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Genesis Energy LP’s Q1 2026 results were slightly below expectations due to planned producer turnarounds and a revision of near-term volumes at the Shenandoah field, which impacted margin by $12–$15 million. Despite this, the company reaffirmed its 2026 EBITDA guidance of 15–20% growth over 2025. The Offshore segment remains the primary growth driver, with new tie-backs like Monument and discoveries like Tiberius and Bandit set to utilize existing infrastructure. The Marine segment faced reduced availability due to a heavy dry-docking schedule but benefits from a stable Jones Act market. Sulfur Services encountered headwinds from refinery disruptions and Chinese import competition. Financially, Genesis made significant strides by refinancing debt and repurchasing $135 million of high-cost Series A preferred securities, resulting in $12 million in annual interest savings. CEO Grant Sims emphasized a long-term goal of reducing leverage to 4.0x and eventually increasing distributions as the capital structure is optimized. The partnership expects that increasing production from dedicated deepwater Gulf of Mexico leases will drive substantial free cash flow in the coming years without requiring significant new capital investment.

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Full Earnings Call Transcript — Q1 • 2026-05-09

Operator: Greetings, and welcome to the Genesis Energy LP First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dwayne Morley, Vice President of Investor Relations. Thank you. Please go ahead.
Dwayne Morley: Thanks, Donna. Good morning, and welcome to the 2026 First Quarter Conference Call for Genesis Energy. Genesis Energy has 3 business segments. The Offshore Pipeline Transportation segment is engaged in providing the critical infrastructure to move oil produced from our long-lived, world-class reservoirs from the deepwater Gulf of America to onshore refining centers. The Marine Transportation segment is engaged in the maritime transportation of primarily refined petroleum products. The Onshore Transportation and Services segment is engaged in the transportation, handling, blending, storage and supply of energy products, including crude oil and refined products primarily around refining centers as well as the processing of sour gas streams to remove sulfur at refining operations. Genesis' operations are primarily located in the Gulf Coast states and the Gulf of America. During this conference call, management may be making forward-looking statements within the meanings of the Securities Act of 1933 and the Securities Exchange Act of 1934 [indiscernible] provides safe harbor protection to encourage companies to provide forward-looking information. Genesis intends to avail itself of those safe harbor provisions and directs you to its most recently filed and future filings with the Securities and Exchange Commission. We also encourage you to visit our website at genesisenergy.com, where a copy of the press release we issued this morning is located. The press release also presents a reconciliation of non-GAAP financial measures to the most comparable GAAP financial measures. At this time, I'd like to introduce Grant Sims, CEO of Genesis Energy LP. Mr. Sims is joined by Kristen Jesulaitis, Chief Financial Officer and Chief Legal Officer; Ryan Sims, President and Chief Commercial Officer; and Louie Nicol, Chief Accounting Officer. With that, I'll now turn the call over to Grant.
