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Edited Transcript of MMLP earnings conference call or presentation 23-Apr-20 1:00pm GMT

Q1 2020 Martin Midstream Partners LP Earnings Call

Kilgore Apr 25, 2020 (Thomson StreetEvents) -- Edited Transcript of Martin Midstream Partners LP earnings conference call or presentation Thursday, April 23, 2020 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Randall L. Tauscher

Martin Midstream Partners L.P. - Executive VP & COO of Martin Midstream GP LLC

* Robert D. Bondurant

Martin Midstream Partners L.P. - Executive VP, CFO, Treasurer & Director of Martin Midstream GP LLC

* Ruben S. Martin

Martin Midstream Partners L.P. - President, CEO & Director of Martin Midstream GP LLC

* Sharon L. Taylor

Martin Midstream Partners L.P. - Head of IR

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Conference Call Participants

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* Kyle May

Capital One Securities, Inc., Research Division - Associate

* Selman Akyol

Stifel, Nicolaus & Company, Incorporated, Research Division - MD of Equity Research

* Sunil K. Sibal

Seaport Global Securities LLC - MD & Senior Energy Infrastructure Analyst

* Torrey Joseph Schultz

RBC Capital Markets, Research Division - Co-Head & MD of Master Limited Partnership Franchise

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the Martin Midstream Partners First Quarter 2020 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

I would now like to hand the conference over to your speaker, Director of Finance and Investor Relations, Sharon Taylor. Madam, please go ahead.

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Sharon L. Taylor, Martin Midstream Partners L.P. - Head of IR [2]

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Thank you, Latif, and good morning, everyone. Joining me on the call this morning are Ruben Martin, our President and CEO; Bob Bondurant, our CFO; and Randy Tauscher, our COO. Also joining us is Danny Cavin, Director of FP&A; and David Cannon, Director of Financial Reporting.

Before we get started, I'd like to remind you that management may be making forward-looking statements as defined by the SEC. Such statements are based on our current judgments regarding the factors that could impact the future performance of Martin, including facts and assumptions related to the impact of the COVID-19 pandemic, but actual outcomes could be materially different. You should review the risk factors and other information discussed in our SEC filings and form your own opinions about Martin's future performance.

We will discuss non-GAAP financial measures on today's call. Please refer to the table in our earnings press release posted in the Investor Relations section of our website to find information regarding those non-GAAP financial measures, including a reconciliation of historical non-GAAP financial measures referenced in today's call to their corresponding GAAP measures.

I'll now turn the call over to Mr. Ruben Martin.

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Ruben S. Martin, Martin Midstream Partners L.P. - President, CEO & Director of Martin Midstream GP LLC [3]

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Thank you, Sharon. Good morning to everyone, and thank you for being on the call today. As we all know, the world has turned upside down since our last earnings call on January 29. The COVID-19 pandemic has grown and spread throughout the nation, and we've seen oil prices drop down below 0 for the first time in our lives. The economy has been disrupted, and we're all wondering when things will return to normal and what this normal will look like. So here at Martin, we've prioritized the health and safety of our employees, the businesses that we serve and the communities we live and work in. Specifically, we put safety initiatives in place to ensure that the virus would not be spread in our workplace or the locations we serve. To that end, we implemented work-from-home initiative for all eligible employees and we staged equipment and resources so the support is readily available for them. We began awareness training for all of our drivers, our vessel crews, blending operators and other affected personnel regarding preventative measures when delivering the locations or working in or around our docks, vessels and trucks. Our communication lines are open 24/7 for the environmental health and safety division, land and marine logistics and sales and marketing teams.

At this time, all of our assets are operational, and we are servicing our customers in a dependable manner they have come to expect from us. We have diversified businesses that serve the refinery industry, and that diversification has been crucial as we navigate this crisis.

We enjoy long-term contracts, many with minimum volume commitments. And over the last few years, have limited our upstream exposure by selling our pipeline and natural gas storage assets. However, we are not immune from the current situation, and we expect our financial results to be impacted by a decline in refined product demand across the industries we serve. So we've identified what we can control and have taken actions to fortify our businesses, protect our assets and contain cost. Across the company, we are finalizing cost containment initiatives and where safety and regulatory concerns are not an issue, we are planning to defer capital expenditures to 2021. I have confidence in our leadership team to continue to find and exploit additional avenues to provide value to our shareholders.

