Genesis Energy, L.P.

Greetings and welcome to the Genesis Energy fourth quarter 2020 earnings conference call. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Karen Pape. Please go ahead.

Genesis has four business segments. The onshore pipeline transportation segment is engaged in providing the critical infrastructure to move oil produced from the long-lived world-class reservoirs from the deepwater Gulf of Mexico to onshore refining centers. The sodium minerals and sulfur services segment includes Trona and Trona-based exploring, mining, processing, producing, marketing, and selling activities as well as the processing of sour gas streams to remove sulfur at refining operations. The onshore facilities and transportation segment is engaged in the transportation, handling, blending, storage, and supply of energy products, including crude oil and refined products. The marine transportation segment is engaged in the maritime transportation of primarily refined petroleum products. Genesis operations are primarily located in Wyoming, the Gulf Coast states, and the Gulf of Mexico. During this conference call, management may be making forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. The law provides safe harbor protection to encourage companies to provide forward-looking information. Genesis intends to avail itself of those safe harbor provisions and directs you to its most recently filed and future filings with the Securities Exchange Commission. We also encourage you to visit our website at genesisenergy.com, where a copy of the press release we issued today is located. The press release also presents a reconciliation of non-GAAP financial measures to the most comparable GAAP financial measures. At this time, I would like to introduce Grant Sims, CEO of Genesis Energy LP. Mr. Sims will be joined by Bob Deer, Chief Financial Officer, and Ryan Sims, Senior Vice President, Finance and Corporate Development.

