Genesis Energy, L.P. Provides Operational and Commercial Update
September 14 2020 - 9:00AM
Business Wire
Genesis Energy, L.P. (NYSE:GEL) intends herewith to provide an
update on its offshore operations, following Hurricane Laura, as
well as disclose the receipt of some $41 million in cash that will
also be accounted for as an increase in reported Adjusted EBITDA
for the third quarter.
Turning first to the offshore, there is no apparent damage to
our 100% owned and operated Cameron Highway Oil Pipeline System
(“CHOPS”) nor any of its appurtenant facilities. As currently
configured, the CHOPS pipeline goes up and over a junction platform
located in Garden Banks block 72, where it can receive pigs and
launch pigs for proper maintenance of two of its 30 inch diameter
pipeline segments. That platform, located in 520 feet of water,
recorded waves in the 70-80 foot range and sustained winds in
excess of 130 mph as the eye of Laura passed some 17 miles to the
southwest of its location. The platform experienced damage to its
topside facilities which is usual and customary, and not
significant nor unexpected, after experiencing those type of
weather conditions. Below the waterline, through diving and
remotely operated vehicle inspections, several areas of structural
stress have been identified that will require further investigation
and analysis. As a result, no oil is currently flowing through the
CHOPS pipeline.
Grant Sims, CEO of Genesis Energy, said, “We are aggressively
working to collect data and conduct a rigorous structural analysis
for review by the Bureau of Safety and Environmental Enforcement to
hopefully be able to re-occupy the platform, conduct the cleanup
tasks required and return the CHOPS pipeline to normal operations.
Based upon continuing data collection, observations and analysis,
it would appear that CHOPS is more than likely not going to be in a
position to resume operations before October 1 at the earliest.
However, we have been successful, to date, in working with
shippers to divert all available and affected CHOPS barrels into
our 64% owned and operated Poseidon Oil Pipeline for deliveries by
it directly to shore or for Poseidon to deliver barrels into the
Auger Pipeline for further transportation to shore via this
alternative path. Because of the rate structures amongst the
various pipelines, we expect minimal revenue impact to Genesis
during this period of interrupted operations of CHOPS, other than
when the volumes were shut in for the storm, and assuming the
continuing conditions that there is enough available capacity on
Poseidon and/or Auger to receive and transport all of the affected
CHOPS volumes.
We would expect to incur total expenses associated with
inspections, analyses and topside facility repairs in the range of
$3-5 million, most of which will be reflected in the third quarter.
Any potential costs associated with structural reinforcement or
modification, either to the platform or pipeline facilities, will
be treated as capital in future periods.
We are working diligently and as hard as possible to determine
what it will take to return CHOPS to normal service as soon as we
can, while never losing sight of our commitment to safe and
responsible operations.
Shifting gears a bit, I would like to also take this opportunity
to disclose that we have received approximately $41 million in cash
that will be recognized as Adjusted EBITDA in the third quarter for
covenant compliance purposes, all as more fully described in our
senior secured credit agreement. The cash received is associated
with the exercise of a letter of credit we had issued to us as
beneficiary from a customer that defaulted under a twenty year term
agreement entered into in 2008. The dollars collected from such
contractual right will be credited to dollars owed us under the
last years of the contract. Under the mechanics of said agreement,
we will continue to be paid the dollars owed to us.
Having already received this cash and being able to recognize it
as increased Adjusted EBITDA this quarter is a positive development
for us under the circumstances. Accordingly, we see no scenarios
where we have the risk of not comfortably living within all of our
financial covenants as we deal with the aftermath of this hurricane
season and the Covid-19 pandemic which has directly and indirectly
challenged our businesses, like virtually all others, but which are
clearly recovering and looking forward to better things in
2021.”
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, marine transportation and onshore
facilities and transportation. Genesis’ operations are primarily
located in the Gulf Coast region of the United States, Wyoming and
the Gulf of Mexico.
This operations and commercial update 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 operations and commercial update
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, the impact of Hurricane Laura and the associated
timing and costs, the COVID-19 pandemic, 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 or continued spread 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/20200914005286/en/
Genesis Energy, L.P. Ryan Sims SVP – Finance and Corporate
Development (713) 860-2521
Genesis Energy (NYSE:GEL)
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