Finally, I want to take a moment to thank our employees, many of who are managing their workflow and remotely, while continuing to support the businesses and each other. They have remained committed and dedicated to their jobs during this demanding time, and I'm very grateful.

I'll now turn it over to our CFO, Bob Bondurant, to discuss our quarterly financials.

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Robert D. Bondurant, Martin Midstream Partners L.P. - Executive VP, CFO, Treasurer & Director of Martin Midstream GP LLC [4]

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Okay. Thank you, Ruben. I'd like to begin with discussing our first quarter performance, which fell short of forecast by $4.7 million or 13%. Actual adjusted EBITDA was $31 million compared to guidance of $35.7 million. Our terminalling services business exceeded guidance by $0.7 million, primarily at the Smackover refinery, which benefited from lower utility costs and other operating expenses.

We also exceeded forecast in our packaged lubricants business as a result of better-than-anticipated margins in the first quarter. As we think about the near-term and the impact of the economic shutdown from the COVID-19 virus on our terminalling segment, there should be minimal impact on the storage component of this business due to minimum volume commitment contracts. However, there is a downside risk in our packaged lubricant and grease businesses due to anticipated reduced demand from our oil and gas production customers and our construction customers. However, we should continue to see strong demand from our customers, which distribute our lubricant and grease products to the agricultural industry.

Now our transportation segment fell short of guidance by $0.3 million as we realized adjusted EBITDA of $7.9 million compared to our forecast of $8.2 million. Our Marine Transportation group exceeded guidance by $0.6 million as overall barge demand remained strong, and we continued to experience increased pricing primarily in our dirty tows. Our near-term outlook currently remains cautiously optimistic for marine transportation, as we are now seeing demand for the use of barges as floating stores for crude oil which should support barge utilization if refinery barge demand decreases.

In our land transportation business, we missed guidance by $0.9 million as we began to see a deterioration in our load count beginning in March, primarily from our refinery customers. As demand destruction for refined products began in March as a result of the economic shutdown caused by COVID-19, we saw refinery utilization slowly reduce. This resulted in fewer daily truckloads from these refineries.

As we look forward and comparing to overall guidance, we believe our truck transportation EBITDA will be the partnership's most negatively impacted business line, as we anticipate refinery utilization to negatively impact our daily truckload count, which will reduce the adjusted EBITDA in our truck transportation business.

Now moving to our Natural Gas Liquids segment. We missed guidance in this segment by $1.9 million, primarily in our butane logistics business. Our butane logistics business had adjusted EBITDA of $3.4 million compared to our guidance of $5.7 million. This miss was primarily due to smaller margins than originally anticipated associated with a generally weaker demand from refinery customers as the utilization slowly fell throughout the quarter.

Looking forward, we reduced guidance in our butane logistics business as we are concerned about the reduced butane production out of third-party refiners as they run at lower utilization rates during the economic shutdown. As a result, we don't have precise visibility on how much butane volume we can purchase and store this summer in order to sell back to refiners during the winter blending season. However, we believe working capital invested in this business will be significantly less than last year, primarily due to depressed energy prices, meaning our debt levels supporting our butane inventory will be lower in 2020.

Our Sulfur Services segment missed guidance by $3.2 million. The majority of the miss was in our fertilizer group, which missed guidance by $2 million as volumes sold was less than forecasted. However, we believe most of this volume shortfall will be made up in the second quarter based upon the visibility of our month-to-date sales in April.

Also, we still believe the amount of corn acres to be planted this year will be greater than a year ago. Therefore, we remain optimistic about the performance of the fertilizer group for the remainder of the year.

On the pure sulfur side of the business, we missed guidance by $1.2 million, of which $0.4 million was in our molten sulfur business and $0.8 million was in our sulfur prilling business.

In the molten sulfur side of the business, our ocean-going tug, which provides the horsepower to move sulfur from Beaumont to Tampa, experienced a blown engine in the quarter, which negatively impacted our operating cost by $0.4 million, accounting for the guidance miss in the molten business.

