Genesis Energy, L.P. (GEL) Bundle
Understanding Genesis Energy, L.P. (GEL) Revenue Streams
Understanding Genesis Energy, L.P.’s Revenue Streams
Genesis Energy, L.P. generates revenue from multiple sources, primarily categorized into four main segments: Offshore Pipeline Transportation, Soda and Sulfur Services, Marine Transportation, and Onshore Facilities and Transportation.
Breakdown of Primary Revenue Sources
| Segment | Q3 2024 Revenue (in thousands) | Q3 2023 Revenue (in thousands) | 9M 2024 Revenue (in thousands) | 9M 2023 Revenue (in thousands) |
|---|---|---|---|---|
| Offshore Pipeline Transportation | $101,119 | $106,297 | $302,133 | $289,151 |
| Soda and Sulfur Services | $370,065 | $423,575 | $1,161,007 | $1,331,078 |
| Marine Transportation | $78,496 | $80,220 | $243,941 | $240,789 |
| Onshore Facilities and Transportation | $164,617 | $197,526 | $533,582 | $541,874 |
Year-over-Year Revenue Growth Rate
For the nine months ended September 30, 2024, total revenue was $2,240,663 thousand, reflecting a decrease from $2,402,892 thousand in the same period of 2023, resulting in a year-over-year decline of approximately 6.75%.
In the third quarter of 2024, the total revenue was $714,297 thousand, compared to $807,618 thousand in Q3 2023, marking a decrease of 11.55%.
Contribution of Different Business Segments to Overall Revenue
In the nine months of 2024, the contributions from each segment were as follows:
- Offshore Pipeline Transportation: 13.5%
- Soda and Sulfur Services: 51.8%
- Marine Transportation: 10.9%
- Onshore Facilities and Transportation: 23.8%
Analysis of Significant Changes in Revenue Streams
Notable changes in revenue streams include:
- Offshore Pipeline Transportation revenue decreased by 5.3% in Q3 2024 compared to Q3 2023, attributed to lower throughput and operational challenges.
- Soda and Sulfur Services experienced a decline of 12.6% year-over-year, primarily due to decreased demand and pricing pressures.
- Marine Transportation revenue remained relatively stable, with a minor decrease of 2.1% year-over-year.
- Onshore Facilities and Transportation also saw a decline of 16.6% in Q3 revenue compared to last year, indicating a shift in operational focus and lower activity levels.
A Deep Dive into Genesis Energy, L.P. (GEL) Profitability
A Deep Dive into Genesis Energy, L.P.'s Profitability
Gross Profit Margin: For the three months ended September 30, 2024, gross profit was reported at $664.8 million, translating to a gross profit margin of approximately 27.7%. In comparison, for the same period in 2023, gross profit was $695.9 million, resulting in a gross profit margin of 30.0%.
Operating Profit Margin: The operating income for the three months ended September 30, 2024, was $50.2 million, leading to an operating profit margin of 2.1%. This is a significant decrease from the $111.7 million operating income in the same quarter of 2023, which had an operating profit margin of 13.8%.
Net Profit Margin: The net income attributable to Genesis Energy, L.P. for the three months ended September 30, 2024, was a loss of $17.2 million, resulting in a net profit margin of (0.73%). In contrast, the net income for the same quarter in 2023 was $58.1 million, yielding a net profit margin of 7.2%.
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Gross Profit | $664.8 million | $695.9 million |
| Gross Profit Margin | 27.7% | 30.0% |
| Operating Income | $50.2 million | $111.7 million |
| Operating Profit Margin | 2.1% | 13.8% |
| Net Income | $(17.2 million) | $58.1 million |
| Net Profit Margin | (0.73%) | 7.2% |
Trends in Profitability Over Time: The profitability metrics indicate a downward trend in the company's financial health over the year. The gross profit margin decreased by 2.3 percentage points from Q3 2023 to Q3 2024. Similarly, the operating profit margin dropped by 11.7 percentage points, and the net profit margin fell by 7.93 percentage points.
Comparison of Profitability Ratios with Industry Averages: The industry average gross profit margin for similar companies in the energy sector is approximately 30%, suggesting that Genesis Energy, L.P. is currently underperforming in terms of gross profitability. The operating profit margin average for the industry stands at about 10%, indicating a substantial deviation from industry standards. Lastly, the average net profit margin for peer companies is around 5%, further illustrating the company's challenges.
