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Item 2. Management’s Discussion and Analysis

2020-11-04 compared with 2020-08-06 · 105 added, 91 removed, 216 unchanged (48% of the section changed)

23 unchanged sentences

The Ethylene Sales Agreement is a long-term, fee-based agreement with a minimum purchase commitment and includes variable pricing based on OpCo's actual feedstock and natural gas costs and estimated other costs of producing ethylene (including OpCo's estimated operating costs and a five-year average of OpCo's expected future maintenance capital expenditures and other turnaround expenditures based on OpCo's planned ethylene production capacity for the year), plus a fixed margin per pound of $0.10 less revenue from co-products sales.

Pursuant to the Ethylene Sales Agreement, Westlake's obligation to pay for the annual minimum commitment (95% of OpCo's budgeted ethylene production), which is measured at the end of the year, is generally not reduced for the first 45 days of a force majeure event, but is reduced for the portion of a force majeure event extending beyond the 45th day.

Pursuant to the Ethylene Sales Agreement, Westlake's obligation to pay for the annual minimum commitment (95% of OpCo's budgeted ethylene production), which is measured on an annual basis, is generally not reduced for the first 45 days of a force majeure event, but is reduced for the portion of a force majeure event extending beyond the 45th day.

In the event of a force majeure event, we recognize buyer deficiency fees 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.

Westlake has an option to take 95% of volumes in excess of the minimum commitment on an annual basis under the Ethylene Sales Agreement if we produce more than our planned production.

1 unchanged sentence

In addition, under the Ethylene Sales Agreement, if production costs billed to Westlake on an annual basis are less than 95% of the actual production costs incurred by OpCo during the contract year, OpCo is entitled to recover the shortfall in such production costs (proportionate to the volume sold to Westlake) in the subsequent year ("Shortfall").

The Shortfall is recognized during the period in which the related operating, maintenance or turnaround activities occur.

The Shortfall is generally recognized during the period in which the related operating, maintenance or turnaround activities occur.

Operating Expenses, Maintenance Capital Expenditures and Turnaround Costs

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Because the expenses other than feedstock costs and natural gas are based on forecasted amounts and remain a fixed component of the price per pound of ethylene sold under the Ethylene Sales Agreement for any given 12-month period, our ability to manage operating expenses, maintenance expenditures and turnaround cost may directly affect our profitability and cash flows.

The impact on profitability is partially mitigated by the fact that we recognize any Shortfall as revenue in the period such costs and expenses are incurred.

The impact on profitability is partially mitigated by the fact that we generally recognize any Shortfall as revenue in the period such costs and expenses are incurred.

We seek to manage our operating and maintenance expenses on our ethylene production facilities by scheduling maintenance and turnarounds over time to avoid significant variability in our operating margins and minimize the impact on our cash flows, without compromising our commitment to safety and environmental stewardship.

19 unchanged sentences

Reconciliations for each of MLP distributable cash flow and EBITDA are included in the "Results of Operations" section below.

Recent Developments Affecting Industry Conditions and Our Business

Recent Developments

COVID-19 and Other Recent Developments Affecting Industry Conditions and Our Business

On March 11, 2020, the World Health Organization declared the ongoing coronavirus (COVID-19) outbreak a pandemic and recommended containment and mitigation measures worldwide.

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

We did not experience significant disruptions to our business operations in the six months ended June 30, 2020 and do not expect to experience significant disruptions to our business operations resulting from COVID-19, primarily due to the fact that 95% of our production is sold to Westlake on a take-or-pay contract.

Though the price of crude oil has partially recovered from its sudden collapse in early March 2020, due to the continuing impact of low crude-oil prices and the addition of ethylene production capacity in recent months, prices for ethylene and co-products have remained weak and have also negatively impacted our plants' operating rates.

We may idle production and reduce operating rates if it is not economical for us to produce ethylene to sell to third parties.

We did not experience significant disruptions to our business operations in the nine months ended September 30, 2020 and do not expect to experience significant disruptions to our business operations resulting from COVID-19, primarily due to the fact that 95% of our production is sold to Westlake on a take-or-pay contract.

Our first priority in our response to this crisis has been the health and safety of our operators, who are loaned to us by Westlake, and those of our customers and vendors.

Westlake has implemented preventative measures and developed corporate and regional response plans to minimize unnecessary risk of exposure.

