Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated and condensed financial statements and the notes thereto included elsewhere in this quarterly report.
Overview
We are a publicly traded limited partnership with a diverse set of operations focused primarily in the Gulf Coast region of the U.S. Our four primary business lines include:
• Terminalling, processing, and storage services for petroleum products and by-products;
• Land and marine transportation services for petroleum products and by-products, chemicals, and specialty products;
• Sulfur and sulfur-based products processing, manufacturing, marketing, and distribution; and
• Marketing, distribution, and transportation services for natural gas liquids and blending and packaging services for specialty lubricants and grease.
The petroleum products and by-products we collect, transport, store and market are produced primarily by major and independent oil and gas companies who often turn to third parties, such as us, for the transportation and disposition of these products. In addition to these major and independent oil and gas companies, our primary customers include independent refiners, large chemical companies, and other wholesale purchasers of these products. We operate primarily in the Gulf Coast region of the U.S. This region is a major hub for petroleum refining, natural gas gathering and processing, and support services for the exploration and production industry.
We were formed in 2002 by Martin Resource Management Corporation, a privately-held company whose initial predecessor was incorporated in 1951 as a supplier of products and services to drilling rig contractors. Since then, Martin Resource Management Corporation has expanded its operations through acquisitions and internal expansion initiatives as its management identified and capitalized on the needs of producers and purchasers of petroleum products and by-products and other bulk liquids. Martin Resource Management Corporation is an important supplier and customer of ours. As of June 30, 2024, Martin Resource Management Corporation owned 15.7% of our total outstanding common limited partner units and 100% of MMGP Holdings, LLC ("Holdings"), which is the sole member of Martin Midstream GP LLC ("MMGP"), our general partner. MMGP owns a 2.0% general partner interest in us.
We entered into the Omnibus Agreement that governs, among other things, potential competition and indemnification obligations among the parties to the agreement, related party transactions, the provision of general administration and support services by Martin Resource Management Corporation and our use of certain of Martin Resource Management Corporation’s trade names and trademarks. Under the terms of the Omnibus Agreement, the employees of Martin Resource Management Corporation are responsible for conducting our business and operating our assets.
Martin Resource Management Corporation has operated our business since our inception in 2002. Martin Resource Management Corporation began operating our NGL business in the 1950s and our sulfur business in the 1960s. It began our land transportation business in the early 1980s and our marine transportation business in the late 1980s. It entered into our fertilizer and terminalling and storage businesses in the early 1990s.
Significant Recent Developments
MMLP Receives Buyout Offer from Martin Resource Management. On May 24, 2024, we announced that Martin Resource Management filed an amendment to its Schedule 13D (the “13D Amendment”) with the SEC. The 13D Amendment disclosed that Martin Resource Management submitted a non-binding proposal to the Conflicts Committee, pursuant to which Martin Resource Management would acquire all of the outstanding Common Units of the Partnership not already owned by Martin Resource Management or its subsidiaries for a cash purchase price of $3.05 per Common Unit. The other terms of such proposal are set forth in the 13D Amendment.
The proposed transaction is subject to several contingencies, including the approval of the Conflicts Committee and the Board of Directors, the approval by the Partnership’s unitholders, and the satisfaction of any conditions to the
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consummation of a transaction set forth in any definitive agreement concerning the transaction. There can be no assurance that definitive documentation will be executed or that any transaction will materialize on the terms described above or at all.
Galveston Bridge Allision. During May 2024, we experienced a casualty loss of $0.5 million that represents two separate insurance deductibles under our marine transportation protection and indemnity coverage policy and our hull coverage policy stemming from a bridge allision in Galveston, Texas.
Electronic Level Sulfuric Acid Joint Venture. On October 19, 2022, Martin ELSA Investment LLC, our affiliate, entered into definitive agreements with Samsung C&T America, Inc. and Dongjin USA, Inc., an affiliate of Dongjin Semichem Co., Ltd., to form DSM Semichem LLC (“DSM”). DSM will produce and distribute electronic level sulfuric acid (“ELSA”). By leveraging our existing assets located in Plainview, Texas and installing additional facilities (the “ELSA Facility”) as required, DSM will produce ELSA that meets the strict quality standards required by the recent advances in semiconductor manufacturing. In addition to owning a 10% non-controlling interest in DSM, we will be the exclusive provider of feedstock to the ELSA Facility. We, through our affiliate MTI, will also provide land transportation services for the ELSA produced by DSM. We expect to fund approximately $27.0 million in aggregate capital expenditures in connection with this joint venture. On April 1, 2024, we contributed $6.5 million to DSM, which represents the cash contribution required pursuant to DSM's limited liability agreement for our 10% non-controlling interest. As of June 30, 2024, we have funded approximately $23.9 million toward ELSA related project costs.
Subsequent Events
Quarterly Distribution. On July 17, 2024, we declared a quarterly cash distribution of $0.005 per common unit for the second quarter of 2024, or $0.020 per common unit on an annualized basis, which will be paid on August 14, 2024, to unitholders of record as of August 7, 2024.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based on the historical consolidated and condensed financial statements included elsewhere herein. We prepared these financial statements in conformity with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances. We routinely evaluate these estimates, utilizing historical experience, consultation with experts and other methods we consider reasonable in the particular circumstances. Our results may differ from these estimates, and any effects on our business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known. Changes in these estimates could materially affect our financial position, results of operations or cash flows. See the "Critical Accounting Policies and Estimates" section in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 2, "Significant Accounting Policies" in Notes to Consolidated Financial Statements included within our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024.
Our Relationship with Martin Resource Management Corporation
Martin Resource Management Corporation is engaged in the following principal business activities:
• distributing asphalt, marine fuel and other liquids;
• providing marine bunkering and other shore-based marine services in Texas, Louisiana, Mississippi, Alabama, and Florida;
• operating a crude oil gathering business in Stephens, Arkansas;
• providing crude oil gathering and marketing services of base oils, asphalt, and distillate products in Smackover, Arkansas;
• providing crude oil marketing and transportation from the well head to the end market;
• operating an environmental consulting company;
• operating a butane optimization business;
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• supplying employees and services for the operation of our business; and
• operating, solely for our account, the asphalt facilities in Hondo, South Houston and Port Neches, Texas, and Omaha, Nebraska.
We are and will continue to be closely affiliated with Martin Resource Management Corporation as a result of the following relationships.