Grant Sims: Good morning, and thanks for joining us today. As noted in our earnings release this morning, when we step back and look at the first quarter in totality, results came in a touch below where we had envisioned, driven primarily by the confluence of factors we had flagged and largely anticipated heading into the year. Our Offshore Pipeline Transportation segment, while up 40% year-over-year, came in short of our near-term expectations for a reason I'll walk through in a moment. The rest of our businesses, for the most part, performed right in line with where we expected them to be. None of what we experienced in the quarter changes our view of the underlying businesses. This is a year that was always going to be shaped by the cadence of producer activity and turnarounds in the deepwater Gulf of Mexico as well as the impact of a heavier-than-usual dry docking calendar on our marine fleet. And the first quarter reflects exactly that. At the same time, the world around us continues to evolve in ways that could work to our benefit. The current geopolitical backdrop is creating disruptions to traditional hydrocarbon trade flows. And to the extent these dislocations persist or there's a protracted period to return to normal, we have seen and we have taken advantage of opportunities to capture incremental volumes and margin that were not necessarily contemplated in our original plan. Against that backdrop, we expect to deliver 2026 adjusted EBITDA at or near the midpoint of the range we outlined in February, which called for plus or minus 15% to 20% growth over our normalized 2025 baseline of approximately $500 million to $510 million. Beyond the operating results, the quarter was also very productive on the balance sheet front. We were active and opportunistic, completing a series of transactions that we believe meaningfully improve our financial profile, extended our maturity runway and reduced the cost to finance the business on a go-forward basis. I'll walk through those actions in more detail later in the call, but the net result is a reduction in the annual financing cost of approximately $12 million and a capital structure that is simpler, leaner and more flexible than it was just 90 days ago. With that, I'll go into a little bit more detail on each of our business segments. Let me start with offshore, and to set the stage what happened in the first quarter, something we largely telegraphed on our year-end call. We knew going into the quarter that several of our producer customers had scheduled turnarounds at key production hubs tied directly into our pipeline systems. And we told you that those events would weigh on sequential results. One of those turnarounds did come to pass in the first quarter and frankly, ran a bit longer than anyone had originally expected. Separately, we also saw a sequential reduction in throughput from the Shenandoah FPU which began producing last year and came out of the gate with impressively high initial flow rates, rates that actually were above and beyond our predrill expectations. A step back from those early peaks is, in our experience, a fairly normal part of how these deepwater reservoirs behave, and it does not change our fundamental view of what Shenandoah represents for Genesis over time. That said, having now run the production from 4 wells through the system for almost 9 months and based upon what we are being told by the operator, we have revised our expectations for Shenandoah volumes for the rest of the year. The net effect to us is roughly $12 million to $15 million less segment margin from that field in 2026 versus what we had embedded in our original guidance for the year. But just to reiterate, we believe we have other positives that will keep us on track to achieve the midpoint of our original guidance we outlined in February. I want to spend a little more time on the subsurface picture at Shenandoah because I think that will provide genuinely important context for how we should think about this field and deepwater conventional reservoirs in general over the longer term. The operator has recently shared their analysis with us, which is based upon the production history from the 4 Phase 1 wells drilled and producing to date. And I can share that what they are seeing is encouraging. Their conclusions regarding the aerial extent and connectivity of the hydrocarbon-bearing sands have led to upward revisions in their estimates of total original oil in place. Additionally, bottom hole pressures are starting to stabilize across the wells, and they have concluded through observed pressure measurements that the field is ideally positioned and connected to a very large and strong associated aquifer that, in essence, acts like a natural waterflood, a mechanism that when present in a reservoir like this tends to significantly improve cumulative recovery of the original oil in place. While there is still inherent risk in subsurface analysis, the combination of more calculated oil and a higher recovery of that original oil in place over time is very encouraging relative to original expectations for the 20- to 30-year productive life of the Shenandoah Monument and Shenandoah South fields. The important nuance worth pointing out is that wells in these strong water drive reservoirs need to be produced at rates calculated to ensure the water does not, in essence, get produced in lieu of the more viscous oil and before the aquifer serves its purpose to push the oil in place to the perforations in the producing wells. Managing that process carefully is how you maximize what ultimately comes out of the ground. So while we might see slightly lower volumes in