Westlake Chemical Partners LP

Previous wording

Westlake has an option to take 95% of volumes in excess of the minimum commitment on an annual basis under the Ethylene Sales Agreement if we produce more than our planned production. Under the Ethylene Sales Agreement, the price for the sale of such excess ethylene to Westlake is based on a formula similar to that used for the minimum purchase commitment, with the exception of certain fixed costs. In addition, under the Ethylene Sales Agreement, if production costs billed to Westlake on an annual basis are less than 95% of the actual production costs incurred by OpCo during the contract year, OpCo is entitled to recover the shortfall in such production costs (proportionate to the volume sold to Westlake) in the subsequent year ("Shortfall"). The Shortfall is generally recognized during the period in which the related operating, maintenance or turnaround activities occur.

Current wording

Westlake has an option to take 95% of volumes in excess of the minimum commitment on an annual basis under the Ethylene Sales Agreement if we produce more than our planned production. Under the Ethylene Sales Agreement, the price for the sale of such excess ethylene to Westlake is based on a formula similar to that used for the minimum purchase commitment, with the exception of certain fixed costs. Under the Ethylene Sales Agreement, if we produce more than our planned production in a contract year, we reimburse Westlake for certain non-variable costs that were charged on excess quantities of ethylene produced and sold to Westlake. Such reimbursement is scheduled to be paid by the Partnership after the conclusion of the year.

Previous wording

For the quarter ended June 30, 2024, net income was $88.0 million on net sales of $284.2 million. This represents an increase in net income of $12.7 million as compared to net income of $75.3 million on net sales of $264.2 million for the quarter ended June 30, 2023. Net income attributable to the Partnership for the second quarter of 2024 was $14.4 million as compared to $11.9 million for the second quarter of 2023, an increase of$2.5 million. Income from operations was $93.6 million for the second quarter of 2024 as compared to $80.5 million for the second quarter of 2023. Income from operations, net income and net income attributable to the Partnership for the second quarter of 2024 as compared to the second quarter of 2023 were higher primarily due to higher ethylene sales volumes to Westlake and lower ethane feedstock costs in the second quarter of 2024 compared to the second quarter of 2023, partially offset by lower ethylene sales prices to Westlake. Net sales for the second quarter of 2024 increased by $20.0 million as compared to net sales for the second quarter of 2023, mainly due to higher ethylene sales volumes to Westlake and higher ethylene and co-products sales prices to third parties in the second quarter of 2024 compared to the second quarter of 2023, partially offset by lower ethylene sales prices to Westlake.

Current wording

For the quarter ended September 30, 2024, net income was $104.1 million on net sales of $277.0 million. This represents an increase in net income of $23.2 million as compared to net income of $80.9 million on net sales of $321.7 million for the quarter ended September 30, 2023. Net income attributable to the Partnership for the third quarter of 2024 was $18.1 million as compared to $13.2 million for the third quarter of 2023, an increase of$4.9 million. Income from operations was $109.7 million for the third quarter of 2024 as compared to $86.2 million for the third quarter of 2023, an increase of $23.5 million. Income from operations, net income and net income attributable to the Partnership for the third quarter of 2024 as compared to the third quarter of 2023 were higher primarily due to higher ethylene and co-products sales volumes and prices to third parties and lower ethane feedstock costs and natural gas prices in the third quarter of 2024 compared to the third quarter of 2023, partially offset by lower ethylene sales volumes and prices to Westlake. Net sales for the third quarter of 2024 decreased by $44.7 million as compared to net sales for the third quarter of 2023, mainly due to lower ethylene sales volumes and prices to Westlake in the third quarter of 2024 compared to the third quarter of 2023, partially offset by higher ethylene and co-products sales volumes and prices to third parties.

