Westlake Chemical Partners Q1 2026 Earnings Call - Middle East Conflict Fuels Ethylene Price Surge, Boosting Third-Party Margins
Summary
Westlake Chemical Partners delivered a stable first quarter, posting net income of $14 million and distributable cash flow of $18 million, driven by a higher third-party average sales price that offset slightly lower production volumes. The conflict in the Middle East has disrupted global chemical feedstock supplies, prompting customers to pivot toward North American producers and pushing ethylene prices higher. This geopolitical tension provided a tailwind for the 5% of OpCo’s production sold outside the fixed-margin agreement with its parent company, Westlake Corporation.
Management emphasized the resilience of its business model, highlighted by 47 consecutive quarterly distributions and a trailing 12-month coverage ratio that improved to 1.0x. The partnership maintains a conservative balance sheet with a consolidated leverage ratio of approximately 1.0x and $81 million in cash. While the fixed-margin structure with Westlake provides a predictable floor, the Q1 results demonstrate how external supply shocks can quickly translate into incremental cash flow for unitholders through opportunistic third-party sales.
Key Takeaways
- Westlake Chemical Partners reported Q1 2026 net income of $14 million ($0.40 per unit), a $9 million improvement year-over-year primarily due to higher production and sales volumes following a planned turnaround at Petro 1.
- Consolidated net income, including OpCo earnings, reached $82 million on sales of $306 million, while distributable cash flow (DCF) came in at $18 million ($0.51 per unit), up $13 million from Q1 2025.
- Geopolitical disruptions in the Middle East have tightened global chemical feedstock supplies, driving North American ethylene prices higher and benefiting the 5% of OpCo’s production sold on the open market.
- Management confirmed that third-party ethylene volumes sold in March increased as the company capitalized on elevated pricing, with expectations for further margin expansion in Q2 if prices remain supportive.
- The partnership’s fixed-margin ethylene sales agreement with parent company Westlake Corporation ($0.10 per pound) continues to provide a stable cash flow floor, insulating the MLP from broader market volatility.
- Trailing 12-month distribution coverage ratio improved to 1.0x from 0.8x in the prior quarter, reflecting the normalization of operations after last year’s Petro 1 turnaround.
- Westlake Chemical Partners announced a Q1 2026 distribution of $0.4714 per unit, marking the 47th consecutive quarterly payout since its 2014 IPO without any reductions.
- Distributions have grown 71% since the original minimum quarterly distribution of $0.275 per unit, supported by predictable fee-based cash flows and conservative capital management.
- The balance sheet remains robust with $81 million in cash, $400 million in long-term debt (mostly at the partnership level), and a consolidated leverage ratio of approximately 1.0x.
- Management outlined four growth levers for the future: increasing ownership interest in OpCo, acquiring qualified income streams, pursuing organic expansions, and negotiating a higher fixed margin with Westlake Corporation.
- No planned turnarounds are scheduled for 2026, positioning the partnership for steady operational output and consistent cash generation in the coming quarters.
- A leadership transition is underway, with John Bakst set to join as CFO on June 15, while outgoing CFO Steve Bender will serve as a special advisor to ensure a smooth handover.
Full Transcript
Kelly, Conference Call Operator: Good afternoon. Thank you for standing by. Welcome to the Westlake Chemical Partners first quarter 2026 earnings conference call. During the presentation, all participants will be in listen-only mode. After the speaker’s remarks, you will be invited to participate in a question and answer session. As a reminder, this conference is being recorded today, May 5, 2026. I would now like to turn the call over to today’s host, Jeff Hawley, Westlake Chemical Partners Vice President and Chief Accounting Officer. Sir, you may begin.
Jeff Hawley, Vice President and Chief Accounting Officer, Westlake Chemical Partners: Thank you, Kelly. Good afternoon, everyone, and welcome to the Westlake Chemical Partners first quarter 2026 conference call. I’m joined today by Albert Chao, our Executive Chairman, Jean Mark Gilson, our President and CEO, Steve Bender, our Executive Vice President and Chief Financial Officer, and other members of our management team. During this call, we refer to ourselves as Westlake Partners or the Partnership. References to Westlake refer to our parent company, Westlake Corporation, and references to OpCo refer to Westlake Chemical OpCo LP, a subsidiary of Westlake and the Partnership which owns certain olefins assets. Additionally, when we refer to distributable cash flow, we are referring to Westlake Chemical Partners MLP distributable cash flow. Definitions of these terms are available on the partnership’s website.
