Westlake Partners (WLKP) Q3 2026 Earnings Call Transcript

DATE

Wednesday, Nov. 4, 2026

CALL PARTICIPANTS

• Vice President of Finance and Investor Relations - Jeff Holy
• Executive Chairman - Albert Chao
• President and Chief Executive Officer - Jean-Marc Gilson
• Senior Vice President and Chief Financial Officer - Jon Baksht

TAKEAWAYS

• Net Income -- $16.2 million, representing an increase from $14.7 million in the third quarter of 2025 due to higher production and sales volume.
• Net Income per Unit -- $0.46, compared to $0.42 in the same quarter of the previous year.
• Total Net Sales -- $314.5 million, reflecting a slight increase from $308.9 million reported in the third quarter of 2025.
• MLP Distributable Cash Flow -- $18.0 million, increasing by $3.1 million due to higher sales volume and lower maintenance capital expenditures.
• MLP Distributable Cash Flow per Unit -- $0.51, providing sufficient coverage for the declared distribution.
• Trailing Twelve-Month Coverage Ratio -- 1.09x, improving from 1.04x at the end of the second quarter as the impact of the 2025 Petro 1 turnaround aged out.
• Quarterly Distribution -- $0.4714 per unit, marking the 49th consecutive quarterly payment since the initial public offering.
• Ethylene Sales Agreement Margin -- $0.10 per pound, which is the fixed cash margin paid by Westlake Corporation for 95% of OpCo's ethylene production.
• Third-Party Sales Exposure -- 5% of annual sales, which are sold at market prices and are subject to pricing volatility.
• Cash Flow from Operating Activities -- $122.2 million, an increase of $17.0 million due to favorable changes in working capital.
• Consolidated Cash and Investments -- $113.4 million, consisting of $47.6 million in cash and $65.7 million in investments with Westlake Corporation.
• Long-Term Debt -- $400 million, with $377 million held at the Partnership and $23 million held at OpCo.
• Consolidated Leverage Ratio -- 1x, reflecting the company's commitment to maintaining conservative financial metrics.
• EBITDA -- $128.3 million, compared to $126.1 million in the third quarter of 2025.
• Maintenance Capital Expenditures -- $15.1 million, which includes both capitalized costs and pure expense items.
• OpCo Capital Expenditures -- $12.1 million for the third quarter of 2026.
• Cumulative Distribution Coverage -- 1.05x, maintained since the partnership's inception in July 2014.
• Distribution Growth -- 71% since the original minimum quarterly distribution of $0.2750 per unit.
• Ownership Interest -- 22.8% interest in Westlake Chemical OpCo LP, which owns the primary olefins assets.
• Olefins Assets -- three ethylene production facilities located in Kentucky and Louisiana, plus an ethylene pipeline.
• Planned Turnarounds -- zero scheduled for the remainder of 2026 or for the full year of 2027.
• Westlake Corporation Net Sales -- $261.9 million, representing revenue generated under the primary sales agreement.
• Third-Party Net Sales -- $52.5 million, comprising co-products, ethylene, and other sales to external buyers.

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RISKS

• Gilson stated, "third-party ethylene prices have been volatile in 2026 due largely to the ongoing conflict in the Middle East," noting that this impact affects the portion of sales not covered by the fixed-margin agreement.

SUMMARY

Westlake Chemical Partners LP (NYSE:WLKP) reported third quarter results that highlighted the stability of its fixed-margin business model amid broader market volatility. Management reported that 95% of the partnership's ethylene production is sold to its parent company, Westlake Corporation, under a contract that provides a predictable cash margin of $0.10 per pound. The company stated that its cash flows and earnings remained consistent, allowing for the declaration of its 49th consecutive quarterly distribution without the need for external capital market access. Management emphasized that the partnership's financial position is supported by conservative leverage and an improving distribution coverage ratio as the effects of prior year maintenance activities diminish. Looking ahead, the partnership intends to focus on several strategic growth levers as it prepares for upcoming contract negotiations in 2027.

