Ladies and gentlemen, thank you for standing by and welcome to the MMLP Third Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers presentation, there will be a question-and-answer 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. Thank you. Please go ahead.

Thank you, operator and good morning, everyone. I'm joined by Bob Bondurant, President and CEO; Randy Tauscher, Chief Operating Officer; David Cannon, Controller; and Danny Cavin, 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. 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. We will discuss non-GAAP financial measures on today's call. Please refer to the table in our earnings press release posted in the Investor Relations section of our website to find information regarding those non-GAAP financial measures, including a reconciliation of historical non-GAAP financial measures referenced in today's call to their corresponding GAAP measures. And now, I will turn the call over to Bob for his remarks on our third quarter results. Bob?

Thanks, Sharon. First, I want to let our investor base and our employees know that I'm very pleased with our performance in the third quarter. We exceeded our internal EBITDA forecast by over $2 million. As a result of this stronger third quarter performance, I believe we are positioned to exceed the range of our disclosed EBITDA forecast of $95 million to $102 million for 2021. Our third quarter performance along with the anticipated fourth quarter performance will be a significant catalyst to helping us achieve our deleveraging goals. This should set us up for a beneficial refinancing of our high-cost secured notes next fall. I truly appreciate every employee at Martin Midstream for working together to help us positively position the company towards the refinancing of our notes. Let's now discuss our third quarter performance by business segment. Overall, for the third quarter, we had adjusted EBITDA of $21.5 million compared to $22.5 million in the third quarter of 2020. While our cash flow was less than a year ago, as I just said, we did exceed our internal forecast by over $2 million which I believe positions us to exceed our range of EBITDA guidance provided at the course of the year. Our largest cash flow contributor for the third quarter was our Terminalling and Storage segment which had adjusted EBITDA of $11.3 million compared to $14.2 million a year ago. While our cash flow from this segment in this quarter was less than a year ago, it was the strongest cash flow quarter in this segment this year, primarily due to strengthening margins in our Packaged Lubricant and Grease business. Compared to a year ago, the cash flow at the Smackover Refinery was down $1.3 million. This was due to the scheduled contract adjustment to the throughput…

Thanks, Bob. At quarter end, the total of our long-term debt outstanding was $555 million which consisted of: $209 million drawn on our revolving credit facility, $54 million of secured 1.5 lien notes due 2024 and $292 million as secured second lien notes due 2025. First lien leverage and adjusted leverage ratios were 1.72x and 5.47x respectively, after adjusting debt for the working capital sub-limits related to our NGL inventory volumes that are either forward sold or hedged. As I reminded folks on last quarter's call, the third quarter brings an increase in working capital needs related to our butane optimization business, as we began acquiring and storing inventory to be delivered to our customers in the butane blending season which begins Q4 of this year continuing through Q1 of next year. As a result, although transitory, our leverage, as it did this year, should increase and peak annually in the third quarter as a result of higher working capital needs that occurred during our lowest cash flow quarter due to the seasonal nature of both the butane and fertilizer businesses. In addition, this year due to rising commodity prices, our working capital requirements exceeded the maximum allowed supplement reduction of $50 million. As we move further into the blending season, we anticipate our working capital needs and our leverage to be significantly reduced as a result of increased cash flows from the butane optimization business and improvement in our earnings results as the impacts of COVID-19 continue to abate. Distributable cash flow for the third quarter totaled $5.2 million and $25.3 million through nine months of 2021. Free cash flow calculated as DCF less growth capital expenditures and lease payments was $3.8 million for the quarter and $19.4 million year-to-date. Growth capital totaled $1.4 million for the quarter and $3.3 million for the year with no changes to our guidance of between $4 million and $5 million for the full year. Maintenance CapEx was approximately $2.9 million for the third quarter and $11.1 million year-to-date. Again, no changes to our guidance which is between $17 million and $19 million for the year. And those numbers include our current forecast for maintenance CapEx at terminal due to Hurricane Ida. Our EBITDA guidance has been between $95 million and $102 million for the year. But as you have read in the press release and heard in Bob's remarks today, at this time, we are positioned to reach the high end of that range which will result in approximately $34 million in distributable cash flow and $26 million of adjusted free cash flow in 2021. This concludes our prepared remarks for this morning and I will now turn the call back to the operator for Q&A.

Your first question is from the line of Selman Akyol with Stifel.

Good morning. First of all, can we just start off on -- I guess the pace of activity that you're seeing in refineries. And I think you noted that it was good for transportation but can you just talk a little bit about what you see in how you see that rolling into Q4 and beyond?

Yes, Kevin. This is Randy. Good morning. The refinery utilization in the PADD 3 where we are primarily concerned has continued to improve throughout the year through the end of the third quarter. In the fourth quarter, we've actually seen a decline really since Hurricane Ida came through and knocked out some hurricanes in the Louisiana area. But seven of those nine refineries came back on pretty quickly. Two of the nine are still down. But in the last month, we have seen in the last three weeks, about 88.5% and a decline to 87.5%. And last week, it was down to between 82% and 83%, PADD 3 refinery utilization. I think we're seeing a slightly heavier turnaround slate than we have seen in the recent 1.5 years because of COVID. And we really don't have a feel for the turnaround late in the first and second quarter of next year yet, although I would anticipate it's going to be heavier than what we've seen in the last several years.

