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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-12295
GENESIS ENERGY, L.P.
(Exact name of registrant as specified in its charter)
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Delaware | | | | 76-0513049 |
(State or other jurisdiction of incorporation or organization) | | | | (I.R.S. Employer Identification No.) |
| | | | | | | |
919 Milam, Suite 2100, | | | | |
| Houston | , | TX | | | | 77002 |
(Address of principal executive offices) | | | | (Zip code) |
Registrant’s telephone number, including area code: | (713) | 860-2500 |
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Securities registered pursuant to Section 12(b) of the Act: | |
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered |
Common units | GEL | NYSE |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | |
Large accelerated filer | x | | Accelerated filer | ¨ |
Non-accelerated filer | ¨ | | Smaller reporting company | ☐ |
| | | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. There were 122,539,221 Class A Common Units and 39,997 Class B Common Units outstanding as of May 2, 2022.
GENESIS ENERGY, L.P.
TABLE OF CONTENTS
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Item 1. | | |
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Item 2. | | |
Item 3. | | |
Item 4. | | |
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Item 1. | | |
Item 1A. | | |
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Item 3. | | |
Item 4. | | |
Item 5. | | |
Item 6. | | |
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GENESIS ENERGY, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except units)
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| (unaudited) | | |
ASSETS | | | |
CURRENT ASSETS: | | | |
Cash and cash equivalents | $ | 9,547 | | | $ | 19,987 | |
Restricted cash | 5,005 | | | 5,005 | |
Accounts receivable - trade, net | 531,791 | | | 400,334 | |
Inventories | 84,094 | | | 77,958 | |
| | | |
Other | 39,162 | | | 39,200 | |
Total current assets | 669,599 | | | 542,484 | |
FIXED ASSETS, at cost | 5,519,055 | | | 5,464,040 | |
Less: Accumulated depreciation | (1,607,285) | | | (1,551,855) | |
Net fixed assets | 3,911,770 | | | 3,912,185 | |
MINERAL LEASEHOLDS, net of accumulated depletion | 547,985 | | | 549,005 | |
| | | |
EQUITY INVESTEES | 290,005 | | | 294,050 | |
INTANGIBLE ASSETS, net of amortization | 126,783 | | | 127,063 | |
GOODWILL | 301,959 | | | 301,959 | |
RIGHT OF USE ASSETS, net | 136,386 | | | 140,796 | |
OTHER ASSETS, net of amortization | 34,712 | | | 38,259 | |
TOTAL ASSETS | $ | 6,019,199 | | | $ | 5,905,801 | |
LIABILITIES AND CAPITAL | | | |
CURRENT LIABILITIES: | | | |
Accounts payable - trade | $ | 365,935 | | | $ | 264,316 | |
Accrued liabilities | 231,270 | | | 232,623 | |
| | | |
Total current liabilities | 597,205 | | | 496,939 | |
SENIOR SECURED CREDIT FACILITY | 94,800 | | | 49,000 | |
SENIOR UNSECURED NOTES, net of debt issuance costs | 2,932,003 | | | 2,930,505 | |
DEFERRED TAX LIABILITIES | 14,476 | | | 14,297 | |
OTHER LONG-TERM LIABILITIES | 437,609 | | | 434,925 | |
Total liabilities | 4,076,093 | | | 3,925,666 | |
| | | |
MEZZANINE CAPITAL: | | | |
Class A Convertible Preferred Units, 25,336,778 issued and outstanding at March 31, 2022 and December 31, 2021 | 790,115 | | | 790,115 | |
Redeemable noncontrolling interests, 250,114 and 246,394 preferred units issued and outstanding at March 31, 2022 and December 31, 2021, respectively | 267,242 | | | 259,568 | |
| | | |
PARTNERS’ CAPITAL: | | | |
Common unitholders, 122,579,218 units issued and outstanding at March 31, 2022 and December 31, 2021 | 597,783 | | | 641,313 | |
Accumulated other comprehensive loss | (5,485) | | | (5,607) | |
Noncontrolling interests | 293,451 | | | 294,746 | |
Total partners’ capital | 885,749 | | | 930,452 | |
TOTAL LIABILITIES, MEZZANINE CAPITAL AND PARTNERS’ CAPITAL | $ | 6,019,199 | | | $ | 5,905,801 | |
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
GENESIS ENERGY, L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
REVENUES: | | | | | | | |
Offshore pipeline transportation | | | | | $ | 68,068 | | | $ | 64,384 | |
Sodium minerals and sulfur services | | | | | 285,674 | | | 227,287 | |
Marine transportation | | | | | 55,774 | | | 40,331 | |
Onshore facilities and transportation | | | | | 222,431 | | | 189,217 | |
Total revenues | | | | | 631,947 | | | 521,219 | |
COSTS AND EXPENSES: | | | | | | | |
Onshore facilities and transportation product costs | | | | | 199,602 | | | 160,751 | |
Onshore facilities and transportation operating costs | | | | | 15,677 | | | 16,262 | |