• CEO Gilson highlighted the durability of the partnership's structure, stating, "The high degree of stability in cash flow, when paired with the predictability of our business, has enabled us to deliver the long history of reliable distributions and coverage."
• CFO Baksht confirmed the company's self-funding capability, noting, "With the Partnership's stability and cash flows, we are able to sustain our current distribution without the need to access the capital markets."
• The partnership's current Ethylene Sales Agreement is established through 2027, with management expecting to initiate negotiations for the next contract cycle in the coming year.
• Management identified four primary levers for future growth: increasing ownership in OpCo, acquiring qualified income streams, pursuing organic expansions, and negotiating higher fixed margins in the sales agreement.
• Operational maintenance is managed through a turnaround reserve system that pre-funds major inspections, helping to stabilize cash flow despite these significant periodic expenditures.
• Management noted that ethylene prices have been rising in the fourth quarter of 2026, which could provide a modest financial benefit for the 5% of annual sales made to third parties.

INDUSTRY GLOSSARY

• Ethylene: A gaseous chemical building block used primarily in the production of plastics and other industrial chemicals.
• OpCo: Westlake Chemical OpCo LP, the subsidiary entity that owns and operates the partnership's olefins production facilities.
• Ethylene Sales Agreement (ESA): A long-term contract between the partnership and Westlake Corporation that establishes a fixed cash margin for ethylene production.
• MLP: Master Limited Partnership, a publicly traded entity that combines the tax benefits of a partnership with the liquidity of a public stock.
• Distributable Cash Flow (DCF): A non-GAAP measure representing the cash available for distribution to unitholders after accounting for maintenance capital and reserves.
• Turnaround: A scheduled shutdown of a production facility for major maintenance, repairs, and inspections.
• EBITDA: Earnings before interest, taxes, depreciation, and amortization, used to measure operating performance.

Full Conference Call Transcript

Operator: Good afternoon. Thank you for standing by. Welcome to the Westlake Chemical Partners third quarter 2026 earnings conference call. During the presentation, all participants will be in a listen-only mode. After the speaker's remarks, you will be invited to participate in a question-and-answer session. As a reminder, this conference is being recorded today, November 4th, 2026. I would now like to turn the call over to today's host, Jeff Holy, Westlake Chemical Partners Vice President of Finance and Investor Relations. Sir, you may begin.

Jeff Holy: Thank you. Good afternoon, everyone, and welcome to the Westlake Chemical Partners Third Quarter 2026 Conference Call. I am joined today by Albert Chao, our Executive Chairman, Jean-Marc Gilson, our President and CEO, Jon Baksht, our Senior Vice President and Chief Financial Officer, and other members of our management team. During this call, we will refer to ourselves as Westlake Partners or the Partnership. References to Westlake refer to our parent company, Westlake Corporation, and references to OpCo refer to Westlake Chemical OpCo LP, a subsidiary of both Westlake and the Partnership, which owns certain olefins assets. Additionally, when we refer to distributable cash flow, we are referring to Westlake Chemical Partners MLP distributable cash flow.

Definitions of these terms are available on the Partnership's website. Today, management is going to discuss certain topics that will contain forward-looking information that is based on management's beliefs and 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. We encourage you to learn more about the factors that could lead our actual results to differ by reviewing the cautionary statements in our regulatory filings, which are also available on our investor relations website. This morning, Westlake Partners issued a press release with details of our third quarter 2026 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 the conclusion of this call. The replay can be accessed via the Partnership's website. Please note that information reported on this call speaks only as of today, November 4th, 2026, 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 that this conference call is being broadcast live through an internet webcast system that can be accessed on our webpage at wlkpartners.com. Now, I would like to turn the call over to Jean-Marc Gilson. Jean-Marc?

Jean-Marc Gilson: Thank you, Jeff. Good afternoon, everyone, and thank you for joining us to discuss our third quarter 2026 results. In this morning's press release, we reported Westlake Partners third quarter 2026 net income of $16 million, or $0.46 per unit, which was above our net income in both the second quarter of 2026 and the third quarter of 2025. The stability of Westlake Partners' business model is consistently demonstrated through our fixed-margin Ethylene Sales Agreement, which minimizes market volatility and other production risk. The high degree of stability in cash flow, when paired with the predictability of our business, has enabled us to deliver the long history of reliable distributions and coverage.

