What changed in this filing

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Item 1. Financial Statements

2020-11-04 compared with 2020-08-06 · 95 added, 72 removed, 326 unchanged (34% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30,

(in thousands of dollars, except unit amounts)

19 unchanged sentences

Common unitholders—publicly and privately held (21,072,315 and 21,072,315 units issued

and outstanding at June 30, 2020 and December 31, 2019, respectively)

and outstanding at September 30, 2020 and December 31, 2019, respectively)

Common unitholder—Westlake (14,122,230 and 14,122,230 units issued and outstanding at

June 30, 2020 and December 31, 2019, respectively)

September 30, 2020 and December 31, 2019, respectively)

General partner—Westlake

5 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands of dollars, except unit amounts and per unit data)

9 unchanged sentences

Income before income taxes

Income tax provision

Income tax provision (benefit)

Net income attributable to noncontrolling interest in OpCo

19 unchanged sentences

Balance at June 30, 2020

Quarterly distribution to unitholders

Quarterly distribution to noncontrolling interest retained in OpCo by Westlake

Balance at September 30, 2020

The accompanying notes are an integral part of the consolidated financial statements.

Common Unitholders—

12 unchanged sentences

Balance at June 30, 2019

Offering costs related to private placement of common units

Quarterly distributions to unitholders

Quarterly distribution to noncontrolling interest retained in OpCo by Westlake

Balance at September 30, 2019

The accompanying notes are an integral part of the consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands of dollars)

52 unchanged sentences

Westlake's retained interest of 77.2 % is recorded as noncontrolling interest in the Partnership's consolidated financial statements.

In the opinion of the Partnership's management, the accompanying unaudited consolidated interim financial statements reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair statement of the Partnership's financial position as of June 30, 2020 , its results of operations for the three and six months ended June 30, 2020 and 2019 and the changes in its cash position for the six months ended June 30, 2020 and 2019 .

In the opinion of the Partnership's management, the accompanying unaudited consolidated interim financial statements reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair statement of the Partnership's financial position as of September 30, 2020 , its results of operations for the three and nine months ended September 30, 2020 and 2019 and the changes in its cash position for the nine months ended September 30, 2020 and 2019 .

Results of operations and changes in cash position for the interim periods presented are not necessarily indicative of the results that will be realized for the fiscal year ending December 31, 2020 or any other interim period.

7 unchanged sentences

The pandemic has resulted in widespread adverse impacts on the global economy and on our employees, customers and suppliers.

Though the Partnership did not experience significant disruptions to its business operations in the six months ended June 30, 2020 and does not expect significant disruptions to its business operations resulting from COVID-19, the impact that COVID-19 will have on the Partnership's financial condition, results of operations and cash flows will depend on future developments, including, among others, the ultimate duration, geographic spread and severity of the virus, the actions to contain the virus, the consequences of governmental and other measures designed to prevent the spread of the virus, the development of effective treatments, the impact on the operation of OpCo facilities, Westlake, customers, suppliers and other third parties and the timing and extent to which normal economic and operating conditions resume.

The Partnership did not experience significant disruptions to its business operations in the nine months ended September 30, 2020 and does not expect significant disruptions to its business operations resulting from COVID-19.

However, the impact that COVID-19 will have on the Partnership's financial condition, results of operations and cash flows cannot be estimated with certainty at this time as it will depend on future developments, including, among others, the ultimate duration, geographic spread and severity of the virus, the actions to contain the virus, the consequences of governmental and other measures designed to prevent the spread of the virus, the development of effective treatments, the impact on the operation of OpCo facilities, Westlake, customers, suppliers and other third parties and the timing and extent to which normal economic and operating conditions resume.

Recent Accounting Pronouncements

17 unchanged sentences

Accounts receivable—third parties consist of the following:

September 30,

Trade customers

6 unchanged sentences

Inventories consist of the following:

September 30,

Finished products

1 unchanged sentence

Property, Plant and Equipment

Depreciation expense on property, plant and equipment of $ 22,714 and $ 22,227 is included in cost of sales in the consolidated statements of operations for the three months ended June 30, 2020 and 2019 , respectively.