Previous wording

For thesix months ended June 30, 2024, net income was $177.7 million on net sales of $568.8 million. This represents anincrease in net income of $11.0 million as compared to net income of $166.7 million on net sales of $571.9 million for thesix months ended June 30, 2023. Net income attributable to the Partnership for thesix months ended June 30, 2024 was $29.3 million as compared to $26.8 million for thesix months ended June 30, 2023, anincrease of $2.5 million. Income from operations was $188.7 million for thesix months ended June 30, 2024 as compared to $178.7 million for thesix months ended June 30, 2023. Income from operations, net income and net income attributable to the Partnership for thesix months ended June 30, 2024 as compared to thesix months ended June 30, 2023 were higher primarily due to higher ethylene sales volumes to Westlake and lower ethane feedstock costs and natural gas prices in the six months ended June 30, 2024 comparedto thesix months ended June 30, 2023, partially offset by lower ethylene sales prices to Westlake. Net sales for thesix months ended June 30, 2024 decreased by $3.1 million as compared to net sales for the six months ended June 30, 2023, mainly due to lower ethylene sales prices, partially offset by higher sales volumes during the six months ended June 30, 2024 as compared to thesix months ended June 30, 2023.

Current wording

For thenine months ended September 30, 2024, net income was $281.8 million on net sales of $845.8 million. This represents anincrease in net income of $34.2 million as compared to net income of $247.6 million on net sales of $893.5 million for thenine months ended September 30, 2023. Net income attributable to the Partnership for thenine months ended September 30, 2024 was $47.4 million as compared to $40.0 million for thenine months ended September 30, 2023, anincrease of $7.4 million. Income from operations was $298.4 million for thenine months ended September 30, 2024 as compared to $264.9 million for thenine months ended September 30, 2023, an increase of $33.5 million. Income from operations, net income and net income attributable to the Partnership for thenine months ended September 30, 2024 as compared to thenine months ended September 30, 2023 were higher primarily due to higher ethylene and co-products sales volumes and prices to third parties, higher ethylene sales volumes to Westlake and lower ethane feedstock costs and natural gas prices in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, partially offset by lower ethylene sales prices to Westlake. Net sales for thenine months ended September 30, 2024 decreased by $47.7 million as compared to net sales for the nine months ended September 30, 2023, mainly due to lower ethylene sales prices to Westlake, partially offset by higher ethylene and co-products sales volumes and prices to third parties and higher ethylene sales volumes to Westlake during the nine months ended September 30, 2024 as compared to thenine months ended September 30, 2023.

Previous wording

Second Quarter 2024 Compared with Second Quarter 2023

Current wording

Third Quarter 2024 Compared with Third Quarter 2023

Previous wording

Net Sales. Total net sales increased by $20.0 million, or 7.6%, to $284.2 million in the second quarter of 2024 from $264.2 million in the second quarter of 2023. The increase in net sales in the second quarter of 2024 was primarily due to higher ethylene sales volumes to Westlake and higher ethylene and co-products sales prices to third parties in the second quarter of 2024 compared to the second quarter of 2023, partially offset by lower ethylene sales prices to Westlake. Lower average sales prices in the second quarter of 2024 contributed to a 1.2% decrease in net sales compared to the second quarter of 2023. Higher sales volumes in the second quarter of 2024 contributed to an 8.8% increase in net sales compared to the second quarter of 2023.

Current wording

Net Sales. Total net sales decreased by $44.7 million, or 13.9%, to $277.0 million in the third quarter of 2024 from $321.7 million in the third quarter of 2023. The decrease in net sales in the third quarter of 2024 was primarily due to lower ethylene sales volumes and prices to Westlake in the third quarter of 2024 compared to the third quarter of 2023, partially offset by higher ethylene and co-products sales volumes and prices to third parties. Lower average sales prices in the third quarter of 2024 contributed to a 15.1% decrease in net sales compared to the third quarter of 2023. Higher sales volumes in the third quarter of 2024 contributed to a 1.2% increase in net sales compared to the third quarter of 2023.

Previous wording

Gross Profit. Gross profit increased to $101.2 million in the second quarter of 2024 from $87.7 million in the second quarter of 2023. Gross profit margin percentage in the second quarter of 2024 was 35.6%, as compared to 33.2% for the second quarter of 2023. The higher gross profit was primarily due to higher ethylene sales volumes to Westlake, higher ethylene and co-products sales prices to third parties and lower ethane feedstock costs in the second quarter of 2024 compared to the second quarter of 2023, partially offset by lower ethylene sales prices to Westlake. The higher gross profit margin was primarily due to lower ethane feedstock costs in the second quarter of 2024 compared to the second quarter of 2023.