Good morning, everyone. As we mentioned in this morning's earnings release, 2020 was understandably a challenging year for our businesses due to the COVID-19-related demand destruction, lower refinery utilization and crude differentials, as well as an unprecedented hurricane season. Despite these challenges, we were able to generate approximately $602 million of adjusted consolidated EBITDA, as calculated under our senior secured credit facility, hitting the midpoint of our previously announced guidance. In fact, we were able to pay down and otherwise reduce total adjusted debt by some $62 million, despite paying approximately $45 million of financing fees associated with two unsecured refinancings during the year and paying $50 million in the first quarter of this year that was actually associated with the quarterly distribution declared for the fourth quarter of 2019. While we expect 2021 to be somewhat a year of transition as our base businesses continue to recover and we move ever closer to the significant contribution from several contracted offshore projects, we are increasingly confident in the long-term fundamentals of our businesses and our significant operating leverage to the upside as the global economy continues to improve. Our offshore pipeline transportation segment was challenged in 2020 from an unprecedented hurricane season, but the outlook remains strong. While the downtime and non-recurring costs associated with the inspections and repairs to the Garden Bank 72 platform negatively impacted 2020 segment margin by some $40 million, the first quarter of 2021 remains on track to generate a more normalized earnings profile of approximately $85 million per quarter. Regarding the new administration's most recent executive order, which directs the Department of Interior to temporarily pause new oil and natural gas leasing on federal lands, in our estimation, it is very important to note that the targeted pause by the Department of Interior does not impact existing operations or permits for valid existing leases, which are continuing to be reviewed and approved. In fact, since January 21st, the Bureau of Ocean Energy Management has issued 63 new permits, including 38 revised new well permits and four brand new well permits through February 16th, so basically the last three weeks. I'd like to put this in perspective because the sheer magnitude of the Deepwater Gulf is often misunderstood and, in my opinion, underappreciated. The recoverable reserves from a single deepwater well is often in the range of 15 to 20 million barrels of oil equivalent. Let me repeat, 15 to 20 million barrels are often recovered from a single well. So permitting and drilling a single well tied back into a production facility connected into one of our pipelines can be the equivalent of hooking up 25 to 30 onshore shell wells. The producers must hook these wells into a deepwater production handling facility where once separated, the oil would then be metered into one of our pipelines, which as a practical matter is the only pipeline option. These kinds of typical deepwater wells are often the only pipeline option. These kinds of typical deepwater wells are often at flush production for two or three years, not two or three months or even weeks, and often have a productive economic life of seven to ten years per well. It is a completely different world than onshore, especially shell basins. If the temporary ban on new leases were to be extended or become permanent, which we believe would require a change in the law, it is important to note we have hundreds of thousands of acres that are dedicated to our offshore pipeline systems under life of lease dedications, all of which are existing valid leases under primary term previously granted extensions of their primary term, or held by production in perpetuity, alone or in recognized units. We believe there is a tremendous inventory of incremental drilling and subsea tieback opportunities on these existing valid leases that can keep our base production levels flat to slightly growing for many years, if not decades, to come. Near-to-intermediate-term activity is quite robust around our producing customers' facilities. Occidental Petroleum has recently drilled and completed two new wells in the Lucius field, both of which are already contractually obligated to flow through our 100% owned Seiko pipeline and onto shore through our 64% owned Poseidon pipeline. BHP Petroleum has recently increased its working interest share in its operated Shinzi field. It has publicly announced its intent to drill several more infill wells in Shinzi proper, along with its intent to pursue a new two-well subsea development from what it calls Shinzi North. All of the production from these new wells are already contractually obligated to flow through our 100% owned Shinzi lateral and onto shore through either Poseidon or our 100% owned CHOPS pipeline. Additionally, an affiliate of Beacon has just announced a new discovery at Winterfell. And late last year, Equinor announced a major new discovery at its monument prospect. Together, these two new discoveries represent hundreds and hundreds of millions of barrels of newly discovered resources that are closer to our existing pipeline infrastructure than anyone else's. All of this is, of course, in addition to our larger contracted offshore projects, Argos and Kings Key, which have both recently been publicly confirmed that they remain on track for first oil in 2022. We anticipate that these two fields, when fully ramped up, will generate an excess of $25 million a quarter or over $100 million a year in additional segment margin. We also remain in active discussions with three separate new stand-alone deepwater production hubs in various stages of sanctioning, and with first oil starting in the late 2024-2025 timeframe, totaling more than 