Ownership
Martin Resource Management Corporation owns approximately 15.7% of the outstanding limited partner units and indirectly owns 100% of MMGP, our general partner, through its 100% interest in Holdings, which is the sole member of MMGP. MMGP owns a 2% general partner interest in us.
Management
Martin Resource Management Corporation directs our business operations through its ownership interests in and control of our general partner. We benefit from our relationship with Martin Resource Management Corporation through access to a significant pool of management expertise and established relationships throughout the energy industry. We do not have employees. Martin Resource Management Corporation employees are responsible for conducting our business and operating our assets on our behalf.
Related Party Agreements
The Omnibus Agreement requires us to reimburse Martin Resource Management Corporation for all direct expenses it incurs or payments it makes on our behalf or in connection with the operation of our business. We reimbursed Martin Resource Management Corporation for $42.9 million of direct costs and expenses for the three months ended June 30, 2024, compared to $38.6 million for the three months ended June 30, 2023. We reimbursed Martin Resource Management Corporation for $82.2 million of direct costs and expenses for the six months ended June 30, 2024, compared to $79.5 million for the six months ended June 30, 2023. There is no monetary limitation on the amount we are required to reimburse Martin Resource Management Corporation for direct expenses.
In addition to the direct expenses, under the Omnibus Agreement, we are required to reimburse Martin Resource Management Corporat ion for indirect general and administrative and corporate overhead expenses. In each of the three months ended June 30, 2024 and 2023, the Conflicts Committee approved reimbursement amounts of $3.4 million and $3.5 million, respectively. In each of the six months ended June 30, 2024 and 2023, the Conflicts Committee approved reimbursement amounts of $6.8 million and $7.0 million, respectively. The Conflicts Committee will review and approve future adjustments in the reimbursement amount for indirect expenses, if any, annually. These indirect expenses covered the centralized corporate functions Martin Resource Management Corporation provides for us, su ch as accounting, treasury, clerical, engineering, legal, billing, information technology, administration of insurance, general office expenses and employee benefit plans and other general corporate overhead functions we share with Martin R esource Management Corporation’s retained businesses. The Omnibus Agreement also contains significant non-compete provisions and indemnity obligations. Martin Resource Management Corporation also licenses certain of its trademarks and trade names to us under the Omnibus Agreement.
These additional related party agreements include, but are not limited to, a master transportation services agreement, marine transportation agreements, terminal services agreements, and a tolling agreement. Pursuant to the terms of the Omnibus Agreement, we are prohibited from entering into certain material agreements with Martin Resource Management Corporation without the approval of the Conflicts Committee.
For a more comprehensive discussion concerning the Omnibus Agreement and the other agreements that we have entered into with Martin Resource Management Corporation, please refer to "Item 13. Certain Relationships and Related Transactions, and Director Independence" set forth in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024.
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Commercial
We have been and anticipate that we will continue to be both a significant customer and supplier of products and services offered by Martin Resource Management Corporation. In the aggregate, the impact of related party transactions included in total costs and expenses accounted for approximately 28% and 24% of our total costs and expenses during the three months ended June 30, 2024 and 2023, respectively. In the aggregate, the impact of related party transactions included in total costs and expenses accounted for approximately 27% and 21% of our total costs and expenses during the six months ended June 30, 2024 and 2023, respectively.
Correspondingly, Martin Resource Management Corporation is one of our significant customers. Our sales to Martin Resource Management Corporation accounted for approximately 14% and 17% of our total revenues for the three months ended June 30, 2024 and 2023, respectively. Our sales to Martin Resource Management Corporation accounted for approximately 15% and 13% of our total revenues for the six months ended June 30, 2024 and 2023, respectively.
For a more comprehensive discussion concerning the agreements that we have entered into with Martin Resource Management Corporation, please refer to "Item 13. Certain Relationships and Related Transactions, and Director Independence" set forth in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024.
Approval and Review of Related Party Transactions
If we contemplate entering into a transaction, other than a routine or in the ordinary course of business transaction, in which a related person will have a direct or indirect material interest, the proposed transaction is submitted for consideration to the board of directors of our general partner or to our management, as appropriate. If the board of directors of our general partner is involved in the approval process, it determines whether to refer the matter to the Conflicts Committee of our general partner's board of directors, as constituted under our limited partnership agreement. If a matter is referred to the Conflicts Committee, the Conflicts Committee obtains information regarding the proposed transaction from management and determines whether to engage independent legal counsel or an independent financial advisor to advise the members of the committee regarding the transaction. If the Conflicts Committee retains such counsel or financial advisor, it considers such advice and, in the case of a financial advisor, such advisor’s opinion as to whether the transaction is fair and reasonable to us and to our unitholders.
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Non-GAAP Financial Measures
To assist management in assessing our business, we use the following non-GAAP financial measures: earnings before interest, taxes, and depreciation and amortization ("EBITDA"), adjusted EBITDA (as defined below), adjusted EBITDA after giving effect to the exit of the butane optimization business, distributable cash flow available to common unitholders (“Distributable Cash Flow”), and free cash flow after growth capital expenditures and principal payments under finance lease obligations ("Adjusted Free Cash Flow"). Our management uses a variety of financial and operational measurements other than our financial statements prepared in accordance with U.S. GAAP to analyze our performance.
Certain items excluded from EBITDA and Adjusted EBITDA are significant components in understanding and assessing an entity's financial performance, such as cost of capital and historical costs of depreciable assets.
EBITDA and Adjusted EBITDA . We define Adjusted EBITDA as EBITDA before unit-based compensation expenses, gains and losses on the disposition of property, plant and equipment, impairment and other similar non-cash adjustments. Adjusted EBITDA is used as a supplemental performance and liquidity measure by our management and by external users of our financial statements, such as investors, commercial banks, research analysts, and others, to assess:
• the financial performance of our assets without regard to financing methods, capital structure, or historical cost basis;
• the ability of our assets to generate cash sufficient to pay interest costs, support our indebtedness, and make cash distributions to our unitholders; and
• our operating performance and return on capital as compared to those of other companies in the midstream energy sector, without regard to financing methods or capital structure.
