Genesis Energy, L.P. Q1 FY2026 earnings call

Overall Q1 Performance

• Aggregate Q1 2026 results were slightly below internal expectations, driven by anticipated factors including scheduled producer turnarounds and a heavier-than-usual dry docking calendar, which do not change management's long-term positive view of the business.
• Geopolitical disruptions to global hydrocarbon trade flows have created opportunities to capture incremental volumes and margins not included in original 2026 planning.

Offshore Pipeline Development Highlights

• The Shenandoah field operator's updated subsurface analysis revised upward estimates of total original oil in place, and confirmed a strong natural aquifer water drive that is expected to improve long-term cumulative oil recovery and extend the field's 20- to 30-year productive life. Near-term production rates are being managed deliberately to maximize long-term recovery.
• The 2-well Monument subsea tieback to Shenandoah is progressing ahead of schedule, with first production expected before end-2026 and second production in early 2027; 2 additional Shenandoah wells are planned for 2027, with subsea pumping expansion planned for 2028, and first production from Shenandoah South expected in H1 2028. The Shenandoah FPU capacity is being expanded to 140,000 barrels per day.
• The fourth Salamanca field well was brought online ahead of schedule, lifting total production to over 40,000 barrels per day; a fifth Salamanca well and a fifth Buckskin well are scheduled to come online by Q2 2026.
• Harbour Energy (new owner of LLOG) has contracted a second rig to accelerate development, targeting 20% compound annual production growth through 2030 and doubling Gulf of Mexico production by end-2027, with most new output flowing through Genesis infrastructure at no additional capital cost to Genesis. 2 to 4 additional dedicated wells are expected by early 2028.
• The Kosmos Energy/Occidental Tiberius development, which will route all production exclusively through Genesis-owned infrastructure, reached FID with first production expected in H2 2028, requiring no capital from Genesis. The new Bandit discovery is located on acreage already dedicated to Genesis gathering and pipeline systems, meaning future production will flow through existing infrastructure with no new capital required from Genesis.

Balance Sheet Optimization

• During Q1 2026, Genesis completed a series of transactions: a new $750 million 6.75% coupon senior unsecured notes offering, full redemption of higher-cost 7.75% notes due 2028, an upsized and extended revolving credit facility, and opportunistic repurchase of $135 million in high-cost Series A preferred securities. These steps reduce annual run-rate financing costs by approximately $12 million.
• Remaining Series A preferred face value is ~$394 million. Full retirement or refinancing of the Series A preferred could reduce annual cash costs by an additional $20 million (refinancing) to $45 million (full redemption). Refinancing other senior unsecured bonds maturing in 2029 at the current 6.75% coupon could add a further $35 million in annual interest savings. Total potential annual cost savings from full capital structure optimization could reach $80 million or more.

Long-Term Strategic Goals

• Management targets a leverage ratio of ~4x. As free cash flow grows, Genesis will continue retiring high-cost preferred securities, reduce absolute debt levels, and work toward growing distributions to common unitholders while maintaining flexibility to pursue organic and inorganic growth opportunities.

1. Offshore Pipeline Transportation: Revenue was up 40% year-over-year, but came in below management's near-term Q1 expectations due to extended producer turnaround activity and a normal production decline from early peak levels at the Shenandoah field. The segment expects a net $12 million to $15 million reduction in 2026 segment margin from Shenandoah compared to original guidance. Multiple new wells and development projects are progressing to add incremental future throughput to the segment's 100% and majority-owned pipeline infrastructure. 2. Marine Transportation: Results were in line with management expectations. Stable supply-demand balance across brown water and blue water fleets, with utilization at/near 100% of available capacity. 16% of total available operating days for the blue water fleet were lost in Q1 2026 due to planned regulatory dry dockings, with a comparable reduction expected in Q2 and residual impacts expected in Q3. The 60-day (later extended to 150-day total) Jones Act waiver had no material impact on the segment's served markets. 3. Onshore Transportation and Services: Core transportation and terminal operations performed in line with expectations, with healthy throughput levels across Texas, Raceland and Baton Rouge facilities supported by rising offshore production volumes. Sulfur Services underperformed in Q1 due to operational disruptions at the segment's largest, lowest-cost refinery host facility that reduced sodium hydrosulfide (NaSH) production and increased costs. Sulfur Services also faces ongoing competitive pressure from low-priced Chinese sulfur product imports targeting South American markets.

• Management reaffirms full-year 2026 adjusted EBITDA guidance, and expects results will land at or near the midpoint of the range outlined in February 2026. The February guidance calls for 15% to 20% growth over a 2025 normalized baseline of approximately $500 million to $510 million.
• Offshore Pipeline Transportation 2026 segment margin from the Shenandoah field was revised down by $12 million to $15 million versus original guidance, but management expects other positive operating drivers will offset this reduction to keep full-year results on track.

• Longer-than-expected scheduled producer turnarounds and near-term production declines at Shenandoah negatively impacted Q1 2026 results and full-year 2026 segment margin expectations for the Offshore Pipeline Transportation segment. While subsurface analysis is encouraging for long-term recovery, there remains inherent uncertainty in deepwater reservoir estimates.
• Planned dry dockings for the majority of the blue water Marine Transportation fleet through 2027 temporarily reduce available operating capacity and near-term earnings, with residual impacts from 2026 dry dockings expected to extend into Q3 2026.
• Sulfur Services faces ongoing operational and margin pressure from low-priced Chinese sulfur product imports that are displacing Genesis sales in South American markets at uneconomic price points.
• Operational disruptions at third-party host refineries can directly reduce Sulfur Services production volumes and increase per-unit costs, as seen in Q1 2026.
• Capital structure optimization to retire high-cost preferred securities is partially constrained by bank leverage covenant terms, limiting the ability to retire the full outstanding balance of Series A preferred in a single transaction in the near term.

Q: How long has competitive pressure from Chinese sulfur product imports affected the Sulfur Services business, and how is Genesis responding to this competition? / A: Chinese dehydrated sodium hydrosulfide imports that are processed and sold in South America have competed with Genesis' solution-form NaSH sales for several years. Competitive offerings are being sold at completely uneconomic prices, and this pressure has grown amid recent sulfur price dislocations driven largely by Middle East market disruptions. Genesis has lost market share in South America due to this competition plus domestic supply constraints, so it is focusing on developing new, higher-value market applications in North America instead.

Q: Is planning to continue opportunistic incremental reductions of high-cost preferred and debt, or could it pursue a larger transaction to eliminate all high-cost paper more quickly? / A: Current covenants for the senior secured facility classify the convertible preferred as 100% equity, which limits the ability to retire the full outstanding balance in one transaction while maintaining compliance with leverage ratio requirements. For the remainder of 2026, Genesis will continue its current approach of incremental opportunistic retirement. As EBITDA grows and the overall debt balance is reduced over time, Genesis will gain flexibility to potentially retire the remaining preferred balance in a single large transaction while remaining well within covenant limits.