We and Westlake have modified certain business practices (including those related to employee travel, employee work locations and employee work practices) to conform to government restrictions and best practices encouraged by the Center for Disease Control and Prevention, the World Health Organization and other governmental and regulatory authorities.

We and Westlake have implemented strategies to reduce costs, increase operational efficiencies and lower capital spending.

We have also deferred the planned turnaround at OpCo's Petro 2 ethylene unit and associated maintenance cost into the first half of 2021.

The turnaround is expected to last 60 days.

We have also deferred the planned turnaround at OpCo's Petro 2 ethylene unit and associated maintenance cost into the second half of 2021.

The turnaround is expected to last approximately 60 days.

We may idle production and reduce operating rates if it is not economical for us to produce ethylene to sell to third parties.

Impact of Hurricanes Laura and Delta

On August 27, 2020, Hurricane Laura made landfall in Louisiana as a Category 4 storm, which resulted in wide-spread damage to property and infrastructure in the greater Lake Charles area, including the electricity transmission system.

On October 9, 2020, Hurricane Delta made landfall as a Category 2 storm in the same general vicinity of Louisiana.

As a precautionary measure, OpCo idled its units in the Lake Charles area, Petro 1 and Petro 2, in advance of each storm.

As a result of the storms and certain pre-existing issues discovered during start-up following Hurricanes Laura and Delta, Petro 1 and Petro 2 remained shut down in the month of September.

Petro 1 and Petro 2 have resumed production.

In connection with these outages and pursuant to the Ethylene Sales Agreement, OpCo provided notices of force majeure events to Westlake.

Under the Ethylene Sales Agreement, Westlake's obligation to pay for the annual minimum commitment (95% of OpCo's budgeted ethylene production) will generally not be reduced for the first 45 days of a force majeure event.

As a result of the force majeure event due to Hurricane Laura, we recognized a buyer deficiency fee of $41.3 million 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.

Results of Operations

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

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(2) See "Reconciliation of EBITDA to Net Income, Income from Operations and Net Cash Provided by Operating Activities" below.

Three Months Ended June 30, 2020

Six Months Ended June 30, 2020

Three Months Ended September 30, 2020

Nine Months Ended September 30, 2020

Product sales prices and volume percentage change from prior-year period

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Average industry prices (1)

8 unchanged sentences

The following table presents reconciliations of MLP distributable cash flow to net income and net cash provided by operating activities, the most directly comparable GAAP financial measures, for each of the periods indicated.

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

10 unchanged sentences

The following table presents reconciliations of EBITDA to net income, income from operations and net cash provided by operating activities, the most directly comparable GAAP financial measures, for each of the periods indicated.

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

4 unchanged sentences

Interest expense

Provision for income taxes

Benefit (Provision) for income taxes

Income from operations

1 unchanged sentence

Other income, net

For the quarter ended June 30, 2020 , net income was $80.4 million on net sales of $238.5 million .

This represents an increase in net income of $0.3 million as compared to net income of $80.1 million on net sales of $270.1 million for the quarter ended June 30, 2019 .

Net income attributable to Westlake Chemical Partners LP for the second quarter of 2020 was $14.9 million as compared to $13.7 million for the second quarter of 2019 , an increase of $1.2 million .

Net income and net income attributable to Westlake Chemical Partners LP for the first quarter of 2020 as compared to the first quarter of 2019 were higher primarily due to the higher earnings on ethylene sold to Westlake, lower manufacturing costs, selling, general and administrative expenses and interest expense, partially offset by lower ethylene production.

Net sales for the second quarter of 2020 decreased by $31.6 million as compared to net sales for the second quarter of 2019 , mainly due to lower sales volumes to Westlake and third parties and lower sales prices to third parties, partially offset by higher sales prices to Westlake per the terms of the Ethylene Sales Agreement.

Income from operations was $83.9 million for the second quarter of 2020 as compared to $84.3 million for the second quarter of 2019 .

Income from operations for the second quarter of 2020 decreased mainly as a result of overall lower sales volumes to Westlake and lower sales prices and volumes to third parties, partially offset by lower manufacturing costs and selling, general and administrative expenses, as compared to the second quarter of 2019 .

For the six months ended June 30, 2020 , net income was $174.1 million on net sales of $489.0 million .

