James Allshull

James Allshull inquired about the apparent drawdown of the Investment Management Agreement receivable with Westlake to fund distributions in the past year and whether future distributions would be covered by operations as the distribution coverage ratio improves. He also asked about the anticipated financing methods for potential growth initiatives, such as increasing OpCo ownership or pursuing organic growth.

Answer

M. Steven Bender, EVP and CFO, clarified that the drawdown reflected the cost of a maintenance turnaround, explaining that cash is accumulated in the investment account for such events. He noted that operating reserves, approximately $74 million at year-end 2025, were sufficient to cover distributions. Bender expects the coverage ratio to rise above 1.1 times in 2026 due to no planned turnarounds, replenishing both the operating surplus and the investment account. For growth initiatives, he stated that financing would typically involve 'drop-downs' monetized through external funding, a combination of debt and equity, or the issuance of new units.

James Allshull asked about the drawdown on the Investment Management Agreement receivable to fund distributions in 2025, inquiring if his interpretation was correct and if sufficient funds remained. He also questioned if the anticipated improvement in the 2026 distribution coverage ratio would eliminate the need for further drawdowns. Additionally, he inquired about the financing strategy for future growth opportunities, such as increasing OpCo ownership or organic expansions.

Answer

M. Steven Bender, Executive Vice President and Chief Financial Officer, clarified that the drawdown on the Investment Management Agreement receivable in 2025 was due to the Petro 1 maintenance turnaround, which impacted production and income. He assured that the partnership's $74 million operating surplus at year-end 2025 was sufficient to cover distributions. He projected that the absence of turnarounds in 2026 would boost the coverage ratio above 1.1 times, replenishing cash and operating surplus. For future growth initiatives, Mr. Bender indicated financing would involve "drop-downs" of OpCo interest, funded by a combination of external debt, equity, or new unit issuance.