WLKP Westlake Chemical Partners LP

• Increased quarterly cash distribution by 2.9% sequentially, or 12% annually, to $0.3756 per unit, the eleventh consecutive quarterly increase in distributions
• Acquired an additional 5% interest in Westlake Chemical OpCo LP (“OpCo”) and concluded $113.9 million follow-on equity offering
• Record quarterly net income attributable to the Partnership of $13.4 million, or $0.47 per unit
• Record quarterly MLP distributable cash flow of $15.5 million

Westlake Chemical Partners LP (NYSE: WLKP) (the "Partnership") today reported record net income attributable to the Partnership of $13.4 million, or $0.47 per limited partner unit, for the three months ended September 30, 2017, an increase of $4.7 million compared to third quarter 2016 net income attributable to the Partnership of $8.7 million. The increase in net income attributable to the Partnership as compared to the prior-year period was primarily due to the Partnership’s increased ownership of OpCo that was effective as of July 1, 2017, and increased production at all of OpCo’s facilities, partially offset by certain reimbursements received by OpCo from Westlake Chemical Corporation (“Westlake”) in the third quarter of 2016 in accordance with the Ethylene Sales Agreement between OpCo and Westlake. Cash flow from operations in the third quarter of 2017 was $139.6 million, an increase of $147.5 million compared to third quarter of 2016 cash flow from operations of $(7.9) million. The increase in cash flow from operations was due to increased production at OpCo’s facilities, a decrease in working capital and a decrease in turnaround expenditures following the turnaround and 250 million pound expansion project at OpCo’s Petro 1 facility in Lake Charles, Louisiana, which was completed in July 2016. For the three months ended September 30, 2017, MLP distributable cash flow was a record $15.5 million, an increase of $8.7 million compared to third quarter 2016 MLP distributable cash flow of $6.8 million. The increase in MLP distributable cash flow as compared to the prior-year period was due to the Partnership’s increased ownership interest in OpCo, higher production volumes at all of OpCo’s facilities and lower maintenance capital expenditures.

The third quarter 2017 net income attributable to the Partnership of $13.4 million, or $0.47 per limited partner unit, increased by $3.4 million from second quarter 2017 net income attributable to the Partnership of $10.0 million due to the Partnership’s increased ownership interest in OpCo, which was effective as of July 1, 2017. Third quarter 2017 cash flow from operations of $139.6 million increased by $26.4 million compared to second quarter 2017 cash flow from operations of $113.2 million. The increase in cash flow from operations was due to increased production at OpCo’s facilities and a decrease in working capital. Third quarter 2017 MLP distributable cash flow of $15.5 million increased by $4.5 million compared to second quarter 2017 MLP distributable cash flow of $11.0 million due to the Partnership’s increased ownership interest in OpCo.

Net income attributable to the Partnership of $33.1 million, or $1.23 per limited partner common unit, for the nine months ended September 30, 2017, increased $3.0 million compared to the first nine months of 2016 net income attributable to the Partnership of $30.1 million. The increase in net income attributable to the Partnership as compared to the prior-year period was due to the Partnership’s increased ownership interest in OpCo and increased production at all of OpCo’s facilities, partially offset by certain reimbursements from Westlake under the Ethylene Sales Agreement that were recorded in the first nine months of 2016. Cash flow from operations in the first nine months of 2017 was $401.9 million, an increase of $224.5 million compared to the first nine months of 2016 cash flow from operations of $177.4 million. This increase in cash flow from operations was due to increased production at OpCo’s facilities, a decrease in working capital and lower turnaround expenditures. For the nine months ended September 30, 2017, MLP distributable cash flow was $37.9 million, an increase of $17.3 million compared to the first nine months of 2016 MLP distributable cash flow of $20.6 million. The increase in MLP distributable cash flow as compared to the prior-year period was due to the higher production volumes, lower maintenance capital expenditures and the Partnership’s increased ownership interest in OpCo.

On September 29, 2017, WLKP issued and sold 5,175,000 common units representing limited partner interests in the Partnership for $113.9 million. The Partnership used the net proceeds of the public offering and approximately $118.6 million of borrowings under the $300.0 million senior unsecured revolving credit agreement with Westlake Chemical Corporation (the “MLP Revolver”) to acquire an additional 5% interest in OpCo for $229.2 million, effective as of July 1, 2017.