In our sulfur prilling business, we forecasted to collect $3 million in business interruption insurance from our ship loader casualty loss we experienced last May. The actual collections in the quarter was $2.7 million. The balance of the miss was primarily due to reduced sulfur volumes run through our sulfur prillers, which impacts the operating fees we bill our customers. The reduced sulfur volumes we experienced was a result of third-party refinery utilization, which began to decrease as a result of the demand destruction caused by COVID-19.

As we think about the remainder of the year, we believe our molten sulfur business will not be affected as we are paid a monthly logistics fee by our primary customer. However, we do believe there will be reduced overall sulfur volumes from third-party refineries, which will negatively impact our prilling volume, which will in turn impact our operating fee revenue. We, of course, will still be paid our reservation fees no matter what amount of sulfur volume is processed through our prillers.

So to summarize, our first quarter miss in cash flow was primarily a result of reduced third-party refinery utilization, which impacted our butane, prilled sulfur and land transportation businesses. The other miss was in our fertilizer business, but we expect a substantial recovery in fertilizer cash flow in the second quarter provided the weather continues to cooperate.

As we thought about a guidance revision for 2020 due to the economic shutdown as a result of COVID-19, we believe reduced third-party refinery utilization will continue to negatively impact us in our butane, prilled sulfur and land transportation businesses. Also, we should see some decline in our packaged lubricants and grease business.

We felt it was appropriate with our guidance revision to disclose a range of adjusted EBITDA for the year as it is difficult to predict exactly when third-party refinement utilization returns to normal.

Also to save capital in the near term, we are deferring maintenance capital expenditures of $2.7 million into 2021 and also deferring growth capital expenditures of $2.3 million into 2021.

Finally, between permanent and furloughed reductions in the workforce, on an annualized basis, we expect to reduce operating and SG&A cost by a total approximating $5 million.

So now I'd like to turn the call back to Sharon to discuss our balance sheet, liquidity and financial strategy.

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Sharon L. Taylor, Martin Midstream Partners L.P. - Head of IR [5]

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Thank you, Bob. I'll begin with a normal walk-through of the debt components of our balance sheet, define our bank ratios at quarter end, then discuss our capital spending during the first quarter and then to our revised full year 2020 guidance.

On March 31, 2020, the partnership's balance sheet reflected approximately $535 million of both long-term and current installments of funded debt. The current installment amount includes our senior unsecured notes due February of 2021, which I will discuss further in a moment and current finance lease obligations. Long-term debt was related to our revolving credit facility. Our balance sheet funded debt is shown before unamortized debt issuance and unamortized issuance premiums, as actual funded debt outstanding was $534 million.

Reconciling this amount at quarter end, our revolving credit facility was $170 million, and the notional amount of our senior unsecured notes was $364 million. Our total available liquidity on March 31, reducing those amounts by outstanding letters of credit of $17.1 million, was $213 million based on our $400 million revolving credit facility.

For the quarter ended March 31, 2020, our bank compliant leverage ratios, defined as senior secured indebtedness to adjusted EBITDA and total indebtedness to adjusted EBITDA, were 1.48x and 4.7x, respectively. Our total debt ratio is shown without adjustments from the working capital carve-out sublimit. This sublimit allows us to exclude certain debt directly attributed to the seasonal NGL inventory build where the partnership has either forward sold or hedged inventory from our total debt-to-EBITDA calculation. However, the first quarter is typically the end of our selling season, and this year, we have not begun the seasonal NGL inventory buildup. Therefore, that carve-out mechanism was not utilized as of March 31. Our bank compliant interest coverage ratio as defined by adjusted EBITDA to consolidated interest expense was 2.72x. So on March 31, the partnership was in full compliance with all covenants either banking or otherwise.

Now I'll move to a brief discussion of our senior unsecured notes. During the first quarter, the partnership repurchased and retired approximately $9 million of our senior unsecured notes. Since we repurchased our notes at a discount, you'll find a $3.5 million gain on the retirement within the Other Income statement of the -- Other Income section of the income statement. We believe that with the current market disruption, value can be created by repurchasing our notes at a discount.