Today, management is going to discuss certain topics that will contain forward-looking information that is based on management’s beliefs as well as assumptions made by and information currently available to management. These forward-looking statements suggest predictions or expectations and thus are subject to risks or uncertainties. We encourage you to learn more about the factors that could lead our actual results to differ by reviewing the cautionary statements in our regulatory filings, which are also available on our investor relations website. This morning, Westlake Partners issued a press release with details of our first quarter 2026 financial and operating results. This document is available in the press release section of our webpage at wlkpartners.com. A replay of today’s call will be available beginning 2 hours after the conclusion of this call. The replay can be accessed via the partnership’s website.
Please note that information reported on this call speaks only as of today, May fifth, 2026, and therefore you are advised that time-sensitive information may no longer be accurate as of the time of any replay. I would finally advise you that this conference call is being broadcast live through an internet webcast system that can be accessed on our webpage at wlkpartners.com. Now, I’d like to turn the call over to Jean Mark Gilson. Jean Mark?
Jean Mark Gilson, President and Chief Executive Officer, Westlake Chemical Partners: Thank you, Jeff, and good afternoon, everyone, and thank you for joining us to discuss our first quarter 2026 results. In this morning’s press release, we reported Westlake Partners first quarter 2026 net income of $14 million or $0.40 per unit. Compared to the fourth quarter of 2025, our first quarter sales and earnings benefited from a higher third-party average sales price that was offset by slightly lower production and sales volume. The stability of Westlake Partners business model is consistently demonstrated to our fixed margin ethylene sales agreement, which minimizes market volatility and other production risk. The high degree of stability in cash flow when paired with the predictability of our business has enabled us to deliver the long history of reliable distribution and coverage.
This quarter distribution is the 47th consecutive quarterly distribution since our IPO in July 2014 without any reductions. Before I turn the call over to Steve Bender, I want to provide some thoughts on our CFO transition. As you may have read, on April 20, we announced that on June 15, John Bakst will join Westlake Corporation and Westlake Partners LP as Senior Vice President and Chief Financial Officer. John brings experience from the oil and gas, packaging, and building product industries, as well as investment banking to Westlake, and we look forward to him joining the partnership. On June 15, Steve Bender will transition to the role of special advisor and will continue to report to me as he supports the transition. We anticipate that Steve Bender will participate in the second quarter earnings call in August.
With that, I would like to turn our call over to Steve to provide more detail on the financial and operating results for the quarter. Steve?
Steve Bender, Executive Vice President and Chief Financial Officer, Westlake Chemical Partners: Thank you, Jean Mark, and good afternoon, everyone. In this morning’s press release, we reported Westlake Partners first quarter 2026 net income of $14 million or $0.40 per unit. Consolidated net income, including OpCo’s earnings, was $82 million on consolidated net sales of $306 million. The partnership had distributable cash flow for the quarter of $18 million or $0.51 per unit. First quarter 2026 net income for Westlake Partners of $14 million was $9 million above the first quarter of 2025 partnership net income, due primarily to higher production and sales volumes as a result of last year’s planned turnaround at Petro 1.
Distributable cash flow of $18 million for the first quarter of 2026 increased by $13 million when compared to the first quarter of 2025, due to higher production sales and sales volumes and more maintenance capital expenditures as a result of last year’s Petro 1 planned turnaround. As compared to the fourth quarter of 2025, net income for Westlake Partners in the first quarter of 2026 declined by less than $1 million due to lower production and sales volumes that was mostly offset by higher third-party average sales price. Sequentially, our trailing 12-month coverage ratio improved to 1 time from 0.8 times, reflecting the aging out of the impact of the Petro 1 turnaround that occurred in the first quarter of 2025.
Our operating surplus improved by $1 million as we achieved a coverage ratio above 1 in the first quarter. Turning our attention to the balance sheet and cash flows, at the end of the first quarter, we had consolidated cash in cash investments with Westlake through our investment management agreement totaling $81 million. Long-term debt at the end of the quarter was $400 million, of which $377 million was at the partnership. The remaining $23 million was at OpCo. In the first quarter of 2026, OpCo spent $6 million on capital expenditures. We maintained our strong leverage metrics with a consolidated leverage ratio of approximately 1 times.
On May 4, 2026, we announced a quarterly distribution of $0.4714 per unit with respect to the first quarter of 2026. Since our IPO in 2014, the partnership has made 47 consecutive quarterly distributions to unitholders. We have grown distributions 71% since the partnership’s original minimum quarterly distribution of $0.275 per unit. The partnership’s first quarter distribution will be paid on June 1, 2026 to unitholders of record on May 14, 2026. The partnership’s predictable fee-based cash flow continues to prove beneficial in today’s environment and is differentiated by consistency of our earnings and cash flows.
Looking back, since our IPO in July of 2024, we have maintained a cumulative distribution coverage ratio of approximately 1 times and the partnership stability and cash flows, we were able to sustain our current distribution without the need to access capital markets. For modeling purposes, we have no planned turnarounds in 2026. Now I’d like to turn the call back over to Jean Marc to make some closing comments. Jean Marc?
