Published: 2022-05-04 00:00:00 ET

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Organization

We are a growth-oriented master limited partnership founded in Delaware in 1996 and focused on the midstream segment of the crude oil and natural gas industry as well as the production of natural soda ash. Our operations are primarily located in the Gulf Coast region of the United States, Wyoming and in the Gulf of Mexico. We provide an integrated suite of services to refiners, crude oil and natural gas producers and industrial and commercial enterprises and have a diverse portfolio of assets, including pipelines, offshore hub and junction platforms, our trona and trona-based exploring, mining, processing, producing, marketing and selling business based in Wyoming (our “Alkali Business”), refinery-related plants, storage tanks and terminals, railcars, rail unloading facilities, barges and other vessels and trucks. We are owned 100% by our limited partners. Genesis Energy, LLC, our general partner, is a wholly-owned subsidiary. Our general partner has sole responsibility for conducting our business and managing our operations. We conduct our operations and own our operating assets through our subsidiaries and joint ventures.

We currently manage our businesses through the following four divisions that constitute our reportable segments:

•Offshore pipeline transportation, which includes processing of crude oil and natural gas in the Gulf of Mexico;

•Sodium minerals and sulfur services involving trona and trona-based exploring, mining, processing, marketing and selling activities, as well as soda ash production and processing of high sulfur (or “sour”) gas streams for refineries to remove the sulfur and selling the related by-product, sodium hydrosulfide (or “NaHS,” commonly pronounced “nash”);

•Onshore facilities and transportation, which include terminaling, blending, storing, marketing and transporting crude oil and petroleum products; and

•Marine transportation to provide waterborne transportation of petroleum products and crude oil throughout North America

Basis of Presentation and Consolidation

The accompanying Unaudited Condensed Consolidated Financial Statements include Genesis Energy, L.P. and its subsidiaries, including our general partner, Genesis Energy, LLC.

Our results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the fiscal year. The Unaudited Condensed Consolidated Financial Statements included herein have been prepared by us without audit pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they reflect all adjustments (which consist solely of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the financial results for interim periods. Certain information and notes normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures are adequate to make the information presented not misleading when read in conjunction with the information contained in the periodic reports we file with the SEC pursuant to the Securities Exchange Act of 1934, including the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021 (our “Annual Report”).

Except per unit amounts, or as noted within the context of each footnote disclosure, the dollar amounts presented in the tabular data within these footnote disclosures are stated in thousands of dollars.

Recent and Proposed Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), which provides expedients and exceptions for accounting treatment of contracts which are affected by the anticipated discontinuation of the London InterBank Offered Rate (“LIBOR”) and other rates resulting from rate reform that are entered into on or before December 31, 2022. Contract terms that are modified due to the replacement of a reference rate are not required to be remeasured or reassessed under relevant accounting standards. The discontinuation of LIBOR is expected to occur in 2023. We are evaluating the provisions of ASU 2020-04 and have not yet determined the impact on our Consolidated Financial Statements and disclosures related to our senior secured credit facility due to the uncertain timing of the transition to another interest rate benchmark.

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Revenue from Contracts with Customers

The following tables reflect the disaggregation of our revenues by major category for the three months ended March 31, 2022 and 2021, respectively:

			Three Months Ended March 31, 2022
			Offshore Pipeline Transportation						Sodium Minerals & Sulfur Services						Marine Transportation						Onshore Facilities and Transportation						Consolidated
Fee-based revenues			$	68,068					$	—					$	55,774					$	13,631					$	137,473
Product Sales			—						258,775						—						208,800						467,575
Refinery Services			—						26,899						—						—						26,899
			$	68,068					$	285,674					$	55,774					$	222,431					$	631,947

			Three Months Ended March 31, 2021
			Offshore Pipeline Transportation						Sodium Minerals & Sulfur Services						Marine Transportation						Onshore Facilities and Transportation						Consolidated
Fee-based revenues			$	64,384					$	—					$	40,331					$	24,394					$	129,109
Product Sales			—						204,778						—						164,823						369,601
Refinery Services			—						22,509						—						—						22,509
			$	64,384					$	227,287					$	40,331					$	189,217					$	521,219

The Company recognizes revenue upon the satisfaction of its performance obligations under its contracts. The timing of revenue recognition varies for our different revenue streams. In general, the timing includes recognition of revenue over time as services are being performed as well as recognition of revenue at a point in time for delivery of products.

