Genesis Energy will increase its footprint in the deepwater Gulf of Mexico with expansion of an existing pipeline system and construction of a new line, it said in its first-quarter earnings report on Wednesday.
Genesis will spend about $500 million over the next three years expanding the capacity of its CHOPs system, which transports oil from deepwater oilfields to markets on the Texas Gulf Coast, as well as building a new 105-mile pipeline called "SYNC".
The move comes as the company has entered into definitive agreements to transport the crude from two deepwater developments representing a combined production handling capacity of around 160,000 barrels of oil per day, CEO Grant Sims said.
First oil from both deepwater developments is expected in late 2024 or 2025, Sims said.
The company also has entered into an agreement to sell its idled offshore Independence Hub platform for gross proceeds of $40 million, Sims said.
In its first quarter, the company's offshore pipeline transportation segment performed below expectations because of unplanned producer downtime and mechanical operational disruptions that have largely been remedied, Sims said.
Genesis expects its 2022 financial performance to come in toward the high end of its previously announced adjusted EBITDA range of $565 million to $585 million, Sims said.
Demand to move clean refined products from the Gulf Coast to the East Coast has increased because of geopolitical events, which have kept up strong demand for Genesis's larger blue water vessels, the company said.
Utilization of the company's inland marine vessels is nearing 100%, as refinery utilization rates recover.
(Reuters - Reporting by Stephanie Kelly; editing by Jason Neely and Bernadette Baum)
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