Current wording

Gross Profit. Gross profit increased to $116.9 million in the third quarter of 2024 from $93.0 million in the third quarter of 2023. Gross profit margin percentage in the third quarter of 2024 was 42.2%, as compared to 28.9% for the third quarter of 2023. The higher gross profit margin was primarily due to lower ethane feedstock costs and natural gas prices in the third quarter of 2024 compared to the third quarter of 2023. The gross profit margin for the third quarter of 2024 was also positively affected by insurance recoveries of approximately $6.2 million related to the settlement of a business interruption claim associated with Hurricane Laura, which impacted OpCo's Petro 1 and Petro 2 facilities in the second half of 2020 and impacted production in the subsequent periods.

Previous wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $0.4 million, or 5.6%, to $7.6 million in the second quarter of 2024 as compared to $7.2 million in the second quarter of 2023. The increase was mainly attributable to higher service costs in the second quarter of 2024 as compared to the second quarter of 2023.

Current wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $0.6 million, or 9.0%, to $7.3 million in the third quarter of 2024 as compared to $6.7 million in the third quarter of 2023. The increase was mainly attributable to a higher provision for credit losses in the third quarter of 2024 as compared to the third quarter of 2023.

Previous wording

Interest Expense—Westlake. Interest expense of $6.7 million in the second quarter of 2024 increased from $6.1 million in the second quarter of 2023 mainly due to higher interest rates on the debt balance outstanding in the second quarter of 2024 as compared to the second quarter of 2023.

Current wording

Interest Expense—Westlake. Interest expense of $6.7 million in the third quarter of 2024 increased from $6.4 million in the third quarter of 2023 mainly due to higher interest rates on the debt balance outstanding in the third quarter of 2024 as compared to the third quarter of 2023.

Previous wording

MLP Distributable Cash Flow. MLP distributable cash flow increased by $2.1 million to $17.1 million in the second quarter of 2024 from $15.0 million in the second quarter of 2023. The increase in the second quarter of 2024, as compared to the prior-year period, was primarily attributable to increased earnings at OpCo, partially offset by higher reserves for turnarounds and maintenance capital expenditures.

Current wording

MLP Distributable Cash Flow. MLP distributable cash flow increased by $4.3 million to $17.9 million in the third quarter of 2024 from $13.6 million in the third quarter of 2023. The increase in the third quarter of 2024, as compared to the prior-year period, was primarily attributable to increased earnings at OpCo and lower maintenance capital expenditures, partially offset by higher reserves for future turnarounds.

Previous wording

Net Sales. Total net sales decreased by $3.1 million, or 0.5%, to $568.8 million in thesix months ended June 30, 2024 from $571.9 million in thesix months ended June 30, 2023. Thedecrease in net sales in thesix months ended June 30, 2024 was primarily due to lower ethylene sales prices, partially offset by higher sales volumes during the six months ended June 30, 2024 as compared to thesix months ended June 30, 2023. The lower average sales prices in the six months ended June 30, 2024 contributed to a 3.9% decrease in net sales compared to the six months ended June 30, 2023. The higher sales volumes in the six months ended June 30, 2024 contributed to a 3.3% increase in net sales as compared to thesix months ended June 30, 2023.

Current wording

Net Sales. Total net sales decreased by $47.7 million, or 5.3%, to $845.8 million in thenine months ended September 30, 2024 from $893.5 million in thenine months ended September 30, 2023. Thedecrease in net sales in thenine months ended September 30, 2024 was primarily due to lower ethylene sales prices to Westlake, partially offset by higher ethylene sales volumes to Westlake and higher ethylene and co-products sales volumes and prices to third parties during the nine months ended September 30, 2024 as compared to thenine months ended September 30, 2023. The lower average sales prices in the nine months ended September 30, 2024 contributed to a 7.9% decrease in net sales compared to the nine months ended September 30, 2023. The higher sales volumes in the nine months ended September 30, 2024 contributed to a 2.6% increase in net sales as compared to thenine months ended September 30, 2023.

