Genesis Energy, L.P.

Greetings and welcome to the Genesis Energy fourth quarter 2025 earnings conference hall webcast. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. You may be placed in the question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star zero. It's now my pleasure to turn the call over to your host, Dwayne Morley, Vice President, Investor Relations. Please go ahead, Dwayne.

Good morning, and welcome to the 2025 fourth quarter conference call for Genesis Energy. Genesis Energy has three business segments. The offshore pipeline transportation segment is engaged in providing the critical infrastructure to move oil produced from the long-lived Ross Reservoir from the deepwater Gulf of America to onshore refining centers. The marine transportation segment is engaged in the maritime transportation of primarily refined petroleum products. The onshore transportation and services segment is engaged in the transportation, handling, blending, storage, and supply of energy products, including crude oil and refined products, primarily around refining centers, as well as the processing of sour gas streams to remove sulfur at refining operations. Genesis's operations are primarily located in the Gulf Coast states and the Gulf of America. During this conference call, management may be making forward-looking statements within the meanings 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 this morning 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 Kristen Jesselitis, Chief Financial Officer and Chief Legal Officer, Brian Sims, President and Chief Commercial Officer, and Louie Nichol, Chief Accounting Officer. And with that, I'll now turn the call over to Grant.

Thanks, Dwayne, and good morning to everyone. Thanks for listening to the call. As noted in our earnings release this morning, our fourth quarter results came in slightly ahead of our internal expectations as our offshore pipeline transportation segment saw strong growth driven by steady base volumes, a full quarter of volumes from Shenandoah well above its minimum volume commitment, along with continued ramping volumes from Salamanca. Our marine transportation segment returned to a more normalized level of operating performance as our refinery customers increased runs of heavy crude oil, which drove higher volumes of intermediate black oil available for transport. In addition, the transitory market conditions and supply pressures that impacted our blue water fleet last quarter now appear to be behind us, all of which should provide for a constructive outlook for our marine segments as we look ahead. The strategic actions we took in 2025, combined with the strong operating performance from our underlying businesses and new offshore volumes, enabled us to exit the year with effectively zero outstanding under our $800 million senior secured revolving credit facility at the end of the year after giving effect to cash on hand. With ample liquidity, and an increasingly clear line of sight ahead of us, the board made the decision to increase our quarterly common unit distribution to 18 cents per unit, representing a 9.1% increase year over year. Furthermore, Just last week, we opportunistically purchased an additional $25 million of our corporate preferred units in a privately negotiated transaction. Taken together, these actions demonstrate our disciplined approach to capital allocation. As we look ahead to 2026, and assuming our other businesses perform as expected, the Genesis story at this point is largely a deepwater Gulf of America growth story. Based on our ongoing discussions with our offshore producer customers and the conversations we have with them during their year-end budgeting cycle, we have been provided with lots of information, including expected production volumes for 2026 and beyond, along with current and future expected drilling schedules. We were also notified of certain planned and routine turnarounds they have scheduled for 2026, a couple of which will take place at production facilities where we handle the hydrocarbon molecules more than once, and thus can be more financially impactful. While we benefited from no significant turnarounds in 2025, these are absolutely normal and customary, and in some cases, unfortunately, they can last upwards of 30 to 45 days each. These are their plans, and as I believe everyone can appreciate, We ultimately do not control our customers' operations, nor the precise timing of them drilling, completing, and bringing new high-impact wells online. We fully understand that plans and schedules offshore change. Deepwater drill ship schedules change. Weather throughout the year changes. Plan turnarounds can be delayed or extended for a variety of reasons outside our control. What is important, though, is that despite all of this, And a heavier than normal recurring dry docking schedule, which we'll go into more detail in 2026, we still reasonably expect to deliver sequential growth in adjusted EBITDA of plus or minus 15 to 20% over our normalized 2025 adjusted EBITDA of approximately $500 to $510 billion. We obviously hope to exceed the top end of that range in 2026. And quite frankly, we could easily make a case for such an outcome. To the extent our actual results differ in any significant way, we would simply view that as more of a timing issue, with ultimate cash