Westlake Chemical's Q4 2024: Dissecting Contradictions in MLP Strategy, Turnaround Impact, and Ethane Margins

These are the key contradictions discussed in Westlake Chemical Partners LP's latest 2024Q4 earnings call, specifically including: MLP arrangement and distribution growth expectations, financial impact of turnarounds, and ethane cracker margins:



Financial Performance and Stability:
- Westlake Chemical Partners reported net income of $62 million for full year 2024, an increase of $8 million compared to the previous year.
- The stability in financial performance was attributed to a fixed margin ethylene sales agreement and investment-grade sponsorship by Westlake Corporation, providing predictable earnings and stable cash flows.

Distributable Cash Flow and Distribution Growth:
- The Partnership's distributable cash flow increased by $4 million to $67 million for the full year 2024, with distribution coverage at 1.01 times.
- The Partnership has maintained 42 consecutive quarterly distributions since its IPO in 2014, with a 71% distribution growth since then. This growth was supported by stable fee-based cash flows from the fixed margin ethylene sales contract.

Turnaround and Capital Expenditure Impact:
- A planned 60-day turnaround at the Petro 1 ethylene unit in 2025 is expected to impact distribution coverage temporarily.
- The turnaround, with projected costs included in the amount charged to Westlake and fully reserved for, is anticipated to result in a temporary earnings impact followed by a recovery post-turnaround.

North American Ethylene Market Conditions:
- North American spot ethylene prices and margins improved due to tightening industry supply-demand conditions in 2024, benefiting the Partnership through higher third-party ethylene sales prices and margins.
- As of 2025, favorable ethylene sales prices and margins are expected to continue benefiting the Partnership's financial performance.