However, according to the terms of our revolving credit facility, any repurchases the partnership makes must be funded within 90 days of receipt of proceeds from an asset sale. At this time, we have fully utilized any available proceeds. As we discussed on our previous earnings call, we were optimistic that the senior unsecured notes would be refinanced prior to the end of the first quarter. The disruption surrounding the COVID-19 pandemic has contributed to unfavorable conditions in the credit markets. Management remains confident in our ability to refinance the senior notes prior to the springer in our revolving credit facility, which states that if the notes are not refinanced by August 19, 2020, the revolver will mature. To assist us with the refinancing, we engaged Stephens Inc., one of the largest privately held independent financial service firms in the country, as a financial adviser to assist us in exploring strategic alternatives to address this near-term maturity

Now let's turn our focus to capitalized spending during the quarter. First, discussing growth capital expenditures, they were approximately $5.4 million, not including amounts related to the Neches ship loader replacement. At year-end, we anticipated the majority of growth capital spent in the first quarter would be related to the new Phoenix grease plant. However, there has been a delay in the permitting of the facility due to the COVID-19 pandemic, and we now expect the capital spend to occur in the second quarter. Our largest growth capital spend in quarter 1 was upgrading the ammonia storage system at Neches to service a 5-year contract.

Turning to the capital spend related to the ship loader replacement at the Neches facility. During the first quarter, we spent approximately $2.2 million and anticipate spending an additional $700,000 in the second quarter. Those amounts will be offset by insurance proceeds, and this is property insurance proceeds, not business interruption that Bob spoke to. So we will have insurance proceeds of $1.8 million that was received in the first quarter and an anticipated $4.9 million to be received in the second quarter. In total, the capital spend during 2019 and 2020 to replace the Neches ship loader is anticipated to be approximately $12.2 million with insurance proceeds offsetting $11.7 million. And as a reminder, the ship loader was placed back in service in late January.

Switching to maintenance capital. During the first quarter, we spent approximately $3.2 million. The partnership had distributable cash flow of $18.3 million, which equated to 7.45x coverage for the quarter.

And finally, regarding our revised EBITDA guidance for 2020. Given the current uncertainties around the full impact of COVID-19 around the world and the anticipated economic impact on the partnership's businesses, we felt it necessary to withdraw 2020 guidance that was given in January. Further, due to lack of visibility around current and long-term market demand, we felt it appropriate to provide less detailed guidance and disclose a range of cash flow that could result from the various impacts on each of our operating segments that Bob described in his remarks. We are now guiding to adjusted EBITDA for full year 2020 to be between $95 million and $107 million, the mid-range being $101 million or an approximate 14% reduction to our original forecast.

Also, as mentioned earlier by Bob, we intend to save capital by deferring approximately $2.7 million of maintenance capital expenditures and $2.3 million of growth capital expenditures into 2021. And in addition to the identified deferrals, we anticipate our ability to complete the original capital expenditure forecast will be impacted by social distancing and other factors related to the COVID-19 pandemic. Accordingly, we have revised both our growth and maintenance 2020 CapEx forecast and provided a range of expected capital spend.

Growth or expansion capital is now expected to be between $9 million and $10 million, and maintenance capital is expected to be between $14 million and $16 million. The partnership intends to provide our usual detailed forecast by business line and operating segment when energy markets stabilize and the impact of COVID-19 is clarified.

This concludes our prepared remarks this morning. I will now turn the call back to the operator for Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of TJ Schultz of RBC Capital Markets.

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Torrey Joseph Schultz, RBC Capital Markets, Research Division - Co-Head & MD of Master Limited Partnership Franchise [2]

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Great. I think just first, I appreciate the effort on the updated guidance and the range there. Can you frame some of your assumptions in there to get to that range for 2020? What does the low end or high end assume for timing for some sort of recovery on the demand side or trend in refinery utilization?