flows just sliding to the right, rather than any fundamental degradation in the long-term cash flows expected from the fields contracted to access our offshore infrastructure. You know, even if certain offshore activity slips to the right, 2027 should be meaningfully stronger than 2026. based upon our producer customers' current development plans that we've seen. And as a result, the opportunities available to us in 26 become even more compelling in 2027 and beyond. With that, I'll go into a little more detail on each of our business segments. As noted in our earnings release, our offshore pipeline transportation segment delivered another quarter of strong sequential growth, with both segment margin and total volumes increasing across our chops and Poseidon pipelines, rising approximately 19% and 16% respectively versus the third quarter, marking the third consecutive quarter of sequential improvement. In fact, from the first quarter to the fourth quarter of 2025, segment margin increased by roughly 57%, with total volumes across both systems growing approximately 28%. These results were driven by steady volumes from our legacy fields, strong contributions from Shenandoah, and a continued ramp-up in volumes from Salamanca. During the quarter, volumes from the Shenandoah FBU remained steady as the facility continued to operate at or near its 100,000-barrel-per-day target rate from four Phase I wells. At Salamanca, volumes continued to ramp from its first three wells, and we remain encouraged by both reservoir performance and the remaining development plans. An additional well at Salamanca is scheduled for completion in this second quarter, with the potential for a fifth well as early as the fourth quarter. Together, these wells are expected to result in total production of 50,000 to 60,000 barrels a day per day from the Salamanca production facility. Looking ahead, we expect the monument development a two-well subsea tieback to Shenandoah, to be completed and flowing through our facilities by late this year, certainly early 2027. Following Monument, a fifth well at Shenandoah is scheduled to be drilled, which could increase total throughput across the Shenandoah FPU to as much as 120 KVD, with potential upside of an additional 10,000 to 20,000 barrels per day in early 2027. In addition to the five development wells between Salamanca and Shenandoah, We're aware of at least eight additional development or subsea tieback wells at legacy production facilities served exclusively by our pipeline infrastructure that are planned to be drilled over the next 12 to 15 months. Taking together, this activity underscores that producers in the Gulf of America continue to prioritize long cycle, high return deep water developments. We remain actively engaged in commercial discussions around future tieback and development opportunities that can access our offshore systems as projects are sanctioned. Given the competitive economics and long planning cycles associated with these developments, we do not expect near-term commodity price volatility to materially impact offshore development activity in the Gulf. As we look beyond 2026, we would be remiss not to highlight the results of BOEM's most recent lease sale, Big Beautiful Gulf One, or BBG1, which was held on December 10th, 2025. The outcome of this sale further reinforces our view, and that of the broader upstream industry, that there remains strong long-term interest in the central Gulf of Mexico. BBG-1 generated over 300 million in high bids for 181 tracks covering approximately 1 million acres in federal waters, with roughly 65% of the acreage located in the central Gulf of Mexico. When combined with lease sales 259 and 261, which took place in March and December of 2023, respectively, more than 4.4 million acres have been leased in federal Gulf waters over the past three years. Approximately 2.4 million acres, or 53% of the total, which are located in the central Gulf, where our offshore plant land infrastructure is located and has existing capacity. The breadth of current development activity, the scale of recent lease sales, and the long cycle nature of deepwater investment all underscore our conviction that the Gulf of America remains a world-class basin with decades and decades of existing inventory. We believe Genesis is uniquely positioned as the only truly independent third-party provider of crude oil pipeline logistics in the region, offering producers with flow assurance, and downstream market optionality along the Gulf Coast. Our differentiated asset footprint, deep customer relationships, and decades of existing and future inventory ahead position us for continued growth and decades and decades of opportunity in this world-class basin. Our marine transportation segment returned to a more normalized level of operating performance during the quarter. Market conditions across both our brown water and blue water fleets stabilized as refinery runs of heavy crudes increased and broader equipment utilization improved. Demand for our inland or brown water fleet recovered as Gulf Coast refiners responded to the widening of light to heavy differentials and increased runs of heavy crude oil, which allowed the supply of intermediate black oil needing to be transported to return to more normalized levels. Looking ahead, we remain optimistic that our marine