Genesis Energy, L.P. — 2020 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2020. This annual filing does not provide a separate full set of fourth-quarter results. Genesis is a midstream energy and marine transportation partnership and a major natural soda ash producer, with four reportable segments: offshore pipeline transportation; sodium minerals and sulfur services; onshore facilities and transportation; and marine transportation.
Financial performance and liquidity
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $1.825 billion | $2.481 billion |
| Operating income (loss) | $(246.0) million | $272.7 million |
| Net income (loss) attributable to Genesis | $(416.7) million | $96.0 million |
| Net income (loss) per common unit | $(4.01) | $0.18 |
| Cash from operating activities | $296.7 million | $382.3 million |
| Segment Margin (non-GAAP) | $607.5 million | $713.3 million |
| Available Cash before Reserves (non-GAAP) | $255.3 million | $359.5 million |
| Net interest expense | $209.8 million | $219.4 million |
At year-end, cash and cash equivalents were $21.3 million. Long-term debt was $3.4 billion, including $643.7 million drawn on the $1.7 billion revolving credit facility. The partnership reported $1.055 billion of remaining facility availability, subject to covenant compliance. Total liabilities were $4.18 billion.
Common-unit distributions fell from $0.55 to $0.15 per unit per quarter beginning with the first quarter of 2020; the fourth-quarter 2020 distribution of $0.15 was paid in February 2021. Preferred-unit distributions remained $0.7374 quarterly per unit.
Material changes versus 2019
- Revenue decreased 26%, primarily reflecting lower crude and petroleum product prices and volumes, as well as lower soda ash and NaHS demand and soda ash export pricing.
- Net results swung to a substantial loss, principally due to $280.8 million of impairment expense, including approximately $277 million for crude-by-rail logistics assets, and a $22.0 million loss on asset sales.
- Total Segment Margin declined $105.8 million. By segment, offshore pipeline margin fell to $270.1 million from $320.0 million; sodium minerals and sulfur services fell to $130.1 million from $223.9 million; onshore facilities and transportation rose to $147.3 million from $111.4 million; and marine transportation rose to $60.1 million from $57.9 million.
- Operating cash flow declined $85.5 million, while Available Cash before Reserves declined $104.2 million.
- Capital spending totaled $151.0 million, including $87.8 million of maintenance capital and $63.2 million of growth capital.
Outlook, risks and unusual items
- COVID-19 and operating conditions: Lower demand and volumes affected the businesses beginning in the second quarter. Management reported signs of a modest recovery late in 2020 and expected recovery to continue in some markets, while noting substantial uncertainty and potential for further impairments.
- Asset disruptions: Tropical Storm Cristobal and Hurricanes Laura, Marco, Delta and Zeta caused downtime, damage and approximately $8 million in incremental offshore operating costs. CHOPS was shut from August 26, 2020; volumes were diverted to Poseidon, and a bypass returned CHOPS to service on February 4, 2021.
- Soda ash: The Granger facility’s approximately 500,000-ton annual capacity was placed in cold standby in April 2020. Management expected 2021 domestic and export prices to be marginally lower than 2020 levels. The Granger Optimization Project was delayed by a year, with completion expected near the end of 2023 and funding intended to come from GSO-affiliated preferred investment, subject to agreement covenants.
- Debt and covenants: Genesis issued $750 million of 7.75% notes due 2028 and $750 million of 8.00% notes due 2027, using proceeds to refinance nearer-term notes and repay revolver borrowings. The refinancing generated debt-extinguishment losses; open-market note repurchases generated $27.3 million of cancellation-of-debt income. Although compliant with covenants at December 31, management said it was likely the partnership would not remain in full compliance with the interest-coverage covenant absent an amendment or waiver. It was negotiating to amend and extend the facility, which was due to mature in May 2022.
- Other items: The agreed sale of remaining CO2 assets to a Denbury subsidiary provided $22.5 million in 2020 and was to provide a further $70 million in quarterly installments during 2021. Genesis recorded a one-time restructuring and severance charge of approximately $13 million. The partnership’s common-unit distribution reduction and high debt burden remain relevant to cash available for distributions and financial flexibility.
Most important facts for investors to verify
- Whether the credit facility was amended or extended, and whether Genesis maintained compliance with its financial covenants after year-end.
- Actual 2021 operating cash flow, debt reduction, liquidity and common-unit distributions compared with management’s expectations.
- Whether soda ash and NaHS volumes and prices recovered, and the financial effect of the Granger facility’s standby status and expansion schedule.
- Whether the remaining CO2 sale proceeds were collected as scheduled and whether the rail-asset impairment assumptions remain appropriate.
- How quickly offshore volumes recovered after CHOPS returned to service, and whether hurricane-related repairs or future interruptions created further costs.
- The sensitivity of results to ANSAC export concentration, customer demand, commodity markets, preferred distributions and substantial debt service.