Previous wording

Gross Profit. Gross profit increased to $203.4 million in thesix months ended June 30, 2024 from $193.8 million in thesix months ended June 30, 2023. Gross profit margin in thesix months ended June 30, 2024 was 35.8%, as compared to 33.9% for thesix months ended June 30, 2023. The increase in gross profit margin was primarily due to lower ethane feedstock costs and natural gas prices in the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Current wording

Gross Profit. Gross profit increased to $320.4 million in thenine months ended September 30, 2024 from $286.8 million in thenine months ended September 30, 2023. Gross profit margin in thenine months ended September 30, 2024 was 37.9%, as compared to 32.1% for thenine months ended September 30, 2023. The increase in gross profit margin was primarily due to higher sales prices and volumes to third parties and lower ethane feedstock costs and natural gas prices in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Previous wording

Interest Expense—Westlake. Interest expense of $13.2 million in the six months ended June 30, 2024 was comparable to interest expense of $13.4 million in thesix months ended June 30, 2023.

Current wording

Interest Expense—Westlake. Interest expense of $19.9 million in the nine months ended September 30, 2024 was comparable to interest expense of $19.9 million in thenine months ended September 30, 2023.

Previous wording

Other Income, net. Other income, net increased by $0.7 million to $2.6 million in the six months ended June 30, 2024 from $1.9 million in the six months ended June 30, 2023, primarily due to higher interest earned on the balance with Westlake under the Investment Management Agreement due to higher market interest rates as well as a higher average amount of cash invested in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

Current wording

Other Income, net. Other income, net increased by $0.7 million to $3.9 million in the nine months ended September 30, 2024 from $3.2 million in the nine months ended September 30, 2023, primarily due to higher interest earned on the balance with Westlake under the Investment Management Agreement due to higher market interest rates as well as a higher average amount of cash invested in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

Previous wording

MLP Distributable Cash Flow. MLP distributable cash flow increased by $1.5 million to $34.0 million in thesix months ended June 30, 2024 from $32.5 million in thesix months ended June 30, 2023. Theincrease in thesix months ended June 30, 2024, as compared to the prior-year period, was primarily attributable to increased earnings at OpCo, partially offset by higher reserves for turnarounds and maintenance capital expenditures.

Current wording

MLP Distributable Cash Flow. MLP distributable cash flow increased by $5.7 million to $51.9 million in thenine months ended September 30, 2024 from $46.2 million in thenine months ended September 30, 2023. Theincrease in thenine months ended September 30, 2024, as compared to the prior-year period, was primarily attributable to increased earnings at OpCo, partially offset by higher reserves for future turnarounds.

Previous wording

EBITDA. EBITDA increased by $13.4 million to $247.6 million in thesix months ended June 30, 2024 from $234.2 million in thesix months ended June 30, 2023. Theincrease was primarily due to higher ethylene sales volumes to Westlake and lower ethane feedstock costs and natural gas prices during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, partially offset by lower ethylene sales prices to Westlake.

Current wording

EBITDA. EBITDA increased by $36.9 million to $386.8 million in thenine months ended September 30, 2024 from $349.9 million in thenine months ended September 30, 2023. The increase was primarily due to higher ethylene and co-products sales volumes and prices to third parties, higher ethylene sales volumes to Westlake and lower ethane feedstock costs and natural gas prices during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, partially offset by lower ethylene sales prices to Westlake.

