GENESIS ENERGY LP (GEL)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 printed revenue of $725.6M, Adjusted EBITDA of $160.6M, Total Segment Margin of $172.5M, and EPS of $(0.58); results were pressured by a $43.0M impairment, higher interest expense, and producer downtime in Offshore, consistent with management’s “transition year” framing .
• Management lowered forward Adjusted EBITDA expectations to around $700M for 2025 (vs ~$800M discussed mid‑2024) and ~$800M for 2026 (vs ~>$900M prior), citing soda ash headwinds while emphasizing mid‑year offshore project start‑ups (Shenandoah, Salamanca) and marine strength; this constitutes a guidance cut and a key narrative shift to harvesting cash and balance sheet simplification in 2H 2025 .
• Offshore challenges (mechanical issues at major host platforms, Hurricane Rafael downtime) weighed on segment margin YoY; however, both Shenandoah and Salamanca remain on schedule for first oil in Q2 2025, adding ~200 kb/d of handling capacity and expected to ramp quickly, a potential stock catalyst into mid‑year .
• Soda ash macro remains oversupplied into 1H 2025; management expects segment margin “at or near 2024” levels despite operating improvements and cost actions, with sequential pricing improvement more likely in 2026+ as synthetic capacity rationalizes .
• The board raised the quarterly common unit distribution to $0.165 (annualized $0.66) and reiterated flexibility to deploy increasing free cash flow to debt reduction and potentially preferred redemptions as the leverage ratio trends toward a long‑term 4x target (bank leverage stood at 5.25x at YE 2024) .

What Went Well and What Went Wrong

What Went Well

• Marine Transportation remained constructive with high utilization and increasing day rates; fewer offshore dry docks in 2025 should support sequential improvement, and management sees a multi‑year structural tailwind from limited new Jones Act supply .
• Major offshore growth projects are ~90% complete, with Shenandoah and Salamanca on schedule for Q2 2025 start‑up; management expects rapid ramp and host‑platform tie‑back opportunities sustaining cash flows for “years and years” .
• Alkali operations improved physically: Granger is producing ~3,900 tons/day at or slightly above design capacity, and Westvaco issues are behind them; cost reduction initiatives have been implemented to position for eventual soda ash price recovery .

What Went Wrong

• Offshore segment margin fell 28% YoY due to a contractual rate step‑down, producer underperformance at two host platforms, higher operating costs, and storm‑related downtime (Hurricane Rafael) .
• Soda and sulfur services segment margin declined 10% YoY on weaker export pricing and lower NaHS volumes/pricing despite higher soda ash volumes, reflecting global oversupply and mixed demand, particularly in China and South America .
• At the consolidated level, Q4 included a $43.0M impairment from terminating an ERP integration project, +$15.0M YoY increase in net interest expense, and +$9.7M YoY increase in DDA, driving a net loss to common of $(71.3)M and EPS of $(0.58) .

Financial Results

Quarterly Financials vs Prior Periods

Segment Margin Breakdown (Quarterly)

KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We are now just a few short months away from… the inflection point where our capital‑intensive expansion projects are completed and paid for, and we start to reap the increased cash to be generated from such investments.” — CEO Grant Sims .
• “These two new developments remain on schedule for first production late in the second quarter of 2025… [and] will add upwards of 200,000 barrels per day of incremental production handling capacity to our pipeline system.” — CEO Grant Sims .
• “We believe Adjusted EBITDA in 2025 will be around $700 million and that 2026… could be around $800 million.” — CEO Grant Sims .
• “Our team has identified numerous opportunities, and we have since started to implement several initiatives to reduce our fixed and marginal operating costs in the [soda ash] business.” — CEO Grant Sims .
• “We remain optimistic about the near‑to‑medium term outlook with our marine transportation segment… [and] believe we are still in the early stages of a multi‑year structural shift.” — CEO Grant Sims .

Q&A Highlights

• Offshore downtime sensitivity: Management bracketed potential impact at ~$5–$10M per quarter if all affected volumes were offline; expects restoration over next several months, not lasting through 2025 .
• 2026 EBITDA composition: ~$800M outlook assumes Marine roughly flat vs 2025 at ~$130–$140M; upside possible but not in base case .
• Capital allocation priorities: Banks treat the convertible preferred as 100% equity for covenant compliance; as leverage approaches ~4x, GEL has flexibility to more rapidly redeem preferred using excess cash .
• Distribution increases: Board will evaluate at the appropriate time post free cash flow inflection; allocation likely “a little bit of all of the above” (debt reduction, preferred redemptions, returns) .
• Soda ash contracting: Contracts skewed shorter to avoid locking in low prices; management expects prices to rise through 2025 as ~4% ex‑China synthetic capacity shut‑ins tighten the market .

Estimates Context

• Wall Street consensus (S&P Global/Capital IQ) for GEL’s Q4 2024 EPS, revenue, and EBITDA was unavailable due to SPGI access limitations at query time; as a result, we cannot quantify beats/misses versus Street for this quarter. We recommend treating the quarter as an operationally in‑line print relative to management’s “transition year” narrative and focusing on mid‑2025 offshore ramp and soda ash normalization thereafter [SPGI data unavailable via tool].

Key Takeaways for Investors

• 2H 2025 free cash flow inflection remains the core catalyst, anchored by Shenandoah and Salamanca first oil in Q2 and rapid ramp thereafter; track operator installation milestones and early volumes for confirmation -.
• Offshore segment headwinds were transient (mechanical issues, storm downtime) and should abate; watch remediation progress and restoration timing across affected wells to gauge segment margin normalization .
• Marine’s constructive backdrop (high utilization, rising day rates, limited newbuilds) supports steady earnings; fewer dry docks in 2025 reduce maintenance drag and boost days on the water .
• Soda ash remains the swing factor; with Granger at/above design capacity and cost actions underway, GEL is positioned to benefit when pricing normalizes, likely more meaningfully in 2026+ as synthetic supply rationalizes .
• Balance sheet flexibility improved: YE leverage at 5.25x (per facility definition) with a clear path to ~4x over time; expect priority use of excess cash for debt reduction and potentially preferred redemptions, then increasing returns to common .
• Distribution policy is advancing incrementally (raised to $0.165/quarter for Q4); future increases likely paced by free cash flow growth post inflection .
• Near‑term stock narrative hinges on the mid‑year offshore ramp and confirmation that soda ash prices stabilize; downside risks include prolonged producer remediation or weaker‑than‑expected global demand for soda ash .

Appendix: Q4 2024 Detailed Components

• Impairment expense: $43.0M (ERP integration project terminated) .
• Interest expense, net: $(75.6)M in Q4 2024, +$15.0M YoY .
• Adjusted Consolidated EBITDA (per credit facility, LTM) at YE 2024: $706.4M; adjusted debt/Adjusted Consolidated EBITDA of 5.25x .
• Available Cash before Reserves: $43.3M; coverage 2.14x on $0.165 quarterly distribution .