the near term, we believe there is an increasing chance that volumes will be stronger for longer versus what we originally anticipated, and that is, in fact, a very good thing. Looking at near-term activity around the Shenandoah FPU, the current -- the operator currently has a rig on location working in the Monument field, which is a 2-well 17-mile subsea tieback development sanctioned to produce across the Shenandoah FPU. The first of those Monument wells is expected to be brought online before year-end, ahead of our original expectations with the second well following in very early 2027. After Monument, the plan is to keep that rig in the vicinity, drilling and completing 2 more Shenandoah wells through the balance of 2027. Layered on top of that, a subsea pumping system is being planned for installation in early 2028 to expand and extend total production across both the existing and future well inventory at Shenandoah proper. Simultaneously, the Shenandoah South partnership is well into execution of their subsea development project with production from the first well in that adjacent field expected to cross the Shenandoah FPU in the first half of 2028. To accommodate all of this near-term activity, the Shenandoah FPU operator is actively working to expand the facility's crude oil handling capacity to 140,000 barrels per day. That kind of proactive investment speaks to the confidence the operator has in the development program ahead. While 2026 may reflect a more measured year from Shenandoah than we initially projected, the trajectory from here is one we find genuinely exciting. Every barrel that flows from the Shenandoah FPU as well as from the future tiebacks and subsea developments in the area moves exclusively through our 100% owned sink lateral and onto shore through our 64% owned CHOPS pipeline. Our position is durable. It is competitively and contractually protected and the runway in front of it is long. Elsewhere in the portfolio, Salamanca continues to progress. The fourth well at that facility was brought online during the quarter, ahead of schedule, lifting total production from the Salamanca FPU to just over 40,000 barrels per day. A fifth well remains on the schedule for later this year. We also expect the fifth well at Buckskin to come on production here in the second quarter, adding yet another layer of incremental throughput across our systems. Importantly, we are also seeing the broader LLOG-operated development program continue to accelerate. Harbour Energy, through their acquisition of LLOG has contracted a second rig in pursuit of their stated goal of doubling their production in the Gulf of Mexico by the end of 2027 with 20% compounded annual growth rate through 2030, a majority of which will flow through us. Beyond the near-term activity I just described, we could reasonably expect to see 2, 3 or maybe even 4 additional wells drilled and completed by the end of 2027 or early 2028 at LLOG-operated fields contractually dedicated to us, the production from which would flow exclusively through our existing infrastructure. That kind of development cadence with a second rig now in the mix speaks to the conviction our producer customers have in the opportunity set in the Gulf of America and gives us increasing confidence in the volume trajectory across our systems as we move into 2027 and beyond and none of which requires any of our capital. More broadly, the pace of sanctioning and exploration activity around our infrastructure in the deepwater Gulf of America continues to underscore the long-term vitality of the basin in which we operate. Just recently, Kosmos Energy and Occidental announced final investment decision on the Tiberius development in Keathley Canyon, a subsea tieback project in the outboard Wilcox trend, targeting first oil in the second half of 2028. Importantly, for Genesis, Tiberius is being tied back to the Lucius platform. And from Lucius, production will flow directly into our 100% owned SEKCO Pipeline and downstream through our 64% owned Poseidon Pipeline. In other words, every barrel from Tiberius will move exclusively through Genesis-owned infrastructure, adding yet another tranche of dedicated volumes to our system when the field comes online in 2028, again, requiring no capital from Genesis. Separately, the Bandit prospect located in Green Canyon Block 680 in the Deepwater Gulf of America, recently announced and highlighted by Occidental, Woodside and Chevron is yet another encouraging data point with an announced new discovery in the Central Gulf of America. The interesting thing about the Bandit discovery is that it is on acreage that has been dedicated to our 100% owned Anaconda-associated gas gathering system, our 100% owned Constitution oil gathering system and our 64% owned Cameron Highway Pipeline since 2004. This is a concrete example of something we have reiterated numerous times in the past. We believe we have decades and decades of future production inventory in place from contractually dedicated leases in the Gulf of America, the production from which will require 0 additional capital expenditures from us. Stepping back, the setup for the remainder of 2026 in our Offshore Pipeline Transportation segment is solid. The commodity prices with where they are, our producer customers have every incentive to push for maximum uptime and throughput, and we are seeing that discipline reflected in how they are running their operation. The broader cadence of additional activity remains on track with multiple wells anticipated to come online over the next several quarters, which provides us with a good line of sight into strong volumes not only over the