Depreciation expense on property, plant and equipment of $ 45,467 and $ 44,441 is included in cost of sales in the consolidated statements of operations for the six months ended June 30, 2020 and 2019 , respectively.

Depreciation expense on property, plant and equipment of $ 22,913 and $ 22,313 is included in cost of sales in the consolidated statements of operations for the three months ended September 30, 2020 and 2019 , respectively.

Depreciation expense on property, plant and equipment of $ 68,380 and $ 66,754 is included in cost of sales in the consolidated statements of operations for the nine months ended September 30, 2020 and 2019 , respectively.

Deferred Charges and Other Assets

Amortization expense on other assets of $ 3,099 and $ 4,630 is included in costs of sales in the consolidated statements of operations for the three months ended June 30, 2020 and 2019 , respectively.

Amortization expense on other assets of $ 6,377 and $ 9,260 is included in costs of sales in the consolidated statements of operations for the six months ended June 30, 2020 and 2019 , respectively.

Amortization expense on other assets of $ 3,010 and $ 4,368 is included in costs of sales in the consolidated statements of operations for the three months ended September 30, 2020 and 2019 , respectively.

Amortization expense on other assets of $ 9,387 and $ 13,628 is included in costs of sales in the consolidated statements of operations for the nine months ended September 30, 2020 and 2019 , respectively.

Distributions and Net Income Per Limited Partner Unit

On July 31, 2020 , the board of directors of Westlake Chemical Partners GP LLC ("Westlake GP"), the Partnership's general partner, declared a quarterly cash distribution for the three months ended June 30, 2020 of $ 0.4714 per unit.

This distribution is payable on August 24, 2020 to the unitholders of record as of August 10, 2020 .

On October 30, 2020 , the board of directors of Westlake Chemical Partners GP LLC ("Westlake GP"), the Partnership's general partner, declared a quarterly cash distribution for the three months ended September 30, 2020 of $ 0.4714 per unit.

This distribution is payable on November 24, 2020 to the unitholders of record as of November 9, 2020 .

Distributions are declared subsequent to quarter end;

therefore, the table below represents total cash distributions declared from earnings of the related periods pertaining to such distributions.

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Net income attributable to the Partnership

Limited partners' distribution declared on common units

Distribution in excess of net income

Net income in excess of distribution (distribution in excess of net income)

Net income per unit applicable to common limited partner units is computed by dividing the respective limited partners' interest in net income by the weighted-average number of common units outstanding for the period.

7 unchanged sentences

(in thousands of dollars, except unit amounts and per unit data)

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Limited Partners' Common Units

1 unchanged sentence

Net income attributable to the Partnership:

Distribution in excess of net income

Net income in excess of distribution

Weighted average units outstanding:

2 unchanged sentences

Basic and diluted

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

Limited Partners' Common Units

6 unchanged sentences

Basic and diluted

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Limited Partners' Common Units

1 unchanged sentence

Net income attributable to the Partnership:

Distribution in excess of net income

Net income in excess of distribution

Weighted average units outstanding:

5 unchanged sentences

(in thousands of dollars, except unit amounts and per unit data)

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

Limited Partners' Common Units

13 unchanged sentences

Above $1.6875

The Partnership's distribution for the three months ended June 30, 2020 did not exceed the $ 1.2938 per unit threshold, and, as a result, no distribution was made with respect to the Partnership's incentive distribution rights to Westlake, as the holder of the Partnership's incentive distribution rights.

The Partnership's distribution for the three months ended September 30, 2020 did not exceed the $ 1.2938 per unit threshold, and, as a result, no distribution was made with respect to the Partnership's incentive distribution rights to Westlake, as the holder of the Partnership's incentive distribution rights.

Distribution Per Common Unit

Distributions per common unit for the three and six months ended June 30, 2020 and 2019 were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Distributions per common unit for the three and nine months ended September 30, 2020 and 2019 were as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Distributions per common unit

2 unchanged sentences

The Equity Distribution Agreement was amended on February 28, 2020 to reference a new shelf registration for utilization under this agreement.

No common units were issued under this program as of June 30, 2020 .

No common units were issued under this program as of September 30, 2020 .

On March 29, 2019, the Partnership completed the issuance and sale of 2,940,818 common units at a price of $ 21.40 per unit through a private placement.