On November 1, 2017, the Board of Directors of Westlake Chemical Partners GP LLC, the general partner of the Partnership, announced a quarterly distribution for the third quarter of 2017 of $0.3756 per limited partner unit to be payable on November 29, 2017 to unit holders of record as of November 14, 2017. The third quarter 2017 distribution increased 12.0% compared to the third quarter 2016 distribution and 2.9% compared to the second quarter 2017 distribution. MLP distributable cash flow provided coverage of 1.28x the declared distributions for the third quarter of 2017 and reflects the Partnership’s increased ownership interest in OpCo following the dropdown transaction completed in September 2017.

OpCo's Ethylene Sales Agreement with Westlake is designed to provide for stable and predictable cash flows. The agreement provides that 95% of OpCo's ethylene production is sold to Westlake for a cash margin of $0.10 per pound, net of operating costs, maintenance capital expenditures and reserves for future turnaround expenditures.

“We are pleased with OpCo’s performance for the quarter. This quarter marks a milestone for the Partnership as we completed the first follow-on offering since our initial public offering in August 2014, and first dropdown transaction since May 2015. The stability in earnings and cash flows provided by our sales agreement with Westlake Chemical provide a foundation for continued growth and we will continue to evaluate opportunities for us to deliver value to our stakeholders,” said Albert Chao, President and Chief Executive Officer.

The statements in this release and the related teleconference relating to matters that are not historical facts, such as distribution growth, are forward-looking statements. These forward-looking statements are subject to significant risks and uncertainties. Actual results could differ materially, based on factors including, but not limited to, operating difficulties; the volume of ethylene that we are able to sell; the price at which we are able to sell ethylene; changes in the price and availability of feedstocks; changes in prevailing economic conditions; actions of Westlake Chemical Corporation; actions of third parties; inclement or hazardous weather conditions, including flooding, and the physical impacts of climate change; environmental hazards; changes in laws and regulations (or the interpretation thereof); inability to acquire or maintain necessary permits; inability to obtain necessary production equipment or replacement parts; technical difficulties or failures; labor disputes; difficulty collecting receivables; inability of our customers to take delivery; fires, explosions or other industrial accidents; our ability to borrow funds and access capital markets; and other risk factors. For more detailed information about the factors that could cause actual results to differ materially, please refer to the Partnership's Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC in March 2017.

This release is intended to be a qualified notice under Treasury Regulation Section 1.1446-4(b). Brokers and nominees should treat one hundred percent (100.0%) of the Partnership's distributions to non-U.S. investors as being attributable to income that is effectively connected with a United States trade or business. Accordingly, the Partnership's distributions to non-U.S. investors are subject to federal income tax withholding at the highest applicable effective tax rate.

Use of Non-GAAP Financial Measures

This release makes reference to certain “non-GAAP” financial measures, such as MLP distributable cash flow and EBITDA, as defined in Regulation G of the U.S. Securities Exchange Act of 1934, as amended. We report our financial results in accordance with U.S. generally accepted accounting principles ("GAAP"), but believe that certain non-GAAP financial measures, such as MLP distributable cash flow and EBITDA, provide useful supplemental information to investors regarding the underlying business trends and performance of our ongoing operations and are useful for period-over-period comparisons of such operations. These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the financial measures prepared in accordance with GAAP. A reconciliation of MLP distributable cash flow and EBITDA to net income and net cash provided by operating activities can be found in the financial schedules at the end of this release. We define distributable cash flow as net income plus depreciation, amortization and disposition of property, plant and equipment, less contributions from turnaround reserves and maintenance capital expenditures. We define MLP distributable cash flow as distributable cash flow less distributable cash flow attributable to Westlake's noncontrolling interest in OpCo and distributions attributable to incentive distribution rights holder. MLP distributable cash flow does not reflect changes in working capital balances. We define EBITDA as net income before interest expense, income taxes, depreciation and amortization. Because MLP distributable cash flow and EBITDA may be defined differently by other companies in our industry, our definition of MLP distributable cash flow and EBITDA may not be comparable to similarly titled measures of other companies.