The GAAP measures most directly comparable to adjusted EBITDA are net income (loss) and net cash provided by (used in) operating activities. Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income (loss), operating income (loss), net cash provided by (used in) operating activities, or any other measure of financial performance presented in accordance with GAAP. Adjusted EBITDA may not be comparable to similarly titled measures of other companies because other companies may not calculate Adjusted EBITDA in the same manner.
Adjusted EBITDA does not include interest expense, income tax expense, and depreciation and amortization. Because we have borrowed money to finance our operations, interest expense is a necessary element of our costs and our ability to generate cash available for distribution. Because we have capital assets, depreciation and amortization are also necessary elements of our costs. Therefore, any measures that exclude these elements have material limitations. To compensate for these limitations, we believe that it is important to consider net income (loss) and net cash provided by (used in) operating activities as determined under GAAP, as well as adjusted EBITDA, to evaluate our overall performance.
Distributable Cash Flow. We define Distributable Cash Flow as Net Cash Provided by (Used in) Operating Activities less cash received (plus cash paid) for closed commodity derivative positions included in Accumulated Other Comprehensive Income (Loss), plus changes in operating assets and liabilities which (provided) used cash, less maintenance capital expenditures and plant turnaround costs. Distributable Cash Flow is a significant performance measure used by our management and by external users of our financial statements, such as investors, commercial banks and research analysts, to compare basic cash flows generated by us to the cash distributions we expect to pay unitholders. Distributable Cash Flow is also an important financial measure for our unitholders since it serves as an indicator of our success in providing a cash return on investment. Specifically, this financial measure indicates to investors whether or not we are generating cash flow at a level that can sustain or support an increase in our quarterly distribution rates. Distributable Cash Flow is also a quantitative standard used throughout the investment community with respect to publicly-traded partnerships because the value of a unit of such an entity is generally determined by the unit's yield, which in turn is based on the amount of cash distributions the entity pays to a unitholder.
Adjusted Free Cash Flow. We define Adjusted Free Cash Flow as Distributable Cash Flow less growth capital expenditures and principal payments under finance lease obligations. Adjusted Free Cash Flow is a significant performance measure used by our management and by external users of our financial statements and represents how much cash flow a business generates during a specified time period after accounting for all capital expenditures, including expenditures for growth and maintenance capital projects. We believe that Adjusted Free Cash Flow is important to investors, lenders, commercial banks and research analysts since it reflects the amount of cash available for reducing debt, investing in additional capital projects, paying distributions, and similar matters. Our calculation of Adjusted Free Cash Flow may or may not be comparable to similarly titled measures used by other entities.
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The GAAP measure most directly comparable to Distributable Cash Flow and Adjusted Free Cash Flow is Net Cash Provided by (Used in) Operating Activities. Distributable Cash Flow and Adjusted Free Cash Flow should not be considered alternatives to, or more meaningful than, Net Income (Loss), Operating Income (Loss), Net Cash Provided by (Used in) Operating Activities, or any other measure of liquidity presented in accordance with GAAP. Distributable Cash Flow and Adjusted Free Cash Flow have important limitations because they exclude some items that affect Net Income (Loss), Operating Income (Loss), and Net Cash Provided by (Used in) Operating Activities. Distributable Cash Flow and Adjusted Free Cash Flow may not be comparable to similarly titled measures of other companies because other companies may not calculate these non-GAAP metrics in the same manner. To compensate for these limitations, we believe that it is important to consider Net Cash Provided by (Used in) Operating Activities determined under GAAP, as well as Distributable Cash Flow and Adjusted Free Cash Flow, to evaluate our overall liquidity.
The following tables reconcile the non-GAAP financial measurements used by management to our most directly comparable GAAP measures for the three and six months ended June 30, 2024 and 2023, which represents EBITDA, adjusted EBITDA, adjusted EBITDA after giving effect to the exit of the butane optimization business, distributable cash flow, and adjusted free cash flow:
Reconciliation of Net Income (Loss) to EBITDA, Adjusted EBITDA, and Adjusted EBITDA After Giving Effect to the Exit of the Butane Optimization Business
Three Months Ended June 30, Six Months Ended June 30,
2024 2023 2024 2023
(in thousands) (in thousands)
Net income (loss) $ 3,780 $ 1,081 $ 7,053 $ (4,005)
Adjustments:
Interest expense 14,377 15,263 28,219 30,920
Income tax expense 1,772 996 2,568 2,831
Depreciation and amortization 12,687 12,547 25,336 25,448
EBITDA 32,616 29,887 63,176 55,194
Adjustments:
Gain on disposition or sale of property, plant and equipment (953) (673) (1,161) (285)
Loss on extinguishment of debt — — — 5,121
Lower of cost or net realizable value and other non-cash adjustments — (3,717) — (12,850)
Unit-based compensation 49 38 103 90
Adjusted EBITDA $ 31,712 $ 25,535 $ 62,118 $ 47,270
Adjustments:
Less: net loss associated with butane optimization business — 2,564 — 2,255
Plus: lower of cost or net realizable value and other non-cash adjustments — $ 3,717 — 12,850
Adjusted EBITDA after giving effect to the exit of the butane optimization business
$ 31,712 $ 31,816 $ 62,118 $ 62,375
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Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA, Adjusted EBITDA After Giving Effect to the Exit of the Butane Optimization Business, Distributable Cash Flow, and Adjusted Free Cash Flow
Three Months Ended June 30, Six Months Ended June 30,
2024 2023 2024 2023
(in thousands) (in thousands)
Net cash provided by operating activities $ 11,828 $ 49,510 $ 21,937 $ 98,774
Interest expense 1
13,004 13,903 25,480 27,485
Current income tax expense 1,420 306 2,542 964
Lower of cost or net realizable value and other non-cash adjustments — (3,717) — (12,850)
Changes in operating assets and liabilities which (provided) used cash:
Accounts and other receivables, inventories, and other current assets 9,919 (43,135) 9,639 (91,517)
Trade, accounts and other payables, and other current liabilities (3,786) 7,171 3,442 23,145
Other (673) 1,497 (922) 1,269
Adjusted EBITDA 31,712 25,535 62,118 47,270
Adjustments:
Less: net loss associated with butane optimization business — 2,564 — 2,255
Plus: lower of cost or net realizable value and other non-cash adjustments — 3,717 — 12,850
Adjusted EBITDA after giving effect to the exit of the butane optimization business
31,712 31,816 62,118 62,375
Adjustments:
Interest expense (14,377) (15,263) (28,219) (30,920)
Income tax expense (1,772) (996) (2,568) (2,831)
Deferred income taxes 352 690 26 1,867
Amortization of debt discount 600 600 1,200 1,000
Amortization of deferred debt issuance costs 773 760 1,539 2,435
Payments for plant turnaround costs (745) (432) (6,705) (661)
Maintenance capital expenditures (7,009) (7,438) (12,211) (14,072)
Distributable cash flow 9,534 9,737 15,180 19,193
Principal payments under finance lease obligations (1) (3) (1) (9)
Investment in DSM Semichem LLC (6,938) — (6,938) —
Expansion capital expenditures (5,450) (1,925) (11,681) (2,682)
Adjusted free cash flow $ (2,855) $ 7,809 $ (3,440) $ 16,502
1 Net of amortization of debt issuance costs and discount, which are included in interest expense but not included in net cash provided by operating activities.