Marine transportation operating costs | | | | | 43,728 | | | 33,086 | |
Sodium minerals and sulfur services operating costs | | | | | 213,625 | | | 184,431 | |
Offshore pipeline transportation operating costs | | | | | 23,016 | | | 20,716 | |
General and administrative | | | | | 15,122 | | | 11,666 | |
Depreciation, depletion and amortization | | | | | 69,506 | | | 66,286 | |
| | | | | | | |
Total costs and expenses | | | | | 580,276 | | | 493,198 | |
OPERATING INCOME | | | | | 51,671 | | | 28,021 | |
Equity in earnings of equity investees | | | | | 12,444 | | | 20,660 | |
Interest expense | | | | | (55,104) | | | (57,829) | |
Other expense | | | | | (4,258) | | | (20,065) | |
Income (loss) from operations before income taxes | | | | | 4,753 | | | (29,213) | |
Income tax expense | | | | | (304) | | | (222) | |
| | | | | | | |
| | | | | | | |
NET INCOME (LOSS) | | | | | 4,449 | | | (29,435) | |
Net loss (income) attributable to noncontrolling interests | | | | | (1,876) | | | 2 | |
Net income attributable to redeemable noncontrolling interests | | | | | (7,823) | | | (4,791) | |
NET LOSS ATTRIBUTABLE TO GENESIS ENERGY, L.P. | | | | | $ | (5,250) | | | $ | (34,224) | |
Less: Accumulated distributions attributable to Class A Convertible Preferred Units | | | | | (18,684) | | | (18,684) | |
NET LOSS ATTRIBUTABLE TO COMMON UNITHOLDERS | | | | | $ | (23,934) | | | $ | (52,908) | |
NET LOSS PER COMMON UNIT (Note 11): | | | | | | | |
| | | | | | | |
| | | | | | | |
Basic and Diluted | | | | | $ | (0.20) | | | $ | (0.43) | |
WEIGHTED AVERAGE OUTSTANDING COMMON UNITS: | | | | | | | |
Basic and Diluted | | | | | 122,579 | | | 122,579 | |
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
GENESIS ENERGY, L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
Net income (loss) | | | | | $ | 4,449 | | | $ | (29,435) | |
Other comprehensive income: | | | | | | | |
Decrease in benefit plan liability | | | | | 122 | | | 122 | |
Total Comprehensive income (loss) | | | | | 4,571 | | | (29,313) | |
Comprehensive loss (income) attributable to noncontrolling interests | | | | | (1,876) | | | 2 | |
Comprehensive income attributable to redeemable noncontrolling interests | | | | | (7,823) | | | (4,791) | |
Comprehensive loss attributable to Genesis Energy, L.P. | | | | | $ | (5,128) | | | $ | (34,102) | |
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
GENESIS ENERGY, L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
(In thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Number of Common Units | | Partners’ Capital | | Noncontrolling Interest | | Accumulated Other Comprehensive Loss | | Total |
Partners’ capital, December 31, 2021 | 122,579 | | | $ | 641,313 | | | $ | 294,746 | | | $ | (5,607) | | | $ | 930,452 | |
Net income (loss) | — | | | (5,250) | | | 1,876 | | | — | | | (3,374) | |
Cash distributions to partners | — | | | (18,387) | | | — | | | — | | | (18,387) | |
Adjustment to valuation of noncontrolling interest in subsidiary | — | | | (1,209) | | | 1,209 | | | — | | | — | |
Cash distributions to noncontrolling interests | — | | | — | | | (5,202) | | | — | | | (5,202) | |
Cash contributions from noncontrolling interests | — | | | — | | | 822 | | | — | | | 822 | |
Other comprehensive income | — | | | — | | | — | | | 122 | | | 122 | |
Distributions to Class A Convertible Preferred unitholders | — | | | (18,684) | | | — | | | — | | | (18,684) | |
| | | | | | | | | |
| | | | | | | | | |
Partners’ capital, March 31, 2022 | 122,579 | | | $ | 597,783 | | | $ | 293,451 | | | $ | (5,485) | | | $ | 885,749 | |
| Number of Common Units | | Partners’ Capital | | Noncontrolling Interest | | Accumulated Other Comprehensive Loss | | Total |
Partners’ capital, December 31, 2020 | 122,579 | | | $ | 829,326 | | | $ | (1,113) | | | $ | (9,365) | | | $ | 818,848 | |
Net loss | — | | | (34,224) | | | (2) | | | — | | | (34,226) | |
Cash distributions to partners | — | | | (18,387) | | | — | | | — | | | (18,387) | |
Cash contributions from noncontrolling interests | — | | | — | | | 236 | | | — | | | 236 | |
Other comprehensive income | — | | | — | | | — | | | 122 | | | 122 | |
Distributions to Class A Convertible Preferred unitholders | — | | | (18,684) | | | — | | | — | | | (18,684) | |
Partners’ capital, March 31, 2021 | 122,579 | | | $ | 758,031 | | | $ | (879) | | | $ | (9,243) | | | $ | 747,909 | |
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
GENESIS ENERGY, L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | |
Net income (loss) | $ | 4,449 | | | $ | (29,435) | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities - | | | |
Depreciation, depletion and amortization | 69,506 | | | 66,286 | |
| | | |
| | | |
Amortization and write-off of debt issuance costs and premium | 2,034 | | | 3,210 | |
| | | |
Payments received under previously owned direct financing leases | — | | | 17,500 | |
Equity in earnings of investments in equity investees | (12,444) | | | (20,660) | |
Cash distributions of earnings of equity investees | 12,846 | | | 19,929 | |
Non-cash effect of long-term incentive compensation plans | 3,061 | | | 1,560 | |
Deferred and other tax liabilities | 179 | | | 72 | |
Unrealized losses (gains) on derivative transactions | (1,903) | | | 17,599 | |
| | | |
Other, net | 5,686 | | | 6,160 | |
Net changes in components of operating assets and liabilities (Note 14) | (29,169) | | | (5,062) | |
Net cash provided by operating activities | 54,245 | | | 77,159 | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | |
Payments to acquire fixed and intangible assets | (80,199) | | | (39,388) | |
Cash distributions received from equity investees - return of investment | 6,008 | | | 9,314 | |
Investments in equity investees | (1,323) | | | — | |
| | | |
| | | |
Proceeds from asset sales | — | | | 23 | |
| | | |
Net cash used in investing activities | (75,514) | | | (30,051) | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | |
Borrowings on senior secured credit facility | 181,700 | | | 212,000 | |
Repayments on senior secured credit facility | (135,900) | | | (156,700) | |
| | | |
Net proceeds from issuance of preferred units (Note 10) | — | | | 17,738 | |
Repayment of senior unsecured notes (Note 9) | — | | | (80,859) | |
Debt issuance costs | — | | | (1,916) | |
| | | |
Contributions from noncontrolling interests | 822 | | | 236 | |
Distributions to noncontrolling interests | (5,202) | | | — | |
Distributions to common unitholders | (18,387) | | | (18,387) | |
Distributions to preferred unitholders | (18,684) | | | (18,684) | |
Other, net | 6,480 | | | 6,233 | |
Net cash provided by (used in) financing activities | 10,829 | | | (40,339) | |
Net increase (decrease) in cash and cash equivalents and restricted cash | (10,440) | | | 6,769 | |
Cash and cash equivalents and restricted cash at beginning of period | 24,992 | | | 27,018 | |
Cash and cash equivalents and restricted cash at end of period | $ | 14,552 | | | $ | 33,787 | |
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Basis of Presentation and Consolidation
Organization
We are a growth-oriented master limited partnership founded in Delaware in 1996 and focused on the midstream segment of the crude oil and natural gas industry as well as the production of natural soda ash. Our operations are primarily located in the Gulf Coast region of the United States, Wyoming and in the Gulf of Mexico. We provide an integrated suite of services to refiners, crude oil and natural gas producers and industrial and commercial enterprises and have a diverse portfolio of assets, including pipelines, offshore hub and junction platforms, our trona and trona-based exploring, mining, processing, producing, marketing and selling business based in Wyoming (our “Alkali Business”), refinery-related plants, storage tanks and terminals, railcars, rail unloading facilities, barges and other vessels and trucks. We are owned 100% by our limited partners. Genesis Energy, LLC, our general partner, is a wholly-owned subsidiary. Our general partner has sole responsibility for conducting our business and managing our operations. We conduct our operations and own our operating assets through our subsidiaries and joint ventures.
We currently manage our businesses through the following four divisions that constitute our reportable segments:
•Offshore pipeline transportation, which includes processing of crude oil and natural gas in the Gulf of Mexico;
•Sodium minerals and sulfur services involving trona and trona-based exploring, mining, processing, marketing and selling activities, as well as soda ash production and processing of high sulfur (or “sour”) gas streams for refineries to remove the sulfur and selling the related by-product, sodium hydrosulfide (or “NaHS,” commonly pronounced “nash”);
•Onshore facilities and transportation, which include terminaling, blending, storing, marketing and transporting crude oil and petroleum products; and
•Marine transportation to provide waterborne transportation of petroleum products and crude oil throughout North America
Basis of Presentation and Consolidation
The accompanying Unaudited Condensed Consolidated Financial Statements include Genesis Energy, L.P. and its subsidiaries, including our general partner, Genesis Energy, LLC.