Previous wording

CASH FLOW DISCUSSION FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023

Current wording

CASH FLOW DISCUSSION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

Previous wording

Operating activities provided cash of $226.5 million in the first six months of 2024 compared to cash provided by operating activities of $243.4 million in the first six months of 2023. The $16.9 million decrease in cash flows from operating activities was mainly due to a decrease of $49.4 million in cash provided by working capital during the six months ended June 30, 2024 as compared to the prior-year period. Changes in components of working capital, which we define for the purposes of this cash flow discussion as accounts receivable, net—Westlake, accounts receivable, net—third parties, inventories, prepaid expenses and other current assets less accounts payable—Westlake, accounts payable—third parties and accrued and other liabilities, provided cash of $0.3 million in the first six months of 2024 as compared to $49.7 million of cash provided in the first six months of 2023, resulting in an overall unfavorable change of $49.4 million. The unfavorable change in working capital was mainly attributable to unfavorable changes in net accounts receivable—Westlake, accounts receivable—third parties, accounts payable—third parties and accrued and other liabilities. The unfavorable change in accounts receivable, net—Westlake was primarily due to a smaller buyer deficiency fee and Shortfall collected in the first six months of 2024 as compared to the first six months of 2023 partially offset by lower ethane feedstock costs. Unfavorable changes in accounts receivables— third parties, accounts payable—third parties and accrued and other liabilities were due to higher third party sales and lower maintenance costs in the first six months of 2024 as compared to the first six months of 2023.

Current wording

Operating activities provided cash of $352.5 million in the first nine months of 2024 compared to cash provided by operating activities of $344.3 million in the first nine months of 2023. The $8.2 million increase in cash flows from operating activities was mainly due to lower cash used for turnaround activity compared to the first nine months of 2023. Changes in components of working capital, which we define for the purposes of this cash flow discussion as accounts receivable, net—Westlake, accounts receivable, net—third parties, inventories, prepaid expenses and other current assets less accounts payable—Westlake, accounts payable—third parties and accrued and other liabilities, provided cash of $1.2 million in the first nine months of 2024 as compared to $39.5 million of cash provided in the first nine months of 2023, resulting in an overall unfavorable change of $38.3 million. The unfavorable change in working capital was mainly attributable to unfavorable changes in net accounts receivable—Westlake, accounts payable—third parties and accrued and other liabilities. The unfavorable change in accounts receivable, net—Westlake was primarily due to a smaller buyer deficiency fee and Shortfall collected in the first nine months of 2024 as compared to the first nine months of 2023, partially offset by changes in the payable with Westlake due to fluctuating ethane feedstock costs. Unfavorable changes in accounts payable—third parties and accrued and other liabilities were due to the timing of payment of accruals and the impact of the Calvert City Olefins turnaround activities on these balances in the first nine months of 2023.

Previous wording

Net cash used for investing activities in the first six months of 2024 was $20.0 million as compared to net cash used for investing activities of $46.3 million in the first six months of 2023, resulting in an overall favorable change of $26.3 million in investing cash flows. During the first six months of 2023, there were net investments with Westlake of $29.1 million under the Investment Management Agreement, whereas, in the first six months of 2024 there were no investing activities under the Investment Management Agreement. Capital expenditures during the first six months of 2024 were slightly higher than the first six months of 2023. For both the comparative periods, these capital expenditures were primarily related to projects to increase production capacity or reduce costs, maintenance costs and safety and environmental projects at our facilities.

Current wording

Net cash used for investing activities in the first nine months of 2024 was $50.5 million as compared to net cash used for investing activities of $53.1 million in the first nine months of 2023, resulting in an overall favorable change of $2.6 million in investing cash flows. During the first nine months of 2024, there were net investments with Westlake of $15.0 million under the Investment Management Agreement, whereas during the first nine months of 2023, there were net investments with Westlake of $19.1 million under the Investment Management Agreement. Capital expenditures during the first nine months of 2024 were slightly higher than the first nine months of 2023. For both the comparative periods, these capital expenditures were primarily related to projects to increase production capacity or reduce costs, maintenance costs and safety and environmental projects at our facilities.

Previous wording

Net cash used for financing activities in the first six months of 2024 was $199.1 million as compared to net cash used for financing activities of $202.5 million in the first six months of 2023. The cash outflows in the first six months of 2024 were related to distributions of $165.9 million to the noncontrolling interest retained in OpCo by Westlake and of $33.2 million to unitholders by the Partnership. The cash outflows in the first six months of 2023 were related to distributions of $169.3 million to the noncontrolling interest retained in OpCo by Westlake and of $33.2 million to unitholders by the Partnership.

