Genesis Energy NYSE: GEL said its second-quarter 2026 performance was broadly in line with internal expectations, with some results slightly ahead, as the company continued to reshape its balance sheet, retire high-cost preferred securities and return its marine fleet to full operating capacity.
Chief Executive Officer Grant Sims said the company’s primary focus during the quarter was “right-sizing, simplifying, and strengthening” its capital structure. Genesis sold certain non-core and underutilized offshore natural gas assets in early June for $95 million. According to Sims, the sale simplified the company’s offshore footprint, eliminated expenses associated with assets that were neither profitable nor core to its strategy, and pre-funded a portion of asset-retirement obligations tied to related retained assets.
Later in June, Genesis closed a $99.5 million non-recourse accounts receivable securitization facility priced at SOFR plus 137.5 basis points. Sims said the facility represented a lower-cost source of liquidity than borrowings under the company’s senior secured credit facility and would not count as funded debt under its bank-calculated leverage ratio.
Preferred Retirements and Distribution Increase
Genesis used proceeds from the asset sale and receivables facility to repurchase about $83 million of its 11.24% Series A preferred securities in a negotiated transaction at 102% of par. The company also purchased 250,000 common units in the open market at a weighted average price of $14.57 per unit.
The remaining proceeds were used to reduce borrowings under Genesis’ $900 million senior secured credit facility to zero at the end of the quarter, with the balance retained as cash in an interest-bearing account, Sims said.
During the first half of 2026, Genesis retired approximately $218 million of its Series A preferred securities, including roughly $135 million during the first quarter and $83 million during the second quarter. The remaining principal amount of the preferred securities was about $311 million at quarter-end, representing a reduction of about 40% from the beginning of the year.
The company also completed refinancing transactions during the first quarter, issuing $750 million of 6.75% senior unsecured notes due 2034 and redeeming higher-cost 7.75% notes due 2028. Sims said the preferred retirements and refinancing actions are expected to reduce the annualized all-in cost of capital supporting its businesses by approximately $25 million.
Looking ahead, Genesis sees potential for an additional $50 million to $60 million in annual cash savings over the next several years through debt reduction, additional preferred retirements and possible refinancings of nearer-term unsecured maturities.
In mid-July, the board increased the quarterly distribution to $0.20 per common unit from $0.18. Sims said the increase was 11% from the prior quarter, 21% from the second quarter of 2025 and 33% from the same period two years earlier. Management said its capital-allocation priorities remain reducing absolute debt, retiring the high-cost preferred securities, and increasing distributions or repurchasing undervalued equity while maintaining financial flexibility.
Offshore Volumes Affected by Field Downtime
Genesis’ Offshore Pipeline Transportation segment performed slightly below management’s expectations during the quarter. Sims said several operators experienced operational challenges and unplanned downtime at key fields connected to Genesis infrastructure, affecting production volumes despite Genesis maintaining more than 99% pipeline-system availability.
He said the effects were tied primarily to changing timing for new wells, as well as well intervention and remediation work. Still, Sims characterized the developments as near-term fluctuations within a long-term deepwater Gulf of America business supported by multi-decade production assets.
Genesis cited BP’s announced expansion at its Atlantis production facility as an example of future activity that could support pipeline volumes without requiring new capital from Genesis. BP and partners Chevron and Woodside plan to add two subsea and water-injection wells at Atlantis, a project expected to add about 10,000 barrels of oil equivalent per day of gross peak annualized average production and increase ultimate recoveries. Production from Atlantis is contractually dedicated to Genesis’ CHOPS pipeline, Sims said.
Management said multiple wells are anticipated to come online over the next several quarters, providing visibility into offshore volumes for the balance of 2026 and beyond.
Marine Capacity Restored, Onshore Segment Benefits From Market Dislocations
The Marine Transportation segment delivered results largely in line with expectations. The second of Genesis’ two largest vessels—and the final vessel included in its 2026 dry-docking program—left the shipyard in the week before the call and returned to service.
Sims said the vessel’s shipyard time would weigh somewhat on third-quarter results, but the return to full capacity should support improving quarterly performance through the remainder of the year and a more normalized operating run rate. He said Genesis was operating at or near 100% of available capacity across vessel classes, supported by Gulf Coast refinery activity, healthy crack spreads and heavy crude movements from Venezuela and Canada.
Genesis’ Onshore Transportation and Services segment posted a solid quarter, supported by steady volumes at its Texas City and Raceland terminals and associated pipeline systems. The company also captured incremental, likely non-recurring margins from market dislocations associated with the conflict in Iran.
During the question-and-answer session, Sims said those opportunities included moving a small amount of oil released from the Strategic Petroleum Reserve and benefiting from pricing differentials between Texas and Louisiana. In some cases, shippers found it advantageous to pay for movements on both the CHOPS and Poseidon systems, he said. Genesis does not expect those conditions to continue into the third quarter and beyond under current circumstances.
The company’s sulfur services business performed in line with expectations, with strong demand from pulp and paper customers and steady operations at its largest host refinery, Sims said.
About Genesis Energy (NYSE:GEL)
Genesis Energy LP NYSE: GEL is a publicly traded master limited partnership headquartered in Houston, Texas, that owns and operates a diversified portfolio of energy infrastructure assets in the United States. The company's primary focus is on the transportation, storage and delivery of refined petroleum products, serving major domestic markets across the Gulf Coast, Atlantic Seaboard and inland waterway systems.
Genesis Energy's operations are organized into several key business segments.
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