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Results of Operations
The results of operations for the three and six months ended June 30, 2024 and 2023, have been derived from our consolidated and condensed financial statements.
We evaluate segment performance on the basis of operating income, which is derived by subtracting cost of products sold, operating expenses, selling, general and administrative expenses, and depreciation and amortization expense from revenues. The following table sets forth our operating revenues and operating income by segment for the three and six months ended June 30, 2024 and 2023. The results of operations for these interim periods are not necessarily indicative of the results of operations which might be expected for the entire year.
Our consolidated and condensed results of operations are presented on a comparative basis below. There are certain items of income and expense which we do not allocate on a segment basis. These items, including interest expense and indirect selling, general and administrative expenses, are discussed following the comparative discussion of our results within each segment.
Three Months Ended June 30, 2024 Compared to the Three Months Ended June 30, 2023
Operating Revenues Intersegment Revenues Eliminations Operating Revenues
after Eliminations Operating Income (Loss) Operating Income (Loss) Intersegment Eliminations Operating
Income (Loss)
after
Eliminations
Three Months Ended June 30, 2024 (In thousands)
Terminalling and storage $ 24,402 $ (2,027) $ 22,375 $ 3,302 $ (1,986) $ 1,316
Transportation 61,467 (3,791) 57,676 8,036 (3,810) 4,226
Sulfur services 37,193 (1) 37,192 7,463 3,665 11,128
Specialty products 67,317 (29) 67,288 4,945 2,131 7,076
Indirect selling, general and administrative
— — — (3,819) — (3,819)
Total $ 190,379 $ (5,848) $ 184,531 $ 19,927 $ — $ 19,927
Operating Revenues Intersegment Revenues Eliminations Operating Revenues
after Eliminations Operating Income (Loss) Operating Income (Loss) Intersegment Eliminations Operating
Income (Loss)
after
Eliminations
Three Months Ended June 30, 2023 (In thousands)
Terminalling and storage $ 23,906 $ (2,222) $ 21,684 $ 4,446 $ (2,210) $ 2,236
Transportation 58,395 (3,645) 54,750 9,016 (3,671) 5,345
Sulfur services 40,330 — 40,330 5,286 3,207 8,493
Specialty products 78,898 (26) 78,872 2,475 2,674 5,149
Indirect selling, general and administrative
— — — (3,894) — (3,894)
Total $ 201,529 $ (5,893) $ 195,636 $ 17,329 $ — $ 17,329
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Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023
Operating Revenues Intersegment Revenues Eliminations Operating Revenues
after Eliminations Operating Income (Loss) Operating Income (Loss) Intersegment Eliminations Operating
Income (Loss)
after
Eliminations
Six Months Ended June 30, 2024 (In thousands)
Terminalling and storage $ 48,687 $ (3,795) $ 44,892 $ 6,959 $ (3,686) $ 3,273
Transportation 123,509 (7,526) 115,983 17,867 (7,599) 10,268
Sulfur services 70,874 (1) 70,873 11,148 6,753 17,901
Specialty products 133,663 (50) 133,613 9,503 4,532 14,035
Indirect selling, general and administrative
— — — (7,655) — (7,655)
Total $ 376,733 $ (11,372) $ 365,361 $ 37,822 $ — $ 37,822
Operating Revenues Intersegment Revenues Eliminations Operating Revenues
after Eliminations Operating Income (Loss) Operating Income (Loss) Intersegment Eliminations Operating
Income (Loss)
after
Eliminations
Six Months Ended June 30, 2023 (In thousands)
Terminalling and storage $ 47,825 $ (5,283) $ 42,542 $ 7,554 $ (5,254) $ 2,300
Transportation 120,334 (9,861) 110,473 18,458 (9,934) 8,524
Sulfur services 76,009 — 76,009 9,839 6,058 15,897
Specialty products 211,175 (34) 211,141 7,075 9,130 16,205
Indirect selling, general and administrative
— — — (8,092) — (8,092)
Total $ 455,343 $ (15,178) $ 440,165 $ 34,834 $ — $ 34,834
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Terminalling and Storage Segment
Comparative Results of Operations for the Three Months Ended June 30, 2024 and 2023
Three Months Ended June 30, Variance Percent Change
2024 2023
(In thousands, except BBL per day)
Revenues $ 24,402 $ 23,906 $ 496 2 %
Cost of products sold 24 25 (1) (4) %
Operating expenses 15,522 13,932 1,590 11 %
Selling, general and administrative expenses 820 333 487 146 %
Depreciation and amortization 5,729 5,195 534 10 %
2,307 4,421 (2,114) (48) %
Other operating income, net 995 25 970 3,880 %
Operating income $ 3,302 $ 4,446 $ (1,144) (26) %
Shore-based throughput volumes (gallons) 42,491 42,434 57 — %
Smackover refinery throughput volumes (guaranteed minimum BBL per day) 6,500 6,500 — — %
Revenues. Revenues increased $0.5 million. Revenue at our shore-based terminals increased $0.6 million, including $0.4 million in fuel throughput and $0.2 million in space rent. In addition, revenue at our specialty terminals increased $0.5 million primarily as a result of higher throughput and storage revenue. Revenue at our Smackover refinery decreased $0.8 million primarily as a result of decreased natural gas surcharge revenue.
Operating expenses. Operating expenses increased primarily as a result of liability insurance claims of $1.4 million, repairs and maintenance of $0.2 million, operating supplies of $0.2 million and employee-related expenses of $0.5 million, offset by a decrease in natural gas utilities of $0.9 million.
