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Operator
Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Westlake Chemical Partners' fourth-quarter and full-year 2016 earnings conference call.
(Operator Instructions)
As a reminder, ladies and gentlemen, this conference is being recorded today, February 21, 2017. I would now like to turn the call over to today's host, Ben Ederington, Westlake Chemical Partners' Vice President and Chief Administrative Officer. Sir, you may begin.
- VP and Chief Administrative Officer
Thank you. Good morning, everyone, and welcome to the Westlake Chemical Partners' fourth-quarter and full-year 2016 conference call. I'm joined today by Albert Chao, our President and CEO; Steve Bender, our Senior Vice President and Chief Financial Officer, and others of our management team.
The conference call will begin with Albert, who will open with a few comments regarding Westlake Chemical Partners' performance in the fourth quarter and full-year, as well as a current outlook on our performance and opportunities. Steve will then provide a more detailed look at our financial and operating results. Finally, Albert will add a few concluding comments, and then we will open the call up to questions.
During this call, we refer to ourselves as Westlake Partners, or the Partnership. References to Westlake Chemical refer to our parent company, Westlake Chemical Corporation. And references to OpCo refer to Westlake Chemical OpCo LP, a subsidiary of Westlake Chemical and the Partnership, which owns certain olefin assets.
Today, management is going to discuss certain topics that will contain forward-looking information that is based on management's beliefs as well as assumptions made by, and information currently available to management. These forward-looking statements suggest predictions or expectations, and thus are subject to risks or uncertainties.
Actual results could differ materially, based upon many factors including operating difficulties, the volume of ethylene that we are able to sell, the price at which we're able to sell ethylene, changes in the prevailing economic conditions, actual and proposed governmental regulatory actions, competitive products and pricing pressures, our ability to borrow funds and access capital markets, and other risk factors discussed in our SEC filings.
This morning, Westlake Partners issued a press release with details of our fourth-quarter and full-year financial and operating results. This document is available in the press release section of our webpage at WLKPartners.com.
A replay of today's call will be available beginning two hours after completion of this call, until 11:59 PM Eastern time on February 28, 2017. The replay may be accessed by dialing the following numbers:
Domestic callers should dial 855-859-2056. International callers may access the replay at 404-537-3406. The access code is 55489298.
Please note that information reported on this call speaks only as of today, February 21, 2017, and therefore you are advised that time-sensitive information may no longer be accurate as of the time of any replay. I would finally advise you, this conference call is being broadcast live through an internet webcast system that can be accessed on our webpage at WLKPartners.com.
Now, I'd like to turn the call over to Albert Chao. Albert?
- President and CEO
Thank you, Ben. Good morning, ladies and gentlemen, and thank you for joining us on our earnings call to discuss our fourth-quarter and full-year 2016 results. In this morning's press release, reported consolidated net income including OpCo's earnings of $94 million for the fourth quarter 2016, Westlake Partners net income was $11 million, or $0.39 per limited partner unit.
For the full year, consolidated net income was $353 million, while Partner's net income was $41 million or $1.50 per unit. This was the first full quarter following our expansion at Petro 1 unit in Lake Charles, Louisiana, which added 250 million pounds of annual ethylene capacity. With the additional annual capacity at Petro 1, we are pleased to report record quarterly production, which led to a record quarterly distributable cash flow.
This expansion, along with our plan to expand our Calvert City, Kentucky facility in the first quarter of 2017 should allow us to continue with our targeted annual low double digit growth rate of distributions. On January 27, 2017, we announced an increase in distributions to our unit holders, with respect to the fourth quarter of 2016. This 2.9% increase in distributions is the eighth consecutive quarterly increase in distributions to our unit holders, since our initial public offering in August of 2014.
In regards to the IRS proposed regulations governing qualifying income for master limited partnerships we were pleased that the IRS and Treasury upheld a previously-issued private letter ruling regarding the production of ethylene. We appreciate the thorough process taken by the IRS and Treasury department to reach their final decision, and properly recognize this industry practice will continue to generate qualified income under the code.
With this uncertainty removed, all of the strategies to continue the growth in distributions remain at our disposal, including organic expansion of our current units, drop down transactions with OpCo, third-party acquisitions, and negotiation of the higher ethylene margins with Westlake. I would now like to turn the call over to Steve to provide more detail on the financial and operating results for the fourth quarter.
- SVP and CFO
Thank you, Albert, and good morning, everyone. In this morning's Press Release, we reported consolidated net income, including OpCo's earnings of $94 million, on consolidated sales of $294 million for the fourth quarter of 2016.
Westlake Partners' net income was $11 million, or $0.39 per unit. We also reported MLP distributable cash flow of $12 million for the fourth quarter. Fourth-quarter net income for Westlake Partners increased by $100,000 when compared to the fourth quarter of 2015. MLP distributable cash flow of $12 million was $2 million higher than fourth-quarter 2015 MLP distributable cash flow of $10 million.