Contract Assets and Liabilities

The table below depicts our contract asset and liability balances at December 31, 2021 and March 31, 2022:

						Contract Assets												Contract Liabilities
						Current Assets- Other												Accrued Liabilities						Other Long-Term Liabilities
Balance at December 31, 2021						$	13,563											$	2,619					$	19,028
Balance at March 31, 2022						4,687												2,415						18,498

Transaction Price Allocations to Remaining Performance Obligations

We are required to disclose the amount of our transaction prices that are allocated to unsatisfied performance obligations as of March 31, 2022. We are exempt from disclosing performance obligations with a duration of one year or less, revenue recognized related to performance obligations where the consideration corresponds directly with the value provided to customers and contracts with variable consideration that is allocated wholly to an unsatisfied performance obligation or promise to transfer a good or service that is part of a series in accordance with ASC 606.

The majority of our contracts qualify for one of these expedients or exemptions. For the remaining contract types that involve revenue recognition over a long-term period with long-term fixed consideration (adjusted for indexing as required), we determined our allocations of transaction price that relate to unsatisfied performance obligations. For our tiered pricing offshore transportation contracts, we provide firm capacity for both fixed and variable consideration over a long term period. Therefore, we have allocated the remaining contract value to future periods.

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The following chart depicts how we expect to recognize revenues for future periods related to these contracts:

			Offshore Pipeline Transportation									Onshore Facilities and Transportation
Remainder of 2022			$	55,635								$	5,400
2023			65,645									7,200
2024			59,034									1,800
2025			62,699									—
2026			44,691									—
Thereafter			57,612									—
Total			$	345,316								$	14,400

Lessee Arrangements

We lease a variety of transportation equipment (primarily railcars), terminals, land and facilities, and office space and equipment. Lease terms vary and can range from short term (under 12 months) to long term (greater than 12 months). A majority of our leases contain options to extend the life of the lease at our sole discretion. We considered these options when determining the lease terms used to derive our right of use assets and associated lease liabilities. Leases with a term of less than 12 months are not recorded on our Unaudited Condensed Consolidated Balance Sheets and we recognize lease expense for these leases on a straight-line basis over the lease term.

Our “Right of Use Assets, net” balance includes our unamortized initial direct costs associated with certain of our transportation equipment leases. Additionally, it includes our unamortized prepaid rents, our deferred rents, and our previously classified intangible asset associated with a favorable lease. Our lease liability includes our cease-use provision for railcars no longer in use. Our short-term and long-term lease liabilities are recorded within “Accrued liabilities” and “Other long-term liabilities,” respectively, on our Unaudited Condensed Consolidated Balance Sheets.

Lessor Arrangements

We have the following contracts in which we act as a lessor. We also, from time to time, sublease certain of our transportation and facilities equipment to third parties.

Operating Leases

During the three months ended March 31, 2022 and 2021, we acted as a lessor in a revenue contract associated with the M/T American Phoenix, which is included in our marine transportation segment. Our lease revenues for this arrangement (inclusive of fixed and variable consideration) were $4.1 million and $3.4 million for the three months ended March 31, 2022 and 2021, respectively.

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The major components of inventories were as follows:

			March 31, 2022						December 31, 2021
Petroleum products			$	795					$	998
Crude oil			8,962						11,834
Caustic soda			6,654						5,690
NaHS			18,308						17,040
Raw materials - Alkali operations			7,760						7,599
Work-in-process - Alkali operations			10,058						7,496
Finished goods, net - Alkali operations			17,669						13,681
Materials and supplies, net - Alkali operations			13,888						13,620
Total			$	84,094					$	77,958

Inventories are valued at the lower of cost or net realizable value. There was no adjustment to the net realizable value of inventories during the period ended March 31, 2022. As of December 31, 2021, the net realizable value of inventories were below cost by $2.0 million, which triggered a reduction of the value of inventory in our Consolidated Financial Statements by this amount.

Materials and supplies include chemicals, maintenance supplies and spare parts which will be consumed in the mining of trona ore and production of soda ash processes.

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Fixed Assets

Fixed assets consisted of the following:

 

			March 31, 2022						December 31, 2021
Crude oil and natural gas pipelines and related assets			$	2,840,622					$	2,839,443
Alkali facilities, machinery and equipment			675,940						670,880
Onshore facilities, machinery and equipment			269,107						269,245
Transportation equipment			21,056						21,106
Marine vessels			1,018,919						1,018,284
Land, buildings and improvements			228,450						227,540
Office equipment, furniture and fixtures			26,535						23,965
Construction in progress			400,840						350,137
Other			37,586						43,440
Fixed assets, at cost			5,519,055						5,464,040
Less: Accumulated depreciation			(1,607,285)						(1,551,855)
Net fixed assets			$	3,911,770					$	3,912,185