Selling, general and administrative expenses. Selling, general and administrative expenses increased primarily due to employee-related expenses.
Depreciation and amortization. The increase in depreciation and amortization is primarily the result of capital expenditures offset by recent disposals.
Other operating income, net. Other operating income, net represents gains and losses from the disposition of property, plant and equipment.
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Comparative Results of Operations for the Six Months Ended June 30, 2024 and 2023
Six Months Ended June 30, Variance Percent Change
2024 2023
(In thousands, except BBL per day)
Revenues $ 48,687 $ 47,825 $ 862 2 %
Cost of products sold 42 31 11 35 %
Operating expenses 30,557 28,240 2,317 8 %
Selling, general and administrative expenses 1,102 882 220 25 %
Depreciation and amortization 11,124 10,794 330 3 %
5,862 7,878 (2,016) (26) %
Other operating income (loss), net 1,097 (324) 1,421 439 %
Operating income $ 6,959 $ 7,554 $ (595) (8) %
Shore-based throughput volumes (gallons) 88,260 85,783 2,477 3 %
Smackover refinery throughput volumes (guaranteed minimum) (BBL per day) 6,500 6,500 — — %
Revenues. Revenues increased $0.9 million. Revenue at our shore-based terminals increased $1.6 million, including $0.9 million in fuel throughput and $0.6 million in space rent. In addition, revenue at our specialty terminals increased $0.8 million, primarily as a result of higher throughput and storage revenue. Revenue at our Smackover refinery decreased $1.6 million, primarily as a result of decreased natural gas surcharge revenue.
Operating expenses. Operating expenses increased primarily as a result of liability insurance claims of $1.6 million, property insurance expense of $0.8 million, employee-related expenses of $0.8 million, repairs and maintenance of $0.4 million and operating supplies of $0.4 million. These increases were offset by a decrease in natural gas utilities of $2.1 million.
Selling, general and administrative expenses. Selling, general and administrative expenses increased primarily due to employee-related expenses.
Depreciation and amortization. The increase in depreciation and amortization is primarily the result of capital expenditures offset by recent disposals.
Other operating income (loss), net. Other operating income (loss), net represents gains and losses from the disposition of property, plant and equipment.
Transportation Segment
Comparative Results of Operations for the Three Months Ended June 30, 2024 and 2023
Three Months Ended June 30, Variance Percent Change
2024 2023
(In thousands)
Revenues $ 61,467 $ 58,395 $ 3,072 5 %
Operating expenses 47,783 44,285 3,498 8 %
Selling, general and administrative expenses 2,527 1,981 546 28 %
Depreciation and amortization 3,381 3,760 (379) (10) %
7,776 8,369 (593) (7) %
Other operating income, net 260 647 (387) (60) %
Operating income $ 8,036 $ 9,016 $ (980) (11) %
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Revenues . Revenues for our Transportation Segment increased $3.1 million. In our marine transportation division, inland revenues increased $0.4 million, primarily related to higher transportation rates, offset by a decrease in utilization associated with equipment repairs and regulatory inspections. Offshore revenues increased $0.3 million, primarily related to higher transportation rates. Additionally, there was a rise in pass-through revenue (primarily fuel) of $0.2 million. In our land transportation division, revenue increased $2.1 million, primarily due to a $2.7 million increase in freight revenue related to a 6% increase in total miles. Ancillary revenue decreased $0.5 million.
Operating expenses . The increase in operating expenses is primarily a result of lease expense of $1.2 million, employee-related expenses of $1.1 million, insurance premiums of $1.1 million and pass-through expenses (primarily fuel) of $0.6 million, offset by repairs and maintenance of $0.9 million.
Selling, general and administrative expenses . Selling, general and administrative expenses increased primarily due to employee-related expenses.
Depreciation and amortization. The decrease in depreciation and amortization is primarily the result of asset disposals, offset by capital expenditures.
Other operating income, net. Other operating income, net represents gains and losses from the disposition of property, plant and equipment.
Comparative Results of Operations for the Six Months Ended June 30, 2024 and 2023
Six Months Ended June 30, Variance Percent Change
2024 2023
(In thousands)
Revenues $ 123,509 $ 120,334 $ 3,175 3 %
Operating expenses 94,424 90,475 3,949 4 %
Selling, general and administrative expenses 4,727 4,530 197 4 %
Depreciation and amortization 6,857 7,522 (665) (9) %
$ 17,501 $ 17,807 $ (306) (2) %
Other operating income, net 366 651 (285) (44) %
Operating income $ 17,867 $ 18,458 $ (591) (3) %
Revenues. Revenues for our Transportation Segment increased $3.2 million. In our marine transportation division, inland revenues increased $2.7 million, primarily related to higher transportation rates, offset by a decrease in utilization associated with equipment repairs and regulatory inspections. Offshore revenues increased $0.1 million, primarily related to higher transportation rates. Additionally, there was a rise in pass-through revenue (primarily fuel) of $0.2 million. In our land transportation division, revenue increased $0.2 million, primarily due to a $3.8 million increase in freight revenue related to a 5% increase in total miles. Ancillary revenue decreased $3.6 million.
Operating expenses. The increase in operating expenses is primarily a result of lease expense of $3.0 million, employee-related expenses of $1.1 million, insurance premiums of $1.5 million, outside hauls and towing of $0.3 million and pass-through expenses (primarily fuel) of $0.2 million, offset by repairs and maintenance of $2.4 million.
Selling, general and administrative expenses. Selling, general and administrative expenses decreased primarily due to lower employee-related expenses .
Depreciation and amortization. The decrease in depreciation and amortization is primarily the result of asset disposals, offset by capital expenditures.
Other operating income, net. Other operating income, net represents gains and losses from the disposition of property, plant and equipment.
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Sulfur Services Segment
Comparative Results of Operations for the Three Months Ended June 30, 2024 and 2023
Three Months Ended June 30, Variance Percent Change
2024 2023
(In thousands)
Revenues:
Services $ 3,477 $ 3,357 $ 120 4 %
Products 33,716 36,973 (3,257) (9) %
Total revenues 37,193 40,330 (3,137) (8) %
Cost of products sold 22,183 28,141 (5,958) (21) %
Operating expenses 2,744 3,186 (442) (14) %
Selling, general and administrative expenses 1,717 962 755 78 %
Depreciation and amortization 2,778 2,756 22 1 %
7,771 5,285 2,486 47 %
Other operating income (loss), net (308) 1 (309) (30,900) %
Operating income $ 7,463 $ 5,286 $ 2,177 41 %
Sulfur (long tons) 91 123 (32) (26) %
Fertilizer (long tons) 64 73 (9) (12) %
Total sulfur services volumes (long tons) 155 196 (41) (21) %
Services revenues. Services revenues increased as a result of a contractually prescribed, index-based fee adjustment.