The increase in MLP distributable cash flow was primarily due to the increased production at OpCo's Petro 1 unit, which completed its 250 million pound expansion in July of 2016. The Partnership's fourth-quarter net income of $11 million was $2 million or $0.07 per limited partner unit higher than third-quarter 2016 net income of $9 million.
MLP distributable cash flow was $5 million greater than third quarter MLP distributable cash flow of $7 million. This increase in net income and MLP distributable cash flow was primarily the result of increased production at our Calvert City and Petro 1 ethylene units, along with lower maintenance expense. For the full year 2016, consolidated net income, including OpCo's earnings, was $353 million, or $1 million lower than 2015 net income of $354 million.
Partners' net income for the full year of $41 million was $1 million higher than 2015 net income of $40 million. 2016 MLP distributable cash flow of $32 million was $5 million less than 2015 MLP distributable cash flow of $37 million. This decrease in MLP distributable cash flow was due to lower production and higher maintenance costs at our Petro 1 facility, due to the major turnaround and expansion project.
As previously noted, this turnaround and expansion project at OpCo's Petro 1 unit began in mid April, and was completed at the end of July 2016. The benefit from the long-term ethylene sales agreement with our sponsor, Westlake Chemical, is a stable fee-based cash flow.
This contract represents 95% of our ethylene sales, and protects the Partnership's cash flow from the margin volatility that can be associated with the ethylene business. This ethylene contract, which is structured to generate a margin of $0.10 per pound of ethylene, along with the take or pay provisions, incentivizes us to continue to look for opportunities to increase capacity and operating rates.
Along with the recently-completed 250 million-pound ethylene expansion of our Petro 1 plant, we are also preparing for the expansion of our Calvert City facility, which we have scheduled to begin at the end of the first quarter of 2017. This outage to complete the expansion is planned for approximately three weeks, and will, in addition to other incremental capacity increases, bring our annual ethylene capacity at Calvert City to 730 million pounds.
For the fourth quarter of 2016, OpCo spent $31 million in capital expenditures, as we prepared for the upcoming expansion at Calvert City. For the full year 2016, Capital Expenditures at OpCo were $299 million. The majority of this spending was for the expansion work at Petro 1, along with the long lead items for our upcoming expansion at Calvert City.
At year-end, we had consolidated cash of $89 million, of which $87 million was held at OpCo, and $2 million at the partnership level. Long-term debt was $595 million, of which $460 million was at OpCo and $135 million was at the partnership.
On January 27, 2017, we declared a quarterly distribution to unit holders of $0.345 per unit. This increase in distributions of $0.097 cents per unit represents a 2.9% increase from the third quarter of 2016. This was the first full quarter since the expansion of our Petro 1 facility, which was completed in July.
The record quarterly production of 950 million pounds and the resulting earnings led to a coverage ratio of 1.26 for the quarter. As Albert previously stated, now that the IRS has removed the uncertainty regarding the status of our operations, we have the full complement of strategies available to us to continue our growth in earnings, in cash flow, at a low double digit growth rate, including organic expansions of our current units, future drop down transactions at OpCo, third-party acquisitions, and negotiating the higher ethylene margin.
Now I'd like to turn the call back over to Albert to make some closing comments. Albert?
- President and CEO
Thank you, Steve. The stable fee-based cash flow generated by our fixed margin ethylene sales contract with Westlake Chemical forms the foundation for us to deliver long-term value to our unit holders. This enables us to successfully pursue drop down transactions, organic growth, and third-party acquisition opportunities to increase distributions to our unitholders.
Looking forward, we are preparing for the upcoming expansion of our Calvert City facility in the first quarter of 2017. The additional capacity already achieved through the recently completed Lake Charles expansion, along with the plant expansion at Calvert City, will allow us to continue our targeted low double-digit growth rate in distributions. We will continue to assess all of the levers that will allow us to grow MLP distributable cash flow.
Thank you very much for listening to our fourth-quarter and full-year earnings call this morning. Now, I'll turn the call back over to Ben. Ben?
- VP and Chief Administrative Officer
Thank you, Albert. Before we begin taking questions, I would like to remind you that a replay of this teleconference will be available starting two hours after we conclude the call. We will provide that number again at the end of the call. Operator, we are now prepared to take questions.
Operator
(Operator Instructions)
Our first question comes from the line of Robert Balsamo with FBR.
- Analyst
Congrats on a nice quarter. I think you were pretty clear on this, but I just want to double check, because it sounds pretty constructive. You mentioned that the distribution growth for 2017 can be driven pretty much solely off the organic development at Calvert City? So you don't really require drop downs with the current outlook, to get to the guided distribution growth?