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Robert D. Bondurant, Martin Midstream Partners L.P. - Executive VP, CFO, Treasurer & Director of Martin Midstream GP LLC [3]

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So the -- this is Bob. The fundamental driver, of course, for us, is refinery utilization. So as we thought about it, we looked at -- so let me back up. We operate primarily in the -- all really in the PADD 3 world of refinery on the Gulf Coast of the U.S. So we focus on, what we think, refinery utilization will be in that world. Current PADD 3 utilization, I think, is about 73.8%. As we thought about it, we actually thought about rates below that for Q2 on average, slowly improving in Q3 and slowly improving again in Q4, but not getting back to full utilization at all this year. So that's big picture thoughts. That's affecting the trucking business and the sulfur business primarily. And we think in our butane business, the impact is really more on the supply side we're getting this summer. And we do think whatever we will be able to buy this summer and store on the butane business will be sold 100% back to refiners in the fourth quarter of this year and first quarter next year. So we really don't have refinery utilization going back to normal in our thought process until next year.

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Torrey Joseph Schultz, RBC Capital Markets, Research Division - Co-Head & MD of Master Limited Partnership Franchise [4]

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Okay. Makes sense. And then just moving to some of the barges. How much capacity do you have there to take advantage of storing crude oil on barges? And have those discussions or arrangements already started at this point?

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Randall L. Tauscher, Martin Midstream Partners L.P. - Executive VP & COO of Martin Midstream GP LLC [5]

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Yes. This is Randy. The -- 1 week ago on the barges, utilization was very tight. Rates were continuing to go up in the last week due to change in some product flows. The utilization isn't as tight, and the rates are going up at this point. We're still not in a position with the current contango to be able to utilize barges to store oil for a significant amount of time. But the markets are quite volatile, and we'll just have to see what happens there.

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Torrey Joseph Schultz, RBC Capital Markets, Research Division - Co-Head & MD of Master Limited Partnership Franchise [6]

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Okay. Good. Just lastly on the refinancing. So that August springer date. I guess just first, is there any potential to extend that date just given some of the logistical challenges and what you may have to address with your financial alternatives with your advisers? Or you also said that you're confident on refinancing those. So just any color you have on the progress or traction you're getting to address the '21 notes?

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Sharon L. Taylor, Martin Midstream Partners L.P. - Head of IR [7]

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So as you know and when we talked about, we hired Stephens a few weeks back, they have made some contact with some of our largest bondholders. The feedback there has been very positive and very constructive. So at this point, management believes that we will get those notes refinanced before we even have to look at addressing the springer. But we have a very supportive bank group that we are in discussions with at all times. I feel confident and very optimistic that should the need arise for the springer to be adjusted, we would be able to push that out to allow the company additional time and the markets additional time to stabilize, so we can finalize our refinance.

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Operator [8]

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(Operator Instructions) Our next question comes from the line of Kyle May of Capital One Securities.

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Kyle May, Capital One Securities, Inc., Research Division - Associate [9]

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Kind of following up on TJ's question about the barges. Are you able to use any of your other storage assets to take advantage of the contango opportunity in the market?

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Randall L. Tauscher, Martin Midstream Partners L.P. - Executive VP & COO of Martin Midstream GP LLC [10]

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Yes. This is Randy again. Most of our storage assets, we already have contracted out. So we don't see a lot of volatility in the terminal section of the business. Now we do have storage assets in Tampa, Florida, which we currently do not have under contract. And yes, there is significant interest in those assets at this point in time.

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Kyle May, Capital One Securities, Inc., Research Division - Associate [11]

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Okay. Got it. And then one other question, maybe looking at the lubricant section. First, do you have the sales volumes for the first quarter? And then secondly, can you talk about your expectations for the balance of the year?

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Robert D. Bondurant, Martin Midstream Partners L.P. - Executive VP, CFO, Treasurer & Director of Martin Midstream GP LLC [12]

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Yes, this is Bob. I don't have any volumes in front of me. I'll have to get back to you on that and expectations for the rest of the year. I think on the packaged lubricant side, we're still in slight volume decrease. We're primarily seeing an impact in our grease business. We sell a lot of grease into the [frac oil] side business. We also sell a certain type of grease for construction, what do you call it, post-tension grease, I couldn't think of the name. As far as volume decline, I think big picture in lubricant package business we're impacting maybe a 10% to 12% decline in overall cash flow. So I don't have a (inaudible) I remember the big picture numbers.