Current wording

Net cash used for financing activities in the first nine months of 2024 was $300.4 million as compared to net cash used for financing activities of $290.1 million in the first nine months of 2023. The cash outflows in the first nine months of 2024 were related to distributions of $250.6 million to the noncontrolling interest retained in OpCo by Westlake and of $49.8 million to unitholders by the Partnership. The cash outflows in the first nine months of 2023 were related to distributions of $240.3 million to the noncontrolling interest retained in OpCo by Westlake and of $49.8 million to unitholders by the Partnership.

Previous wording

In order to fund non-annual turnaround expenditures, we cause OpCo to reserve an amount for turnaround costs during each twelve-month period designed to cover future turnaround activities. Each of OpCo's ethylene production facilities requires turnaround maintenance approximately every five years. By reserving additional cash annually, we intend to reduce the variability in OpCo's cash flow. We expect to commence the next planned maintenance turnaround at Petro 1 in the first quarter of 2025. Westlake's purchase price for ethylene purchased under the Ethylene Sales Agreement includes a component (adjusted annually) designed to cover, over the long term, substantially all of OpCo's turnaround expenditures.

Current wording

In order to fund non-annual turnaround expenditures, we cause OpCo to reserve an amount for turnaround costs during each twelve-month period designed to cover future turnaround activities. Each of OpCo's ethylene production facilities requires turnaround maintenance approximately every five years. By reserving additional cash annually, we intend to reduce the variability in OpCo's cash flow. Although we had previously planned to commence the next maintenance turnaround at the Petro 1 ethylene unit in the third quarter of 2024, we made the decision to defer the planned turnaround in order to maintain production and capitalize on higher average third-party ethylene sales prices during the second half of 2024. We expect to commence the next planned maintenance turnaround at Petro 1 in the first quarter of 2025. Westlake's purchase price for ethylene purchased under the Ethylene Sales Agreement includes a component (adjusted annually) designed to cover, over the long term, substantially all of OpCo's turnaround expenditures.

Previous wording

Westlake has historically funded expansion capital expenditures related to Lake Charles Olefins and Calvert City Olefins. No such funding was required by OpCo during the six months ended June 30, 2024 and 2023. Total capital expenditures for the six months ended June 30, 2024 and 2023 were $20.0 million and $17.2 million, respectively. We expect that Westlake will loan additional cash to OpCo to fund its expansion capital expenditures in the future, but Westlake is under no obligation to do so.

Current wording

Westlake has historically funded expansion capital expenditures related to Lake Charles Olefins and Calvert City Olefins. No such funding was required by OpCo during the nine months ended September 30, 2024 and 2023. Total capital expenditures for the nine months ended September 30, 2024 and 2023 were $35.5 million and $34.0 million, respectively. We expect that Westlake will loan additional cash to OpCo to fund its expansion capital expenditures in the future, but Westlake is under no obligation to do so.

Previous wording

As of June 30, 2024, our cash and cash equivalents totaled $66.0 million. In addition, we have cash invested under the Investment Management Agreement (as described below) and a revolving credit facility with Westlake available to supplement cash if needed, as described under "Indebtedness" below.

Current wording

As of September 30, 2024, our cash and cash equivalents totaled $60.2 million. In addition, we have cash invested under the Investment Management Agreement (as described below) and a revolving credit facility with Westlake available to supplement cash if needed, as described under "Indebtedness" below.

Previous wording

In August 2017, the Partnership, OpCo and Westlake executed the Investment Management Agreement that authorizes Westlake to invest the Partnership's and OpCo's excess cash with Westlake for durations of up to a maximum of nine months. Per the terms of the Investment Management Agreement, the Partnership earns a market return plus five basis points and Westlake provides daily availability of the invested cash to meet any liquidity needs of the Partnership or OpCo. The Partnership had $94.5 million of cash invested under the Investment Management Agreement at June 30, 2024.

Current wording

In August 2017, the Partnership, OpCo and Westlake executed the Investment Management Agreement that authorizes Westlake to invest the Partnership's and OpCo's excess cash with Westlake for durations of up to a maximum of nine months. Per the terms of the Investment Management Agreement, the Partnership earns a market return plus five basis points and Westlake provides daily availability of the invested cash to meet any liquidity needs of the Partnership or OpCo. The Partnership had $109.5 million of cash invested under the Investment Management Agreement at September 30, 2024.