Westlake Chemical Partners LP

Westlake Chemical Partners is a limited partnership formed by Westlake Chemical Corporation to operate, acquire and develop ethylene production facilities and other qualified assets. Headquartered in Houston, Texas, the Partnership owns an 18.3% interest in Westlake Chemical OpCo LP. Westlake Chemical OpCo LP's assets consist of three ethylene production facilities in Calvert City, Kentucky, and Lake Charles, Louisiana and an ethylene pipeline. For more information about Westlake Chemical Partners LP, please visit http://www.wlkpartners.com.

Westlake Chemical Partners LP Conference Call Information:

A conference call to discuss Westlake Chemical Partners' third quarter 2017 results will be held Tuesday, November 7, 2017 at 12:00 PM Eastern Time (11:00 AM Central Time). To access the conference call, dial (855) 765-5686 or (234) 386-2848 for international callers, approximately 10 minutes prior to the scheduled start time and reference passcode 97240040.

A replay of the conference call will be available beginning two hours after its conclusion until 11:59 p.m. Eastern Time on November 13, 2017. To hear a replay, dial (855) 859-2056 or (404) 537-3406 for international callers. The replay passcode is 97240040.

The conference call will also be available via webcast at: https://edge.media-server.com/m6/p/zepzr3xx and the earnings release can be obtained via the Partnership web page at: http://investors.wlkpartners.com/event.

 

WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")

  CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)       Three Months Ended September 30,     Nine Months Ended September 30, 2017     2016 2017     2016 (In thousands of dollars, except per unit data) Revenue Net sales—Westlake Chemical Corporation ("Westlake") $ 258,049 $ 193,964 $ 711,968 $ 606,859 Net co-product, ethylene and other sales—third parties 38,726   35,390   152,368   85,940   Total net sales 296,775 229,354 864,336 692,799 Cost of sales 201,372   142,553   571,401   407,203   Gross profit 95,403 86,801 292,935 285,596 Selling, general and administrative expenses 6,805   5,788   21,519   17,733   Income from operations 88,598 81,013 271,416 267,863 Other income (expense) Interest expense—Westlake (6,190 ) (4,947 ) (17,592 ) (7,381 ) Other income, net 162   (13 ) 1,844   230   Income before income taxes 82,570 76,053 255,668 260,712 Provision for income taxes 325   194   925   890   Net income 82,245 75,859 254,743 259,822 Less: Net income attributable to noncontrolling interests in Westlake Chemical OpCo LP ("OpCo") 68,860   67,198   221,619   229,733   Net income attributable to Westlake Partners $ 13,385   $ 8,661   $ 33,124   $ 30,089     Net income per limited partners unit attributable to Westlake Partners (basic and diluted)

Common units

$ 0.47 $ 0.32 $ 1.23 $ 1.11 Subordinated units $ —   $ 0.32   $ 1.07   $ 1.11     Distributions declared per unit $ 0.3756   $ 0.3353   $ 1.0955   $ 0.9780     MLP distributable cash flow $ 15,478   $ 6,833   $ 37,892   $ 20,643     Distribution declared Limited partner units—public $ 6,803 $ 4,338 $ 16,116 $ 12,653 Limited partner units—Westlake 5,304 4,735 15,471 13,812 Incentive distribution rights 498   91   1,052   139   Total distribution declared $ 12,605   $ 9,164   $ 32,639   $ 26,604   EBITDA $ 117,813   $ 107,290   $ 359,762   $ 335,565          

WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

  September 30, 2017 December 31, 2016 (In thousands of dollars) ASSETS Current assets Cash and cash equivalents $ 17,249 $ 88,900 Receivable under the Investment Management Agreement—Westlake Chemical Corporation ("Westlake") 119,009 — Accounts receivable, net—Westlake 60,405 126,977 Accounts receivable, net—third parties 16,651 12,085 Inventories 3,881 3,934 Prepaid expenses and other current assets 413   269   Total current assets 217,608 232,165 Property, plant and equipment, net 1,206,246 1,222,238 Other assets, net 93,844   100,825   Total assets $ 1,517,698   $ 1,555,228     LIABILITIES AND EQUITY Current liabilities (accounts payable and accrued liabilities) $ 44,920 $ 37,777 Long-term debt payable to Westlake 477,121 594,629 Other liabilities 2,178   1,859   Total liabilities 524,219   634,265   Common unitholders—public 409,684 297,367 Common unitholder—Westlake 49,025 4,813 Subordinated unitholder—Westlake — 42,534 General partner—Westlake (242,074 ) (242,430 ) Accumulated other comprehensive income 226   200   Total Westlake Partners partners' capital 216,861 102,484 Noncontrolling interest in OpCo 776,618   818,479   Total equity 993,479   920,963   Total liabilities and equity $ 1,517,698   $ 1,555,228      

WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

  Nine Months Ended September 30, 2017     2016 (In thousands of dollars) Cash flows from operating activities Net income $ 254,743 $ 259,822 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 86,502 67,472 Other balance sheet changes 60,671   (149,924 ) Net cash provided by operating activities 401,916   177,370   Cash flows from investing activities Additions to property, plant and equipment (56,607 ) (268,647 ) Proceeds from disposition of assets 129 157 Proceeds from involuntary conversion of assets 1,672 — Receivables under The Investment Management Agreement - Westlake (119,000 ) —   Net cash used for investing activities (173,806 ) (268,490 ) Cash flows from financing activities Net proceeds from equity offerings 110,739 — Proceeds from debt payable to Westlake 155,257 212,175 Repayment of debt payable to Westlake (272,765 ) (1,098 ) Quarterly distributions to noncontrolling interest retained in OpCo by Westlake (263,480 ) (188,736 ) Quarterly distributions to unitholders (29,512 ) (25,774 ) Net cash used for financing activities (299,761 ) (3,433 ) Net decrease in cash and cash equivalents (71,651 ) (94,553 ) Cash and cash equivalents at beginning of the period 88,900   169,559   Cash and cash equivalents at end of the period $ 17,249   $ 75,006                

WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")

 

RECONCILIATION OF MLP DISTRIBUTABLE CASH FLOW TO NET INCOME

AND NET CASH PROVIDED BY OPERATING ACTIVITIES

(Unaudited)

 

Three Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30, 2017 2017     2016 2017     2016 (In thousands of dollars) Net cash provided (used) by operating activities $ 113,208 $ 139,630 $ (7,907 ) $ 401,916 $ 177,370 Changes in operating assets and liabilities and other (26,630 ) (57,222 ) 83,835 (146,810 ) 82,841 Deferred income tax expense (108 ) (163 ) (69 ) (363 ) (389 ) Net Income $ 86,470   $ 82,245   $ 75,859   $ 254,743   $ 259,822   Add: Depreciation, amortization and disposition of property, plant and equipment 27,299 31,790 26,290 89,239 67,472 Less: Contribution to turnaround reserves (7,624 ) (7,778 ) (17,625 ) (22,641 ) (33,963 ) Maintenance capital expenditures (9,764 ) (9,827 ) (21,747 ) (28,081 ) (103,609 ) Incentive distribution rights (323 ) (498 ) (91 ) (1,052 ) (139 ) Distributable cash flow attributable to noncontrolling interest in OpCo (85,091 ) (80,454 ) (55,853 ) (254,316 ) (168,940 ) MLP distributable cash flow $ 10,967   $ 15,478   $ 6,833   $ 37,892   $ 20,643              

WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")

 

RECONCILIATION OF EBITDA TO NET INCOME AND NET CASH

PROVIDED BY OPERATING ACTIVITIES

(Unaudited)

 

Three Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30, 2017 2017     2016 2017     2016 (In thousands of dollars) Net cash provided (used) by operating activities $ 113,208 $ 139,630 $ (7,907 ) $ 401,916 $ 177,370 Changes in operating assets and liabilities and other (26,630 ) (57,222 ) 83,835 (146,810 ) 82,841 Deferred income tax expense (108 ) (163 ) (69 ) (363 ) (389 ) Net Income $ 86,470   $ 82,245   $ 75,859   $ 254,743   $ 259,822   Add: Depreciation and amortization 27,299 29,053 26,290 86,502 67,472 Interest expense 5,942 6,190 4,947 17,592 7,381 Provision for income taxes 297   325   194   925   890   EBITDA $ 120,008   $ 117,813   $ 107,290   $ 359,762   $ 335,565  

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Westlake Chemical Partners LPInvestorsSteve Bender, 713-585-2900orMediaL. Benjamin Ederington, 713-585-2900