Mineral Leaseholds

Our Mineral Leaseholds, relating to our Alkali Business, consist of the following:

			March 31, 2022						December 31, 2021
Mineral leaseholds			$	566,019					$	566,019
Less: Accumulated depletion			(18,034)						(17,014)
Mineral leaseholds, net of accumulated depletion			$	547,985					$	549,005

Our depreciation and depletion expense for the periods presented was as follows:

									Three Months Ended March 31,
															2022						2021
Depreciation expense															$	65,750					$	62,702
Depletion expense															1,020						912

Asset Retirement Obligations

We record asset retirement obligations (“AROs”) in connection with legal requirements to perform specified retirement activities under contractual arrangements and/or governmental regulations.

The following table presents information regarding our AROs since December 31, 2021:

ARO liability balance, December 31, 2021			$	220,906
Accretion expense			3,447
Settlements			(1,461)
ARO liability balance, March 31, 2022			$	222,892

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At March 31, 2022 and December 31, 2021, $35.3 million and $36.3 million are included as current in “Accrued liabilities” on our Unaudited Condensed Consolidated Balance Sheets, respectively. The remainder of the ARO liability as of March 31, 2022 and December 31, 2021 is included in “Other long-term liabilities” on our Unaudited Condensed Consolidated Balance Sheets.

With respect to our AROs, the following table presents our forecast of accretion expense for the periods indicated:

Remainder of			2022			$	9,486
			2023			$	10,583
			2024			$	9,767
			2025			$	10,469
			2026			$	8,216

Certain of our unconsolidated affiliates have AROs recorded at March 31, 2022 and December 31, 2021 relating to contractual agreements and regulatory requirements. In addition, certain entities that we consolidate have non-controlling interest owners that are responsible for their representative share of future costs of the related ARO liability. These amounts are immaterial to our Unaudited Condensed Consolidated Financial Statements.

We account for our ownership in our joint ventures under the equity method of accounting. The price we pay to acquire an ownership interest in a company may exceed or be less than the underlying book value of the capital accounts we acquire. Such excess cost amounts are included within the carrying values of our equity investees. At March 31, 2022 and December 31, 2021, the unamortized excess cost amounts totaled $316.3 million and $319.9 million, respectively. We amortize the differences in carrying value as change in equity earnings.

The following table presents information included in our Unaudited Condensed Consolidated Financial Statements related to our equity investees:

									Three Months Ended March 31,
															2022						2021
Genesis’ share of operating earnings															$	16,010					$	24,533
Amortization of differences attributable to Genesis’ carrying value of equity investments															(3,566)						(3,873)
Net equity in earnings															$	12,444					$	20,660
Distributions received(1)															$	19,018					$	29,516

(1) Includes distributions attributable to the period and received during or promptly following such period.

The following tables present the unaudited balance sheet and income statement information (on a 100% basis) for Poseidon Oil Pipeline Company, L.L.C. (“Poseidon”) (which we own 64% of and is our most significant equity investment):

			March 31, 2022						December 31, 2021
BALANCE SHEET DATA:
Assets
Current assets			$	15,869					$	17,827
Fixed assets, net			156,464						160,379
Other assets			11,430						6,186
Total assets			$	183,763					$	184,392
Liabilities and equity
Current liabilities			$	7,436					$	7,668
Other liabilities			233,066						231,970
Equity (Deficit)			(56,739)						(55,246)
Total liabilities and equity			$	183,763					$	184,392

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									Three Months Ended March 31,
															2022						2021
STATEMENTS OF OPERATIONS DATA:
Revenues															$	31,189					$	42,413
Operating income															$	21,953					$	32,161
Net income															$	20,907					$	31,145

Poseidon’s Revolving Credit Facility

The following table summarizes the components of our intangible assets at the dates indicated:

 

			March 31, 2022																		December 31, 2021
			Gross Carrying Amount						Accumulated Amortization						Carrying Value						Gross Carrying Amount						Accumulated Amortization						Carrying Value
Marine contract intangibles			$	800					$	616					$	184					$	800					$	607					$	193
Offshore pipeline contract intangibles			158,101						55,474						102,627						158,101						53,394						104,707
Other			40,240						16,268						23,972						37,933						15,770						22,163
Total			$	199,141					$	72,358					$	126,783					$	196,834					$	69,771					$	127,063

Our amortization of intangible assets for the periods presented was as follows:

									Three Months Ended March 31,
															2022						2021
Amortization of intangible assets															$	2,588					$	2,600

We estimate that our amortization expense for the next five years will be as follows:

