges in the fourth quarter. The one thing that impacted our fourth quarter this year different than the years was the volumes were much lower and sales in the fourth quarter this year relative to previous fourth quarters. But high single digits is approximately is what we would have been unhedged. That's correct.

Okay. All right, thanks a lot.

Thank you.

There are no further questions at this time. I will now turn the call back to Bob Bondurant, President and CEO, for closing remarks.

Thank you and thanks to everyone for your participation today. To reemphasize, our near-term goal continues to be reducing our debt to a target level of 3.75 times our annual cash flow by using free cash flow to execute this strategy. Subsequent to the winter event of last week, we feel very optimistic about our first quarter cash flows, especially in our butane and fertilizer businesses. Now, I would like to take a moment to make a comment about the coming energy transition strategy from hydrocarbons to renewables. I believe this transition will be over a very long period of time. And I also believe our geographic footprint and the long-term relationships we have serving some of the largest and most sophisticated refineries in the world positions our company well for the future. Here at Martin, we are and will continue to be committed to excelling in safety and environmental stewardship through operational excellence. In the coming year, we intend to speak more to the internal priorities and strategies that govern sustainability within our organization and the communities we work in and around. Thank you again. This concludes my remarks.

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