Genesis Energy (NYSE:GEL) expects full-year 2026 adjusted EBITDA to land near or possibly below the low end of its original guidance, as lower-than-anticipated offshore pipeline volumes and delays in new Gulf of Mexico wells offset a third quarter without weather-related disruptions.
CEO Grant Sims said third-quarter results nevertheless came in modestly ahead of the company’s internal expectations. Onshore transportation and services exceeded expectations, while marine transportation was generally in line despite an extended vessel dry docking.
Offshore volumes delayed
Sims attributed the third-quarter volume shortfall to unplanned curtailments at legacy connected fields, continuing challenges at two initial Shenandoah wells and a planned Salamanca turnaround that its operator moved from the fourth quarter into the third.
Shenandoah operated at or slightly below its minimum volume commitment during the third quarter, and Sims expects it to remain around that level until two Monument wells begin producing. Genesis expects both wells to come online in the first quarter of 2027, later than previously anticipated.
The two Monument wells are expected to add a combined 20,000 to 25,000 barrels of oil per day in throughput, reaching that level sometime in the first quarter, Sims said. A rig is also expected to return to Shenandoah to drill a fifth producing well, with initial production anticipated at approximately 20,000 barrels per day.
At Salamanca, two wells being drilled are expected to start production early in 2027, bringing total output closer to the facility’s design capacity of 60,000 to 70,000 barrels per day. Genesis had previously anticipated one of those wells would be producing by the end of 2026.
Asked whether the operational issues reflected a broader problem, Sims said the high-pressure, high-temperature Deep Wilcox formation is a new frontier where operators have encountered challenges, primarily around well completion design. He said he did not believe the issues affected the reserves in place.
“It has to do with figuring out how to get them out as efficiently as possible,” Sims said.
Marine rates and onshore activity
Genesis’ marine fleet returned to full capacity in the fourth quarter after an offshore vessel’s dry docking extended longer than expected into the third quarter. Available capacity is essentially fully utilized, Sims said, and negotiated spot rates have strengthened by well over 10% in some cases.
Only about 10% of the inland fleet is contracted beyond Dec. 31, and Sims expects a large portion to be recontracted at higher rates. About half of the offshore fleet is also expected to be repriced into a stronger market.
The American Phoenix is scheduled to come off its long-term contract in the third quarter of 2027. After a planned 45-day dry dock, Sims said the vessel could potentially be repriced at a rate 15% to 20% or more above its current level.
In onshore transportation and services, strong volumes at the Texas City terminal and associated pipelines, as well as at Raceland and in South Louisiana, helped results exceed expectations. Opportunistic marketing activity also continued from the prior quarter, though Sims said Genesis is not budgeting for such opportunities in future periods.
The sulfur services business performed slightly below expectations as operational issues at its largest host refinery reduced the sour gas available for sodium hydrosulfide production. Sims said operating rates have since risen and Genesis is discussing additional host refinery locations with multiple parties.
Balance sheet and distributions
Genesis ended the quarter with no borrowings under its $900 million senior secured credit facility, approximately $41.5 million in unrestricted cash and a bank-calculated leverage ratio of about 5.03 times. It has no debt maturities until 2029.
The company retired roughly 40% of its Series A cumulative preferred securities during the first nine months of 2026, reducing the outstanding face amount from approximately $529 million to $311 million. The remaining securities carry a current cash rate of 11.24%.
Sims said the company plans to pursue further cash savings by reducing debt, potentially refinancing higher-coupon unsecured notes as they become callable at more attractive premiums beginning in the first half of 2027, and redeeming the remaining preferred securities. Its long-term leverage target is around 4 times.
The board declared a quarterly distribution of $0.20 per common unit, unchanged from the prior quarter and approximately 21% higher than a year earlier. Sims said Genesis expects to grow distributions prudently over time while retaining financial flexibility.
About Genesis Energy (NYSE:GEL)
Genesis Energy, L.P. is a Houston-based publicly traded master limited partnership that provides midstream energy infrastructure and related industrial services. The company owns and operates assets used to gather, transport, process and store crude oil and other energy products, primarily in the United States.
Genesis Energy’s offshore pipeline transportation business serves producers in the Gulf of Mexico, moving crude oil and natural gas through an extensive network of pipelines and related infrastructure.
