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Edited Transcript of TPCG earnings conference call or presentation 15-Aug-19 2:00pm GMT

Q2 2019 TPC Group Inc Earnings Call

HOUSTON Aug 16, 2019 (Thomson StreetEvents) -- Edited Transcript of TPC Group Inc earnings conference call or presentation Thursday, August 15, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Daniel Valenzuela

TPC Group - Director of Financial Planning & Analysis

* Ed Dineen

TPC Group - Chairman & CEO

* Bart de Jong

TPC Group - SVP & CFO

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Conference Call Participants

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* Roger Spitz

Bank of America - Analyst

* Chris Tucallili

Apollo - Analyst

* Jake Kemeny

Prudential Fixed Income - Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, welcome to the TPC Group Second Quarter Earnings conference call. (Operator Instructions). As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Mr. Daniel Valenzuela, Director of Financial Planning and Analysis. Sir, you may begin.

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Daniel Valenzuela, TPC Group - Director of Financial Planning & Analysis [2]

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Thank you, Joelle. And welcome to everyone attending today's conference call for TPC Group second quarter 2019 earnings. Joining me on the call today are Ed Dineen, Chairman and Chief Executive Officer; and Bart de Jong, Senior Vice President and Chief Financial Officer.

While management wouldn't be making any specific references to the materials, we have posted on our Website a slide presentation that includes supplemental financial information about the quarter as well as our quarterly report for the quarter ending June 30, 2019. The slides and our annual report can be accessed through the secure investor portal on our Website at tpcgrp.com.

A replay of this conference call will be available for seven days following this call. As provided on Slide 2 of the presentation, some of our comments on the call today may include forward-looking statements about management's expectations for the future. Although we believe that such statements are based on reasonable assumptions, no assurances can be given that such statements will prove to have been correct and we don't plan to update any forward-looking statements if expectations change.

Please note the information provided on this call speaks only as of today, August 15, 2019, therefore you are advised that time-sensitive information may no longer be accurate in the future.

In addition, some of our comments may reference non-GAAP financial measures. An explanation of these measures and reconciliation to the most comparable GAAP financial measures and other disclosures are contained in this slide presentation on our Website.

As a reminder, the information discussed on this call is intended only for the personal and confidential use of certain persons who have expressly been given access by TPC Group. If you have not expressly been given access by TPC Group or are not an agent acting on behalf of an individual who have expressly been given access by TPC Group, you are hereby notified that you are accessing protected and confidential information of TPC Group. Any review, dissemination, distribution or copying of this information is strictly prohibited.

And now, I would like to turn the call over to Ed.

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Ed Dineen, TPC Group - Chairman & CEO [3]

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Thank you, Dan. Good morning, everyone, and thank you for joining us on the call. Before Bart discusses our financial results for the quarter, I would like to discuss the refinancing that we recently completed.

As you know, we have recently solidified our capital structure by refinancing all of our debt. We issued $930 million of 10.5% senior secured notes that mature in 2024 and we amended, extended and upsized our ABL credit facility to $200 million.

On the senior secured notes, we received $1.75 billion in orders from 62 accounts, 14 of which were in excess of $50 million. Of the top 10 investors in our prior notes, 70% participated, along with many new investors. So, we thank all of you for your support and welcome, all, new and returning investors to our first quarterly earnings call after the refinancing.

With the net proceeds from the new notes we redeemed the previous notes, which were set to mature in December of 2020, repaid and terminated the Riverstone term loan and paid down our ABL credit facility. We believe we are now on solid ground to move forward and continue to deliver on our long-range plan.

I'll now turn the call over to Bart who will update you on our second quarter financial results. After which, I will come back to review our second quarter and first half of 2019 financial and operating performances. I will then provide updates on the major accomplishments achieved so far this year, the current business conditions and our outlook for the third quarter and the full year.

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Bart de Jong, TPC Group - SVP & CFO [4]

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Thank you, Ed, and good morning, everyone. First of all, I, too, want to express my appreciation for your support in the successful refinancing of our debt and welcome all new and returning investors.

As always, I'll provide you with the summary of our operating second results for the quarter followed by some comments on our consolidated results and cash flow. I will then touch on our financial position as of the end of the quarter.

Overall, second quarter sales volume was GBP975 million, which was up 80% year-over-year. Sales volume for the C4 processing segment was up 39%, which reflected substantial increases for all products in the segment.

