Westlake Chemical Partners LP Quarterly Report (Form 10-Q)
Westlake Chemical Partners LP (WLKP) filed its quarterly report for the period ended March 31, 2025. The company reported net income of $34.1 million, or $0.97 per unit, on revenue of $243.1 million. WLKP’s net income was impacted by a $14.1 million gain on the sale of assets and a $10.3 million loss on the early extinguishment of debt. The company’s cash and cash equivalents increased to $143.1 million, and its debt decreased to $1.35 billion. WLKP’s common units outstanding as of April 25, 2025, were 35,238,556. The report also includes management’s discussion and analysis of the company’s financial condition and results of operations, as well as quantitative and qualitative disclosures about market risk.
Westlake Chemical Partners LP: Navigating Challenges and Maintaining Resilience
Westlake Chemical Partners LP, a Delaware limited partnership, is a key player in the ethylene production industry. The partnership operates, acquires, and develops ethylene production facilities and related assets, with a focus on maximizing profitability and cash flow.
Financial Performance Overview
For the first quarter of 2025, Westlake Chemical Partners LP reported a decrease in net income to $42.3 million, down from $89.6 million in the same period of 2024. Net sales also declined by 16.5% to $237.6 million, compared to $284.7 million in the first quarter of 2024. This decrease in financial performance was primarily due to lower ethylene sales volumes to Westlake and lower co-products sales volumes to third parties, as a result of lower production volumes during the Petro 1 turnaround in the first quarter of 2025.
Table 1: Financial Highlights
| Metric | Q1 2025 | Q1 2024 | Change |
|---|---|---|---|
| Net Sales | $237.6 million | $284.7 million | -16.5% |
| Net Income | $42.3 million | $89.6 million | -52.8% |
| Net Income Attributable to Westlake Chemical Partners LP | $4.9 million | $14.8 million | -66.9% |
| Income from Operations | $46.6 million | $95.1 million | -51.0% |
| MLP Distributable Cash Flow | $4.7 million | $16.9 million | -72.2% |
| EBITDA | $75.0 million | $124.4 million | -39.7% |
Revenue and Profit Trends
The decrease in net sales was primarily due to lower ethylene sales volumes to Westlake and lower co-products sales volumes to third parties, as a result of lower production volumes during the Petro 1 turnaround in the first quarter of 2025. This was partially offset by higher ethylene sales prices to Westlake and third parties.
Gross profit decreased to $54.1 million in the first quarter of 2025, down from $102.2 million in the first quarter of 2024. The gross profit margin percentage also declined to 22.8% in the first quarter of 2025, compared to 35.9% in the same period of 2024. This was primarily due to higher ethane feedstock and natural gas costs in the first quarter of 2025 compared to the first quarter of 2024.
MLP distributable cash flow, a non-GAAP measure, decreased by $12.2 million to $4.7 million in the first quarter of 2025, compared to $16.9 million in the first quarter of 2024. This decrease was primarily attributable to decreased earnings at OpCo and higher maintenance capital expenditures due to the Petro 1 turnaround in the first quarter of 2025.
Similarly, EBITDA, another non-GAAP measure, decreased by $49.4 million to $75.0 million in the first quarter of 2025, from $124.4 million in the first quarter of 2024. This decline was primarily due to lower ethylene sales volumes to Westlake and lower co-products sales volumes to third parties, as a result of lower production volumes during the Petro 1 turnaround, as well as higher ethane feedstock and natural gas costs, partially offset by higher ethylene sales prices to Westlake and third parties.
Strengths and Weaknesses
Strengths:
- Long-term, fee-based Ethylene Sales Agreement with Westlake: The partnership generates a substantial majority of its revenue through a long-term, fee-based Ethylene Sales Agreement with Westlake, which includes a minimum purchase commitment and variable pricing based on the partnership’s actual feedstock and natural gas costs, as well as estimated other costs of production.
- Control over OpCo: The partnership controls OpCo, the limited partnership that owns and operates the ethylene production facilities, through its ownership of the general partner.
- Diversified Asset Base: OpCo’s assets include two ethylene production facilities at Westlake’s Lake Charles, Louisiana site, one ethylene production facility at Westlake’s Calvert City, Kentucky site, and a 200-mile common carrier ethylene pipeline.
- Experienced Management Team: The partnership is managed by an experienced team with a track record of effectively managing operating expenses, maintenance capital expenditures, and turnaround costs to maximize profitability and cash flow.
Weaknesses:
- Reliance on Westlake: The partnership’s sole revenue-generating asset is its limited partner interest in OpCo, which is majority-owned by Westlake. This creates a significant dependence on Westlake’s performance and strategic decisions.
- Exposure to Commodity Price Fluctuations: The partnership’s profitability is affected by fluctuations in the prices of ethane feedstock and natural gas, which can impact the partnership’s operating expenses and margins.
- Variability in Cash Flows: The partnership’s cash flows can be impacted by the timing and costs of major maintenance activities, or turnarounds, at its ethylene production facilities, which occur approximately every five years.
Outlook and Future Considerations
The partnership’s future performance will be influenced by several key factors:
Ongoing Turnaround Activities: The partnership’s recent Petro 1 turnaround in the first quarter of 2025 had a significant impact on its financial results, highlighting the importance of effectively managing these periodic maintenance activities to minimize disruptions and maintain consistent cash flows.
Commodity Price Trends: The partnership’s profitability is closely tied to the prices of ethane feedstock and natural gas. Continued volatility in these commodity prices could impact the partnership’s operating margins and cash flows.
Westlake’s Strategic Decisions: As the majority owner of OpCo and the partnership’s general partner, Westlake’s strategic decisions and actions will continue to have a significant influence on the partnership’s future growth and performance.
Potential Expansion and Acquisitions: The partnership may seek to expand its asset base or make strategic acquisitions in the future, which could require additional funding and potentially impact its financial profile and cash flow generation.
Regulatory and Environmental Considerations: The partnership’s operations are subject to various environmental regulations, and changes in these regulations could affect its costs and compliance requirements.
Overall, Westlake Chemical Partners LP has demonstrated resilience in the face of challenges, leveraging its long-term, fee-based Ethylene Sales Agreement with Westlake and its experienced management team to navigate market conditions. However, the partnership’s reliance on Westlake and exposure to commodity price fluctuations remain key risks that will require ongoing attention and strategic management to ensure the partnership’s continued success.