remainder of the year, but for many years to come. Putting aside the near-term noise of turnarounds in Shenandoah current production rates, the longer-term story in our Offshore Pipeline segment remains intact. Our Marine Transportation segment delivered results largely in line with our expectations. Underlying market fundamentals across both our brown water and blue water fleet remains stable with supply and demand dynamics appearing well balanced. We expect this equilibrium to persist for the remainder of the year, supported by steady demand and minimal net supply additions of new Jones Act tonnage. The 60-day Jones Act waiver issued in March and the 90-day extension issued at the end of April has had 0 practical effect on the markets we serve, where a significant amount of the foreign flagged activity associated with the waiver appears to have been concentrated on the movement of clean products from the Gulf Coast to the West Coast, well outside our operating lanes. Operationally, we continue to run at or near 100% of available capacity across all vessel classes and remain well positioned to capture incremental demand and potentially higher inland day rates should additional heavy crude imports flow into the Gulf Coast refineries and drive more intermediate product movements through our heater barge fleet. On the dry docking front, 2 of our 4 blue water vessels completed their required regulatory yard periods during the first quarter. A third, one of our 2 largest vessels entered the shipyard in early March and expected back in service toward the end of May. And the fourth is scheduled to enter in early June and exit around mid-third quarter. Collectively, this activity reduced total available operating days in our blue water fleet by approximately 16% in the first quarter. And the second quarter will see a comparable reduction with some residual effect potentially carrying over into the third quarter. Despite these temporary periods off the water, we remain confident that these blue water vessels will recontract into a stable, if not improving rate environment when they return to service. Looking ahead to 2027, our remaining 5 blue water vessels are scheduled to complete their regulatory dry dockings over the course of that year, and we are actively evaluating whether to shift one of those into late '26 or alternatively into early 2028 to better balance fleet availability and earnings potential across the next several years. Taken together, we continue to believe our Marine Transportation segment remains well positioned over the medium to long term to benefit from broader structural momentum in the Jones Act market, supported by steady utilization, the ongoing retirement of older tonnage and a substantial lack of new construction comparable Jones Act vessels. Our Onshore Transportation & Services segment had a quiet quarter. This part of the business does what it's supposed to do, moving molecules reliably for a broad base of upstream and downstream customers who depend on us for access to Gulf Coast refinery markets and the flow assurance and market optionality comes with it. During the quarter, volumes did just that and moved through both our Texas and Raceland terminal and pipeline systems at healthy levels, benefiting from the continued ramp of offshore production finding its way to shore. Our Baton Rouge terminal also saw good activity with a steady flow of intermediate products through the facility to ExxonMobil, our main refinery customer. Our Sulfur Services business had a more challenging quarter, and the primary culprit was operational disruptions at our largest host refinery, which also happens to be our lowest cost production facility. When that refinery runs below capacity, our NaSH production drops accordingly and our cost increase, and that is what played out in the first quarter. We expect that refinery in our NaSH facility to return to more normalized operations. And as it does, production volumes and the associated segment margin should recover. The one ongoing headwind I would flag is the competitive pressure we are seeing from sulfur-related products -- product imports originating in China and moving into South American markets. That situation has not resolved itself and with sulfur prices moving higher recently is something we are watching carefully. As I mentioned earlier, I want to take a moment to highlight the meaningful steps we took during the quarter to further strengthen our balance sheet and materially lower our cost of financing this business. During the first quarter, we completed a series of transactions, a new $750 million senior unsecured notes offering with a coupon of 6.75%, the tender and full redemption of our higher cost 7.75% senior unsecured notes due 2028, and upsized and extended revolving credit facility as well as the opportunistic repurchase of $135 million in the aggregate of our high-cost Series A corporate preferred securities that together are expected to reduce our annual financing cost by approximately $12 million per year on a run rate basis. To put this in context, after all this activity, the remaining face value of our Series A corporate preferred stands at approximately $394 million. If we can refinance and ultimately retire this in one form or another over the next couple of years, we can further reduce the cash cost of supporting our business by close to $20 million a year in the case of refinancing and $45 million or so in the case of fully redeeming and extinguishing it. Additionally, if we are able to refinance our other senior unsecured bonds, the nearest tranche of which matures in January 2029 at the same coupon that we just