Jean Mark Gilson, President and Chief Executive Officer, Westlake Chemical Partners: Thank you, M. Steven Bender. We are pleased with the partnership financial and operational performance during the first quarter. Solid operating rates at OpCo’s ethylene facilities during the quarter resulted in a quarterly coverage ratio of 1.0x. Turning to our outlook, the conflict in the Middle East has significantly disrupted the global supply of oil, chemical feedstocks, and polymers. Resulting supply concerns are prompting global chemical customers to source more material from North America in response to the conflict, which is supporting higher demand and prices for North American ethylene. While most of OpCo’s ethylene volume is contracted to Westlake at a fixed margin of $0.10 per pound, margin for the approximately 5% of production that OpCo typically sells to third parties is benefiting from higher selling prices as a result of the factors I just discussed.
Turning to our capital structure, we maintain a strong balance sheet with conservative financial and leverage metrics. As we continue to navigate market conditions, we will evaluate opportunities via our four levers of growth in the future, including increases of our ownership interest of OpCo, acquisitions of other qualified income streams, organic growth opportunities such as expansions of our current ethylene facilities, negotiation of a higher fixed margin in our ethylene sales agreement with Westlake. We remain focused on our ability to continue to provide long-term value and distribution to our unitholders. As always, we will continue to focus on safe operations, along with being good stewards of the environment where we work and live as part of our broader sustainability efforts. Thank you very much for listening to our first quarter earnings call. Now I will turn the call back over to Jeff.
Jeff Hawley, Vice President and Chief Accounting Officer, Westlake Chemical Partners: Thank you, Jean Marc. Before we begin taking questions, I’d like to remind you that a replay of this teleconference will be available 2 hours after the call has ended. We’ll provide instructions to access the replay at the end of the call. Kelly, we will now take questions.
Kelly, Conference Call Operator: Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of James Auchil of Aviation Advisory Service Inc. Your line is now open.
James Auchil, Analyst, Aviation Advisory Service Inc.: Good afternoon, thanks for taking my call. In your prepared remarks, you mentioned that you anticipate, or I don’t know if you anticipate, you’re seeing, I believe increased margins on the 5% of your sales to third parties as a result of the war and thus the increased interest in sourcing your products from a North America-based supplier. Did we really see the impact of that in the first quarter? The war started at the end of February and I’m not remembering exactly when the price of oil started to jump and the shipping was intercepted. Are we gonna see a more significant impact on the second quarter?
Steve Bender, Executive Vice President and Chief Financial Officer, Westlake Chemical Partners: Yes, it’s a very good question. I will say that as a result of the run-up in ethylene pricing, we did take the opportunity in the first quarter, in March, to actually sell more third parties, ethylene volumes than would be normally the case. We typically try to take opportunities to maximize the margin in this business when we see opportunities like this. We did sell more volume in the first quarter than might be typically done as an example, last year’s first quarter. It did improve the margins associated with the business as a result of doing so.
James Auchil, Analyst, Aviation Advisory Service Inc.: Okay.
Steve Bender, Executive Vice President and Chief Financial Officer, Westlake Chemical Partners: As we look into the second quarter, if we see opportunities of this nature and continue to see elevated ethylene, we’ll continue to do so.
James Auchil, Analyst, Aviation Advisory Service Inc.: Okay. I’m looking at the income statement and it says under revenue, the figure for third-party sales is a few million less than the comparable quarter last year. Of course that’s sales, not margin.
Steve Bender, Executive Vice President and Chief Financial Officer, Westlake Chemical Partners: Again, just the impact of only one month of activity. I do expect that if the ethylene remains as elevated as it has been recently, you’ll see more of a positive impact in the second quarter.
James Auchil, Analyst, Aviation Advisory Service Inc.: Excellent. Thank you very much.
Steve Bender, Executive Vice President and Chief Financial Officer, Westlake Chemical Partners: You’re quite welcome.
Kelly, Conference Call Operator: Thank you. I am showing no questions at this time. I will now turn the call back over to Jeff Hawley.
Jeff Hawley, Vice President and Chief Accounting Officer, Westlake Chemical Partners: Thank you, Kelly. Thanks everyone for participating in today’s call. We hope you’ll join us for our next conference call to discuss our second quarter 2026 results.
Kelly, Conference Call Operator: In today’s Westlake Chemical Partners first quarter 2026 earnings conference call. As a reminder, this call will be available for replay beginning 2 hours after the call has ended and may be accessed until 11:59 P.M. Eastern Time on Tuesday, May 19th, 2026. The replay can be accessed via the partnership website. Goodbye.