This represents an increase in net income of $15.6 million as compared to the six months ended June 30, 2019 net income of $158.5 million on net sales of $569.1 million .

Net income attributable to Westlake Chemical Partners LP for the six months ended June 30, 2020 was $32.6 million as compared to $28.7 million for the six months ended June 30, 2019 , an increase of $3.9 million .

The increase in net income and net income attributable to Westlake Chemical Partners LP in the six months ended June 30, 2020 was primarily due to the higher earnings on ethylene sold to Westlake, lower manufacturing costs, selling, general and administrative expenses and interest expense, partially offset by lower ethylene production, as compared to the six months ended June 30, 2019 .

Net sales for the six months ended June 30, 2020 decreased by $80.1 million as compared to net sales for the six months ended June 30, 2019 , mainly due to lower sales prices and volumes to third parties and Westlake.

Income from operations was $181.2 million for the six months ended June 30, 2020 as compared to $168.0 million for the six months ended June 30, 2019 .

Income from operations for the six months ended June 30, 2020 increased mainly as a result of lower manufacturing costs and selling, general and administrative expenses, partially offset by lower ethylene production, as compared to the six months ended June 30, 2019 .

For the quarter ended September 30, 2020 , net income was $91.8 million on net sales of $232.0 million .

This represents an increase in net income of $9.3 million as compared to net income of $82.5 million on net sales of $249.9 million for the quarter ended September 30, 2019 .

Net income attributable to Westlake Chemical Partners LP for the third quarter of 2020 was $18.5 million as compared to $14.9 million for the third quarter of 2019 , an increase of $3.6 million .

Net income and net income attributable to Westlake Chemical Partners LP for the third quarter of 2020 as compared to the third quarter of 2019 were higher primarily due to the higher sales price for ethylene sold to Westlake per the terms of the Ethylene Sales Agreement, the buyer deficiency fee of $41.3 million recognized in third quarter of 2020 as a result of the force majeure event at the Petro 1 and Petro 2 units, as discussed above under "Recent Developments—Impact of Hurricanes Laura and Delta," and lower interest expense, partially offset by lower sales to third parties and increased maintenance expense.

Net sales for the third quarter of 2020 decreased by $17.9 million as compared to net sales for the third quarter of 2019 , mainly due to lower sales to third parties, partially offset by higher sales prices to Westlake per the terms of the Ethylene Sales Agreement and the buyer deficiency fee recognized during the period.

Income from operations was $94.1 million for the third quarter of 2020 as compared to $86.4 million for the third quarter of 2019 .

Income from operations for the third quarter of 2020 increased mainly as a result of the higher sales price for ethylene sold to Westlake, the buyer deficiency fee recognized during the period, partially offset by increased maintenance expense and lower sales volumes to third parties, as compared to the third quarter of 2019 .

For the nine months ended September 30, 2020 , net income was $266.0 million on net sales of $721.0 million .

This represents an increase in net income of $25.0 million as compared to the nine months ended September 30, 2019 net income of $241.0 million on net sales of $819.1 million .

Net income attributable to Westlake Chemical Partners LP for the nine months ended September 30, 2020 was $51.1 million as compared to $43.6 million for the nine months ended September 30, 2019 , an increase of $7.5 million .

The increase in net income and net income attributable to Westlake Chemical Partners LP in the nine months ended September 30, 2020 was primarily due to the buyer deficiency fee of $41.3 million recognized during the current-year period as a result of the force majeure event at the Petro 1 and Petro 2 units and lower selling, general and administrative expenses and interest expense, partially offset by lower sales to third parties, as compared to the nine months ended September 30, 2019 .

Net sales for the nine months ended September 30, 2020 decreased by $98.1 million as compared to net sales for the nine months ended September 30, 2019 , mainly due to lower production and lower sales to third parties, partially offset by higher sales prices to Westlake per the terms of the Ethylene Sales Agreement and the buyer deficiency fee recognized for the period.

Income from operations was $275.4 million for the nine months ended September 30, 2020 as compared to $254.4 million for the nine months ended September 30, 2019 .

Income from operations for the nine months ended September 30, 2020 increased mainly as a result of the buyer deficiency fee recognized during the period and lower selling, general and administrative expenses, partially offset by lower sales to third parties, as compared to the nine months ended September 30, 2019 .