This quarter distribution is the 49th consecutive quarterly distribution since our IPO in July of 2014 without any reductions. With that, I would like now to turn over our call to Jon to provide more detail on the financials and operating results for the quarter. Jon?

Jon Baksht: Thank you, Jean-Marc, and good afternoon, everyone. In this morning's press release, we reported Westlake Partners third quarter 2026 net income of $16 million, or $0.46 per unit. Consolidated net income, including OpCo's earnings, was $91 million on consolidated net sales of $314 million. The Partnership had distributable cash flow for the quarter of $18 million, or $0.51 per unit. Third quarter 2026 net income for Westlake Partners of $16 million was higher than the third quarter 2025 Partnership net income, primarily due to higher production and sales volume.

Distributable cash flow of $18 million for the third quarter of 2026 increased by $3 million compared to the third quarter of 2025 due to the higher production and sales volume and lower maintenance capital expenditures. On a sequential basis, net income for Westlake Partners of $16 million in the third quarter of 2026 was higher than the second quarter on higher production and sales volume. Sequentially, our trailing 12-month coverage ratio improved to 1.09x from 1.04x, reflecting the aging out of the impact of the Petro 1 turnaround that occurred in the first half of 2025. Turning our attention to the balance sheet and cash flows.

At the end of the third quarter, we had a consolidated cash balance and cash investments with Westlake through our Investment Management Agreement totaling $113 million. Long-term debt at the end of the quarter was $400 million, of which $377 million was at the Partnership, and the remaining $23 million was at the OpCo. In the third quarter of 2026, OpCo spent $12 million on capital expenditures. We maintained our strong leverage metrics with a consolidated leverage ratio of approximately 1x. on November 2nd, 2026, we announced a quarterly distribution of $0.4714 per unit with respect to the third quarter of 2026.

Since our IPO in 2014, the Partnership has made 49 consecutive quarterly distributions to our unitholders, and we have grown distributions 71% since the Partnership's original minimum quarterly distribution of $0.2750 per unit. The Partnership's third quarter distribution will be paid on December 1st, 2026, to unitholders on record on November 13th, 2026. The Partnership's predictable, fee-based cash flow continues to prove beneficial in today's economic environment and is differentiated by the consistency of our earnings and cash flows. Looking back, since our IPO in July of 2014, we have maintained a cumulative distribution coverage ratio in excess of 1.05x.

With the Partnership's stability and cash flows, we are able to sustain our current distribution without the need to access the capital markets. For modeling purposes, we have no planned turnarounds for the remainder of 2026 or in 2027. Now, I'd like to turn the call back over to Jean-Marc to make some closing comments. Jean-Marc.

Jean-Marc Gilson: Thank you, Jon. Turning to our outlook, third-party ethylene prices have been volatile in 2026 due largely to the ongoing conflict in the Middle East. Thus far, in the fourth quarter of 2026, ethylene prices have been rising and are currently higher than the average price in the third quarter of 2026, which could provide a modest benefit to the Partnership on the roughly 5% of annual sales made to third parties. Turning to our capital structure, we maintain a strong balance sheet with conservative financial and leverage metrics.

As we continue to navigate market conditions, we will evaluate opportunities via our four levers of growth in the future, including increases of our ownership interest of OpCo, acquisitions of other qualified income streams, organic growth opportunities such as expansions of our current ethylene facilities, and negotiation of a higher fixed margin in our Ethylene Sales Agreement with Westlake. We remain focused on our ability to continue to provide long-term value and distributions to our unitholders. As always, we will continue to focus on safe operations along with being good stewards of the environment where we work and live as part of our broader sustainability efforts. Thank you very much for listening to our third quarter earnings call.

Now I will turn the call back over to Jeff.

Jeff Holy: Thank you, Jean-Marc. Before we begin taking questions, I'd like to remind listeners that a replay of this teleconference will be available two hours after the call has ended. We will provide instructions to access the replay at the end of the call. Grace, we will now take questions.