printed on our longest-dated bonds, we could realize roughly another $35 million a year in reduced financing costs to support our business. So while it's obviously important to focus on our business performance, we should not lose sight that we have the opportunity to drive additional value as much as $80 million a year or perhaps more as we continue to rightsize and optimize our capital structure. In closing, I want to be clear that our first quarter results, while slightly below our internal expectations in the aggregate, do not change our conviction in the Genesis story or our confidence in the longer term. The fundamental drivers of our business remain intact. The activity in the Gulf of America continues to be strong, and the balance sheet actions we have taken this quarter have lowered our cost of capital and materially improved our financial flexibility going forward, and we still have lots of additional optimization to look forward to. As our operational and financial performance continues to strengthen over the coming years, and we generate increasing amounts of free cash flow, we will continue to redeem the remaining balance of our high-cost Series A corporate preferred securities, reduce debt in absolute terms and work our way toward our target leverage ratio of approximately 4x, all of which we should create the room to thoughtfully grow distributions to our common unitholders over time while maintaining the flexibility to evaluate future organic and inorganic opportunities as they may arise. Finally, I would like to say that the management team and the Board of Directors remain steadfast in our commitment to building long-term value for all of our stakeholders, regardless of where you are in the capital structure. We believe the decisions we are making reflect this commitment and our confidence in Genesis moving forward. I would once again like to recognize our entire workforce for their individual efforts and unwavering commitment to safe and responsible operations. I'm extremely proud to be associated with each and every one of you. With that, I'll turn it back to the moderator for questions.
Operator: [Operator Instructions] Our first question today is coming from Michael Blum of Wells Fargo.
Michael Blum: I wanted to ask a little bit about the Sulfur Services business. Obviously, you had a little bit of an operational issue in the first quarter, but more wanted to ask about the Chinese competition coming into the market. Is that something new that's developed recently? Or has that been something that's been ongoing? And how do you see that sort of normalizing over time?
Grant Sims: It is -- we've talked about it on previous calls that we have seen over the last several years, the introduction of what we call Chinese flake, which is dehydrated sodium hydrosulfide, which comes from China, then it is rehydrated in a rehydration facility in South America and distributed to the mining operations that historically, we have shipped sodium hydrosulfide in solution form from the Gulf Coast, primarily a terminal in Lake Charles through the Panama Canal to the western side of South America. So it's something that we have been dealing with for quite some time. I never thought that we'd have to talk about China once we exited the soda ash business again, but we are seeing increasing amounts at noneconomic prices show up. And given where sulfur prices were $650 a ton or so accelerating as a result of the dislocations occurring in large part in the Middle East, the prices at which this competitive flake mash, so to speak, are being offered are completely uneconomic from a capitalistic economic-animal point of view. So it's something that we have to keep an eye on. Our sales over the last several years because we've been supply constrained have actually diminished into South America, into the mines in South America because we have had this competitive pressure, but we've also had some supply constraints. We are evaluating that as a potential future market, but concentrating on new market applications and higher-value markets in North America and elsewhere.
Michael Blum: And then I just wanted to ask your comments about the cost savings you could realize from retiring the preferreds and some of the other high-cost debt. Would you say that the plan is sort of steady as she goes as you've been doing sort of opportunistically reducing those various tranches as you can? Or is there any possibility that you could do something sort of larger and eliminate some of that high-cost paper more quickly?
Grant Sims: Yes. I think that because our covenant under our senior secured facility gives 100% equity treatment, which we think is appropriate to the convertible preferred. We're kind of somewhat limited in terms of taking it out in one fell swoop while we try to manage the headline number of our bank calculated leverage ratio. But -- so I think it's kind of a chipping away, but as we, a, chip away at debt at the numerator and EBITDA continues to grow that at some point, we would have the flexibility to opportunistically potentially take it out in a big chunk and still have plenty of runway and room under our debt covenants. So -- but I think for the remainder of '26, again, it's opportunistically chipping away at it.
Operator: [Operator Instructions] We're showing no additional questions in queue at this time. I'd like to turn the floor back over to Mr. Sims for closing comments.
Grant Sims: Again, we appreciate everybody's interest in dialing in, and we look forward to having a positive discussion with you in 90 days. So thanks very much.
Operator: Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day.