Remainder of			2022			$	8,988
			2023			$	11,733
			2024			$	11,368
			2025			$	11,143
			2026			$	10,843

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Our obligations under debt arrangements consisted of the following:

			March 31, 2022																		December 31, 2021
			Principal						Unamortized Premium and Debt Issuance Costs						Net Value						Principal						Unamortized Premium and Debt Issuance Costs						Net Value
Senior secured credit facility-Revolving Loan(1)			$	94,800					$	—					$	94,800					$	49,000					$	—					$	49,000
5.625% senior unsecured notes due 2024			341,135						1,892						339,243						341,135						2,106						339,029
6.500% senior unsecured notes due 2025			534,834						4,155						530,679						534,834						4,452						530,382
6.250% senior unsecured notes due 2026			359,799						3,215						356,584						359,799						3,410						356,389
8.000% senior unsecured notes due 2027			1,000,000						6,197						993,803						1,000,000						6,592						993,408
7.750% senior unsecured notes due 2028			720,975						9,281						711,694						720,975						9,678						711,297
Total long-term debt			$	3,051,543					$	24,740					$	3,026,803					$	3,005,743					$	26,238					$	2,979,505

(1)    Unamortized debt issuance costs associated with our Revolving Loan, as defined below (included in “Other Assets, net of amortization” on the Unaudited Condensed Consolidated Balance Sheets), under our senior secured credit facility were $4.2 million and $4.7 million as of March 31, 2022 and December 31, 2021, respectively.

Senior Secured Credit Facility

On April 8, 2021, we entered into the Fifth Amended and Restated Credit Agreement (our “new credit agreement”) to replace our Fourth Amended and Restated Credit Agreement. Our new credit agreement provides for a $950 million senior secured credit facility, comprised of a revolving loan facility with a borrowing capacity of $650 million (the “Revolving Loan”) and a term loan facility of $300 million (the “Term Loan”). The new credit agreement matures on March 15, 2024, subject to extension at our request for one additional year on up to two occasions and subject to certain conditions. We repaid the Term Loan in full on November 17, 2021 with a portion of the proceeds received from our sale of a 36% minority interest in CHOPS (Note 10).

At March 31, 2022, the key terms for rates under our Revolving Loan (which are dependent on our leverage ratio as defined in the new credit agreement) are as follows:

•The interest rate on borrowings may be based on an alternate base rate or a Eurodollar rate, at our option. The alternate base rate is equal to the sum of (a) the greatest of (i) the prime rate in effect on such day, (ii) the federal funds effective rate in effect on such day plus 0.5% and (iii) the LIBOR rate for a one-month maturity on such day plus 1% and (b) the applicable margin. The Eurodollar rate is equal to the sum of (a) the LIBOR rate for the applicable interest period multiplied by the statutory reserve rate and (b) the applicable margin. The applicable margin varies from 2.25% to 3.75% on Eurodollar borrowings and from 1.25% to 2.75% on alternate base rate borrowings, depending on our leverage ratio. Our leverage ratio is recalculated quarterly and in connection with each material acquisition. At March 31, 2022, the applicable margins on our borrowings were 2.25% for alternate base rate borrowings and 3.25% for Eurodollar rate borrowings based on our leverage ratio.

•Letter of credit fee rates range from 2.25% to 3.75% based on our leverage ratio as computed under the credit facility and can fluctuate quarterly. At March 31, 2022, our letter of credit rate was 3.25%.

•We pay a commitment fee on the unused portion of the Revolving Loan. The commitment fee rates on the unused committed amount will range from 0.30% to 0.50% per annum depending on our leverage ratio. At March 31, 2022, our commitment fee rate on the unused committed amount was 0.50%.

•We have the ability to increase the aggregate size of the Revolving Loan by an additional $200 million, subject to lender consent and certain other customary conditions.

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At March 31, 2022, we had $94.8 million outstanding under our Revolving Loan, with $7.1 million of the borrowed amount designated as a loan under the inventory sublimit. Our new credit agreement allows up to $100.0 million of the capacity to be used for letters of credit, of which $1.5 million was outstanding at March 31, 2022. Due to the revolving nature of loans under our Revolving Loan, additional borrowings, periodic repayments and re-borrowings may be made until the maturity date. The total amount available for borrowings under our Revolving Loan at March 31, 2022 was $553.7 million, subject to compliance with covenants. Our new credit agreement does not include a “borrowing base” limitation except with respect to our inventory loans.