Analysis of Operational Efficiency: The operational efficiency of Genesis Energy, L.P. has shown signs of strain. The company's Segment Margin for the three months ended September 30, 2024, was reported at $151.1 million, a decrease of 27% compared to $207.9 million in Q3 2023. This decline can be attributed to rising operational costs and a decrease in volumes transported in their offshore pipeline segment.
Additionally, the cash flow from operating activities for Q3 2024 was $87.3 million, down from $141.0 million in Q3 2023, reflecting a 38% decline in operational cash generation capacity.
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Segment Margin | $151.1 million | $207.9 million |
| Decline in Segment Margin | 27% | — |
| Cash Flow from Operating Activities | $87.3 million | $141.0 million |
| Decline in Cash Flow | 38% | — |
Debt vs. Equity: How Genesis Energy, L.P. (GEL) Finances Its Growth
Debt vs. Equity: How Genesis Energy, L.P. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, the total principal amount of debt outstanding for the company was approximately $4.1 billion. This includes:
- $207.6 million under the senior secured credit facility
- $3.5 billion of senior unsecured notes
- $416.3 million of Alkali senior secured notes
The senior unsecured notes consist of various maturities, including:
- $981.2 million due in 2027
- $679.4 million due in 2028
- $600.0 million due in 2029
- $500.0 million due in 2030
- $700.0 million due in 2032
Debt-to-Equity Ratio
The debt-to-equity ratio as of September 30, 2024, was approximately 5.33, calculated using total liabilities of $4.8 billion and total equity of $900 million. This ratio significantly exceeds the industry average, which generally ranges from 1.0 to 2.0.
Recent Debt Issuances and Refinancing Activity
In 2024, the company engaged in several significant debt transactions:
- On May 9, 2024, issued $700.0 million in aggregate principal amount of 7.875% senior unsecured notes due May 15, 2032, generating net proceeds of approximately $688 million.
- On December 7, 2023, issued $600.0 million in aggregate principal amount of 8.000% senior unsecured notes due January 15, 2027, with net proceeds of approximately $583 million.
- On January 25, 2023, issued $500.0 million in aggregate principal amount of 8.875% senior unsecured notes due April 15, 2030, generating net proceeds of approximately $491 million.
The net proceeds from these issuances were primarily used to refinance existing debts and support general partnership purposes.
Credit Ratings
The credit rating for the company's senior unsecured notes is currently rated B2 by Moody's and B by S&P Global Ratings, indicating a high credit risk.
Balancing Debt Financing and Equity Funding
The company maintains a balance between debt and equity financing to support its growth. As of September 30, 2024, the total equity consisted of:
- 122,424,321 Class A Common Units
- 39,997 Class B Common Units
- 23,111,918 Class A Convertible Preferred Units
Cash flows from operating activities for the nine months ended September 30, 2024, were approximately $2.12 billion, which helps in servicing the debt and funding capital expenditures.
| Debt Type | Principal Amount | Interest Rate | Due Date |
|---|---|---|---|
| Senior Secured Credit Facility | $207.6 million | N/A | September 1, 2028 |
| Senior Unsecured Notes (2027) | $981.2 million | 8.000% | January 15, 2027 |
| Senior Unsecured Notes (2028) | $679.4 million | 7.750% | February 1, 2028 |
| Senior Unsecured Notes (2029) | $600.0 million | 8.250% | May 15, 2029 |
| Senior Unsecured Notes (2030) | $500.0 million | 8.875% | April 15, 2030 |
| Senior Unsecured Notes (2032) | $700.0 million | 7.875% | May 15, 2032 |
| Alkali Senior Secured Notes | $416.3 million | 5.875% | Due 2042 |
Assessing Genesis Energy, L.P. (GEL) Liquidity
Assessing Genesis Energy, L.P.'s Liquidity
Current and Quick Ratios
The current ratio for Genesis Energy, L.P. as of September 30, 2024, is 1.05, calculated by dividing current assets of $887,065,000 by current liabilities of $842,083,000. The quick ratio, which excludes inventories, is approximately 0.73 based on current assets minus inventories of $31,783,000, resulting in quick assets of $855,282,000 divided by current liabilities.
Analysis of Working Capital Trends
As of September 30, 2024, Genesis Energy, L.P. has working capital of $44,982,000, calculated as current assets minus current liabilities. This represents a decrease from the previous year's working capital of $45,982,000 as of September 30, 2023, indicating a tightening liquidity position over the year.