11 unchanged sentences

Sales to related parties were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Net sales—Westlake

During the third quarter of 2020, the Lake Charles Petro 1 and Petro 2 facilities were impacted by Hurricane Laura, which resulted in a force majeure event under the Ethylene Sales Agreement.

As a result of the force majeure event, the Partnership recognized a buyer deficiency fee of $ 41,329 as a component of net sales in the quarter ended September 30, 2020, representing fixed margin and unavoided operating and maintenance capital expenditures and maintenance expenses per pound of volume committed by Westlake during the force majeure event.

Payment for the buyer deficiency fee is scheduled to be received by the Partnership after the conclusion of the year.

Cost of Sales from Related Parties

1 unchanged sentence

Charges from related parties in cost of sales were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Feedstock purchased from Westlake and included in cost of sales

Other charges from Westlake and included in cost of sales

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

(in thousands of dollars, except unit amounts and per unit data)

Services from Related Parties Included in Selling, General and Administrative Expenses

1 unchanged sentence

Charges from related parties included within selling, general and administrative expenses were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Services received from Westlake and included in selling, general and administrative expenses

2 unchanged sentences

Charges from related parties for goods and services capitalized as assets were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Goods and services purchased from Westlake and capitalized as assets

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

(in thousands of dollars, except unit amounts and per unit data)

Receivable under the Investment Management Agreement

1 unchanged sentence

Per the terms of the Investment Management Agreement, the Partnership earns a market return plus five basis points and Westlake provides daily availability of the invested cash to meet any liquidity needs of the Partnership or OpCo.

Accrued interest of $ 219 and $ 601 was included in the receivable under the Investment Management Agreement balance at June 30, 2020 and December 31, 2019 , respectively.

Total interest earned related to the Investment Management Agreement was $ 219 and $ 1,155 for the three months ended June 30, 2020 and 2019 , respectively, and $ 807 and $ 1,973 for the six months ended June 30, 2020 and 2019 , respectively.

Accrued interest of $ 69 and $ 601 was included in the receivable under the Investment Management Agreement balance at September 30, 2020 and December 31, 2019 , respectively.

Total interest earned related to the Investment Management Agreement was $ 69 and $ 716 for the three months ended September 30, 2020 and 2019 , respectively, and $ 876 and $ 2,688 for the nine months ended September 30, 2020 and 2019 , respectively.

The Partnership's receivable under the Investment Management Agreement was as follows:

September 30,

Receivable under the Investment Management Agreement

Accounts Receivables

The Partnership's accounts receivable from Westlake result primarily from ethylene sales to Westlake under the Ethylene Sales Agreement.

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

(in thousands of dollars, except unit amounts and per unit data)

Accounts Receivable from Related Parties

The Partnership's accounts receivable from Westlake result primarily from ethylene sales to Westlake and the buyer deficiency fee recognized under the Ethylene Sales Agreement, as discussed above under "Sales to Related Parties."

The Partnership's accounts receivable from Westlake were as follows:

September 30,

Accounts receivable—Westlake

2 unchanged sentences

The related party accounts payable balances were as follows:

September 30,

Accounts payable—Westlake

1 unchanged sentence

OpCo is obligated to Westlake under various long-term and short-term noncancelable operating leases, primarily related to rail car leases and land.

Operating lease rentals paid to Westlake for such leases were $ 726 and $ 562 for the three months ended June 30, 2020 and 2019 , respectively, and $ 1,396 and $ 1,076 for the six months ended June 30, 2020 and 2019 , respectively, and reflected in other charges from Westlake that are included in cost of sales.

Operating lease rentals paid to Westlake for such leases were $ 407 and $ 597 for the three months ended September 30, 2020 and 2019 , respectively, and $ 1,803 and $ 1,673 for the nine months ended September 30, 2020 and 2019 , respectively, and reflected in other charges from Westlake that are included in cost of sales.

OpCo has two site lease agreements with Westlake, each of which has a term of 50 years.

Pursuant to the site lease agreements, OpCo pays Westlake one dollar per site per year.

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

(in thousands of dollars, except unit amounts and per unit data)

Debt Payable to Related Parties

See Note 9 for a description of related party debt payable balances.

Interest on related party debt payable balances for the three months ended June 30, 2020 and 2019 was $ 3,431 and $ 5,125 , respectively.