Our results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the fiscal year. The Unaudited Condensed Consolidated Financial Statements included herein have been prepared by us without audit pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they reflect all adjustments (which consist solely of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the financial results for interim periods. Certain information and notes normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures are adequate to make the information presented not misleading when read in conjunction with the information contained in the periodic reports we file with the SEC pursuant to the Securities Exchange Act of 1934, including the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021 (our “Annual Report”).
Except per unit amounts, or as noted within the context of each footnote disclosure, the dollar amounts presented in the tabular data within these footnote disclosures are stated in thousands of dollars.
2. Recent Accounting Developments
Recent and Proposed Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), which provides expedients and exceptions for accounting treatment of contracts which are affected by the anticipated discontinuation of the London InterBank Offered Rate (“LIBOR”) and other rates resulting from rate reform that are entered into on or before December 31, 2022. Contract terms that are modified due to the replacement of a reference rate are not required to be remeasured or reassessed under relevant accounting standards. The discontinuation of LIBOR is expected to occur in 2023. We are evaluating the provisions of ASU 2020-04 and have not yet determined the impact on our Consolidated Financial Statements and disclosures related to our senior secured credit facility due to the uncertain timing of the transition to another interest rate benchmark.
GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. Revenue Recognition
Revenue from Contracts with Customers
The following tables reflect the disaggregation of our revenues by major category for the three months ended March 31, 2022 and 2021, respectively:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2022 |
| Offshore Pipeline Transportation | | Sodium Minerals & Sulfur Services | | Marine Transportation | | Onshore Facilities and Transportation | | Consolidated |
Fee-based revenues | $ | 68,068 | | | $ | — | | | $ | 55,774 | | | $ | 13,631 | | | $ | 137,473 | |
Product Sales | — | | | 258,775 | | | — | | | 208,800 | | | 467,575 | |
Refinery Services | — | | | 26,899 | | | — | | | — | | | 26,899 | |
| $ | 68,068 | | | $ | 285,674 | | | $ | 55,774 | | | $ | 222,431 | | | $ | 631,947 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2021 |
| Offshore Pipeline Transportation | | Sodium Minerals & Sulfur Services | | Marine Transportation | | Onshore Facilities and Transportation | | Consolidated |
Fee-based revenues | $ | 64,384 | | | $ | — | | | $ | 40,331 | | | $ | 24,394 | | | $ | 129,109 | |
Product Sales | — | | | 204,778 | | | — | | | 164,823 | | | 369,601 | |
Refinery Services | — | | | 22,509 | | | — | | | — | | | 22,509 | |
| $ | 64,384 | | | $ | 227,287 | | | $ | 40,331 | | | $ | 189,217 | | | $ | 521,219 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
The Company recognizes revenue upon the satisfaction of its performance obligations under its contracts. The timing of revenue recognition varies for our different revenue streams. In general, the timing includes recognition of revenue over time as services are being performed as well as recognition of revenue at a point in time for delivery of products.
Contract Assets and Liabilities
The table below depicts our contract asset and liability balances at December 31, 2021 and March 31, 2022:
| | | | | | | | | | | | | | | | | | | | |
| | Contract Assets | | | | Contract Liabilities |
| | Current Assets- Other | | | | Accrued Liabilities | | Other Long-Term Liabilities |
Balance at December 31, 2021 | | $ | 13,563 | | | | | $ | 2,619 | | | $ | 19,028 | |
Balance at March 31, 2022 | | 4,687 | | | | | 2,415 | | | 18,498 | |
Transaction Price Allocations to Remaining Performance Obligations
We are required to disclose the amount of our transaction prices that are allocated to unsatisfied performance obligations as of March 31, 2022. We are exempt from disclosing performance obligations with a duration of one year or less, revenue recognized related to performance obligations where the consideration corresponds directly with the value provided to customers and contracts with variable consideration that is allocated wholly to an unsatisfied performance obligation or promise to transfer a good or service that is part of a series in accordance with ASC 606.
The majority of our contracts qualify for one of these expedients or exemptions. For the remaining contract types that involve revenue recognition over a long-term period with long-term fixed consideration (adjusted for indexing as required), we determined our allocations of transaction price that relate to unsatisfied performance obligations. For our tiered pricing offshore transportation contracts, we provide firm capacity for both fixed and variable consideration over a long term period. Therefore, we have allocated the remaining contract value to future periods.
GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following chart depicts how we expect to recognize revenues for future periods related to these contracts:
| | | | | | | | | | | | |
| Offshore Pipeline Transportation | | | Onshore Facilities and Transportation |
Remainder of 2022 | $ | 55,635 | | | | $ | 5,400 | |
2023 | 65,645 | | | | 7,200 | |
2024 | 59,034 | | | | 1,800 | |
2025 | 62,699 | | | | — | |
2026 | 44,691 | | | | — | |
Thereafter | 57,612 | | | | — | |
Total | $ | 345,316 | | | | $ | 14,400 | |
4. Lease Accounting
Lessee Arrangements
We lease a variety of transportation equipment (primarily railcars), terminals, land and facilities, and office space and equipment. Lease terms vary and can range from short term (under 12 months) to long term (greater than 12 months). A majority of our leases contain options to extend the life of the lease at our sole discretion. We considered these options when determining the lease terms used to derive our right of use assets and associated lease liabilities. Leases with a term of less than 12 months are not recorded on our Unaudited Condensed Consolidated Balance Sheets and we recognize lease expense for these leases on a straight-line basis over the lease term.
Our “Right of Use Assets, net” balance includes our unamortized initial direct costs associated with certain of our transportation equipment leases. Additionally, it includes our unamortized prepaid rents, our deferred rents, and our previously classified intangible asset associated with a favorable lease. Our lease liability includes our cease-use provision for railcars no longer in use. Our short-term and long-term lease liabilities are recorded within “Accrued liabilities” and “Other long-term liabilities,” respectively, on our Unaudited Condensed Consolidated Balance Sheets.
Lessor Arrangements
We have the following contracts in which we act as a lessor. We also, from time to time, sublease certain of our transportation and facilities equipment to third parties.
Operating Leases
During the three months ended March 31, 2022 and 2021, we acted as a lessor in a revenue contract associated with the M/T American Phoenix, which is included in our marine transportation segment. Our lease revenues for this arrangement (inclusive of fixed and variable consideration) were $4.1 million and $3.4 million for the three months ended March 31, 2022 and 2021, respectively.
GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. Inventories
The major components of inventories were as follows:
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Petroleum products | $ | 795 | | | $ | 998 | |
Crude oil | 8,962 | | | 11,834 | |
Caustic soda | 6,654 | | | 5,690 | |
NaHS | 18,308 | | | 17,040 | |
Raw materials - Alkali operations | 7,760 | | | 7,599 | |
Work-in-process - Alkali operations | 10,058 | | | 7,496 | |
Finished goods, net - Alkali operations | 17,669 | | | 13,681 | |
Materials and supplies, net - Alkali operations | 13,888 | | | 13,620 | |
| | | |
Total | $ | 84,094 | | | $ | 77,958 | |
Inventories are valued at the lower of cost or net realizable value. There was no adjustment to the net realizable value of inventories during the period ended March 31, 2022. As of December 31, 2021, the net realizable value of inventories were below cost by $2.0 million, which triggered a reduction of the value of inventory in our Consolidated Financial Statements by this amount.
Materials and supplies include chemicals, maintenance supplies and spare parts which will be consumed in the mining of trona ore and production of soda ash processes.
GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. Fixed Assets, Mineral Leaseholds and Asset Retirement Obligations
Fixed Assets
Fixed assets consisted of the following:
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Crude oil and natural gas pipelines and related assets | $ | 2,840,622 | | | $ | 2,839,443 | |
Alkali facilities, machinery and equipment | 675,940 | | | 670,880 | |
Onshore facilities, machinery and equipment | 269,107 | | | 269,245 | |
Transportation equipment | 21,056 | | | 21,106 | |
Marine vessels | 1,018,919 | | | 1,018,284 | |
Land, buildings and improvements | 228,450 | | | 227,540 | |
Office equipment, furniture and fixtures | 26,535 | | | 23,965 | |
Construction in progress | 400,840 | | | 350,137 | |
Other | 37,586 | | | 43,440 | |
Fixed assets, at cost | 5,519,055 | | | 5,464,040 | |
Less: Accumulated depreciation | (1,607,285) | | | (1,551,855) | |
Net fixed assets | $ | 3,911,770 | | | $ | 3,912,185 | |
Mineral Leaseholds
Our Mineral Leaseholds, relating to our Alkali Business, consist of the following:
| | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 | |
Mineral leaseholds | $ | 566,019 | | | $ | 566,019 | | |
Less: Accumulated depletion | (18,034) | | | (17,014) | | |
Mineral leaseholds, net of accumulated depletion | $ | 547,985 | | | $ | 549,005 | | |
Our depreciation and depletion expense for the periods presented was as follows:
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
Depreciation expense | | | | | $ | 65,750 | | | $ | 62,702 | |
Depletion expense | | | | | 1,020 | | | 912 | |
Asset Retirement Obligations
We record asset retirement obligations (“AROs”) in connection with legal requirements to perform specified retirement activities under contractual arrangements and/or governmental regulations.