220,000 barrels a day of potential new Gulf of Mexico production. Before moving on, I'd like to discuss the deep water's carbon footprint and its critical role in the transition to a lower carbon world. The Gulf of Mexico is already one of the most highly regulated upstream basins in North America from an environmental point of view. I mean, there's no other basin other than the Gulf of Mexico that's overseen by BSEE or the Bureau of Safety and Environmental Enforcement. There is no hydraulic fracking and very, very stringent anti-flaring rules in the Gulf. As a result, oil produced in the Gulf has some of the lowest carbon intensity on a per barrel basis of any hydrocarbon production in the world. In fact, according to third party research, after taking into account the additional emissions incurred in shipping various imports to the United States, the barrels safely and responsibly coming to shore from the Gulf are less emissions-intensive from reservoir to refinery than any other barrel refined by Gulf Coast refineries. Based on this information alone, notwithstanding other things like jobs, energy security, balance of trade, et cetera, not to mention the billions of dollars that go into the U.S. Treasury on an annual basis in royalties, We conclude that it makes absolutely zero sense from a U.S. or global perspective to potentially impede further activity and production in the Gulf of Mexico, even as we focus on climate change and an orderly and practical transition to a lower carbon world. Switching gears to our second largest segment, sodium minerals and sulfur services. Our sodash business continues to improve from one of the most challenging operating environments in recent history. Global demand for SODASH continues to recover, but total demand remains below pre-pandemic levels driven by the wide-ranging impact on demand from COVID-19. As a result, we expect both domestic and export prices in 2021 will be marginally lower than we experienced this past year. That being said, we were sold out in the fourth quarter and currently expect to be sold out of 100% of our production from our West Vaco facility in 2021. This incremental volume over 2020 will drive a growth in segment margin contribution and allow for greater fixed cost absorption and an improved cost structure. We believe all natural producers globally are in a similar situation of being sold out. As we progress through this year and the demand continues to recover, The incremental tons must be supplied with synthetic production, which in general is twice as expensive to make as natural soda. This dynamic is why we believe prices will rise as we go through the year and the market will continue to tighten, especially towards the end of the year when we would otherwise redetermine most of our contract prices for the majority of our sales in 2022. Future prospects of incremental demand for sodash remain strong as it is an integral building block in the global economy. With just over 50% of the market being glass, which includes flat glass, auto glass, container glass, consumer products, and much more, sodash is well positioned to benefit from a continued economic recovery worldwide. Furthermore, the glass manufacturers use sodash to lower the melting point of other raw materials, mainly sand, which in turn reduces their energy consumption and lowers the greenhouse gas emissions at their respective manufacturing sites. Our legacy refinery services or sulfur services business continued to improve during the quarter as we've moved past certain supply disruptions in our supply chain caused by the active hurricane season along the Gulf Coast. Demand for NASH has returned almost all the way to pre-pandemic levels, driven in large part by pulp and paper, as well as our mining customers' production levels returning to pre-pandemic levels driven by the recent dramatic run-up in copper prices, which we think is driven by rapid economic recoveries in the world economies. While the recovery in our sodium minerals and sulfur services segment is predominantly underpinned by economic recovery and global GDP growth, the future is also going to be exciting because we are already very well-positioned to actively participate in many aspects of the energy transition. We are confident these benefits will benefit significantly from various green and emissions-related initiatives. Our Sodash business will increasingly participate in multiple renewable energy themes moving forward, including the production of new LEED-certified glass windows to retrofit older buildings, manufacturing of glass for solar panels, and the production of lithium carbonate and lithium hydroxide, the basic building blocks of lithium ion phosphate batteries used in both the electrification of vehicles and long-term battery storage. In addition to being a building block of lower emissions initiatives, U.S. natural sodash, according to third-party reports, has a greenhouse gas footprint roughly 37% less than Chinese synthetic sodash, when leaving their respective manufacturing sites, and approximately a 22% less greenhouse gas footprint than Chinese synthetic soda ash on a delivered basis to customers in Japan and Southeast Asia after factoring into emissions incurred in rail and shipping transportation. The process to produce synthetic soda ash also creates byproducts such as calcium chloride and ammonia chloride, which need further handling and ultimately increase synthetic soda ash's carbon footprint. This further demonstrates how low-cost natural soda ash produced from the largest known natural deposits of trona in the world, right here in the United States, is the most economic and equally important, most environmentally friendly soda ash in the world. Our refinery services business continues continues to facilitate the eco-friendly removal of the sulfur entrained in