While the second quarter of 2019 was very strong, when compared to the second quarter of 2018, you need to remember that last year, our C4 processing production and sales volumes were negatively impacted by operational issues at our Houston plant and an extended outage by the primary steam supplier at our Port Neches plant.

Sales volume for the performance product segment was down 8%, driven lower dehydro and PIB volumes. Although dehydro ran well during the second quarter of 2019 with on-screen time of 95%, it is important to remember that the catalyst was more than a full year into its life. And while the catalyst has performed at or above our expectations, we have seen some decline in daily production rates. The lower PIB volumes reflect the delay in the implementation of the GF-6 standard until 2020 and the global slowdown in new car sales.

Total revenue for the second quarter of 2019 was $407 million, which was down 5% compared to $429 million for the second quarter of 2018. The decrease reflected the impact of a substantially lower overall average unit selling price partially offset by the increase in sales volume that I just discussed.

The average selling price for the C4 processing segment was down 24% driven by a 29% decline in the average benchmark price for butadiene and an 8% decrease in the average price of unleaded regular gasoline.

The average selling price for the performance product segment was down 14%, primarily due to the -- to decreases of 38% and 16% in the average prices of butane and MTBE, respectively. Second quarter gross profit was $121 million, which is up $14 million from $107 million in the prior year quarter.

C4 processing gross profit was $68 million compared to $52 million in 2018. The increase was driven by significantly stronger demand and margins on raffinates sold to our sold to our refinery customers for alkalization as well as higher butadiene sales volume, partially offset by a negative $7 million year-over-year impact from the month-to-month of butadiene price changes.

Gross profit for the performance product segment was $53 million compared to $65 million for the prior year quarter. The decrease was primarily driven by the lower dehydro production and sales volume previously discussed.

PIB gross profit was essentially flat for the second quarter of 2018 despite the lower volume mentioned earlier as unit margins improved due to the impact of the 38% reduction in butane prices and our industrial PIB segment.

Turning to our consolidated results for the second -- for the second quarter of 2019, we reported net income of $16 million based on pre-tax income of $22 million, compared to a net loss of $2 million based on pre-tax loss of $3 million for the second quarter of 2018.

The $25 million improvement in pre-tax earnings reflected a $14 million increase in gross profit discussed earlier and lower depreciation and amortization expenses, partially offset by higher repair and maintenance and general and administrative expenses.

Turning to the balance sheet, at June 30, the Company had total long-term debt outstanding of $899 million and cash of $0.5 million. The total debt outstanding at June 30 included $47 million on a revolving credit facility and $50 million on our term loan.

Net cash flow for the quarter was negative $4 million as cash generated from operating activities of $50 million, which included a use of working capital of $22 million. It was more than offset by capital expenditures of $12 million and net repayments on our revolving credit facility.

The primary components of the use in working capital were an increase in trade receivables of $10 million, which reflected higher revenue in June versus March and a reduction in current liability, which was driven by the semi-annual interest payments on our 8.75% high-yield notes in the second quarter of 2018.

From a liquidity perspective, at the end of the second quarter, besides $0.5 million in cash, we had an additional $80 million available on the revolver and $25 million available on the Riverstone term loan.

I will now turn the call back over to Ed.

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Ed Dineen, TPC Group - Chairman & CEO [5]

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Thank you, Bart. As I indicated on the last call, we expected a strong second quarter, for which we provided you an adjusted EBITDA range of $50 million to $60 million. Our reported adjusted EBITDA was $63.8 million, which is considerably higher than the upper end of that range.

In fact, our second quarter adjusted EBITDA exceeded our 2019 operating plan and was the second best quarter on record, second only to the $64.5 million in third quarter of 2018. The primary driver of the better-than-expected results for the quarter was much stronger raffinate sales volume due to very strong demand from our refinery customers, which I will come back to you later.

In addition to the higher sales volume, our raffinate margins were better than expected due to the increased alkylation value of our butylenes, partially as a result of the substantial decline in the price of butane over the course of the second quarter.

Our free cash flow for the second quarter was positive $3 million, which included our semi-annual interest payment on the prior notes of $35 million. Our liquidity at June 30 was $106 million. As I have said in the past, we believe $100 million liquidity provides us with ample cushion to maneuver through future market volatility and unexpected operational [up steps].

Our adjusted EBITDA through the first half of the year stands at $104.3 million, which is a little above our operating plan. Our adjusted EBITDA for the last 12 months is $210 million. I think it's important to note that the strong financial results for the first half of 2019 were accomplished in the face of significant commodity headwinds, which clearly had negative earnings impacts on many of the other key players in petrochemicals.

Also, our first half did not include any of the new ethylene cracker crude C4 supply that we had originally planned for due to continued delays in these new 2019 cracker products. The better-than-planned results achieved in spite of these headwinds exemplifies the reduced margin volatility in our business as a result of our restructured C4 processing business model as well as our ability to react quickly and effectively to a changing business environment.

As one example, we were able to cover our increased butadiene sales commitments for 2019 through the timely procurement of incremental contract and spot crude C4 volume. In addition, we secured a number of opportunistic value-creating [fuel] deals.

It's also significant to note that during the second quarter, our operating facilities continued the solid performance we have seen over the past several months, which demonstrates a clear return on the investments we have made in our infrastructure and operational reliability over the past three years. As a result of our strong performance over the past several quarters, we have received credit rating upgrades by both Moody's and S&P.

I would like now to turn to some of our more noteworthy accomplishments thus far in 2019, which are further steppingstones to the significant earnings growth reflected in our long-range plan.

During the second quarter, we completed a major turnaround of our Houston furfural unit, which included correction of corrosion under insulation on a number of the towers in the unit.

We will continue to operate the furfural unit in butane extraction service over the near term. But this unit will be switched to butadiene extraction service starting in 2022 to provide additional crude C4 processing capacity needed to handle the increased crude C4 supply on the next wave ethylene crackers expected to come online starting in 2022.

Completion of the furfural turnaround in the second quarter and the major turnaround of one of our two Port Neches butadiene extraction units in the first quarter is significant because we now have completed major turnarounds of all four of our extraction units within the past 24 months, which positioned thus well for forward-going, reliable and consistent crude C4 processing operations.

Through our new partnership with Nalco, we are fully implemented and improved C4 processing chemistry program and have been very pleased with the results. Fouling and polymer formation, which is a common industry problem, has been an obstacle to reliable and consistent operations for the industry. And we believe the changes we have implemented will substantially reduce this problem in the future.

We have completed a number of key pipeline inspections and repairs, which is another key element of our overall reliability improvement program. Since our last call, we have executed agreements for a new raffinate offtake butane processing deal to start in early 2020 and a new third-party crude C4 terminaling deal to take effect at the end of 2021.

The raffinate offtake butane deal is a key element of our long-range plan and that it will significantly mitigate the risks around raffinate offtake and inventory as the volume of crude C4 processing increases. And it will allow us to convert the furfural unit from butane extraction to butadiene extraction service since butane extraction will be performed by the other party to this arrangement. Further, this redirection of our raffinate creates a market need with certain refining customers that we may fulfill with direct sales of the dehydro isobutylene potentially above our MTBE alternative value. In fact, in Q2, we have been able to do just that and provide incremental profits.

The new crude C4 terminaling deal will reduce our costs and will allow for higher throughput volumes and more flexibility in effectively managing the increase in the volume of crude C4 we will be handling.

During the second quarter, we continue to make progress on our 2019-2020 contract renewal process and we successfully completed our first five-year renewal. We also continue to make good progress with our negotiations for crude C4 supply from the 2022-2024 wave of new crackers.

I'll now turn to current business conditions and what we expect for the third quarter and full year. Our production facilities continue to operate at the reliable and efficient levels that we have seen over the past several quarters, and we expect that to continue.

We anticipate that the tight focus on cost control that kept our fixed operating costs in line with our plan over the first half of the year will continue, and we expect our full-year operating fixed and variable costs to be below our operating plan.

The dehydro unit operated at 96% on-screen time over the first half of 2019, and we believe this unit will continue to perform well until its next scheduled turnaround in Q1 of 2020. The dehydro unit contributed $30 million of EBITDA in the first half of the year and we expect the full-year contribution to be $70 million to $75 million.

We finally started to see some crude C4 volume in July from one of the four new crackers slated to come on in 2019 and are currently expecting to see volume from two others at some point during the third quarter.

We don't expect volume from the fourth until early 2020. We are already working on a contingency plan to make sure we will be able to over any gap in our operating plan from these delays the same way we did during Q1 and Q2.

Regarding butadiene, the slowdown in new car sales and global trade issues have hampered demand. This, combined with new capacities in 2019 has put pressure on the price of butadiene.

After several months during which the contract price remained in the $0.49 to $.05 a pound range, we saw declines, $0.46 a pound in June, $0.43 a pound in July and $0.40 a pound in August.

We believe these prices are now near the bottom based on current feedstock pricing. The U.S. and Europe are in parity, and the Asia is in the $0.50 a pound range.

At current U.S. prices, we actually have an incentive to convert some butadiene to raffinate in our [hydro three] unit, which we are doing this month. We expect B-1 demands will remain strong for the rest of the year in light of the new polyethylene units and delay in new B-1 capacity.

As I mentioned earlier, raffinate demand for alkylation was very strong during the second quarter and our refinery customers have indicated that trend will likely continue for the remainder of the year.

As I told you on the last call, we have deferred a planned major turnaround of our use in raffinate [train] from the fourth quarter of 2019 to the fourth quarter of 2020 based on an assessment of the operating condition of this asset.

This should provide some modest degree of upside to our operating plan since it will result in more B-1 and MTBE production than originally planned. We anticipate that methanol pricing will be down over the rest of the year compared to the first half and that butane will take its normal seasonal upward trend over the remainder of the year but still remain favorably priced versus our operating plan. We expect raffinate and MTBE margins to moderate in the second half but should be better than recent years.

Demand for PIB has been softer than expected this year due to the global slowdown in new car sales and the delay in the implementation of the new GF-6 formulation standard per lube additives until May of 2020.

However, we are starting to see some signs of improvement in the additive sector as it appears that the industry may be beginning to build inventory in the system as it moves to the new standard.

With all that in mind, we are projecting third quarter adjusted EBITDA to be in the range of $55 million to $65 million, and we project that we will achieve our operating plan with adjusted EBITDA in the range of $200 million to $220 million.

Our projected capital spending for 2019 is up slightly from the $55 million to $60 million range I provided on the last few calls as we will be committing a few million dollars more to accelerate needed reliability and infrastructure project.

We are still projecting 2019 turnaround spend to be roughly $22 million with the largest components being the two turnarounds I previously mentioned and some pre-spend on the dehydro turnaround scheduled for Q1 of 2020. The spending is lower than our original plan due to the deferral of the raffinate turnaround previously mentioned.

We anticipate 2019 free cash flow to be in the range of $55 million to $65 billion with no usage of the ABL over the remainder of the year, and to have cash of $75 million to $85 million at the end of the year.

We also expect our liquidity to increase to above $150 million at the end of the third quarter and to above $175 million at the end of the year. Our first interest payment on the new notes is due on February 1, 2020 and with some other large cash requirements in the first quarter of 2020, including property taxes and the scheduled turnaround of the dehydro unit. Our projected cash balance at the end of the first quarter of 2020 is expected to be $5 million to $15 million and our liquidity to still be comfortably above $100 million. We will now take your questions.

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Questions and Answers

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Operator [1]

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Thank you. (Operator Instructions). Our first question comes from Roger Spitz of Bank of America. Your line is now open.

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Roger Spitz, Bank of America - Analyst [2]

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Hi. Thank you and good morning. I just want to make sure I heard a couple of numbers. Dehydro Q2 EBITDA was $17 million based on your comment that the first half was $30 million and that the full year for dehydro was $70 million to $75 million. Did I hear those correctly?

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Bart de Jong, TPC Group - SVP & CFO [3]

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Yes, you heard that correctly, $17 million was the second quarter.

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Roger Spitz, Bank of America - Analyst [4]

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Perfect. And for Q2 EBITDA of the C4 processing, how much of the EBITDA uplift was driven by the raffinate supply and spread expenses? It sounds like most of it or perhaps even more than the EBITDA uplift from Q1. I'm just trying to get a sense of what that was -- how much that added?

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Roger Spitz, Bank of America - Analyst [5]

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That clearly was a significant benefit both volumetrically and margin-wise in the C4 processing segment driven by raffinate. The other thing that really helped us in the second quarter or helped margins in the second quarter was the very low butane price that actually compensated for all of the decline in BD prices and essentially kept our margin share at or above the levels that we have seen earlier in the year. So, it was really two components.

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Ed Dineen, TPC Group - Chairman & CEO [6]

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We can get back on a specific number, but we've been doing a lot of things in the raffinate area. We've moved quite a bit of isobutylene into raffinate at upgraded values. We expect to do more of that in the second half.

We purchased butenes from the outside and upgraded those, and we're actually making incremental money converting some BD to raffinate as well, which has the added benefit of tightening up the BD markets. So, we expect that to continue to the rest of the year and probably into next year given the forces that are driving that.

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Operator [7]

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Thank you. (Operator Instructions). And our next question come will be from Roger Spitz of Bank of America. Your line is now open.

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Roger Spitz, Bank of America - Analyst [8]

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Thank you very much. I just -- I just want to make sure I heard some of these -- some of the numbers. So, the 2019 EBITDA, you've tightened the range to [200 to 220]. Is that -- is that correct?

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Ed Dineen, TPC Group - Chairman & CEO [9]

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Yes, 200 to 220, I would say -- tell you were' trending towards the upper end of that range at this point, but yes, 200 to 220.

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Roger Spitz, Bank of America - Analyst [10]

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Great. And the CapEx is up from $55 million to $60 million, but you didn't provide a particular number other than saying just a few million above that. Is that right?

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Ed Dineen, TPC Group - Chairman & CEO [11]

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Yes, it's going to be $3 million, it may not all be spent this year but there were some additional mechanical integrity codings programs that we wanted to get ahead of. So, we decided with the refinancing behind those and the cash that we're generating that it made sense to bring a little bit of that forward.

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Bart de Jong, TPC Group - SVP & CFO [12]

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I would say we will probably end up slightly above $60 million for the year.

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Roger Spitz, Bank of America - Analyst [13]

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Above $60 million, sorry, above $60 million. And the TAR of cost of $22 million for 2019 though, I think you gave -- is that in addition to the slightly above $60 million, is that right?

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Bart de Jong, TPC Group - SVP & CFO [14]

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Yes, that is correct, yes.

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Roger Spitz, Bank of America - Analyst [15]

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And I think I heard you say 2019 free cash flow was $55 million to $65 million, is that -- did I hear that correctly?

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Ed Dineen, TPC Group - Chairman & CEO [16]

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That is our projection at this point, yes.

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Roger Spitz, Bank of America - Analyst [17]

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Okay, got it. Because I thought last quarter you gave -- maybe I heard differently but $15 million to $40 million on your Q1 call, is that? And so, that's the --

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Ed Dineen, TPC Group - Chairman & CEO [18]

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Yes. With the refinancing and the first interest payment as of February of next year, we've updated that to the $55 million, $60 million.

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Bart de Jong, TPC Group - SVP & CFO [19]

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Or basically, because of the timing of the refi, we are not going to actually have this significant interest cash payment that we would normally pay in December. It's now according to --

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Roger Spitz, Bank of America - Analyst [20]

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Okay, got it.

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Bart de Jong, TPC Group - SVP & CFO [21]

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-- February, so that obviously helps cash flow. But we're -- but [they're overall drivers] obviously, the improved earnings will -- has also driven up the numbers.

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Ed Dineen, TPC Group - Chairman & CEO [22]

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And we're expecting to be positive cash flow next year as well.

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Roger Spitz, Bank of America - Analyst [23]

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Got it. And did you -- did you give a -- for 2020, do you have a CapEx number and a TAR number -- turnaround number for 2020?

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Ed Dineen, TPC Group - Chairman & CEO [24]

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No, we're still working that. We're in the middle of our annual plan, long-range plan process. We're debating the timing of certain turnarounds. For sure, the dehydro turnaround is going to be in Q1 of next year.

The raffinate turnaround that we deferred, we're still looking at the timing of that. So, we haven't finalized that number. We've just received the preliminary capital numbers and we're working on ways through those. They may be up somewhat from thus year, but I don't think anything substantial. And we're working the EBITDAs for next year but we expect it's going to come in north of [$250 million].

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Bart de Jong, TPC Group - SVP & CFO [25]

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And just, Roger, on the turnarounds, obviously, because of the fact that we have a Q1 2020 dehydro turnaround, which is a fairly expensive and major undertaking, we expect the numbers to be quite a bit higher than they were in 2019 for the turnaround.

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Roger Spitz, Bank of America - Analyst [26]

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Okay. The 2020 turnaround is quite a bit higher than the $22 million of '19.

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Bart de Jong, TPC Group - SVP & CFO [27]

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Correct.

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Roger Spitz, Bank of America - Analyst [28]

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Ed, what was the -- you said north of $250 million just a minute ago, I didn't catch what that was for.

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Ed Dineen, TPC Group - Chairman & CEO [29]

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Next year would be -- the EBITDA will be $250 million or higher, somewhere in that ballpark.

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Roger Spitz, Bank of America - Analyst [30]

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Okay, okay, okay, okay, got it.

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Ed Dineen, TPC Group - Chairman & CEO [31]

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We're still working that. So, like on the next call, I'll give you a more definitive range on that.

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Operator [32]

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Thank you. (Operator Instructions). And our next question comes from [Chris Tucallili] with Apollo. Your line is now open.

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Chris Tucallili, Apollo - Analyst [33]

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Hi, thank you for taking the time. Just a quick question on the butadiene prices. What are you -- what are you seeing in August that's making you believe that prices here are kind of bottoming out? I just want to get some more -- some more color on that front please.

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Ed Dineen, TPC Group - Chairman & CEO [34]

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Yes. I think we're looking at a few things, first to -- I think the outage that Exxon had, you probably all saw the fire that they had in one of their crackers. That is tightening up the BD market in the short term.

Asia prices have been hanging in, if not, moving slightly higher. And when we look at where naphtha is positioned to butadiene, we're looking at maybe a rollover of prices as we look towards September. So, we do think things have sort of flattened out. And they may go down slightly over the rest of the year, but we're expecting more than a couple of cents if they do go down.

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Chris Tucallili, Apollo - Analyst [35]

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Got it, okay. And then do you have -- do you have like what the EBITDA change would be for like a $0.02 change or $0.01 change in butadiene?

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Ed Dineen, TPC Group - Chairman & CEO [36]

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Well, that kind of decline has baked into our forecast of $200 million to $220 million. It's not -- that type of move given that we only had roughly 10% of the margin shares, it's not a huge impact on us.

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Chris Tucallili, Apollo - Analyst [37]

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Okay. And then for the -- for the $250 million in 2020, are you assuming a pricing rebound or are you assuming prices stay flat?

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Ed Dineen, TPC Group - Chairman & CEO [38]

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We're still working that. I think we'd see some -- at this point, maybe a modest improvement, but nothing back to the mid-60s or so where we were. But as I said, that's still work in progress. We'll be able to give you more detail and specifics on the next call.

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Chris Tucallili, Apollo - Analyst [39]

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Okay.

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Bart de Jong, TPC Group - SVP & CFO [40]

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Most of -- most of it -- most of that improvement is driven by volumes, mostly additional crude C4 volumes.

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Ed Dineen, TPC Group - Chairman & CEO [41]

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Yes. We'll have -- we're expecting full run rate on the four new crackers will be -- will be there in January and that certainly will move our volumes up.

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Chris Tucallili, Apollo - Analyst [42]

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Okay. And then I guess my next question would be for total CapEx plus the turnaround cost in 2020, it is still fair to assume around $85 million and $90 million for all-in cash cost?

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Ed Dineen, TPC Group - Chairman & CEO [43]

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I think it will be somewhat higher than that because we have the dehydro turnaround. We said on average I think during the road show, on average, it's $85 million, but that could be somewhere between $75 million to $100 million depending on timing of dehydro turnarounds, and I guess the raff's turnaround is our next bigger.

So, if they both go forward -- well, dehydro will certainly go forward next year. Raff's may get pushed into 2021, but if it stays in 2020 then it certainly would be more towards the $95 million to $100 million range.

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Operator [44]

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Thank you. And our next question comes from Jake Kemeny with Prudential. Your line is now open.

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Jake Kemeny, Prudential Fixed Income - Analyst [45]

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Hey, guys. The turnaround in the first quarter for dehydro in the 1Q '18 I believe, the turn cash impact that you've shown in the cash flow statement was like $22 million. So, was your previous comment that the 1Q '20 turn will be greater than the $22 million from 1Q '18?

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Bart de Jong, TPC Group - SVP & CFO [46]

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No. I think -- I think you're probably confusing some numbers. We spent $22 million give or take or expecting to spend $22 million in 2019 on turnarounds, that includes the two large BD unit turnarounds as we've executed in 2019.

The 2018, dehydro turnaround was quite a bit more expensive. Roughly $60 million was spent in 2018 on that turnaround, $30 million of which was capital because of the substantial upgrades to existing assets, and $30 million was "maintenance" portion of that turnaround. The 2020 turnaround is not going to be anywhere close to those types of numbers. Remember, we get a complete revamp of the unit in 2018.

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Jake Kemeny, Prudential Fixed Income - Analyst [47]

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Yes, okay, that's what I thought. I just wanted to make sure I heard you correctly. So, thanks for clarifying that.

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Ed Dineen, TPC Group - Chairman & CEO [48]

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You're welcome.

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Jake Kemeny, Prudential Fixed Income - Analyst [49]

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And then the EBITDA guidance for 2020 directionally is great. I guess that for 2019, the midpoint of the range is still $210 million. You're kind of giving a soft guidance something greater than $250 million next year. So, that would be up I guess $40 million or so.

I guess in the past, the 2020 EBITDA was kind of ballpark at being like $50 million higher than 2019, and I don't mean to split hairs, but it sounds like the growth expectation is maybe like a little bit hampered, and I'm just wondering if that's the case and if that's because just the Q4 surprise is not coming on as fast as you thought because this other guy hasn't started production yet.

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Ed Dineen, TPC Group - Chairman & CEO [50]

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Yes. Well, in fact, we're still working. It is -- it may wound up to be $50 million higher. But what we're seeing relative to what we had in the past, the three primary drivers of upward EBITDA are the higher volumes -- or the new volumes from the four crackers. Those are still there. The PIB volume increase, we're expecting with the GF-6 implementation and then restructuring of some of our earlier new model contract. Those are all constant.

The biggest change has been commodities. So, when we put together our long range plan for the prior year, we had a higher commodity profile as did [IHS] and we're now putting our plan together on the basis of a lower commodity profile, which may bring some of that earnings increase down somewhat. But as I said, it's still a work in progress and we will have a more definitive range for you on the next call.

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Operator [51]

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Thank you. (Operator Instructions). Our next question comes from Chris Tucallili with Apollo. Your line is now open.

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Chris Tucallili, Apollo - Analyst [52]

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Hi. Thank you for -- thank you for taking the follow-up. So, I'm just looking at the road show presentation and you, guys, have that chart for your C4 processing contracts where it showed [T4] margin on dollars per -- dollars per tons basis. So, I think -- I think we're at -- I think the floor is at $220 million and it looks like you, guys are tracking kind of around like the $270 million, $280 million, but where do you think that you, guys, are today given the new commodity environment?

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Bart de Jong, TPC Group - SVP & CFO [53]

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Well, as I pointed out earlier, we have two things that are working in opposite directions affecting our margin share. So, on the one hand, we have a decline in BD price, which is a negative for margin share. At the same time, we have a very, very large decline in butane price, which as you remember, is used as a proxy for the [co-frac] value.

So, as these things move at opposite directions, we actually have seen our margin share be fairly constant over the last couple of months and expect it to be in that same general range in Q3.

Now, if butane starts to recover more seasonally towards the backend of the year, which is what would normally happen as butane can be blended into gasoline and BD prices were to remain in the same ZIP code as they are today, we would expect that margin share to slightly decline towards the backend of the year.

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Chris Tucallili, Apollo - Analyst [54]

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Got it. So, if that's an area where to occur, do you think the fall maybe a little like $250 million or --

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Bart de Jong, TPC Group - SVP & CFO [55]

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Yes, maybe. I mean it's not huge. We certainly don't expect butane to be very strong, but we should expect the more seasonal increase in butane prices towards the backend of the year. So, I think that's probably a fair number to use.

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Operator [56]

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Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Ed Dineen for closing remarks.

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Ed Dineen, TPC Group - Chairman & CEO [57]

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Well, once again, I just like to reiterate our thanks for your support on the refinancing. Our plan I think continues to be very consistent. We're expecting value creation to grow into 2020 and 2021, and as we complete our plan for this year, we look forward to sharing that with you on the next call. Thanks again.

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Operator [58]

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Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone, have a wonderful day.