The following table presents information regarding our AROs since December 31, 2021:
| | | | | |
ARO liability balance, December 31, 2021 | $ | 220,906 | |
Accretion expense | 3,447 | |
| |
| |
| |
Settlements | (1,461) | |
| |
ARO liability balance, March 31, 2022 | $ | 222,892 | |
GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At March 31, 2022 and December 31, 2021, $35.3 million and $36.3 million are included as current in “Accrued liabilities” on our Unaudited Condensed Consolidated Balance Sheets, respectively. The remainder of the ARO liability as of March 31, 2022 and December 31, 2021 is included in “Other long-term liabilities” on our Unaudited Condensed Consolidated Balance Sheets.
With respect to our AROs, the following table presents our forecast of accretion expense for the periods indicated:
| | | | | | | | |
Remainder of | 2022 | $ | 9,486 | |
| 2023 | $ | 10,583 | |
| 2024 | $ | 9,767 | |
| 2025 | $ | 10,469 | |
| 2026 | $ | 8,216 | |
Certain of our unconsolidated affiliates have AROs recorded at March 31, 2022 and December 31, 2021 relating to contractual agreements and regulatory requirements. In addition, certain entities that we consolidate have non-controlling interest owners that are responsible for their representative share of future costs of the related ARO liability. These amounts are immaterial to our Unaudited Condensed Consolidated Financial Statements.
7. Equity Investees
We account for our ownership in our joint ventures under the equity method of accounting. The price we pay to acquire an ownership interest in a company may exceed or be less than the underlying book value of the capital accounts we acquire. Such excess cost amounts are included within the carrying values of our equity investees. At March 31, 2022 and December 31, 2021, the unamortized excess cost amounts totaled $316.3 million and $319.9 million, respectively. We amortize the differences in carrying value as change in equity earnings.
The following table presents information included in our Unaudited Condensed Consolidated Financial Statements related to our equity investees:
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
Genesis’ share of operating earnings | | | | | $ | 16,010 | | | $ | 24,533 | |
Amortization of differences attributable to Genesis’ carrying value of equity investments | | | | | (3,566) | | | (3,873) | |
Net equity in earnings | | | | | $ | 12,444 | | | $ | 20,660 | |
Distributions received(1) | | | | | $ | 19,018 | | | $ | 29,516 | |
(1) Includes distributions attributable to the period and received during or promptly following such period.
The following tables present the unaudited balance sheet and income statement information (on a 100% basis) for Poseidon Oil Pipeline Company, L.L.C. (“Poseidon”) (which we own 64% of and is our most significant equity investment):
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
BALANCE SHEET DATA: | | | |
Assets | | | |
Current assets | $ | 15,869 | | | $ | 17,827 | |
Fixed assets, net | 156,464 | | | 160,379 | |
Other assets | 11,430 | | | 6,186 | |
Total assets | $ | 183,763 | | | $ | 184,392 | |
Liabilities and equity | | | |
Current liabilities | $ | 7,436 | | | $ | 7,668 | |
Other liabilities | 233,066 | | | 231,970 | |
Equity (Deficit) | (56,739) | | | (55,246) | |
Total liabilities and equity | $ | 183,763 | | | $ | 184,392 | |
GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
STATEMENTS OF OPERATIONS DATA: | | | | | | | |
Revenues | | | | | $ | 31,189 | | | $ | 42,413 | |
Operating income | | | | | $ | 21,953 | | | $ | 32,161 | |
Net income | | | | | $ | 20,907 | | | $ | 31,145 | |
Poseidon’s Revolving Credit Facility
Borrowings under Poseidon’s revolving credit facility, which was amended and restated in March 2019, are primarily used to fund spending on capital projects. The March 2019 credit facility is non-recourse to Poseidon’s owners and secured by substantially all of Poseidon’s assets and has a maturity date of March 2024. The March 2019 credit facility contains customary covenants such as restrictions on debt levels, liens, guarantees, mergers, sale of assets and distributions to owners. A breach of any of these covenants could result in acceleration of the maturity date of Poseidon’s debt. Poseidon was in compliance with the terms of its credit agreement for all periods presented in these Unaudited Condensed Consolidated Financial Statements.