crude oil so it doesn't remain in finished refined products like gasoline, jet, and diesel fuel, which when combusted would otherwise end up in the atmosphere. Additionally, we help our host refineries lower their emissions by processing their sour gas streams using our proprietary closed-loop non-combustion technology to remove sulfur from their hydrogen sulfide gas streams. This compares more favorably than the refinery's alternative of a traditional sulfur recovery unit utilizing the Klaus process, which combusts hydrogen sulfide gas and releases certain levels of harmful gases and incremental hydrogen sulfide gas and releases certain levels of harmful gases and incremental carbon dioxide emissions into the atmosphere. In addition to our production process lowering emissions at our host refineries, Sodium hydrosulfide, or NASH, is used by our customers in many ways to help further reduce air emissions from various chemical industrial activities. For example, NASH is used to remove nitrogen oxide, which is a lot worse than carbon dioxide, from the emission stacks of certain activities around metal refining and finishing. NASH and sodash are also both used in flue gas scrubbing to remove harmful particulates from what would have otherwise been released into the atmosphere. especially at large industrial complexes and hydrocarbon-fired power plants. While we are highly confident that crude oil will have a significant role to play for the foreseeable future, as hopefully you can tell, we continue to look at ways to position ourselves to operate and, importantly, participate in a lower-carbon world. Along these lines, we are also pleased to announce that we are very near to launching our ESG website, which will greatly increase our disclosures, and illustrate to all investors that we are committed to operating our business in an ESG responsible manner. I'll switch gears now and focus quickly on the balance sheet and our view of 2021. In addition to the successful refinancing of our 2022 notes early in the year, in December 2020, We accessed the unsecured bond market and completed an upsized $750 million note offering to fully call and redeem our 2023 notes. The remaining proceeds were used to pay down our senior secured credit facility by approximately $350 million, leaving us with ample capacity heading into 2021 and with our nearest unsecured maturity now in June of 2024. This increased interest expense from tilting towards longer-term fixed rate versus shorter-term floating rate debt will likely pressure our ability to live comfortably within the interest coverage ratio in our existing bank agreement, perhaps by the end of the second quarter. However, we are highly confident we will enter into a new senior secured facility, which will replace our current facility that expires in May of 2022 anyway. during the first half of this year to ensure our continuing financial flexibility and increased tenor as our businesses recover from the challenging environment of this past year. Our reported leverage ratio increased in the quarter primarily due to $40 million in weather-related impact we incurred in the second half of the year in the Gulf of Mexico. If only we had experienced a more quote-unquote normalized hurricane season, our total average ratio at the end of 2020 would have been closer to 5.22 times versus the reported 5.57 times. Looking forward to 2021, we would reasonably expect to generate adjusted consolidated EBITDA in 2021 as calculated under our senior secured credit facility between $630 and $660 million, which includes some $30 to $40 million of pro forma adjustments. We currently expect cash obligations for 2021 totaling approximately $500 million, which includes all cash taxes, interest on bank debt and bonds, all maintenance capital spent, growth capital spent, asset retirement obligations, financing fees, estimated changes in working capital, preferred cash distributions, and common distributions at the current $0.15 per unit quarterly payout. At this point, we have budgeted approximately $40 million of growth capital outside of the Grainger expansion, which dollars for Grainger are expected to be paid via the redeemable preferred structure at the SODASH operational level. This minimal growth capital is predominantly allocated to the offshore segment for additional upgrades to our existing systems for anticipated future volumes. Importantly, we expect to generate free cash flow from these identified capital after these identified cash obligations of $80 to $110 million, which we intend to use to repay debt. In summary, we are highly encouraged by the rebound in our businesses, and we still believe we have a clear line of sight to $700 to $800 million in annual adjusted consolidated EBITDA in the coming years. Just a return to 2018-2019 SODASH pricing, combined with the incremental contribution margin from our contracted offshore volumes, would add upwards of $100 million of additional segment margin to the 2021 guidance described above. With this accelerating ability to pay down debt and with relatively de minimis capital requirements to realize the financial benefits of these improving business conditions, we remain steadfast in our commitment to achieving our long-term target leverage ratio of four times. I would like to once again recognize our entire workforce, and especially our miners, mariners, and offshore personnel who live and work in close quarters during this time of social distancing. I am extremely proud to say we have safely operated our assets under our own COVID-19 safety procedures and protocols, with no impact to our business partners and customers, with limited confirmed cases amongst our some 2,000 employees. It is an honor to have the opportunity to work alongside such quality folks. With that, I'll turn it back to the moderator for any questions.