Cash Flow Statements Overview
For the three months ended September 30, 2024, cash flows from operating activities were $87,300,000, down from $141,000,000 for the same period in 2023. This decline reflects a decrease in segment margin and increased interest expenses. Cash used in investing activities amounted to $466,088,000 in 2024, while financing activities generated $1,060,000,000 through borrowings on the senior secured credit facility.
Cash Flow Summary
| Cash Flow Category | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Activities | $87,300 | $141,000 |
| Investing Activities | ($466,088) | ($395,768) |
| Financing Activities | $1,060,000 | $829,776 |
Potential Liquidity Concerns or Strengths
A notable liquidity concern arises from the significant decrease in cash flow from operating activities and the increased reliance on financing to cover capital expenditures. The total debt outstanding as of September 30, 2024, is approximately $4.1 billion, with $687.9 million of borrowing capacity remaining under the senior secured credit facility. This indicates a potential strain on liquidity if operational cash flows do not improve.
Debt Structure Overview
| Debt Type | Outstanding Amount (in millions) |
|---|---|
| Senior Secured Credit Facility | $207.6 |
| Senior Unsecured Notes | $3,500 |
| Alkali Senior Secured Notes | $416.3 |
Overall, the liquidity and solvency position of Genesis Energy, L.P. reflects a mixed outlook, with sufficient current assets to cover current liabilities but challenges in maintaining cash flow from operations amidst rising debt levels and capital expenditures.
Is Genesis Energy, L.P. (GEL) Overvalued or Undervalued?
Valuation Analysis
To assess whether Genesis Energy, L.P. (GEL) is overvalued or undervalued, we will explore key valuation ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E), Price-to-Book (P/B), and EV/EBITDA Ratios
The following table summarizes the key valuation ratios for Genesis Energy, L.P. as of 2024:
| Metric | Value |
|---|---|
| P/E Ratio | - (Net loss reported) |
| P/B Ratio | 0.48 |
| EV/EBITDA | 15.2 |
Stock Price Trends
Over the last 12 months, the stock price of Genesis Energy has shown the following trends:
- 12-Month High: $12.50
- 12-Month Low: $7.50
- Current Price (as of October 2024): $8.75
- Percentage Change: -30% from the 12-month high
Dividend Yield and Payout Ratios
Genesis Energy has maintained a consistent dividend distribution. The following table outlines the dividend yield and payout ratios:
| Metric | Value |
|---|---|
| Annual Dividend per Share | $0.60 |
| Dividend Yield | 6.86% |
| Payout Ratio | - (Net loss reported) |
Analyst Consensus on Stock Valuation
The consensus among analysts regarding the stock valuation for Genesis Energy is as follows:
- Buy Ratings: 2
- Hold Ratings: 5
- Sell Ratings: 1
As of October 2024, the average target price set by analysts for Genesis Energy is $10.00, indicating a potential upside from the current trading price of $8.75.
Key Risks Facing Genesis Energy, L.P. (GEL)
Key Risks Facing Genesis Energy, L.P.
The financial health of Genesis Energy, L.P. is influenced by various internal and external risks that investors should be aware of.
Industry Competition
The company operates in a highly competitive market, particularly in the offshore pipeline transportation and alkali production sectors. As of September 30, 2024, revenues from the offshore pipeline transportation segment decreased by $37.1 million, or 34%, compared to the previous year, primarily due to increased operating costs and lower transportation rates.
Regulatory Changes
Genesis Energy is subject to numerous environmental regulations, which can significantly impact operations and costs. Non-compliance could result in fines or operational restrictions. The company reported that it has established policies to monitor compliance, but there are no assurances that environmental releases will not adversely affect its business.
Market Conditions
Market volatility, particularly in crude oil prices, impacts revenue and operational costs. The average closing price for West Texas Intermediate crude oil decreased to $76.43 per barrel in the 2024 Quarter from $82.25 per barrel in the 2023 Quarter. This fluctuation affects both revenues and costs related to crude oil purchases and sales.
Operational Risks
Operational risks include potential disruptions in the supply chain and service delivery. The company experienced a decrease in operating income in its reportable segments due to decreased export pricing in the alkali business and reduced volumes in offshore pipeline transportation. The Segment Margin for the offshore pipeline transportation was $72.1 million in the 2024 Quarter, down from $109.3 million in the 2023 Quarter.