8. Intangible Assets
The following table summarizes the components of our intangible assets at the dates indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| Gross Carrying Amount | | Accumulated Amortization | | Carrying Value | | Gross Carrying Amount | | Accumulated Amortization | | Carrying Value |
Marine contract intangibles | $ | 800 | | | $ | 616 | | | $ | 184 | | | $ | 800 | | | $ | 607 | | | $ | 193 | |
Offshore pipeline contract intangibles | 158,101 | | | 55,474 | | | 102,627 | | | 158,101 | | | 53,394 | | | 104,707 | |
Other | 40,240 | | | 16,268 | | | 23,972 | | | 37,933 | | | 15,770 | | | 22,163 | |
Total | $ | 199,141 | | | $ | 72,358 | | | $ | 126,783 | | | $ | 196,834 | | | $ | 69,771 | | | $ | 127,063 | |
Our amortization of intangible assets for the periods presented was as follows:
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
Amortization of intangible assets | | | | | $ | 2,588 | | | $ | 2,600 | |
We estimate that our amortization expense for the next five years will be as follows:
| | | | | | | | |
Remainder of | 2022 | $ | 8,988 | |
| 2023 | $ | 11,733 | |
| 2024 | $ | 11,368 | |
| 2025 | $ | 11,143 | |
| 2026 | $ | 10,843 | |
GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. Debt
Our obligations under debt arrangements consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| Principal | | Unamortized Premium and Debt Issuance Costs | | Net Value | | Principal | | Unamortized Premium and Debt Issuance Costs | | Net Value |
Senior secured credit facility-Revolving Loan(1) | $ | 94,800 | | | $ | — | | | $ | 94,800 | | | $ | 49,000 | | | $ | — | | | $ | 49,000 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
5.625% senior unsecured notes due 2024 | 341,135 | | | 1,892 | | | 339,243 | | | 341,135 | | | 2,106 | | | 339,029 | |
6.500% senior unsecured notes due 2025 | 534,834 | | | 4,155 | | | 530,679 | | | 534,834 | | | 4,452 | | | 530,382 | |
6.250% senior unsecured notes due 2026 | 359,799 | | | 3,215 | | | 356,584 | | | 359,799 | | | 3,410 | | | 356,389 | |
8.000% senior unsecured notes due 2027 | 1,000,000 | | | 6,197 | | | 993,803 | | | 1,000,000 | | | 6,592 | | | 993,408 | |
7.750% senior unsecured notes due 2028 | 720,975 | | | 9,281 | | | 711,694 | | | 720,975 | | | 9,678 | | | 711,297 | |
Total long-term debt | $ | 3,051,543 | | | $ | 24,740 | | | $ | 3,026,803 | | | $ | 3,005,743 | | | $ | 26,238 | | | $ | 2,979,505 | |
(1) Unamortized debt issuance costs associated with our Revolving Loan, as defined below (included in “Other Assets, net of amortization” on the Unaudited Condensed Consolidated Balance Sheets), under our senior secured credit facility were $4.2 million and $4.7 million as of March 31, 2022 and December 31, 2021, respectively.
Senior Secured Credit Facility
On April 8, 2021, we entered into the Fifth Amended and Restated Credit Agreement (our “new credit agreement”) to replace our Fourth Amended and Restated Credit Agreement. Our new credit agreement provides for a $950 million senior secured credit facility, comprised of a revolving loan facility with a borrowing capacity of $650 million (the “Revolving Loan”) and a term loan facility of $300 million (the “Term Loan”). The new credit agreement matures on March 15, 2024, subject to extension at our request for one additional year on up to two occasions and subject to certain conditions. We repaid the Term Loan in full on November 17, 2021 with a portion of the proceeds received from our sale of a 36% minority interest in CHOPS (Note 10). At March 31, 2022, the key terms for rates under our Revolving Loan (which are dependent on our leverage ratio as defined in the new credit agreement) are as follows:
•The interest rate on borrowings may be based on an alternate base rate or a Eurodollar rate, at our option. The alternate base rate is equal to the sum of (a) the greatest of (i) the prime rate in effect on such day, (ii) the federal funds effective rate in effect on such day plus 0.5% and (iii) the LIBOR rate for a one-month maturity on such day plus 1% and (b) the applicable margin. The Eurodollar rate is equal to the sum of (a) the LIBOR rate for the applicable interest period multiplied by the statutory reserve rate and (b) the applicable margin. The applicable margin varies from 2.25% to 3.75% on Eurodollar borrowings and from 1.25% to 2.75% on alternate base rate borrowings, depending on our leverage ratio. Our leverage ratio is recalculated quarterly and in connection with each material acquisition. At March 31, 2022, the applicable margins on our borrowings were 2.25% for alternate base rate borrowings and 3.25% for Eurodollar rate borrowings based on our leverage ratio.
•Letter of credit fee rates range from 2.25% to 3.75% based on our leverage ratio as computed under the credit facility and can fluctuate quarterly. At March 31, 2022, our letter of credit rate was 3.25%.