Thank you. We're now conducting a question and answer session. If you'd like to be placed in the question queue, please press star 1 on your telephone keypad. Once again, that's star one to be placed into question Q. If you'd like to remove yourself from the queue, please press star two. One moment, please, while we poll for questions. Our first question today is coming from Sherika Shuny from UBS. Your line is now live.

Hi, good morning, everyone. Glad to hear everyone's safe. Just to start off, Grant, thank you for the thorough discussion on the Gulf of Mexico and putting the executive orders into context and sort of the expectations of why we'll still see Gulf of Mexico volumes for years to come. You know, just wanted to clarify actually some of your commentary around the soda ash side. You sort of intimated, and I'm wondering if you can expand on it, that there might be a sizable ESG tailwind, you know, just with respect to the soda ash business. You talked about EV batteries and so forth. I was just wondering if you can talk about, you know, expand, I guess, on this renewable theme and And will it be a driver of earnings for Genesis in 2022 and 23 and beyond, if you don't mind?

Yeah, it's a good question. Thanks. No, there's no doubt that, you know, just starting with, you know, construction of solar panels, so to speak, that's very glass intensive. And soda ash is used in the manufacturing of all glass components. And it has been since the late 1800s. Nobody's ever found a substitute for it. in terms of glassmaking. And just on that line, just remember that natural production doesn't compete with another chemical. It competes with synthetically produced soda ash, which costs twice as much to manufacture. So that's clearly one. The other is in the battery components. Well, glass, to the extent that we retrofit old buildings with more environmentally sound glass, then obviously, again, from the glass manufacturing point of view. But importantly, the growth that we see on top of just the normal economic recovery and GDP growth is developing economies continue to approach more developed economies on a per capita consumption basis of soda ash is growth in the battery space. In round terms, it takes two parts of soda ash per one part of lithium to make lithium carbonate, which is the building block for new generation batteries. And I might point you to other third-party discussions about that from other public companies, but Albemarle, I think, reported yesterday or the day before with their view of the tremendously, and it's one of the world's largest producers of lithium, but how the demand pull of the electrification of both transportation vehicles as well as battery storage capabilities for renewable energy, both solar as well as wind. And we live in Texas, so we've had some issues with both of those this week. But certainly the storage and battery components would be helpful in terms of being able to manage that through the renewables through this crisis. You know, there's third-party validation of the incremental growth. And then you look at, you know, just the EV market with, you know, everybody from Tesla to General Motors switching to, you know, only EV vehicles. And admittedly, it's 10 or 15 years down the road. But that's going to generate tremendous incremental demand for Sodash to contribute to the electrification.

I completely appreciate that. And then maybe it's sort of a follow-up and kind of more of a near-term outlook. You had some very strong cost performance, more of a near-term outlook. You had some very strong cost performance in 2020. Just wondering, as we sort of think about 21 and maybe into early 22, how much of the cost reductions are you going to be able to permanently capture? And then also as we're sort of thinking about the near term, you talked about the $85 million run rate out of the Gulf. Does that include the first quarter also just given the timing of the startup or was Poseidon able to, you know, make up for it all? I was just wondering if you can give us some context around both of those items.

Yeah, I think on the cost side, those were implemented basically simultaneously. starting in the third quarter of 2020, and so we're still ramping up in terms of realizing all of those. I think starting probably in the second quarter of 2021, we should start realizing across all of our businesses the $38 million or so of annual cost reductions that we implemented at that point in time. Obviously, we're also looking at additional cost sides, primarily in learning to work remotely and what that means for the cost of office space and other things. So we intend to continue to keep a keen eye on the cost side as we move forward throughout 2021 and beyond. Relative to your question on the offshore, the $85 million for the first quarter of 2021 for the offshore.

We feel very comfortable with that. For the cost of office space and other things.

So we intend to continue to keep a keen eye on on the cost side as we move forward throughout 2021 and beyond. Relative to your question on the offshore, the $85 million for the first quarter of 2021 for the offshore, we feel very comfortable with that.

for the offshore. We feel very comfortable with that for the offshore.

We feel very comfortable with driving the offshore, and we feel very comfortable with the low-cost soda producer in the world.

Got it. And then turning to 2021 guidance, I'm just curious, what were the $30 million to $40 million for FOMA adjustments related to?

This is how we view it with our backs, and we have on page 12 of the earnings release on the cost side, there's a reconciliation of Relative to your question on the adjusted EBITDA derived from the GAAP financial statements relative to the total adjusted EBITDA that we view in terms of complying with all of our existing covenants. So, in essence, there's two components of it at this point, and I'll get into it really quickly. But one is the add-back, at least through the second quarter, of the one-time expenses that we took at the end of the second quarter of 2020. 2020 to reflect the costs associated with achieving the $38 million worth of annual cost savings that we discussed in the context of Schnur's earlier question. And we get to add that back as a one-time non-recurring item at least through the second quarter of 2021. at which point we should have the full $38 million of anticipated savings reflected in our financial statements. The second is that on the growth capital that we're spending in the offshore, which is adding pumps and doing some other de-bottlenecking to increase capacity, we have investment-grade take-or-pay agreements with various companies portfolio of customers that back up and have contracted for that incremental capacity. So we get pro forma credit as incremental capacity. So we get pro forma credit on a percent of completion as we spend the money. Then the banks give us pro forma credit for the investment grade take or pay cash flows that are coming against that capital expenditure.

