Press release·03/05/2025 20:40:47

Westlake Chemical Partners LP: Stable Performance Amid Challenging Market Conditions

Westlake Chemical Partners LP, a publicly-traded master limited partnership, has reported its financial results for the year ended December 31, 2024. The partnership’s sole revenue-generating asset is its 22.8% limited partner interest in Westlake Chemical OpCo LP (OpCo), which owns and operates ethylene production facilities and related assets.

Financial Highlights

For the year 2024, Westlake Chemical Partners reported net sales of $1,135.9 million, a decrease of 4.6% compared to 2023. Net income for the year was $369.2 million, up from $334.6 million in the prior year. Net income attributable to the partnership was $62.4 million, an increase of $8.1 million year-over-year.

The partnership’s EBITDA (earnings before interest, taxes, depreciation and amortization) increased by $35.5 million to $507.6 million in 2024. MLP distributable cash flow, a non-GAAP measure of the partnership’s ability to make distributions, rose by $4.3 million to $66.9 million.

Revenue and Profit Trends

The decrease in net sales in 2024 was primarily due to lower ethylene sales prices to the partnership’s primary customer, Westlake Chemical Corporation, including the impact of selling excess ethylene volumes at prices that excluded certain non-variable costs of production. However, this was partially offset by higher ethylene and co-products sales volumes as well as higher third-party ethylene sales prices.

Despite the lower net sales, the partnership’s gross profit margin improved to 36.9% in 2024 from 32.5% in 2023. This was mainly attributable to lower ethane feedstock and natural gas costs, as well as the higher third-party ethylene sales prices. The partnership was also able to reduce its selling, general and administrative expenses by 4.4% year-over-year.

The increase in net income and EBITDA was driven by the higher gross profit, lower feedstock and natural gas costs, and higher ethylene and co-products sales volumes, partially offset by the lower ethylene sales prices to Westlake.

Strengths and Weaknesses

A key strength of Westlake Chemical Partners is its long-term, fee-based Ethylene Sales Agreement with Westlake Chemical Corporation. This agreement provides the partnership with a stable revenue stream, as Westlake is committed to purchasing a minimum volume of ethylene production at a price that includes a fixed margin. This helps to insulate the partnership from fluctuations in commodity prices.

Additionally, the partnership benefits from its access to Westlake’s operational expertise and resources through various service agreements. Westlake provides cybersecurity, information technology, and other support services to the partnership, which helps to maintain the reliability and efficiency of its ethylene production facilities.

One potential weakness is the partnership’s reliance on Westlake as its primary customer and supplier of feedstock. While the long-term agreements help to mitigate risks, the partnership’s financial performance is still closely tied to Westlake’s operations and market conditions. Any disruptions or changes in Westlake’s business could have a significant impact on the partnership.

Another area of concern is the partnership’s exposure to maintenance and turnaround costs at its ethylene production facilities. While these costs are built into the pricing structure of the Ethylene Sales Agreement, the partnership’s profitability and cash flows can be affected by the timing and magnitude of these expenses.

Outlook and Future Prospects

Looking ahead, Westlake Chemical Partners is well-positioned to maintain its stable financial performance. The partnership’s long-term agreements with Westlake, including the Ethylene Sales Agreement and Feedstock Supply Agreement, provide a solid foundation for its operations.

The partnership’s recent investments to increase its ownership interest in OpCo, the entity that owns the ethylene production facilities, further strengthen its position. By increasing its stake from 18.3% to 22.8%, the partnership has enhanced its share of the cash flows generated by these assets.

However, the partnership will need to continue to effectively manage its operating expenses, maintenance capital expenditures, and turnaround costs to maximize profitability. The partnership’s ability to contract with third parties for its remaining uncommitted production capacity will also be an important factor in its future growth and performance.

Additionally, the partnership’s success will depend on the overall demand for ethylene and its derivative products in the markets served by its production facilities. While the partnership has mitigated its direct exposure to commodity price fluctuations, it still faces indirect risks from changes in the supply and demand dynamics of the ethylene market.

Conclusion

Westlake Chemical Partners has demonstrated its ability to navigate challenging market conditions and deliver stable financial results. The partnership’s long-term agreements with Westlake, as well as its operational expertise and cost management, have been key drivers of its performance.

Looking ahead, the partnership appears well-positioned to continue generating consistent cash flows and making distributions to its unitholders. However, it will need to remain vigilant in managing its costs and risks to maintain its competitive edge in the dynamic ethylene market.