Genesis Energy Swings to Profit as Distribution Coverage Triples
Genesis Energy (GEL) reported net income of $42.9 million in the second quarter, a reversal from a $0.4 million loss a year earlier, as offshore pipeline volumes and a debt paydown lifted coverage to 3.2 times its distribution.
Genesis Energy (GEL) swung to a second-quarter profit of $42.9 million, up from a $0.4 million net loss in the same period last year, extending a run of sequential gains that saw net income climb from $9.2 million in the third quarter of 2024 to $19.9 million in the fourth. The pipeline and marine transportation company also raised its quarterly distribution to $0.20 a unit, an 11% increase from the prior quarter and the latest in a string of increases that began with $0.165 in the third quarter of 2024.
The distribution increases have come alongside expanding coverage rather than in spite of it. The distribution coverage ratio reached 3.2 times in the second quarter, up from 2.77 times at year-end 2024 and 1.76 times in the third quarter, giving Genesis room to keep raising payouts while still generating cash for debt reduction. Cash flow from operations reached $180.7 million, nearly quadruple the $47.0 million generated a year earlier and well above the $110.8 million reported in the fourth quarter.
Revenue rose 41% year over year to $532.0 million from $377.3 million, and operating income more than doubled to $105.4 million from $67.7 million. Part of that gain came from a $95 million sale of non-core offshore natural gas assets completed in early June, which produced a $17.4 million gain that had no counterpart in the prior-year quarter. Adjusted EBITDA rose 40% year over year to $171.5 million, continuing a sequential climb from $132.0 million in the third quarter of 2024 and $157.8 million in the fourth.
The Offshore Pipeline Transportation segment carried the quarter, with margin up 32% year over year to $115.6 million on new production from the Shenandoah and Salamanca floating production units. Offshore crude volumes rose 20% to 773,055 barrels a day, led by growth at CHOPS and Poseidon, though Odyssey volumes slipped to 61,963 barrels a day from 71,309. Onshore Transportation and Services margin jumped 53% to $28.2 million on higher crude pipeline volumes and NaHS pricing. Marine Transportation moved the other way, with margin down 14% to $25.6 million as dry-docking days increased and inland barge day rates softened, reversing the more normalized performance the company had described in the fourth quarter. Offshore barge utilization fell to 92.4% from 97.3% a year earlier as one of the company's two largest offshore barges completed dry-docking in the quarter and the other is scheduled to finish in the third. Total segment margin of $169.5 million was up 24% from a year ago but below the $174.0 million posted in the fourth quarter, a sequential dip the company attributed in part to that barge downtime.
Full-year 2025 adjusted EBITDA guidance is being walked down to the lower end of its previously discussed range, as offshore producer volumes are running below forecast. Maintenance capital spending nearly doubled to $31.4 million from $16.8 million a year earlier.
On the balance sheet, Genesis paid its senior secured credit facility down to zero, compared with $6.4 million outstanding at the end of 2024, and established a new $99.5 million non-recourse accounts receivable securitization facility priced at SOFR plus 1.375%. The securitization and related refinancing moves will save roughly $25 million a year in interest costs. Bank leverage fell to 5.00 times on a trailing-twelve-month basis through June, down from 5.41 times in the third quarter of 2024.
Genesis also repurchased an additional $83 million of its 11.24% Series A preferred securities at 102% of par during the quarter, following $135 million repurchased in the first quarter and $25 million repurchased at par in late 2024, extending a preferred-paydown program that has accelerated with each quarter. The comparisons benefited from the absence of a $423.7 million net loss from discontinued operations tied to the divested Alkali business, which weighed on first-half 2024 results but has now fully dropped out of the year-over-year comparison.