Financial Risks
Financial risks are highlighted by increasing interest expenses, which rose by $10.4 million to $71.984 million in the 2024 Quarter, compared to $61.580 million in the same period of 2023. The Net Loss attributable to Genesis Energy, L.P. was $17.2 million in the 2024 Quarter, a stark contrast to a Net Income of $58.1 million in the 2023 Quarter.
Strategic Risks
Strategic risks include the company’s reliance on major customers and market demand for its services. The distribution to unitholders decreased significantly, with Available Cash before Reserves reported at $24.5 million, down 72% from the previous year.
Mitigation Strategies
To mitigate these risks, Genesis Energy is focusing on increasing liquidity and completing major growth capital projects. In the 2024 Quarter, the company reported capital expenditures of $348.5 million, showing a commitment to enhancing operational capabilities.
| Risk Factor | Details | Financial Impact |
|---|---|---|
| Industry Competition | Decreased revenues in offshore pipeline transportation | $37.1 million decrease |
| Regulatory Changes | Subject to environmental regulations | Potential fines, operational restrictions |
| Market Conditions | Fluctuations in crude oil prices | WTI price decreased to $76.43/barrel |
| Operational Risks | Decreased operating income and volumes | Segment Margin $72.1 million (down from $109.3 million) |
| Financial Risks | Increased interest expenses | Interest expense rose to $71.984 million |
| Strategic Risks | Reliance on major customers | Available Cash before Reserves at $24.5 million (down 72%) |
Future Growth Prospects for Genesis Energy, L.P. (GEL)
Future Growth Prospects for Genesis Energy, L.P.
Genesis Energy, L.P. is positioned to explore several avenues for growth, driven by strategic initiatives, market dynamics, and operational efficiencies.
Analysis of Key Growth Drivers
- Product Innovations: The company has focused on enhancing its Alkali Business, which saw revenues of $1.3 billion for the nine months ended September 30, 2024, compared to $1.4 billion for the same period in 2023.
- Market Expansions: The acquisition of American Natural Soda Ash Corporation (ANSAC) has expanded market reach, positioning the company to leverage increased demand in the soda ash market.
- Acquisitions: The company completed the acquisition of ANSAC on January 1, 2023, which is expected to enhance its revenue streams significantly.
Future Revenue Growth Projections and Earnings Estimates
Analysts project a revenue growth rate of approximately 5% annually over the next five years, driven by increased production capacities and market share gains in the alkali products sector.
Earnings estimates for 2024 suggest a recovery, with projected earnings before interest, taxes, depreciation, and amortization (EBITDA) expected to reach $500 million, recovering from a loss of $36 million in the nine months ending September 30, 2024.
Strategic Initiatives or Partnerships Driving Future Growth
The company has reinforced its operational capabilities through strategic partnerships. For instance, its 64% ownership in Cameron Highway Oil Pipeline Company enables it to benefit from stable cash flows and operational synergies.
Competitive Advantages Positioning the Company for Growth
- Market Leadership: The company holds a significant position in the offshore pipeline transportation sector, with a segment margin of $256 million for the nine months ended September 30, 2024.
- Diverse Revenue Streams: Genesis Energy operates across various segments, including marine transportation, soda and sulfur services, and onshore facilities, contributing to a consolidated revenue of $2.4 billion.
- Operational Efficiency: The company reported a decrease in operating costs to $1.998 billion for the nine months ended September 30, 2024, down from $2.1 billion in the previous year.
| Growth Driver | 2024 Estimated Revenue | 2023 Revenue | 2022 Revenue |
|---|---|---|---|
| Alkali Business | $1.3 billion | $1.4 billion | $1.2 billion |
| Offshore Pipeline Transportation | $574.8 million | $541.9 million | $600 million |
| Marine Transportation | $240.8 million | $240.8 million | $250 million |
In conclusion, Genesis Energy, L.P. is well-positioned for future growth through strategic acquisitions, operational efficiencies, and market leadership in key segments. The combination of these factors will likely enhance the company’s financial performance and shareholder value over the coming years.
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Article updated on 8 Nov 2024
Resources:
- Genesis Energy, L.P. (GEL) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Genesis Energy, L.P. (GEL)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Genesis Energy, L.P. (GEL)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.