Products revenues. Products revenues decreased $8.9 million as a result of a 21% decrease in sales volumes, primarily related to a 26% decrease in sulfur volumes, offset by an increase of $5.7 million due to a 15% rise in average sulfur services sales prices.
Cost of products sold. A 21% decrease in sales volumes impacted cost of products sold by $5.9 million. Margin per ton increased $29.35, or 65%.
Operating expenses. Operating expenses decreased due to a reduction of $0.3 million in marine rebill expenses and $0.1 million in utilities. There were no other individually significant fluctuations between periods.
Selling, general and administrative expenses. Selling, general and administrative expenses increased primarily due to higher employee-related expenses.
Depreciation and amortization. Depreciation and amortization increased primarily as a result of capital expenditures offset by recent disposals.
Other operating income (loss), net. Other operating income (loss), net represents gains and losses on the disposition of property, plant and equipment.
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Comparative Results of Operations for the Six Months Ended June 30, 2024 and 2023
Six Months Ended June 30, Variance Percent Change
2024 2023
(In thousands)
Revenues:
Services $ 6,954 $ 6,715 $ 239 4 %
Products 63,920 69,294 (5,374) (8) %
Total revenues 70,874 76,009 (5,135) (7) %
Cost of products sold 44,954 52,090 (7,136) (14) %
Operating expenses 5,684 6,085 (401) (7) %
Selling, general and administrative expenses 3,020 2,579 441 17 %
Depreciation and amortization 5,760 5,433 327 6 %
11,456 9,822 1,634 17 %
Other operating income (loss), net (308) 17 (325) (1,912) %
Operating income $ 11,148 $ 9,839 $ 1,309 13 %
Sulfur (long tons) 182 197 (15) (8) %
Fertilizer (long tons) 136 134 2 1 %
Total sulfur services volumes (long tons) 318 331 (13) (4) %
Services revenues. Services revenues increased as a result of a contractually prescribed, index-based fee adjustment.
Products revenues. Products revenues decreased $2.8 million as a result of a 4% reduction in average sulfur products sales prices. Products revenues decreased $2.6 million due to a 4% reduction in sales volumes, primarily related to an 8% decrease in sulfur volumes.
Cost of products sold. A 10% decrease in product cost impacted cost of products sold by $5.3 million, resulting from reduced commodity prices. A 4% decrease in sales volumes resulted in a decrease in cost of products sold of $1.8 million. Margin per ton increased $7.67, or 15%.
Operating expenses. Operating expenses decreased $0.4 million due to reductions of $0.3 million in utilities expense combined with $0.3 million in marine rebill expenses. These reductions were offset by an increase of $0.1 million in employment expenses and $0.1 million in repairs and maintenance.
Selling, general and administrative expenses. Selling, general and administrative expenses increased primarily due to higher employee-related expenses.
Depreciation and amortization. Depreciation and amortization increased due to the amortization of higher turnaround spend in 2023 as compared to 2022.
Other operating income (loss), net. Other operating income (loss), net represents gains and losses on the disposition of property, plant and equipment.
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Specialty Products Segment
Comparative Results of Operations for the Three Months Ended June 30, 2024 and 2023
Three Months Ended June 30, Variance Percent Change
2024 2023
(In thousands)
Products revenues $ 67,317 $ 78,898 $ (11,581) (15) %
Cost of products sold 59,711 74,270 (14,559) (20) %
Operating expenses 26 18 8 44 %
Selling, general and administrative expenses 1,842 1,299 543 42 %
Depreciation and amortization 799 836 (37) (4) %
4,939 2,475 2,464 100 %
Other operating income, net 6 — 6
Operating income $ 4,945 $ 2,475 $ 2,470 100 %
NGL sales volumes (Bbls) 540 827 (287) (35) %
Other specialty products volumes (Bbls) 93 90 3 3 %
Total specialty products volumes (Bbls) 633 917 (284) (31) %
Products Revenues. Product revenues decreased $13.6 million as a result of the exit of the butane optimization business in the second quarter 2023. For the remaining products, sales volumes increased 3%, increasing revenues by $2.0 million, primarily related to a 3% increase in other specialty products sales volumes. Our average sales price per barrel increased $0.08, resulting in a de minimis increase to revenue.
Cost of products sold . Cost of products sold decreased $16.1 million as a result of the exit of the butane optimization business in the second quarter of 2023. For the remaining products, the increase in sales volumes of 3% resulted in a $1.8 million increase to cost of products sold. Our average cost per barrel decreased $0.45, or 1%, decreasing cost of products sold by $0.3 million. Our margins increased $0.53 per barrel, or 5%, during the period.
Operating expenses. Operating expenses remained consistent.
Selling, general and administrative expenses . Selling, general and administrative expenses increased $0.5 million due to employee-related expenses of $0.6 million offset by a $0.1 million reduction associated with the exit of the butane optimization business in the second quarter of 2023.
Depreciation and amortization. Depreciation and amortization decreased as a result of capital expenditures offset by recent disposals.
Other operating income, net. Other operating income, net represents gains and losses from the disposition of property, plant and equipment.
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Comparative Results of Operations for the Six Months Ended June 30, 2024 and 2023
Six Months Ended June 30, Variance Percent Change
2024 2023
(In thousands)
Products revenues $ 133,663 $ 211,175 $ (77,512) (37) %
Cost of products sold 119,355 198,721 (79,366) (40) %
Operating expenses 51 32 19 59 %
Selling, general and administrative expenses 3,165 3,589 (424) (12) %
Depreciation and amortization 1,595 1,699 (104) (6) %
9,497 7,134 2,363 33 %
Other operating income (loss), net 6 (59) 65 110 %
Operating income $ 9,503 $ 7,075 $ 2,428 34 %
NGL sales volumes (Bbls) 1,162 2,518 (1,356) (54) %
Other specialty products volumes (Bbls) 172 174 (2) (1) %
Total specialty products volumes (Bbls) 1,334 2,692 (1,358) (50) %
Products Revenues. Product revenues decreased $70.5 million as a result of the exit of the butane optimization business in the second quarter of 2023. For the remaining products, sales volumes decreased 3%, lowering revenues by $4.0 million, primarily related to an 3% decrease in NGL sales volumes. Products revenues decreased $3.0 million as a result of a 2% reduction in average specialty products sales prices.
