Westlake Chemical Partners LP - 10-Q Summary (Q2 2026)
Business Context and Reporting Period
This filing covers the quarterly period ended June 30, 2026. Westlake Chemical Partners LP (WLKP) is a Delaware limited partnership that owns a 22.8% limited partner interest in Westlake Chemical OpCo LP ("OpCo"), which operates three ethylene production facilities and a common carrier pipeline. The Partnership consolidates OpCo's results, with Westlake Corporation retaining a 77.2% noncontrolling interest. The Partnership's revenue is derived primarily from an Ethylene Sales Agreement with Westlake, supplemented by third-party sales of ethylene and co-products.
Key Financial Metrics
| Metric | Q2 2026 | Q2 2025 | 6M 2026 | 6M 2025 |
|---|---|---|---|---|
| Total Net Sales | $297.1 million | $297.1 million | $602.8 million | $534.7 million |
| Gross Profit | $94.8 million | $97.5 million | $188.6 million | $151.6 million |
| Gross Margin | 31.9% | 32.8% | 31.3% | 28.4% |
| Net Income (Consolidated) | $82.4 million | $85.8 million | $164.0 million | $128.1 million |
| Net Income Attributable to WLKP | $14.2 million | $14.6 million | $28.4 million | $19.5 million |
| Net Income Per Unit (Basic/Diluted) | $0.40 | $0.41 | $0.81 | $0.55 |
| MLP Distributable Cash Flow | $17.6 million | $15.0 million | $35.5 million | $19.7 million |
| EBITDA | $122.7 million | $124.4 million | $243.9 million | $199.4 million |
| Cash from Operating Activities (6M) | $240.0 million (2026) vs $54.9 million (2025) | |||
| Long-Term Debt | $399.7 million (Payable to Westlake) | |||
| Cash and Cash Equivalents | $49.3 million (as of June 30, 2026) |
Material Changes vs. Prior Period
- Revenue Composition: While total net sales remained flat quarter-over-quarter ($297.1M), the composition shifted. Q2 2025 included a $13.6 million Buyer Deficiency Fee from Westlake due to a production shortfall in the prior year. Excluding this fee, Q2 2026 sales increased by 4.8% driven by higher volumes (+9.0%) partially offset by lower average sales prices (-4.2%).
- Profitability: Consolidated net income decreased slightly in Q2 2026 ($3.4M decline) due to lower ethylene sales prices. However, for the six-month period, net income increased by $35.9M, driven by significantly higher sales volumes and improved gross margins (31.3% vs 28.4% YoY) due to lower feedstock costs.
- Cash Flow: Operating cash flow surged to $240.0 million for the six months ended June 30, 2026, compared to $54.9 million in the prior year. This improvement was driven by higher operating income and favorable working capital changes, specifically a reduction in net accounts receivable from Westlake.
- Capital Expenditures: Capital expenditures decreased to $18.0 million for the six months ended June 30, 2026, from $40.3 million in the prior year, reflecting the absence of major turnaround costs that impacted the 2025 period (Petro 1 turnaround).
Guidance, Outlook, and Risks
- Distributions: On August 3, 2026, the General Partner declared a quarterly distribution of $0.4714 per common unit, payable August 28, 2026. This amount did not exceed the threshold for Incentive Distribution Rights (IDRs), so no IDR distributions were made to Westlake.
- Debt Amendments: On July 8, 2026, the Partnership and OpCo amended their revolving credit facilities (MLP Revolver and OpCo Revolver). The amendments extended maturity dates to July 11, 2031 and removed the 0.10% credit spread adjustment on SOFR-based interest rates.
- Outlook: Management expects to fund capital expenditures and distributions through operating cash flow and existing credit facilities. Expansion capital expenditures are historically funded by Westlake, though not obligated.
- Risks: Key risks include the cyclical nature of the chemical industry, volatility in raw material (ethane) and energy prices, and reliance on Westlake for the majority of sales (83.1% of net sales for the six months ended June 30, 2026). Environmental liabilities and potential operating interruptions (turnarounds, force majeure) also pose risks.
Investor Verification Checklist
- Buyer Deficiency Fees: Verify the timing and recognition of Buyer Deficiency Fees and Shortfall recoveries under the Ethylene Sales Agreement, as these can significantly impact period-over-period revenue comparisons.
- Turnaround Schedules: Confirm the schedule for upcoming major maintenance turnarounds (Petro 1, Petro 2, Calvert City) to anticipate future capital expenditure spikes and potential production downtime.
- Debt Covenants: Review the Consolidated Leverage Ratio covenants under the MLP Revolver (max 4.50:1.00) to ensure compliance given the current debt load of ~$400 million.
- Related Party Concentration: Assess the impact of Westlake's purchasing decisions, as they account for over 80% of revenue, and the terms of the cost-plus pricing mechanism.
- Noncontrolling Interest: Understand that the majority of consolidated net income (~82% in Q2 2026) is attributable to the noncontrolling interest (Westlake), leaving a smaller portion for public unitholders.