RESULTS OF OPERATIONS

Second Quarter 2020 Compared with Second Quarter 2019

Total net sales decreased by $31.6 million , or 11.7% , to $238.5 million in the second quarter of 2020 from $270.1 million in the second quarter of 2019 .

The overall average sales price in the second quarter of 2020 contributed to a 1.9% increase in net sales, primarily due to higher ethylene sales prices to Westlake per the terms of the Ethylene Sales Agreement, partially offset by lower sales prices to third parties, compared to the second quarter of 2019 .

The overall sales volume in the second quarter of 2020 contributed to a decrease in net sales of 13.6% in the second quarter of 2020 compared to the second quarter of 2019 .

Third Quarter 2020 Compared with Third Quarter 2019

Total net sales decreased by $17.9 million , or 7.2% , to $232.0 million in the third quarter of 2020 from $249.9 million in the third quarter of 2019 .

The decrease in net sales in the third quarter of 2020 was primarily due to lower production during the quarter, partially offset by the buyer deficiency fee of $41.3 million recognized for the period and higher sales prices to Westlake per the terms of the Ethylene Sales Agreement in the third quarter of 2020 .

The lower sales volume in the third quarter of 2020 contributed to a decrease in net sales of 34.5% in the third quarter of 2020 compared to the third quarter of 2019 .

The decrease in sales volume for the third quarter of 2020 was primarily due to the force majeure event at our Lake Charles Petro 1 and Petro 2 units.

The average sales price in the third quarter of 2020 contributed to a 10.8% increase in net sales, primarily due to higher ethylene sales prices to Westlake per the terms of the Ethylene Sales Agreement.

Gross Profit.

Gross profit decreased to $90.0 million for the second quarter of 2020 from $92.0 million for the second quarter of 2019 .

The gross profit margin in the second quarter of 2020 was 37.7% , as compared to 34.1% for the second quarter of 2019 .

The second quarter of 2020 gross profit margin was higher mainly due to higher earnings on ethylene sold to Westlake and lower manufacturing costs, partially offset by lower production.

Gross profit increased to $100.4 million for the third quarter of 2020 from $93.2 million for the third quarter of 2019 .

The gross profit margin in the third quarter of 2020 was 43.3% , as compared to 37.3% for the third quarter of 2019 .

The third quarter of 2020 gross profit margin was higher mainly due to higher earnings on ethylene sold to Westlake as a result of the buyer deficiency fee of $41.3 million recognized during the third quarter of 2020, partially offset by lower sales to third parties and increased maintenance expense at the Lake Charles Petro I and Petro 2 units compared to the third quarter of 2019 .

Selling, General and Administrative Expenses.

Selling, general and administrative expenses decreased by $1.5 million , or 19.7% , to $6.1 million in the second quarter of 2020 as compared to $7.6 million in the second quarter of 2019 .

The decrease in the second quarter of 2020 was mainly attributable to lower general and administrative expense allocations, provision for doubtful accounts and consulting and professional fees as compared to the second quarter of 2019 .

Selling, general and administrative expenses decreased by $0.5 million , or 7.4% , to $6.3 million in the third quarter of 2020 as compared to $6.8 million in the third quarter of 2019 .

The decrease in the third quarter of 2020 was mainly attributable to lower general and administrative expense allocations as compared to the third quarter of 2019 .

Interest Expense.

Interest expense decreased by $1.7 million to $3.4 million in the second quarter of 2020 from $5.1 million in the second quarter of 2019 , largely due to a lower average debt balance resulting from the partial repayment of borrowings under the OpCo Revolver in April 2019.

Interest expense decreased by $2.1 million to $2.3 million in the third quarter of 2020 from $4.4 million in the third quarter of 2019 , largely due to a lower interest rate on debt as a result of a decrease in the London Interbank Offered Rate ("LIBOR").

Other Income, net.

Other income, net in the second quarter of 2020 decreased by $1.1 million to $0.1 million as compared to $1.2 million in the second quarter of 2019 due to a decrease in interest income earned under the Investment Management Agreement as a result of a lower average cash balance under the Investment Management Agreement and lower average interest rates.

Provision for Income Taxes.

Provision for income taxes was $0.2 million in the second quarter of 2020 , which was comparable to the second quarter of 2019 .