Understood. And in terms of the onshore business specifically, looking at the WCS differentials and the scenic station unloading volumes that you're seeing today, can you give us a sense of where you see that trending, where you see that increasing to? And is this contingent on OPEC plus barrels coming back to market, Iran, Venezuela, etc.? ? or is it just based on the differential today? And can you also remind us, you know, what is that threshold that the differential has to get to for the rail movements to make sense?

Yeah, it's the, you know, I think that, quite frankly, if the world were not still in a COVID-19 world, that we'd see substantially more volumes running. It's still a fact that, you know, at least in the U.S., that Retail gasoline cells and diesel cells are basically 10 or 11 percent below where they were a year ago. Jet cells are probably 60 or 70 percent below where they were a year ago. So the demand for refined products is still being dramatically affected by the effects of COVID-19. So currently the What we look at and think about is the WCS in Hardesty, Alberta, versus WCS in Houston. If that is kind of in the $12 to $15 range, then, as they say, that seems to support the movement by REL. In our particular situation, our customer, which happens to be ExxonMobil, built up credits, in essence, by paying for volumes that they didn't take or use in primarily the second and third quarters of 2020. And they have four quarters after each quarter to, in essence, make it up. So right now, they are moving trains, but we're not really getting anything because it's from a margin contribution because they're really making up the prepaid volumes that they paid us in 2020. The question is, what happens in the back half of the year after that bank is used up? And if the differentials continue to exist and there's a recovery in refined product demand, which would therefore result in refinery utilization increasing, then we can see that that would continue through the back half of the year and it would be a net positive to us in the back half of the year. Relative to, you know, I mean, I think the viscosity is important to the Gulf Coast refineries represented by the heavier Canadian barrels in terms of optimally loading their FCCs and cokers. But again, all of that is kind of dependent upon and dynamic associated with the What's the refined product demand coming out of the back end of the refinery? So we're being basically in the guidance that we gave. We're basically kind of assuming that volumetrically it's basically flat to what we're currently moving, but that as we get to the back half of the year, it would be a net contributor increase. whereas in the front half of the year, it's not really flowing through the financial results because of the bank of dollars that they are working off.

That's very helpful. And lastly, on the marine segment, so clearly there's been some volatility just quarter over quarter on the earnings there, and I understand that is partly a result of the lower refinery utilization on the inland side, whereas American Phoenix, you know, we saw it step down last quarter, and then it stepped up again recently. So as we, you know, look to 2021, what is, like, a rateable run rate from here?

Well, that's a good question. No, well, the American Phoenix went – Off of contract, that's a big, such a large portion of it. It's a lot of the movement from one quarter to another is directly a result of that. And I can't get into a lot of specific movement from one quarter to another is directly a result of that. And I can't get into a lot of specifics, but it went off of its good five-year contract at the end of September. And this is an anecdote of COVID-19. Everybody has one. But we were actually, in March of last year, almost a year ago, we were very close to finalizing a deal, a new two- or three-year deal for the American Phoenix at numbers which were really very close, within, call it 5% or 10% of that contract. And we were going to finish it up when the guy got back from spring break. And we all know what happened when people went on spring break last year. Nonetheless, it went off of the five-year contract, which was a very attractive contract. And the end of September, it went to one customer for the fourth quarter and the first quarter. The fourth quarter was not at a very attractive rate, and the first quarter was even worse. But it's now gone under with an investment-grade customer, a new 12-month contract, which will start around April 1st, which will be generally consistent with what it got in the fourth quarter, but up from the bottom off of the first quarter. And then the other, as you said, is pointed out, as we've tried to mention, that in large part it's going to be a function of how refinery runs in Pad 2 and Pad 3, the Midwest and Gulf Coast, recover. I just got a note from... Our head of marine operations this morning hit the beginning, and brown utilization by the end of the day is going to be the highest that it's been in the last six months. So things are starting to improve, but that's really what's going to drive things back. But we anticipate as we continue to go through 2021 that as the economy continues to recover, as the demand for refined products increases, returns somewhat, maybe not all the way to normal, but clearly if we get off of it, we've seen refinery utilization kind of from the depths go in the low 70s to the kind of low to mid 80% range. And, you know, unfortunately, the reality is that the Jones Act fleet, whether or not it starts at the MR class and goes through the ocean-going barges, blue water barges, and then into the inland fleet, the The Jones Act fleet is really designed for refineries in the U.S. to run in the mid-90% range, and when they're running in the mid-80% range, there's an excess supply of Jones Act tonnage. So the main barometer to watch for that as a recovery is refinery utilization.