Interest on related party debt payable balances for the three months ended September 30, 2020 and 2019 was $ 2,320 and $ 4,411 , respectively.

Interest on related party debt payable balances for the nine months ended September 30, 2020 and 2019 was $ 9,701 and $ 15,436 , respectively.

Interest on related party debt payable is presented as interest expense—Westlake in the consolidated statements of operations.

Interest capitalized as a component of property, plant and equipment on related party debt was $ 0 for the three months ended June 30, 2020 and 2019 .

At June 30, 2020 and December 31, 2019 , accrued interest on related party debt was $ 3,431 and $ 4,187 , respectively, and is reflected as a component of accrued liabilities in the consolidated balance sheets.

At September 30, 2020 and December 31, 2019 , accrued interest on related party debt was $ 2,320 and $ 4,187 , respectively, and is reflected as a component of accrued liabilities in the consolidated balance sheets.

Debt payable to related parties was as follows:

September 30,

Long-term debt payable to Westlake

Major Customer and Concentration of Credit Risk

During the three months ended June 30, 2020 and 2019 , Westlake accounted for approximately 95.4 % and 85.2 % , respectively, of the Partnership's net sales.

During the six months ended June 30, 2020 and 2019 , Westlake accounted for approximately 90.4 % and 85.6 % , respectively, of the Partnership's net sales.

During the three months ended September 30, 2020 and 2019 , Westlake accounted for approximately 93.9 % and 86.7 % , respectively, of the Partnership's net sales.

During the nine months ended September 30, 2020 and 2019 , Westlake accounted for approximately 91.5 % and 85.9 % , respectively, of the Partnership's net sales.

See Note 7 above for an additional related party transaction.

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

(in thousands of dollars, except unit amounts and per unit data)

Long-term Debt Payable to Westlake

Long-term debt payable to Westlake consists of the following:

September 30,

OpCo Revolver (variable interest rate of London Interbank Offered Rate ("LIBOR") plus 2.0%, scheduled maturity of September 25, 2023)

4 unchanged sentences

The amended Credit Agreement bears interest at a variable rate of either (a) LIBOR plus 2.0 % or, if LIBOR is no longer available, (b) Alternate Base Rate plus 1.0 % .

The weighted average interest rate on all long-term debt was 3.4 % and 4.1 % , respectively, at June 30, 2020 and December 31, 2019 .

As of June 30, 2020 , the Partnership was in compliance with all of the covenants under the OpCo Revolver and the MLP Revolver.

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

(in thousands of dollars, except unit amounts and per unit data)

The weighted average interest rate on all long-term debt was 2.3 % and 4.1 % , respectively, at September 30, 2020 and December 31, 2019 .

As of September 30, 2020 , the Partnership was in compliance with all of the covenants under the OpCo Revolver and the MLP Revolver.

Derivative Commodity Instruments

1 unchanged sentence

The Partnership does not use derivative instruments to engage in speculative activities.

The Partnership had no derivatives that were designated as fair value hedges during the six months ended June 30, 2020 and 2019 .

Gains and losses from changes in the fair value of derivative instruments that are not designated as hedging instruments were included in net sales and cost of sales in the consolidated statements of operations for the six months ended June 30, 2020 and 2019 .

The Partnership had no derivatives that were designated as fair value hedges during the nine months ended September 30, 2020 and 2019 .

The exposure on commodity derivatives used for price risk management includes the risk that the counterparty will not pay if the market price declines below the established fixed price.

2 unchanged sentences

The Partnership also bears the risk that it could lose the benefit of market improvements over the fixed derivative price for the term and volume of the derivative instruments (as such improvements would accrue to the benefit of the counterparty).

The Partnership had non-hedge designated derivatives covering approximately 15.1 million gallons and 36.0 million pounds of commodities as of June 30, 2020 and 39.1 million gallons and 93.0 million pounds of commodities as of December 31, 2019 .

At June 30, 2020 , the fair values of these derivative instruments recorded as accrued liabilities and accounts receivable, net were $ 385 and $ 810 , respectively.

The Partnership had non-hedge designated derivatives covering approximately 7.6 million gallons and 18.0 million pounds of commodities as of September 30, 2020 and 39.1 million gallons and 93.0 million pounds of commodities as of December 31, 2019 .