Other income, net in the third quarter of 2020 decreased by $0.6 million , primarily due to a decrease in interest income earned under the Investment Management Agreement as a result of lower average interest rates.

MLP Distributable Cash Flow.

MLP distributable cash flow increased by $0.5 million to $16.9 million in the second quarter of 2020 from $16.4 million in the second quarter of 2019 .

The increased MLP distributable cash flow in the second quarter of 2020 , as compared to the prior-year period, was primarily due to lower manufacturing costs, partially offset by lower production of ethylene at OpCo and increased turnaround reserve.

EBITDA decreased by $2.5 million to $109.8 million in the second quarter of 2020 from $112.3 million in the second quarter of 2019 .

The decreased EBITDA, as compared to the prior-year period, was primarily due to lower sales volumes to Westlake and third parties and lower sales prices to third parties, partially offset by lower manufacturing costs and selling general and administrative expenses.

Six Months Ended June 30, 2020 Compared with Six Months Ended June 30, 2019

Total net sales decreased by $80.1 million , or 14.1% , to $489.0 million in the six months ended June 30, 2020 from $569.1 million in the six months ended June 30, 2019 .

The overall decreased sales price for the six months ended June 30, 2020 contributed to a 8.9% decrease in net sales, as compared to the six months ended June 30, 2019 , which was mainly due to lower sales prices to third parties and Westlake per the terms of the Ethylene Sales Agreement.

The overall sales volume contributed to a decrease in net sales of 5.2% in the six months ended June 30, 2020 compared to the six months ended June 30, 2019 .

MLP distributable cash flow increased by $0.7 million to $21.2 million in the third quarter of 2020 from $20.5 million in the third quarter of 2019 .

The increased MLP distributable cash flow in the third quarter of 2020 , as compared to the prior-year period, was primarily due to the buyer deficiency fee of $41.3 million recognized in the third quarter of 2020 and lower interest expense, partially offset by increased turnaround reserves.

EBITDA increased by $6.5 million to $120.1 million in the third quarter of 2020 from $113.6 million in the third quarter of 2019 .

The increased EBITDA, as compared to the prior-year period, was primarily due to the buyer deficiency fee of $41.3 million recognized in the third quarter of 2020 , partially offset by lower sales volumes as a result of lower production.

Nine Months Ended September 30, 2020 Compared with Nine Months Ended September 30, 2019

Total net sales decreased by $98.1 million , or 12.0% , to $721.0 million in the nine months ended September 30, 2020 from $819.1 million in the nine months ended September 30, 2019 .

The decrease in net sales in the nine months ended September 30, 2020 was primarily due to lower production during the nine months ended September 30, 2020 and lower sales prices to third parties, partially offset by the buyer deficiency fee of $41.3 million recognized in the current-year period and higher sales price to Westlake per the terms of the Ethylene Sales Agreement in the current-year period.

The lower sales volume contributed to a decrease in net sales of 15.2% in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 .

The decrease in sales volumes for the nine months ended September 30, 2020 was primarily due to the force majeure event at our Lake Charles Petro 1 and Petro 2 units resulting from Hurricane Laura.

The average sales price for the nine months ended September 30, 2020 contributed to a 1.8% decrease in net sales, primarily due to lower sales prices to third parties.

Gross Profit.

Gross profit increased to $193.6 million for the six months ended June 30, 2020 from $182.6 million for the six months ended June 30, 2019 .

The gross profit margin in the six months ended June 30, 2020 was 39.6% , as compared to 32.1% for the six months ended June 30, 2019 .

The six months ended June 30, 2020 gross profit margin was higher mainly due to higher earnings on ethylene sold to Westlake and lower manufacturing costs, partially offset by lower production, as compared to the six months ended June 30, 2019 .

Gross profit increased to $294.0 million for the nine months ended September 30, 2020 from $275.8 million for the nine months ended September 30, 2019 .

The gross profit margin in the nine months ended September 30, 2020 was 40.8% , as compared to 33.7% for the nine months ended September 30, 2019 .

The nine months ended September 30, 2020 gross profit margin was higher mainly due to higher earnings on ethylene sold to Westlake and the buyer deficiency fee of $41.3 million recognized for the nine months ended September 30, 2020 , partially offset by lower sales volumes resulting from the lower production at the Lake Charles Petro I and Petro 2 units compared to the nine months ended September 30, 2019 .