•We pay a commitment fee on the unused portion of the Revolving Loan. The commitment fee rates on the unused committed amount will range from 0.30% to 0.50% per annum depending on our leverage ratio. At March 31, 2022, our commitment fee rate on the unused committed amount was 0.50%.
•We have the ability to increase the aggregate size of the Revolving Loan by an additional $200 million, subject to lender consent and certain other customary conditions.
GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At March 31, 2022, we had $94.8 million outstanding under our Revolving Loan, with $7.1 million of the borrowed amount designated as a loan under the inventory sublimit. Our new credit agreement allows up to $100.0 million of the capacity to be used for letters of credit, of which $1.5 million was outstanding at March 31, 2022. Due to the revolving nature of loans under our Revolving Loan, additional borrowings, periodic repayments and re-borrowings may be made until the maturity date. The total amount available for borrowings under our Revolving Loan at March 31, 2022 was $553.7 million, subject to compliance with covenants. Our new credit agreement does not include a “borrowing base” limitation except with respect to our inventory loans.
Senior Unsecured Note Transactions
On December 17, 2020, we issued $750 million in aggregate principal amount of our 8.00% senior unsecured notes due January 15, 2027 (the “2027 Notes”). Interest payments are due on January 15 and July 15 of each year with the initial interest payment due on July 15, 2021. The issuance generated net proceeds of approximately $737 million, net of issuance costs incurred. We used $316.5 million of the net proceeds to repay the portion of the 6.00% senior unsecured notes due May 15, 2023 (the “2023 Notes”) (including principal, accrued interest and tender premium) that were validly tendered, and the remaining proceeds were used to repay a portion of the borrowings outstanding under our revolving credit facility. On January 19, 2021, we redeemed the remaining principal balance outstanding on our 2023 Notes of $80.9 million in accordance with the terms and conditions of the indenture governing the 2023 Notes. We incurred a total loss of approximately $1.6 million relating to the extinguishment of our remaining 2023 Notes, inclusive of the redemption fee and the write-off of the related unamortized debt issuance costs, which is recorded in “Other expense” in our Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2021.
On April 22, 2021, we completed our offering of an additional $250 million in aggregate principal amount of our 2027 Notes. The notes constitute an additional issuance of our existing 2027 Notes that we issued on December 17, 2020 in an aggregate principal amount of $750 million. The additional $250 million of notes have identical terms as (other than with respect to the issue price) and constitute part of the same series of the 2027 Notes. The $250 million of the 2027 Notes were issued at a premium of 103.75% plus accrued interest from December 17, 2020. We used the net proceeds from the offering for general partnership purposes, including repaying a portion of the revolving borrowings outstanding under our new credit agreement.
Our $3.0 billion aggregate principal amount of senior unsecured notes co-issued by Genesis Energy, L.P. and Genesis Energy Finance Corporation are fully and unconditionally guaranteed jointly and severally by all of Genesis Energy, L.P.’s current and future 100% owned domestic subsidiaries (the “Guarantor Subsidiaries”), except the subsidiaries that hold our Alkali Business and certain other subsidiaries. The non-guarantor subsidiaries are owned by Genesis Crude Oil, L.P., a Guarantor Subsidiary. The Guarantor Subsidiaries largely own the assets that we use to operate our business other than our Alkali Business. As a general rule, the assets and credit of our unrestricted subsidiaries are not available to satisfy the debts of Genesis Energy, L.P., Genesis Energy Finance Corporation or the Guarantor Subsidiaries, and the liabilities of our unrestricted subsidiaries do not constitute obligations of Genesis Energy, L.P., Genesis Energy Finance Corporation or the Guarantor Subsidiaries except, in the case of Genesis Alkali Holdings Company, LLC (“Alkali Holdings”) and Genesis Energy, L.P., to the extent agreed to in the services agreement between Genesis Energy, L.P. and Alkali Holdings, dated as of September 23, 2019 (the “Services Agreement”).
10. Partners’ Capital, Mezzanine Capital and Distributions
At March 31, 2022, our outstanding common units consisted of 122,539,221 Class A units and 39,997 Class B units. The Class A units are traditional common units in us. The Class B units are identical to the Class A units and, accordingly, have voting and distribution rights equivalent to those of the Class A units, and, in addition, the Class B units have the right to elect all of our board of directors and are convertible into Class A units under certain circumstances, subject to certain exceptions. At March 31, 2022, we had 25,336,778 Class A Convertible Preferred Units outstanding, which are discussed below in further detail.
GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Distributions
We paid or will pay the following cash distributions to our common unitholders in 2021 and 2022:
| | | | | | | | | | | | | | | | | | | | | | | |
Distribution For | | Date Paid | | Per Unit Amount | | Total Amount | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
2021 | | | | | | | |
1st Quarter | | May 14, 2021 | | $ | 0.15 | | | $ | |