Thank you very much. Stay safe.

Thank you. Thank you. As a reminder, that's star 1 to be placed in the question queue. Our next question today is coming from Kyle May from Capital One Security. Your line is now live.

Hey, good morning, everybody. Grant, as you pointed out, Genesis should generate 80 to 110 million of free cash flow this year, and a lot of that will go to repaid debt. Just wondering if there's any other levers that you can pull to further accelerate improving the balance sheet.

Well, I mean, I think that clearly the free cash flow generation is the number one priority and the number one thing that we're thinking about. You know, we continue to evaluate potential asset sales as we demonstrated in 2020 and some of the effects of which will be realized in 2021 and are included in that guidance that we exited a non-core business, which was the CO2 pipeline business under a structured agreement with Denberry. So, I mean, I think as we progress through the year that we, A, we're very comfortable where we are by being a net cash flow generator. And so we would continue to evaluate things on the cost side and potential asset sales to the extent that that makes sense and is, you know, accretive to both leverage as well as to everybody else in the capital structure.

Got it. Thanks for that. And as my follow-up, you also mentioned that Genesis is capable of generating in the range of $700 million to $800 million of annual EBITDA And I think one of the caveats you pointed out is returning to the SODASH pricing that we saw in 2018 and 2019. It sounds like SODASH pricing may step down in 2021 versus last year. Just wondering if you could talk about when you think we could see these pricing levels from 2018 and 2019 again and what it's going to take to get there.

Well, we've seen cyclicality, if you will, in prices and therefore financial results in the past in this business. We haven't seen any of the volatility associated with this event, which was pure and simple absolute demand destruction as the world dealt with COVID-19. So We've seen rapid rebounds. Things are very tight or can be very tight. And as I pointed out, the important dynamic to remember is the market works. Natural producers are all sold out because they're the lowest cost manufacturers of this. And as the market demands, regardless of where it is, whether it's in the U.S. or in China, Japan or Indonesia or wherever, as the market demands an incremental ton, it's going to be supplied by synthetic production from somewhere, which is twice as expensive. So that's the background for prices to increase. And so as we continue the economic recovery, as we start realizing some of the tailwinds from the green initiatives that we discussed earlier in the remarks as well as on the some of the questions that that can result in the market tightening very quickly, very rapidly, and providing background for prices to rise. We don't, you know, I don't have a crystal ball. We don't have a crystal ball other than, you know, again, I can just say that things are, as we progress even through 2021, and admittedly we're a whopping year six or seven weeks into the year, but that the supply-demand balance appears to be tightening even as we speak, which is a good precursor to having prices rise. Now, whether or not we get there in 2022, I'm not going to go out on a limb or it takes until 23 or 24, but there's no doubt in our mind that the supply-demand fundamentals and the cost advantage that we have and the fact that all of the Natural producers are already sold out. There's no question that prices are going to rise, and they can rise rapidly, and we intend to take advantage of that.

Got it. Thank you for that. That's helpful.

Thank you. We reach the end of our question-and-answer session. I'd like to turn the floor back over to management for any further or closing comments.

Well, we thank everyone for participating. You know, we give a shout-out to the citizens of Texas, and it's been a rough week on a lot of people. A lot of us have been more fortunate than others, but Texas will get through it, and we'll talk to everyone in another 90 days, if not sooner. So thanks very much for participating.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.