transportation segment could benefit over time from additional volumes produced in the Gulf of America and incremental crude imports into the Gulf Coast, including volumes from Canada, the resumption of exports from Kirkuk, Iraq, and the potential for additional volumes from Venezuela should they all materialize. At a minimum, all of these additional heavy or medium sour volumes showing up on the Gulf Coast should cause heavy to sour differentials to continue to widen, providing refiners the incentive to process increasing volumes of heavier crudes. To the extent these additional heavy volumes come to fruition, this should result in additional intermediate refined product volumes that need to be kept heated and moved from one refinery location to another, which should drive demand for our inland heater barges, providing a constructive backdrop for increasing rates as we move through the year and into next year. Recent commentary from Gulf Coast refiners would reaffirm they are, in fact, starting to see additional heavy sour discounts as additional volumes arrive on the Gulf Coast. To quote from Valero's recent earnings call, looking at differentials, not only with Venezuela, but we've had several beneficial factors that have occurred to kind of help move this market weaker. After last year with discounts fairly tight, most of these market moves are making differentials increasingly favorable for refiners with high complexity refiners such as ours. We are pushing to maximize heavy crude processing in the system going forward with better differentials, end quote. Meanwhile, conditions in our blue water fleet have normalized as incremental capacity that migrated from the west coast to the gulf coast and mid-Atlantic trade lanes has largely been absorbed by the market. As we noted in our earnings release, 2026 is expected to be a higher maintenance year for our blue water fleet, with four of our nine offshore vessels scheduled to undergo regulatory dry dockings in the first half of the year. These planned shipyard periods will temporarily reduce vessel availability and may mute the near-term benefit of any improvement in day rates. Importantly, however, we expect these vessels to reenter the market against a more constructive backdrop and be well positioned to recontract at day rates that are consistent with or modestly above their current levels when they exit the shipyard. In addition, the American Phoenix remains under contract through early 2027. Based upon prevailing market rates for comparable assets, we would expect the American Phoenix to recontract at a higher day rate in our current charter when that contract expires. Overall, we remain confident in the long-term fundamentals of the marine transportation sector. With effectively zero net new supply of our classes of Jones Act vessels and the high cost and long lead times required to construct new equipment, the market remains structurally tight. As demand continues to improve across both our brown and blue water fleets, We expect our marine transportation segment to deliver stable to modestly growing contributions in the years ahead. Our onshore transportation and services segment performed in line with our expectations during the quarter. Throughput volumes continued to increase across both our Texas and Raceland terminals and pipelines as new offshore volumes ramped and moved onshore through our systems. Our legacy refinery services business also delivered results largely consistent with our expectations. As we have mentioned in the past, our refinery services business has faced certain structural headwinds over the past several years. Specifically, we have been supply constrained, in part because refineries moved to run more light sweet crudes as a result of the shell revolution over the last 10 to 15 years. As shell production is peaking, and or the gas-to-oil ratios are increasing from the shell plays, and as the heavy showers we mentioned above are returning to the Gulf Coast, we believe we should have the opportunity to make more NASH, or sodium hydrosulfide, at several of our existing facilities in future periods. We, generally speaking, can sell every ton we make, and we look forward to restoring some of our supply flexibilities. As our financial performance continues to strengthen over the coming years, and we generate increasing amounts of free cash flow, we will continue to reduce debt in absolute terms, redeem our high cost corporate preferred securities, and thoughtfully evaluate future increases in our quarterly distributions to common unit holders over time. Importantly, We will pursue these objectives while maintaining the flexibility to evaluate future organic and inorganic opportunities as they may arise. Finally, I would like to say that the management team and the board of directors remain steadfast in our commitment to building long-term value for all of our stakeholders, regardless of where you are in the capital structure. We believe the decisions we are making reflect this commitment and our confidence in Genesis moving forward. I would once again like to recognize our entire workforce for their individual efforts and, importantly, unwavering commitment to safe and responsible operations. I am extremely proud to be associated with each and every one of you. With that, I'll turn it back to the moderator for questions.