Cost of products sold . Cost of products sold decreased $72.3 million as a result of the exit of the butane optimization business in the second quarter of 2023. For the remaining products, a 3% decrease in product cost impacted cost of products sold by $3.5 million, resulting from reduced commodity prices. A 3% reduction in sales volumes resulted in an additional decrease in cost of products sold of $3.6 million.
Operating expenses. Operating expenses remained consistent.
Selling, general and administrative expenses . Selling, general and administrative expenses decreased $0.4 million due to a $0.5 million reduction associated with the exit of the butane optimization business in the second quarter of 2023 offset by an increase of $0.1 million in employee-related expenses.
Depreciation and amortization. Depreciation and amortization decreased due to certain assets becoming fully depreciated during the first quarter of 2023.
Other operating income (loss), net. Other operating income (loss), net represents gains and losses from the disposition of property, plant and equipment.
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Interest Expense
Comparative Components of Interest Expense, Net for the Three Months Ended June 30, 2024 and 2023
Three Months Ended June 30, Variance Percent Change
2024 2023
(In thousands)
Credit facility $ 1,398 $ 1,941 $ (543) (28) %
Senior notes 11,627 11,627 — — %
Amortization of deferred debt issuance costs 773 760 13 2 %
Amortization of debt discount 600 600 — — %
Other 270 342 (72) (21) %
Finance leases — — —
Capitalized interest (291) (7) (284) (4,057) %
Total interest expense, net $ 14,377 $ 15,263 $ (886) (6) %
Comparative Components of Interest Expense, Net for the Six Months Ended June 30, 2024 and 2023
Six Months Ended June 30, Variance Percent Change
2024 2023
(In thousands)
Credit facility $ 2,568 $ 4,725 $ (2,157) (46) %
Senior notes 22,744 21,840 904 4 %
Amortization of deferred debt issuance costs 1,539 2,435 (896) (37) %
Amortization of debt discount 1,200 1,000 200 20 %
Other 601 931 (330) (35) %
Capitalized interest (433) (11) (422) (3,836) %
Total interest expense, net $ 28,219 $ 30,920 $ (2,701) (9) %
Indirect Selling, General and Administrative Expenses
Three Months Ended June 30, Variance Percent Change Six Months Ended June 30, Variance Percent Change
2024 2023 2024 2023
(In thousands) (In thousands)
Indirect selling, general and administrative expenses $ 3,819 $ 3,894 $ (75) (2) % $ 7,655 $ 8,092 $ (437) (5) %
Indirect selling, general and administrative expenses decreased for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, as a result of a decrease in overhead expenses allocated from Martin Resource Management. Indirect selling, general and administrative expenses decreased for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, as a result of decreases in overhead expenses allocated from Martin Resource Management of $0.2 million, employee-related expenses of $0.1 million, and professional fees of $0.1 million.
Martin Resource Management Corporation allocates to us a portion of its indirect selling, general and administrative expenses for services such as accounting, legal, treasury, clerical, billing, information technology, administration of insurance, engineering, general office expense and employee benefit plans and other general corporate overhead functions we share with Martin Resource Management Corporation retained businesses. This allocation is based on the percentage of time spent by Martin Resource Management Corporation personnel that provide such centralized services. GAAP also permits other methods for allocation of these expenses, such as basing the allocation on the percentage of revenues contributed by a segment. The allocation of these expenses between Martin Resource Management Corporation and us is subject to a number of judgments and estimates,
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regardless of the method used. We can provide no assurances that our method of allocation, in the past or in the future, is or will be the most accurate or appropriate method of allocation for these expenses. Other methods could result in a higher allocation of selling, general and administrative expenses to us, which would reduce our net income.
Under the Omnibus Agreement, we are required to reimburse Martin Resource Management Corporation for indirect general and administrative and corporate overhead expenses. The Conflicts Committee of our general partner approved the following reimbursement amounts during the three and six months ended June 30, 2024 and 2023:
Three Months Ended June 30, Variance Percent Change Six Months Ended June 30, Variance Percent Change
2024 2023 2024 2023
(In thousands) (In thousands)
Conflicts Committee approved reimbursement amount
$ 3,377 $ 3,496 $ (119) (3) % $ 6,754 $ 6,991 $ (237) (3) %
The amounts reflected above represent our allocable share of such expenses. The Conflicts Committee will review and approve future adjustments in the reimbursement amount for indirect expenses, if any, annually.
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Liquidity and Capital Resources
General
Our primary sources of liquidity to meet operating expenses, service our indebtedness, fund capital expenditures and pay distributions to our unitholders have historically been cash flows generated by our operations, borrowings under our credit facility and access to debt and equity capital markets, both public and private. Set forth below is a description of our cash flows for the periods indicated.
Cash Flows - Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
The following table details the cash flow changes between the six months ended June 30, 2024 and 2023:
Six Months Ended June 30, Variance Percent Change
2024 2023
(In thousands)
Net cash provided by (used in):
Operating activities $ 21,937 $ 98,774 $ (76,837) (78) %
Investing activities (37,099) (13,410) (23,689) (177) %
Financing activities 15,163 (85,352) 100,515 118 %
Net increase (decrease) in cash and cash equivalents $ 1 $ 12 $ (11) (92) %
Net cash provided by operating activities. The decrease in net cash provided by operating activities for the six months ended June 30, 2024, includes an increase in operating results and other non-cash charges of $2.4 million, offset by an unfavorable variance in cash flows associated with changes in working capital of $79.3 million.
Net cash used in investing activities. Net cash used in investing activities for the six months ended June 30, 2024, increased $23.7 million. An increase in cash used of $13.2 million resulted from higher payments for capital expenditures and plant turnaround costs in 2024. Further, investments in unconsolidated entities increased $6.9 million, while net proceeds from the sale of property, plant and equipment decreased $3.5 million.