Selling, General and Administrative Expenses.

Selling, general and administrative expenses decreased by $2.3 million , or 15.8% , to $12.3 million in the six months ended June 30, 2020 as compared to $14.6 million in the six months ended June 30, 2019 .

The decrease was mainly attributable to lower general and administrative expense allocations in the six months ended June 30, 2020 , as compared to the prior-year period.

Selling, general and administrative expenses decreased by $2.8 million , or 13.1% , to $18.6 million in the nine months ended September 30, 2020 , as compared to $21.4 million in the nine months ended September 30, 2019 .

The decrease was mainly attributable to lower general and administrative expense allocations in the nine months ended September 30, 2020 , as compared to the prior-year period.

Interest Expense.

Interest expense decreased by $3.6 million to $7.4 million in the six months ended June 30, 2020 from $11.0 million in the six months ended June 30, 2019 due to a lower average debt balance resulting from the partial repayment of borrowings under the OpCo Revolver in April 2019.

Interest expense decreased by $5.7 million to $9.7 million in the nine months ended September 30, 2020 from $15.4 million in the nine months ended September 30, 2019 due to a lower interest rate on debt.

Other Income, net.

Other income, net decreased by $1.3 million to $0.7 million in the six months ended June 30, 2020 as compared to $2.0 million in the six months ended June 30, 2019 , primarily due to a decrease in interest income earned under the Investment Management Agreement as a result of a lower average cash balance under the Investment Management Agreement and lower average interest rates.

Other income, net decreased by $1.8 million to $0.7 million in the nine months ended September 30, 2020 as compared to $2.5 million in the nine months ended September 30, 2019 , primarily due to a decrease in interest income earned under the Investment Management Agreement as a result of lower average interest rates.

Provision for Income Taxes.

Provision for income taxes was $0.4 million for the six months ended June 30, 2020 , which was comparable to the six months ended June 30, 2019 .

Provision for income taxes was $0.4 million for the nine months ended September 30, 2020 , as compared to a provision of $0.5 million for the nine months ended September 30, 2019 .

The decrease was mainly attributable to a tax benefit due to a revaluation of the state deferred income tax liability arising from a decrease in state tax apportionment.

MLP Distributable Cash Flow.

MLP distributable cash flow increased by $1.2 million to $35.2 million in the six months ended June 30, 2020 from $34.0 million in the six months ended June 30, 2019 .

The increased MLP distributable cash flow in the six months ended June 30, 2020 , as compared to the prior-year period, was primarily due to lower manufacturing costs, partially offset by lower production of ethylene at OpCo and increased turnaround reserves.

EBITDA increased by $10.1 million to $233.8 million in the six months ended June 30, 2020 from $223.7 million in the six months ended June 30, 2019 .

The increased EBITDA, as compared to the prior-year period, was primarily due to lower manufacturing costs and selling and general administrative expenses, partially offset by lower sales volumes and prices.

CASH FLOW DISCUSSION FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

MLP distributable cash flow increased by $2.0 million to $56.4 million in the nine months ended September 30, 2020 from $54.4 million in the nine months ended September 30, 2019 .

The increased MLP distributable cash flow in the nine months ended September 30, 2020 , as compared to the prior-year period, was primarily due to the buyer deficiency fee of $41.3 million recognized during the nine months ended September 30, 2020 and lower interest expense, partially offset by increased turnaround reserves.

EBITDA increased by $16.6 million to $353.9 million in the nine months ended September 30, 2020 from $337.3 million in the nine months ended September 30, 2019 .

The increased EBITDA, as compared to the prior-year period, was primarily due to the buyer deficiency fee of $41.3 million during the nine months ended September 30, 2020 , partially offset by lower sales volumes to Westlake and third parties as a result of the lower production.

CASH FLOW DISCUSSION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

Operating Activities

Operating activities provided cash of $223.7 million in the first six months of 2020 compared to cash provided by operating activities of $213.7 million in the first six months of 2019 .

The $10.0 million increase in cash flows from operating activities was mainly due to an increase in income from operations, partially offset by an increase in cash used for working capital during the six months ended June 30, 2020 as compared to the prior-year period.