Got it. That's helpful. And of the two refineries that are not picked up, is one of those your customers as well, either one of them?

No. No, they're not our customers. It's -- the Alliance refinery had a breach flooding over there and they're going to be down for some time. And the other refineries is not somebody we do business with.

Okay. And then, just kind of going back to Ida, our understanding is a lot of barge capacity was taken out as Ida came rolling through. Did your assets get impacted? And then is the strengthening of that market or the less capacity they're benefiting you by any chance?

Well, we've heard that also. We didn't have any of our barges impacted or any of our equipment was not impacted. We -- in the month of September, really in the third quarter, in general, we did not see an improvement in utilization or not much of the one, just a little improvement in utilization from the 2Q to 3Q. As we're looking at the first three weeks of October, we actually have seen another impact or uptick in utilization. And even for the first time this week and this is the first time I can remember in 15 months where we received calls from customers wanting to put marine equipment to work and we didn't have marine equipment available to put to work for them. So we're a small part of the market in the marine world. But it sure seems like it's finally starting to tighten in the marine world from what we've seen over the last 18 months or so.

But then just so I'm clear here, do you have any excess capacity that you could put to work? Or anything rolling off that might roll on at higher prices?

We still have four barges that are without power. We don't have power for them. We can get power when we feel like we can put them to work and keep them utilized enough to bring the crews back and take the fire -- the power out on a full-time basis to put them to work. So yes, everything we have available today, we have employed. We do have some more equipment that we can put to work when the need arises.

And the current buses operating today, I'd say we're generally on shorter-term contracts, to some extent, the market tightens and prices increase, we can realize that on existing equipment fairly quickly, I would say.

Okay. Thinking about sort of the forward curve for butane, it's backward dated. I know you guys have signaled a strong 4Q. Is your 4Q already hedged and therefore, think of it as being locked in?

So our hedge position is the same as the last time we spoke 90 days ago. We're approximately 33% hedged on our butane book. And 90 days ago, middle of July, Bellevue average price was a little over $1.30 for the month. And as we're sitting here today on the 21st, the October, Bellevue average price for the month is about $0.30 higher than that. So we have chosen not to increase our hedge position as we spoke a little bit about the last call because the macro trends in the butane market were favorable then and we consider them still to be favorable today.

Got you. But you didn't...

I'm sorry.

I was just going to say so as you look out it towards November and December, you're pretty confident there as well, too?

Oh, yes. I mean you never know the for market. But if you look at the fundamentals, you look at the amount of butane being stored in inventory on Gulf Coast and around the country, is very low. If you look at the butane production, it's very similar to what it was a year ago. The butane exports are much higher than it was a year ago. And it looks like that's going to continue to be strong here, the core market for butane. The WTI continues to increase and the RBOB and the butane spread, a couple of days ago or even yesterday, it was $0.85. So very wide. So yes, we think the fundamentals are in favor of the butane book at this point.

Understood. And then, just sort of the last one for me. Thinking about inflation. And can you -- do you have, I don't know, cost of service agreements, any CPI, PPI adjusters? I appreciate you calling out the natural gas above $4. But is there anything else you can point to if we get into a rising price environment?

Yes. Well, for the first -- I'll make -- this is Bob. The first point I'll make is I think we've done a really good job keeping up, especially in the trucking business. We've gone to our customers. Our customers who are primarily large refiners and large cable companies understand inflationary pressure and they understand the need for drivers. And so we've done an emphasis to increase driver pay so we can keep our driver pool and we have done a really good job of passing those costs through and increasing our rates. And you're seeing in the numbers in the third quarter. In our Terminalling business, we have CPI adjustments on an annual basis. So, it just depends on the contract when those will roll through. But yes, we're protected there. So, I think we are positioned in a good place as the tight market. Our customers understand the need for increasing rates and I think we've been very effective and will continue to be.

All right. Thank you.

And there are no further questions. I will now turn the call over to Bob Bondurant for closing remarks.

Okay. Thanks to everyone on the call this morning. I appreciate your interest in MMLP. I heard a quote not to long ago that stuck with me. And although I really can't site the source, I want to share it: do not confuse the topography of the path with the trajectory of the journey. What does that mean? Why is that meaningful? To our investors, it's a reminder that the slight increase in leverage at the end of the third quarter was expected and is transitory due to the cyclical nature of our butane and fertilizer businesses. And that looking forward, we are positioned today for strengthening cash flows, even as we manage supply chain disruptions and inflationary pressures. As has been our focus, we will use those cash flows to delever our balance sheet as a means of returning value to our unitholders, believing that ultimately, debt reduction corresponds to unit appreciation. Thanks again to all and have a great day.

This concludes the MMLP third quarter 2021 earnings call. Thank you for your participation. You may now disconnect.