Genesis Energy, L.P. Announces Distribution Reduction to Accelerate De-Leveraging Plan
March 26 2020 - 7:00AM
Business Wire
Genesis Energy, L.P. (NYSE: GEL) announced today that its Board
of Directors has approved a reduction in the Company’s quarterly
common distribution to $0.15 per unit ($0.60 annually) for the
quarter ended March 31, 2020. This reduction will save Genesis
approximately $200 million per year for the foreseeable future,
which the company intends to use to accelerate its de-leveraging
plan.
Grant Sims, CEO of Genesis stated, “Given the current operating
environment and dysfunctional public debt and equity capital
markets, we believe the decision by our Board of Directors to lower
our common unit distribution is a pro-active step to accelerate our
de-leveraging plan and more rapidly strengthen our balance
sheet.
While the operating environment is more uncertain than it was
four to six weeks ago, we have yet to identify any insurmountable
challenges and have absolutely no liquidity concerns. With the
distribution reduction and current availability under our senior
secured credit facility of approximately $700 million, we have
ample liquidity available to us to manage in the current operating
environment. The decision to reduce the common distribution is not
driven by any material deterioration in the performance of our
underlying businesses, but more an analytical and thoughtful
reflection of the current environment.
Furthermore, we have received the required consents from our
bank group to amend our senior secured credit facility. Such
amendment gives us the flexibility to opportunistically purchase
certain of our unsecured notes in the open market.
With the reduction in our common unit distributions, we now
currently estimate our recurring annual cash obligations to be
closer to $420 million in 2020 and closer to $400 million in 2021
and beyond. Other than the Granger expansion, which has a fully
committed alternative financing arrangement in place, we currently
do not have any identified material growth projects, and we are
well positioned to have growing free cash flow in the coming years
which we will use to further de-lever our balance sheet and restore
and maintain our financial flexibility.
Our upstream exposure is to long-cycle deep water Gulf of Mexico
production as opposed to onshore short-cycle shale production. The
ongoing development of the long-cycle, world class reservoirs in
the deep water has proven resilient across multiple previous
commodity cycles, and we have no indication it will not continue
throughout this cycle regardless of its depth and duration.
Relative to counterparty risk, we have a large diversified customer
base across our business segments, which includes refineries, large
integrated customers and other investment grade counterparties.
Finally, given the current operating environment, we are
prudently looking at several initiatives to identify and implement
cost reductions across our various business segments as well as
evaluating options to perhaps slow down our Granger soda ash
facility expansion by as much as twelve months.
The steps we are announcing today will give us the flexibility
to build on the successes of our footprint as it stands today and
help us achieve our objective to deliver the best value to all of
our stakeholders over the long term without losing sight of our
absolute commitment to safe and responsible operations.”
Genesis Energy, L.P. is a diversified midstream energy master
limited partnership headquartered in Houston, Texas. Genesis’
operations include offshore pipeline transportation, sodium
minerals and sulfur services, onshore facilities and transportation
and marine transportation. Genesis’ operations are primarily
located in the Gulf Coast region of the United States, Wyoming and
the Gulf of Mexico.
This press release includes forward-looking statements as
defined under federal law. Although we believe that our
expectations are based upon reasonable assumptions, we can give no
assurance that our goals will be achieved. Actual results may vary
materially. All statements, other than statements of historical
facts, included in this press release that address activities,
events or developments that we expect, believe or anticipate will
or may occur in the future, including but not limited to statements
relating to future financial and operating results and our strategy
and plans, are forward-looking statements, and historical
performance is not necessarily indicative of future performance.
Those forward-looking statements rely on a number of assumptions
concerning future events and are subject to a number of
uncertainties, factors and risks, many of which are outside our
control, that could cause results to differ materially from those
expected by management. Such risks and uncertainties include, but
are not limited to, weather, political, economic and market
conditions, including a decline in the price and market demand for
products, the outbreak of disease, and other uncertainties that are
described more fully in our Annual Report on Form 10-K for the year
ended December 31, 2019 filed with the Securities and Exchange
Commission and other filings, including our Current Reports on Form
8-K and Quarterly Reports on Form 10-Q. We undertake no obligation
to publicly update or revise any forward-looking statement.
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version on businesswire.com: https://www.businesswire.com/news/home/20200326005168/en/
Genesis Energy, L.P. Ryan Sims SVP – Finance and Corporate
Development (713) 860-2521
Genesis Energy (NYSE:GEL)
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