Changes in components of working capital, which we define for the purposes of this cash flow discussion as accounts receivable—Westlake, accounts receivable, net—third parties, inventories, prepaid expenses and other current assets less accounts payable—Westlake, accounts payable—third parties and accrued liabilities, used cash of $2.1 million in the first six months of 2020 as compared to $1.4 million of cash provided in the first six months of 2019 , resulting in an overall unfavorable change of $3.5 million .

The unfavorable change in working capital was mainly attributable to an unfavorable change in Westlake, net accounts receivable, due to lower feedstock purchases, partially offset by a favorable change in third party accounts receivable due to lower sales prices.

Operating activities provided cash of $340.9 million in the first nine months of 2020 compared to cash provided by operating activities of $335.2 million in the first nine months of 2019 .

The $5.7 million increase in cash flows from operating activities was mainly due to an increase in income from operations, partially offset by an increase in cash used for working capital during the nine months ended September 30, 2020 as compared to the prior-year period.

Changes in components of working capital, which we define for the purposes of this cash flow discussion as accounts receivable—Westlake, accounts receivable, net—third parties, inventories, prepaid expenses and other current assets less accounts payable—Westlake, accounts payable—third parties and accrued liabilities, used cash of $2.1 million in the first nine months of 2020 as compared to $14.7 million of cash provided in the first nine months of 2019 , resulting in an overall unfavorable change of $16.8 million .

The unfavorable change in working capital was mainly attributable to an unfavorable change in Westlake, net accounts receivable due to the buyer deficiency fee recognized in the third quarter of 2020.

Investing Activities

Net cash used for investing activities during the first six months of 2020 was $29.6 million as compared to net cash used for investing activities of $17.5 million in the first six months of 2019 , mainly due to increased net cash used under the Investment Management Agreement in the first six months of 2020 , which was partially offset by decreased capital expenditures, as compared to the prior-year period.

Capital expenditures during the first six months of 2020 and 2019 were primarily related to projects to improve production capacity or reduce costs, maintenance and safety and environmental projects at our facilities.

Net cash used for investing activities during the first nine months of 2020 was $58.2 million as compared to net cash used for investing activities of $46.0 million in the first nine months of 2019 , mainly due to increased net cash used under the Investment Management Agreement in the first nine months of 2020 , as compared to the prior-year period.

Capital expenditures during the first nine months of 2020 and 2019 were primarily related to projects to improve production capacity or reduce costs, maintenance and safety and environmental projects at our facilities.

Financing Activities

Net cash used for financing activities during the first six months of 2020 was $190.4 million as compared to net cash used by financing activities of $198.4 million in the first six months of 2019 .

The outflows during the first six months of 2020 were related to the distribution of $157.2 million to Westlake and of $33.2 million to other unitholders by the Partnership.

The cash inflows during the first six months of 2019 were a result of borrowings under the MLP Revolver of $123.5 million and net proceeds from the private placement of common units of approximately $62.9 million .

The cash outflows during the first six months of 2019 were related to the distribution of $153.8 million to Westlake and of $29.6 million to other unitholders by the Partnership as well as a partial repayment of borrowings under the OpCo revolver of $201.4 million .

Net cash used for financing activities during the first nine months of 2020 was $279.3 million as compared to net cash used by financing activities of $290.3 million in the first nine months of 2019 .

The outflows during the first nine months of 2020 were related to the distribution of $229.5 million to Westlake and of $49.8 million to other unitholders by the Partnership.

The cash inflows during the first nine months of 2019 were a result of borrowings under the MLP Revolver of $123.5 million and net proceeds from the private placement of common units of approximately $62.7 million .

The cash outflows during the first nine months of 2019 were related to the distribution of $229.3 million to Westlake and of $45.7 million to other unitholders by the Partnership as well as a partial repayment of borrowings under the OpCo revolver of $201.4 million .

LIQUIDITY AND CAPITAL RESOURCES

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The Partnership intends to use the net proceeds of sales of the common units, if any, for general partnership purposes, including the funding of potential drop-downs and other acquisitions.

No common units had been issued under the ATM Program as of June 30, 2020 .

No common units had been issued under the ATM Program as of September 30, 2020 .

Based on the terms of our cash distribution policy, we expect that we will distribute to our partners most of the excess cash generated by our operations.