Net cash (used in) provided by financing activities. Net cash (used in) provided by financing activities for the six months ended June 30, 2024, increased primarily as a result of an increase in borrowings of long-term debt of $319.9 million, offset by a decrease in repayments of long-term debt of $406.2 million. Additionally, payments of debt issuance costs decreased $14.2 million.
Total Contractual Obligations
A summary of our total contractual cash obligations as of June 30, 2024, is as follows:
Payments due by period
Type of Obligation Total
Obligation Less than
One Year 1-3
Years 3-5
Years Due
Thereafter
Credit facility $ 58,000 $ — $ 58,000 $ — $ —
11.5% senior secured notes, due 2028 400,000 — — 400,000 —
Operating leases 74,031 20,795 34,607 13,884 4,745
Finance lease obligations 76 14 30 32 —
Interest payable on finance lease obligations 13 5 6 2 —
Interest payable on fixed long-term debt obligations 165,926 46,000 92,000 27,926 —
Total contractual cash obligations $ 698,046 $ 66,814 $ 184,643 $ 441,844 $ 4,745
The interest payable under our credit facility is not reflected in the above table because such amounts depend on the outstanding balances and interest rates, which vary from time to time.
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Letters of Credit . At June 30, 2024, we had outstanding irrevocable letters of credit in the amount of $9.2 million, which were issued under our credit facility.
Off-Balance Sheet Arrangements. We do not have any off-balance sheet financing arrangements.
Description of Our Indebtedness
Credit Facility
At June 30, 2024, we maintained a $150.0 million credit facility that matures on February 8, 2027. As of June 30, 2024, we had $58.0 million outstanding under the credit facility and $9.2 million of outstanding irrevocable letters of credit, leaving a maximum available amount to be borrowed under our credit facility for future revolving credit borrowings and letters of credit of $82.9 million. After giving effect to our then current borrowings, letters of credit, and the financial covenants contained in our credit facility, we had the ability to borrow approximately $82.9 million in additional amounts thereunder as of June 30, 2024.
The credit facility is used for ongoing working capital needs and general partnership purposes, and to finance permitted investments, acquisitions and capital expenditures. The level of outstanding draws on our credit facility from January 1, 2024 through June 30, 2024 ranged from a low of $40.5 million to a high of $80.0 million.
The applicable margin for Adjusted Term SOFR borrowings at June 30, 2024 is 3.25%. The applicable margin for Adjusted Term SOFR borrowings effective July 17, 2024 remains at 3.25%.
For a description of our credit facility, see “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Description of Our Long-Term Debt" in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024.
2028 Notes
For a description of our 2028 Notes, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Description of Our Long-Term Debt" in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024.
Capital Resources and Liquidity
Historically, we have generally satisfied our working capital requirements and funded our debt service obligations and capital expenditures with cash generated from operations and borrowings under our credit facility.
On June 30, 2024, we had cash and cash equivalents of $0.05 million and available borrowing capacity of $82.9 million under our credit facility with $58.0 million of borrowings outstanding. After giving effect to our then current borrowings, letters of credit, and the financial covenants contained in our credit facility, we had the ability to borrow approximately $82.9 million in additional amounts thereunder as of June 30, 2024.
We expect that our primary sources of liquidity to meet operating expenses, service our indebtedness, pay distributions to our unitholders and fund capital expenditures will be provided by cash flows generated by our operations, borrowings under our credit facility and access to the debt and equity capital markets. Our ability to generate cash from operations will depend upon our future operating performance, which is subject to certain risks. For a discussion of such risks, please read "Item 1A. Risk Factors" of our Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024. In addition, due to the covenants in our credit facility, our financial and operating performance impacts the amount we are permitted to borrow under that facility.
We are in compliance with all debt covenants as of June 30, 2024, and expect to be in compliance for the next twelve months.
Interest Rate Risk
We are subject to interest rate risk on our credit facility due to the variable interest rate and may enter into interest rate swaps to reduce this variable rate risk.
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Seasonality
A substantial portion of our revenues is dependent on sales prices of products, particularly NGLs and fertilizers, which fluctuate in part based on winter and spring weather conditions. The demand for NGLs is strongest during the winter heating season. The demand for fertilizers is strongest during the early spring planting season. However, our Terminalling and Storage and Transportation business segments and the molten sulfur business are typically not impacted by seasonal fluctuations and a significant portion of our net income is derived from our Terminalling and Storage, Sulfur Services and Transportation business segments. Further, extraordinary weather events, such as hurricanes, have in the past, and could in the future, impact our Terminalling and Storage, Sulfur Services, and Transportation business segments.
Impact of Inflation
Inflation did not have a material impact on our results of operations for the six months ended June 30, 2024 or 2023. Inflation may increase the cost to acquire or replace property, plant and equipment. It may also increase the costs of labor and supplies. In the future, increasing energy prices for products consumed by our operations, such as diesel fuel, natural gas, chemicals, and other supplies, could adversely affect our results of operations. An increase in price of these products would increase our operating expenses which could adversely affect net income. We cannot provide assurance that we will be able to pass along increased operating expenses to our customers.
Environmental Matters
Our operations are subject to environmental laws and regulations adopted by various governmental authorities in the jurisdictions in which these operations are conducted.
On June 15, 2024, the Partnership had a spill of less than 2,500 barrels of crude oil originating from the Partnership’s transfer pipeline, which connects our Sandyland Terminal to our refinery located in Smackover, Union County, Arkansas. The Partnership is working closely with the U.S Environmental Protection Agency (“EPA”), Arkansas Department of Energy and Environment (“ADEE”), and Arkansas Game and Fish Commission to respond to the spill. The Partnership has dedicated the necessary resources, equipment, and personnel to conduct and expedite oil recovery and cleanup activities. As of July 15, 2024, the Partnership’s response efforts have moved from emergency response status with the EPA to remediation status, which is to be overseen by the ADEE. A claim related to the crude oil spill has been made with and accepted by, subject to a reservation of rights, the Partnership’s insurance carriers. The Partnership’s deductibles under the applicable insurance policies total $1.5 million and such deductible expense has been recorded by the Partnership in the Consolidated and Condensed Statements of Operations for the three and six months ended June 30, 2024.
We incurred no material environmental costs, liabilities or expenditures to mitigate or eliminate environmental contamination during the six months ended June 30, 2023.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.