Westlake Chem Partners Lp Stock Price, News & Analysis

Westlake Chemical Partners LP (NYSE: WLKP) is a limited partnership in the U.S. chemical industry. The partnership was formed by Westlake Corporation to operate, acquire and develop ethylene production facilities and other qualified assets. According to company disclosures, it is headquartered in Houston and focuses on ethylene production and related infrastructure within the basic organic chemical manufacturing sector.

The partnership’s primary operating interests are held through Westlake Chemical OpCo LP ("OpCo"). Westlake Chemical Partners owns a 22.8% limited partner interest in OpCo and a 100% interest in Westlake Chemical OpCo GP LLC, which is the general partner of OpCo. Through this structure, the partnership controls OpCo while Westlake Corporation retains the remaining limited partner interest in OpCo and a significant interest in the partnership itself.

Core operations and assets

OpCo’s assets consist of three ethylene production facilities located in Calvert City, Kentucky, and Lake Charles, Louisiana, as well as an ethylene pipeline. These facilities process ethane and propane into ethylene. In addition to ethylene, OpCo produces co-products that include propylene, crude butadiene, pyrolysis gasoline and hydrogen, which are sold to Westlake Corporation and other customers in the United States.

The partnership’s operations are closely linked to Westlake Corporation through long-term commercial agreements. Under an Ethylene Sales Agreement, OpCo sells 95% of its ethylene production to Westlake. The agreement is designed to provide stable and predictable cash flows by setting a cash margin of $0.10 per pound of ethylene, net of operating costs, maintenance capital expenditures and reserves for future turnaround expenditures. This structure is described by the partnership as a fee-based cash flow model with take-or-pay protections for the majority of OpCo’s production.

Business model and cash flow profile

Westlake Chemical Partners’ economic performance is tied to the cash flows generated by OpCo and distributed to the partnership. The partnership highlights MLP distributable cash flow, coverage ratio and EBITDA as key non-GAAP measures used by management and external stakeholders to assess its operating performance, ability to service debt and fund capital expenditures, and to evaluate investment opportunities. These measures are reconciled to net income and net cash provided by operating activities in the partnership’s financial disclosures.

The partnership emphasizes that its Ethylene Sales Agreement with Westlake provides a predictable, fee-based cash flow structure. Because the pricing formula is based on a fixed cash margin per pound of ethylene, net of specified costs, the partnership states that changes in spot ethylene prices have had minimal impact on its cash flows during recent periods. This arrangement is intended to support consistent distributions to unitholders.

Relationship with Westlake Corporation

Westlake Chemical Partners was formed by Westlake Corporation, which remains deeply involved in the partnership’s structure and operations. Westlake retains the majority of the limited partner interest in OpCo and holds a significant interest in Westlake Chemical Partners through ownership of the partnership’s general partner, a substantial portion of its limited partner units and the incentive distribution rights. The partnership and Westlake are also parties to a Feedstock Supply Agreement, a Services and Secondment Agreement and an Omnibus Agreement, which govern feedstock supply, shared services, seconded personnel and certain indemnification obligations.

In an 8-K filing, the partnership reported that OpCo and Westlake agreed to renew both the Ethylene Sales Agreement and the Feedstock Supply Agreement through December 31, 2027, in accordance with their terms. In connection with this renewal, the Services and Secondment Agreement was amended to align its term with the Ethylene Sales Agreement, and the Omnibus Agreement was amended to provide that it would terminate upon termination of the Ethylene Sales Agreement and to address procedural requirements related to Westlake’s indemnification obligations for certain environmental and tax matters.

Production, turnarounds and operations

The partnership’s disclosures highlight the operational performance of OpCo’s ethylene facilities, including planned maintenance activities. A notable example is the turnaround at the Petro 1 ethylene facility in Lake Charles, Louisiana, which began at the end of January and extended into early April in a recent year. The partnership reported that this turnaround temporarily reduced production and sales volumes and increased maintenance capital expenditures, which affected MLP distributable cash flow and coverage ratios during the affected quarters.

Following the completion of the Petro 1 turnaround, management reported that OpCo’s assets ran well and production returned to nameplate capacity levels. The partnership has described the long interval between major Petro 1 turnarounds as a significant operational milestone and has indicated that no further turnarounds are planned for that facility for several years, based on its disclosures.

Distributions and unitholder considerations

Westlake Chemical Partners is structured as a master limited partnership (MLP). The partnership has reported a long history of quarterly cash distributions to its common unitholders. Company press releases note that the Board of Directors of Westlake Chemical Partners GP LLC, the general partner, has declared recurring quarterly distributions per common unit, and that the partnership has announced more than forty consecutive quarterly distributions since its initial public offering in July 2014.

The partnership states that its Ethylene Sales Agreement and related arrangements with Westlake have supported its ability to make these distributions. It also discloses that, under U.S. tax regulations, brokers and nominees should treat 100% of the partnership’s distributions to non-U.S. investors as being attributable to income effectively connected with a U.S. trade or business, subjecting those distributions to federal income tax withholding at the highest applicable effective tax rate.

Regulatory reporting and financial transparency

Westlake Chemical Partners files periodic reports with the U.S. Securities and Exchange Commission, including Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, as well as current reports on Form 8-K for material events. The partnership has highlighted its filing of an Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and offers unitholders the ability to request a hard copy of the report, including complete audited financial statements, free of charge.

In its earnings releases and SEC filings, the partnership explains its use of non-GAAP financial measures such as MLP distributable cash flow, coverage ratio and EBITDA. It states that these measures are intended to provide supplemental information regarding underlying business trends and performance of ongoing operations and to facilitate period-over-period comparisons, while emphasizing that they should be considered in addition to, and not as a substitute for, GAAP measures.

Capital structure and financing relationships

The partnership’s condensed consolidated balance sheets and cash flow statements show that it has long-term debt payable to Westlake and that it engages in financing activities that include proceeds from and repayments of this debt, distributions to noncontrolling interests retained in OpCo by Westlake and distributions to unitholders. The partnership also reports investments and maturities under an Investment Management Agreement with Westlake, which affect its receivables and cash flows.

Through this combination of operating interests in OpCo, long-term commercial agreements with Westlake, and its MLP structure, Westlake Chemical Partners provides investors with exposure to ethylene production assets and related cash flows within the basic organic chemical manufacturing segment.