Operator: Thank you. At this time, we will conduct the Q&A session. As a reminder, to ask a question, you will need to press star one on your telephone and wait for your name to be announced. To withdraw your question, please press star one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of James Altschul with Aviation Advisory Service, Inc. Your line is open.

James Altschul: Wonderful. Thank you for taking my question. Actually, two questions. First of all, just now you made reference to the possibility of negotiating an increased fixed margin with Westlake. What incentive would they have to increase the margin? I mean, what's in it for them? Why would they want to do that?

Jon Baksht: The current contract we have in place is in place through 2027, and we'll have those discussions next year. As it relates to margins, I think the comment was referring to the margins that we're seeing in the marketplace, and ethylene PE margins are currently, with current pricing in polyethylenes, are constructive, and it's the third-party margins we refer to, the 5% of third-party sales.

James Altschul: Oh, okay. Okay. Well, but just one. But, okay, if that's following on what you just said. Sorry. I have to call you right back. Sorry. Busy day today. What incentive. I mean, well, I believe when you're negotiating with Westlake, they're sort of like on both sides of the-

Jean-Marc Gilson: Yeah, you know.

James Altschul: trend, downside and the upside.

Jean-Marc Gilson: If you refer to the $0.10 margin that Westlake is paying for ethylene.

James Altschul: Yeah

Jean-Marc Gilson: we think that this is an appropriate level right now. Considering sometimes it goes up, the marketplace, sometimes it goes up, sometimes it goes down, the real price of ethylene. So we think that over the last more than 10 years, it has provided a stable, some stability to the Partnership, and we intend to continue to do it like that.

James Altschul: Okay. Because, Westlake is sort of on both sides of the negotiation, so they wouldn't have a lot of incentive to make the terms more favorable to the Partnership, would they?

Jean-Marc Gilson: Yeah. No, it's Westlake has an incentive also in having that stability in the operation, and so that's why we'll continue like that right now. There is a negotiation, and the negotiation opens, and just that happened last year. So, we do not intend to change anything. We try to negotiate higher prices, but we are two parties at the table.

James Altschul: Okay. The other thing, if you're looking at comparing the cash flow statement with the reconciliation of MLP distributable cash flow to net income, and the reconciliation, the number from maintenance capital expenditures is different from the additions to property, plant, and equipment on the cash flow statement. Why is the discrepancy? Or is PP&E, addition to property, plant, and equipment, separate from maintenance capital expenditures?

Jeff Holy: That's correct. When you're thinking of maintenance expenditures, many of those will not be capitalized, and so you're thinking of that maintenance expenditure piece being both, that cash flow number's going to include both capitalized numbers and pure expense items.

James Altschul: Okay.

Jeff Holy: Just as a reminder as well, last year on a year-over-year basis, we did have the Petro 1 turnaround, and so you will see higher levels on a year-over-year comparative basis on the full year set of cash flows. So that's also some of the delta when looking at it on a comparative basis.

James Altschul: Okay. I guess finally, am I correct in thinking that the idea is ordinarily the turnaround expenses will be covered by what you have in the turnaround reserves?

Jeff Holy: That's correct. It's pre-funded with the turnaround reserve, but you'll still see those flow through in the cash flow statement in the year of the turnaround. It's just funded from cash on the balance sheet that's already been received through the turnaround reserve.

James Altschul: Okay. Well, thank you very much for answering all my questions. I am sorry I had to interrupt you. My other phone was ringing, and I wanted to cut that off, but apologies for disturbing everybody. Thank you very much.

Jeff Holy: You are very welcome.

Operator: At this time, the Q&A session has now ended. I will now turn the call back over to Jeff Holy.

Jeff Holy: Thank you. Thank you again for participating in today's call. We hope you will join us for our next conference call to discuss our fourth quarter and full year 2026 results.

Operator: Thank you for participating in today's Westlake Chemical Partners third quarter 2026 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 P.M. Eastern Time on Wednesday, November 18th, 2026. The replay can be accessed via the partnership website. Goodbye.

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