At September 30, 2020 , the fair value of these derivative instruments recorded as accrued liabilities was $ 1,147 .

At December 31, 2019 , the fair values of these derivative instruments recorded as accrued liabilities and accounts receivable, net were $ 1,959 and $ 597 , respectively.

The losses recognized in net sales and gains recognized in cost of sales related to derivatives were $ 1,199 and $ 1,291 , respectively, for the three months ended June 30, 2020 and gains recognized in net sales and losses recognized in cost of sales were $ 215 and $ 504 , respectively, for the three months ended June 30, 2019 .

The gains recognized in net sales and losses recognized in cost of sales related to derivatives were $ 2,155 and $ 157 , respectively, for the six months ended June 30, 2020 and $ 2,426 and $ 1,384 , respectively, for the six months ended June 30, 2019 .

The losses recognized in net sales and gains recognized in cost of sales related to derivatives were $ 2,539 and $ 306 , respectively, for the three months ended September 30, 2020 and losses recognized in net sales and cost of sales were $ 6,801 and $ 1,294 , respectively, for the three months ended September 30, 2019 .

The losses recognized in net sales and gains recognized in cost of sales related to derivatives were $ 384 and $ 150 , respectively, for the nine months ended September 30, 2020 and losses recognized in net sales and cost of sales related to derivatives were $ 4,375 and $ 2,678 , respectively, for the nine months ended September 30, 2019 .

The Partnership's commodity contracts are measured using forward curves supplied by industry recognized sources and unrelated third-party services and classified as Level 2 under the fair value measurement guidance.

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

(in thousands of dollars, except unit amounts and per unit data)

Fair Value Measurements

4 unchanged sentences

Unobservable inputs that are not corroborated by market data.

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

(in thousands of dollars, except unit amounts and per unit data)

The Partnership has financial assets and liabilities subject to fair value measures.

1 unchanged sentence

The amounts reported in the consolidated balance sheets for accounts receivable, net and accounts payable approximate their fair value due to the short maturities of these instruments.

The carrying and fair values of the Partnership's long-term debt at June 30, 2020 and December 31, 2019 are summarized in the table below.

The Partnership's long-term debt includes the OpCo Revolver and the MLP Revolver at June 30, 2020 .

The carrying and fair values of the Partnership's long-term debt at September 30, 2020 and December 31, 2019 are summarized in the table below.

The Partnership's long-term debt includes the OpCo Revolver and the MLP Revolver at September 30, 2020 .

The fair value of debt is determined based on the present value of expected future cash flows using a discounted cash flow methodology.

1 unchanged sentence

Inputs used to estimate the fair values of the Partnership's long-term debt include the selection of an appropriate discount rate.

June 30, 2020

September 30, 2020

December 31, 2019

2 unchanged sentences

Accrued Liabilities

Accrued liabilities were $ 16,807 and $ 17,507 at June 30, 2020 and December 31, 2019 , respectively.

Accrued interest, accrued taxes, and accrued maintenance expense, which are components of accrued liabilities, were $ 3,431 , $ 4,770 , and $ 3,411 , respectively, at June 30, 2020 and $ 4,187 , $ 2,611 , and $ 3,225 , respectively, at December 31, 2019 .

Accrued liabilities were $ 16,955 and $ 17,507 at September 30, 2020 and December 31, 2019 , respectively.

Accrued taxes, accrued maintenance expense and accrued interest, which are components of accrued liabilities, were $ 5,550 , $ 4,054 and $ 2,320 , respectively, at September 30, 2020 and $ 2,611 , $ 3,225 and $ 4,187 , respectively, at December 31, 2019 .

No other component of accrued liabilities was more than five percent of total current liabilities.

Non-cash Investing Activity

The non-cash investing activities related to accruals for capital expenditures were $ 182 and $ 567 for the six months ended June 30, 2020 and 2019, respectively.

The non-cash investing activities related to accruals for capital expenditures were $ 1,945 and $ 1,213 for the nine months ended September 30, 2020 and 2019, respectively.

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

(in thousands of dollars, except unit amounts and per unit data)

Commitments and Contingencies

7 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements