Westlake Chemical Partners LP

What they do

Westlake Chemical Partners LP owns a 22.8% limited partner interest in OpCo and controls OpCo through its general partner interest. OpCo operates three ethylene production facilities (Petro 1, Petro 2, and Calvert City Olefins) with a combined capacity of approximately 3.7 billion pounds per year, plus a 200-mile ethylene pipeline. OpCo sells 95% of its planned ethylene production to Westlake under a cost-plus agreement that guarantees a fixed margin of $0.10 per pound. Co-products (propylene, crude butadiene, pyrolysis gasoline, hydrogen) are sold to third parties.

Revenue drivers

• Ethylene Sales Agreement with Westlake — Long-term, fee-based agreement for 95% of planned production; variable pricing based on feedstock and operating costs plus $0.10 fixed margin per pound, less co-product revenue; generates a substantial majority of revenue.
• Co-product sales — Sale of propylene, crude butadiene, pyrolysis gasoline, and hydrogen to third parties on spot or contract basis; reduces effective cost to Westlake and adds incremental revenue.
• Buyer Deficiency Fees — If Westlake purchases less than its annual commitment (95% of budgeted production), OpCo receives a fee covering fixed margin and expenses per pound of volume not taken; provides downside revenue protection.

Recent performance

In Q2 2026, net income attributable to the Partnership was $14.2 million, or $0.40 per unit, slightly below Q2 2025's $14.6 million. Cash flows from operating activities were $129.8 million in Q2 2026, up from $9.1 million in Q2 2025, driven by higher production and sales volume and lower maintenance capital expenditures due to the prior-year Petro 1 turnaround. MLP distributable cash flow was $17.6 million in Q2 2026, up from $15.0 million in Q2 2025, with a trailing twelve-month coverage ratio of 1.04x. For the first half of 2026, net income was $28.4 million, flat compared to the first half of 2025. Revenue for Q2 2026 was $297.1 million, down from $323.0 million in Q4 2025.

Strategy

Management focuses on providing long-term value and distributions to unitholders. They evaluate four growth levers: increasing ownership in OpCo, acquiring other qualified income streams, expanding existing ethylene facilities, and negotiating a higher fixed margin in the Ethylene Sales Agreement. The company also aims to maintain stable cash flows through the fee-based structure and achieve distribution coverage above 1.0x.

Risks

• Dependence on Westlake — Westlake is the primary customer (95% of production) and supplier of feedstocks, so any change in Westlake's operations or contractual commitments directly impacts revenue.
• Feedstock and energy price volatility — Variable pricing passes through actual feedstock and natural gas costs, but fluctuations can affect co-product revenues and overall margins.
• Operational disruptions — Force majeure events at the plants, including turnarounds, can reduce volumes and increase maintenance capital expenditures, impacting cash flows.
• Limited growth opportunities — The sole revenue asset is a 22.8% interest in OpCo; growth depends on Westlake's willingness to sell additional interests or expand facilities, which may not occur.

Outlook

Management expects to provide strong returns and predictable cash flows to unitholders, supported by the ethylene sales agreement with Westlake. They noted higher third-party ethylene prices in Q2 2026 and expect continued stability. The company recently amended its credit facilities to extend maturities to July 2031, indicating a focus on long-term liquidity. No specific guidance was provided beyond continued distribution coverage and potential growth opportunities.