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A Look into Genesis Energy’s Recent Operating Results

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Sep. 21 2016, Updated 10:05 a.m. ET

Offshore Pipeline Transportation segment

Offshore Pipeline Transportation became Genesis Energy’s (GEL) largest business segment after it acquired offshore pipeline assets from Enterprise Product Partners (EPD) in July 2015. This segment alone accounted for 59.2% of the company’s total margins in 2Q16.

Genesis Energy’s (GEL) Offshore Pipeline Transportation segment mainly provides crude oil and natural gas transportation services to deepwater producer customers operating in the Gulf of Mexico. The segment’s recent performance was driven by higher volumes along the offshore crude oil pipelines.

We’ll analyze the impact of current drilling activity in the Gulf Coast region on the company in the next article.

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Onshore Pipeline Transportation segment

Genesis Energy’s Onshore Pipeline Transportation segment mainly provides crude oil and CO2 transportation services. The company noted that this segment’s assets connect “producers to large interstate pipelines and refineries.”

The Onshore Pipeline Transportation segment saw a 16% YoY (year-over-year) decline in its segment margin in 2Q16 due to lower volumes along the Texas pipeline system. The partnership expects lower volumes to continue for the Texas system in the future. Plus, the segment’s performance was also impacted by lower drilling activity in some regions and lower demand from refineries along the Louisiana system.

Refinery Services segment

Genesis Energy’s Refinery Services segment provides sulfur removal services to refineries and sells byproducts produced during the process. The company noted that the segment’s recent performance was impacted by lower NaHS (sodium hydrosulfide) sale volumes due to “lower demand from pulp and paper customers.”

The lower sales volumes were slightly offset by better purchase management and utilization of NaOH (caustic soda). According to an investor presentation, ~85% of the segment’s operating expenses comes from NaOH costs.

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Marine Transportation segment

Genesis Energy’s Marine Transportation segment is involved in the transportation of crude oil through inland marine operations, offshore marine operations, and oil tankers. The segment’s assets include 69 barges, 32 push-boats, nine boats, nine coastwise barges, and one ocean-going tanker.

The segment saw a 34% YoY decline in its segment margin in 2Q16 due to lower rates and lower fleet utilization.

Supply and Logistics segment

Genesis Energy’s (GEL) Supply and Logistics segment is involved in crude oil and refined products acquisition and marketing activities. This segment saw a 30% YoY decline in its segment margin in 2Q16 due to lower margins and lower demand of services resulting from high competition.

Sunoco Logistics Partners (SXL), Buckeye Partners (BPL), and NuStar Energy (NS) saw similar declines in their commodities acquisition and marketing businesses in 2Q16.

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