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Westlake's purchase price for ethylene purchased under the Ethylene Sales Agreement includes a component (adjusted annually) designed to cover, over the long term, substantially all of OpCo's turnaround expenditures.

Our cash is generated from cash distributions from OpCo.

OpCo is a restricted subsidiary under certain indentures governing Westlake's senior notes.

The indentures governing Westlake's senior notes prevent OpCo from making distributions to us if any default or event of default (as defined in the indentures) exists.

Westlake's credit facility does not prevent OpCo from making distributions to us.

On July 31, 2020 , the board of directors of Westlake Chemical Partners GP LLC, our general partner, approved a quarterly distribution of 0.4714 per unit payable on August 24, 2020 to unitholders of record as of August 10, 2020 , which equates to a total amount of approximately $16.6 million per quarter, or approximately $66.4 million per year in aggregate, based on the number of common units outstanding on June 30, 2020 .

Westlake's credit facility and various indentures do not prevent OpCo from making distributions to us.

On October 30, 2020 , the board of directors of Westlake Chemical Partners GP LLC, our general partner, approved a quarterly distribution of $0.4714 per unit payable on November 24, 2020 to unitholders of record as of November 9, 2020 , which equates to a total amount of approximately $16.6 million per quarter, or approximately $66.4 million per year in aggregate, based on the number of common units outstanding on September 30, 2020 .

We do not have a legal or contractual obligation to pay distributions on a quarterly basis or any other basis at our minimum quarterly distribution rate or any other rate.

1 unchanged sentence

Westlake has historically funded expansion capital expenditures related to Lake Charles Olefins and Calvert City Olefins.

Total capital expenditures for the six months ended June 30, 2020 and 2019 were $20.6 million and $25.6 million , respectively.

No funding was required by OpCo to fund capital expenditures during the six months ended June 30, 2020 and 2019 .

Total capital expenditures for the nine months ended September 30, 2020 and 2019 were $29.2 million and $30.0 million , respectively.

No funding was required by OpCo to fund capital expenditures during the nine months ended September 30, 2020 and 2019 .

We expect that Westlake will loan additional cash to OpCo to fund its expansion capital expenditures in the future, but Westlake is under no obligation to do so.

Cash and Cash Equivalents

As of June 30, 2020 , our cash and cash equivalents totaled $23.6 million .

As of September 30, 2020 , our cash and cash equivalents totaled $23.3 million .

In addition, we have cash invested under the Investment Management Agreement (as described below) and a revolving credit facility with Westlake available to supplement cash if needed, as described under "Indebtedness" below.

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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.

The Partnership had $171.4 million of cash invested under the Investment Management Agreement at June 30, 2020 .

The Partnership had $191.2 million of cash invested under the Investment Management Agreement at September 30, 2020 .

OpCo Revolver

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On April 30, 2019, the Partnership repaid $201.4 million of borrowings under the OpCo Revolver.

As of June 30, 2020 , outstanding borrowings under the OpCo Revolver totaled $22.6 million and bore interest at the LIBOR rate plus 2.0%, which is accrued in arrears quarterly.

As of September 30, 2020 , outstanding borrowings under the OpCo Revolver totaled $22.6 million and bore interest at the LIBOR rate plus 2.0%, which is accrued in arrears quarterly.

In September 2018, the OpCo Revolver was amended to extend the scheduled maturity date from August 4, 2019 to September 25, 2023 and revise the applicable margin from 3.0% to 2.0%.

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The repayment of borrowings under the MLP Revolver is subject to acceleration upon the occurrence of an event of default.

As of June 30, 2020 , outstanding borrowings under the MLP Revolver totaled $377.1 million .

As of September 30, 2020 , outstanding borrowings under the MLP Revolver totaled $377.1 million .

We intend to use the MLP Revolver to purchase additional limited partnership interests in OpCo in the future, in the event OpCo desires to sell such additional interests to us, for other acquisitions and for general corporate purposes.

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turnaround activities and the variability of OpCo's cash flow;

receipt of any buyer deficiency fee under the Ethylene Sales Agreement;

compliance with present and future environmental regulations and costs associated with environmentally related penalties, capital expenditures, remedial actions and proceedings, including any new laws, regulations or treaties that may come into force to limit or control carbon dioxide and other greenhouse gas emissions or to address other issues of climate change;

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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 2. Management’s Discussion and Analysis