- SVP and CFO
Robert, as we think about the growth in distributions coming from the expansion of our Petro 1 unit, and the upcoming expansion in Calvert City, we're continuing to look for ways we can continue to grow that distribution growth through 2017 and beyond. So as you noted, we do have expansion capacity this year coming, that will give us the ability to continue drops, or excuse me, continue growth. And look at drops, look at organic growth further beyond the expansions we've had, acquisitions and of course, that lever that allows us to move margin. All of those are available to us to allow further growth in that distributable cash flow, as we march forward beyond 2017 into future years.
- Analyst
That's great. And what are your thoughts currently on equity issuance? I think given the limited liquidity for investors, as far as getting more equity out into the market, obviously you are not under any pressure to do that, with no leverage or what not, but just any thoughts there on potentially accessing the capital markets?
- SVP and CFO
Yes, well we recognize that over time, having additional liquidity is certainly a positive, and certainly as we think about that, we have an ability, as you can see with the balance sheet, to also provide additional leverage in the organization as well. So we're going to be mindful of making sure that we can provide the appropriate growth in distributions, and the appropriate liquidity to provide the investor the growth that they expect, and the ability to provide liquidity, so they can trade in and out of the securities over time.
- Analyst
Great, that's good. And if you could just clarify, maintenance CapEx looking into 2017, what your thoughts are there? What falls into that maintenance number?
- SVP and CFO
Yes, certainly, there will be maintenance related to this upcoming expansion. While the unit is down, we are not only expanding the unit to add that additional capacity, but also doing some maintenance at this stage in the upcoming turnaround in Calvert. So frankly as you know, we have just completed the expansions of our Petro 1 unit, and so that is in good shape and running, and as we noted, had record production in the fourth quarter.
- Analyst
Great, thanks a lot.
Operator
Thank you, and our next question comes from the line of Matthew Blair with Tudor, Pickering, Holt.
- Analyst
So you received the positive IRS ruling in January, and you've been talking about a variety of growth opportunities in front of you. Could you just talk about maybe what changed on your end as a result of this IRS ruling? Does it make you more open to drops? Does it make you more of a player in the M&A market? What changed from that IRS ruling from your perspective, if anything?
- SVP and CFO
Well I think it clarified in the market's mind the qualified income stream. Certainly as you know, we had a private letter ruling that provided that, and the uncertainty of these preliminary regulations issued in 2015 cast a shadow over that ongoing qualification of income streams.
Fortunately, we continued to have the ability to debottleneck the plant and provide the growth in distributions, and not have to go into the markets during that time period. So the levers that Albert mentioned earlier, that is the organic growth opportunities that we have been pursuing, future drop downs that you just noted, acquisitions of course, and of course, the margin that we have at $0.10 and the ability to move that up over time, are all levers that we believe have been available to us and continue to be available to us, and provide that opportunity for future investors to see growth in the business and distributable cash flow. So I think this final regulation the service puts out provides clarity to the market about the ongoing future of the business being qualified, and as Albert, noted the strategies we started with at the IPO were still fully and readily available to us, as we march forward.
- Analyst
Okay, and is there any thought to ramping up the drops into Partners to help Westlake C Corp pay down debt? And if not, when would you expect the next drop to be? Is that still going to be in the 2018-2019 time frame?
- SVP and CFO
We continue to assess the appropriateness of the drop all the time, as well as the other three levers that are available to us. So those are the kinds of things that we'll be assessing throughout this year and into 2018, so that will be an active discussion always within the organization.
- Analyst
Okay, and then after the Calvert City work is complete, when is your next olefin turnaround?
- SVP and CFO
We haven't yet announced that turnaround, but these typically operate in a five to six year cycle. And so as we do the planning work for our Petro 2, which was undertaken in 2013, we'll take, excuse me, 2013, we'll take a look and see what the next appropriate turnaround cycle is. And so to say typically they are on a five to six year horizon.
- Analyst
Got it. Thank you.
Operator
Thank you. I'm showing no further questions at this time. I'd like to turn the call back to Mr. Ederington for closing remarks.
- VP and Chief Administrative Officer
Thank you. Thank you again for participating in today's call. We hope you'll join us for our next conference call to discuss our first quarter results. Have a good day.
Operator
Thank you for participating in today's Westlake Chemical Partners' fourth-quarter and full-year 2016 earnings conference call. As a reminder, this call will be available for replay beginning two hours after the call has ended, and may be accessed until 11:59 PM Eastern Time on February 28, 2017. The replay can be accessed by calling the following numbers: Domestic callers should dial 855-859-2056, international callers may access the replay at 404-537-3406. The access code is 55489298. Everyone, have a great day.