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Operator [13]

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Our next question comes from Selman Akyol of Stifel.

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Selman Akyol, Stifel, Nicolaus & Company, Incorporated, Research Division - MD of Equity Research [14]

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Just a couple of little detailed questions. On the prilling operations, you said part of the miss was due to less business interruption insurance. $3 million was anticipated, $2.7 million came in. Do you expect the remaining $0.3 million to be coming in? Or is that just gone?

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Robert D. Bondurant, Martin Midstream Partners L.P. - Executive VP, CFO, Treasurer & Director of Martin Midstream GP LLC [15]

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No. I think we're done on that. I think we've fully collected the BI side. But we do -- as Sharon said earlier, we do know anticipated cash. We're only spending $700,000 in Q2 on the final property impact on the ship loader. But we anticipate -- what do you say, $4.9 million coming in?

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Sharon L. Taylor, Martin Midstream Partners L.P. - Head of IR [16]

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$4.5 million, I believe.

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Robert D. Bondurant, Martin Midstream Partners L.P. - Executive VP, CFO, Treasurer & Director of Martin Midstream GP LLC [17]

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$4.5 million. So we will have a cash gain in Q2 related to this activity, but it won't go through the P&L, that will just delever.

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Selman Akyol, Stifel, Nicolaus & Company, Incorporated, Research Division - MD of Equity Research [18]

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All right. Very good. And then just sort of following up on the last question. On the lubricants, you referenced several markets there. And I think you'd also talked about agriculture in your comments as well. So can you just sort of break down that as we think about it, if I were to say, construction, agriculture versus oilfield services?

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Robert D. Bondurant, Martin Midstream Partners L.P. - Executive VP, CFO, Treasurer & Director of Martin Midstream GP LLC [19]

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I would say the majority of our business because our largest customers are distributors to the agriculture business. So the majority of our business on the packaged lubricants side and grease tends to migrate toward agriculture. But we know that incremental, I think, on the earlier question from Kyle, our impact is about 10% to 12% of EBITDA in the overall packaged lubricants/grease business, and that's coming from those 2 areas. So I don't have the exact detail on the breakdown, but I know ag is probably the largest piece. And, Randy, do you have any other comments? And am I speaking there at all.

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Randall L. Tauscher, Martin Midstream Partners L.P. - Executive VP & COO of Martin Midstream GP LLC [20]

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Yes. In both grease and the packaging, the oilfields is a component of the sales, a smaller component but a component, nonetheless, and in grease, the post-tension grease to the construction business is a more significant component. So when you're thinking about the grease and lubricants going forward and what we have seen in March and April, I think that there's a probability that we're going to be 10-ish to 20 percent-ish decline in that business as a reasonable probability.

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Selman Akyol, Stifel, Nicolaus & Company, Incorporated, Research Division - MD of Equity Research [21]

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Appreciate that. Then the last one for me is, you guys think about PADD 3 refinery utilization. You referenced the 73%. I guess, 2 questions. Number one, is currently anyone shutdown that you're serving? And then number two, do you anticipate any one shutting down as you go through the second quarter or the balance of the year?

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Randall L. Tauscher, Martin Midstream Partners L.P. - Executive VP & COO of Martin Midstream GP LLC [22]

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Yes. So the PADD 3, you have the largest, most complex refineries in the United States and the world in the PADD 3. And while we've seen a decline there from low 90-ish percentage to mid-70s, the declines we've seen in the other pads has been greater. The refineries that we serve significantly in our MTI and our sulfur business, particularly in the Beaumont Port Arthur area, we have seen them -- their declines to be less than what we have observed in other parts of PADD 3. And we can't sit here today and project what we think is going to happen going forward because it's just such a wide range of outcomes. But we have not seen them other than one refinery, which had a planned turnaround, have any significant reduction in the services we provide for them yet.

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Operator [23]

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Our next question comes from Sunil Sibal of Seaport Global Securities.

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Sunil K. Sibal, Seaport Global Securities LLC - MD & Senior Energy Infrastructure Analyst [24]

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I just wanted to go back on the refinancing. I think previously, you talked about trying to access the private markets also for the refinancing. I was wondering if you could talk a little bit about what are you seeing in that market? And what kind of spreads over the, say, public markets is that market seeing right now?

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Sharon L. Taylor, Martin Midstream Partners L.P. - Head of IR [25]

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So I think on the public side, we'll look at that first. You've seen a little bit of opening in the high-yield market. I think that it's early days on that and why we've hired Stephens to be able to advise us. On the private side, we continue to have discussions with private capital, mostly to assist with our refinancing to bring in maybe a new money component through discussions with them. But we don't have a lot of detail that we're going to share today, just our optimism from discussions that we feel like we are going to be successful in the refinancing, and we won't need to address the revolving credit maturity or springer.

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Sunil K. Sibal, Seaport Global Securities LLC - MD & Senior Energy Infrastructure Analyst [26]

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Okay. Got it. And then just to follow up on some information as provided earlier. So I think you mentioned one storage asset in Florida, which you could utilize for contango. Could you talk how big is that terminal?

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Randall L. Tauscher, Martin Midstream Partners L.P. - Executive VP & COO of Martin Midstream GP LLC [27]

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Well, the 3 tanks that we don't have contracted today is a little over 0.25 million barrels storage. And then the rates that are out there today for storage, it depends on what kind of term you can get shorter term. Obviously, you can go get a higher rate longer term. The rates are 30% to 40% depressed from what the shorter-term rates would be. So a further point is there's 1.5 million-ish of upside in our Tampa tanks to the extent we can get them leased out.

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Sharon L. Taylor, Martin Midstream Partners L.P. - Head of IR [28]

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And I'll follow-on with that. Just to be clear that in our revised guidance, we do not contemplate any additional EBITDA associated with those tanks.

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Sunil K. Sibal, Seaport Global Securities LLC - MD & Senior Energy Infrastructure Analyst [29]

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Okay. And to the extent that you have used some of your terminals, how should we think about duration of those contracts that you've recently signed?

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Randall L. Tauscher, Martin Midstream Partners L.P. - Executive VP & COO of Martin Midstream GP LLC [30]

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Could you repeat the question? I didn't follow it.

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Sunil K. Sibal, Seaport Global Securities LLC - MD & Senior Energy Infrastructure Analyst [31]

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So I was curious to the extent that you have signed recent contracts on terminals for storage. What is the typical duration on those?

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Robert D. Bondurant, Martin Midstream Partners L.P. - Executive VP, CFO, Treasurer & Director of Martin Midstream GP LLC [32]

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Duration on our storage contracts on average?

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Sunil K. Sibal, Seaport Global Securities LLC - MD & Senior Energy Infrastructure Analyst [33]

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Yes.

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Robert D. Bondurant, Martin Midstream Partners L.P. - Executive VP, CFO, Treasurer & Director of Martin Midstream GP LLC [34]

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Yes, approximately 3 years.

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Operator [35]

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At this time, I'd like to turn the call back over to CFO, Bob Bondurant, for closing remarks. Sir?

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Robert D. Bondurant, Martin Midstream Partners L.P. - Executive VP, CFO, Treasurer & Director of Martin Midstream GP LLC [36]

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Thank you, Latif. Our company has been very resilient over the years, managing through difficult operating environments, and we have a plan to manage through these very unusual circumstances as well. Beginning in 2018, our partnership has taken steps to refocus the company by selling assets in order to eliminate our direct upstream exposure and to also reduce our financial leverage. We believe the strategy to primarily become a refinery services-focused company will serve us well over the long term as refineries typically run at normal utilization no matter the price of crude oil. However, with the recent crude price collapse, there's also been a reduction in third-party refinery utilization due to the economic shutdown from COVID-19. We know this reduced utilization will impact our cash flow to a certain degree in the near term, but nothing like it would have been if we still had direct upstream exposure. We believe this lack of direct upstream exposure and the general stability of our cash flow will benefit us in the long run and also in the near term as we execute our plan of refinancing our notes during the second quarter. Thank you all for your time today.

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Operator [37]

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Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.