Senior Unsecured Note Transactions

On December 17, 2020, we issued $750 million in aggregate principal amount of our 8.00% senior unsecured notes due January 15, 2027 (the “2027 Notes”). Interest payments are due on January 15 and July 15 of each year with the initial interest payment due on July 15, 2021. The issuance generated net proceeds of approximately $737 million, net of issuance costs incurred. We used $316.5 million of the net proceeds to repay the portion of the 6.00% senior unsecured notes due May 15, 2023 (the “2023 Notes”) (including principal, accrued interest and tender premium) that were validly tendered, and the remaining proceeds were used to repay a portion of the borrowings outstanding under our revolving credit facility. On January 19, 2021, we redeemed the remaining principal balance outstanding on our 2023 Notes of $80.9 million in accordance with the terms and conditions of the indenture governing the 2023 Notes. We incurred a total loss of approximately $1.6 million relating to the extinguishment of our remaining 2023 Notes, inclusive of the redemption fee and the write-off of the related unamortized debt issuance costs, which is recorded in “Other expense” in our Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2021.

On April 22, 2021, we completed our offering of an additional $250 million in aggregate principal amount of our 2027 Notes. The notes constitute an additional issuance of our existing 2027 Notes that we issued on December 17, 2020 in an aggregate principal amount of $750 million. The additional $250 million of notes have identical terms as (other than with respect to the issue price) and constitute part of the same series of the 2027 Notes. The $250 million of the 2027 Notes were issued at a premium of 103.75% plus accrued interest from December 17, 2020. We used the net proceeds from the offering for general partnership purposes, including repaying a portion of the revolving borrowings outstanding under our new credit agreement.

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Distributions

We paid or will pay the following cash distributions to our common unitholders in 2021 and 2022:

Distribution For						Date Paid						Per Unit Amount						Total Amount
2021
1st Quarter						May 14, 2021						$	0.15					$	18,387
2nd Quarter						August 13, 2021						$	0.15					$	18,387
3rd Quarter						November 12, 2021						$	0.15					$	18,387
4th Quarter						February 14, 2022						$	0.15					$	18,387
2022
1st Quarter						May 13, 2022			(1)			$	0.15					$	18,387

(1) This distribution was declared on April 6, 2022 and will be paid to unitholders of record as of April 29, 2022.

Class A Convertible Preferred Units

Our Class A Convertible Preferred Units rank senior to all of our currently outstanding classes or series of limited partner interests with respect to distribution and/or liquidation rights. Holders of our Class A Convertible Preferred Units vote on an as-converted basis with holders of our common units and have certain class voting rights, including with respect to any amendment to the partnership agreement that would adversely affect the rights, preferences or privileges, or otherwise modify the terms, of those Class A Convertible Preferred Units.    

Accounting for the Class A Convertible Preferred Units

Our Class A Convertible Preferred Units are considered redeemable securities under GAAP due to the existence of redemption provisions upon a deemed liquidation event that is outside our control. Therefore, we present them as temporary equity in the mezzanine section of the Unaudited Condensed Consolidated Balance Sheets. Because our Class A Convertible Preferred Units are not currently redeemable and we do not have plans or expect any events that constitute a change of control in our partnership agreement, we present our Class A Convertible Preferred Units at their initial carrying amount. However, we would be required to adjust that carrying amount if it becomes probable that we would be required to redeem our Class A Convertible Preferred Units.

Initial and Subsequent Measurement

We initially recognized our Class A Convertible Preferred Units at their issuance date fair value, net of issuance costs. We will not be required to adjust the carrying amount of our Class A Convertible Preferred Units until it becomes probable that they would become redeemable. Once redemption becomes probable, we would adjust the carrying amount of our Class A Convertible Preferred Units to the redemption value over a period of time comprising the date the feature first becomes probable and the date the units can first be redeemed. Our Class A Convertible Preferred Units contain a distribution Rate Reset Election (as defined in Note 15). This Rate Reset Election is bifurcated and accounted for separately as an embedded derivative and recorded at fair value at each reporting period. Refer to Note 15 and Note 16 for additional discussion.

Net Loss Attributable to Genesis Energy, L.P. is reduced by Class A Convertible Preferred Unit distributions that accumulated during the period and was reduced by $18.7 million for the three months ended March 31, 2022 and 2021.

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We paid or will pay the following cash distributions to our Class A Convertible Preferred unitholders in 2021 and 2022:

Distribution For						Date Paid						Per Unit Amount						Total Amount
2021
1st Quarter						May 14, 2021						$	0.7374					$	18,684
2nd Quarter						August 13, 2021						$	0.7374					$	18,684
3rd Quarter						November 12, 2021						$	0.7374					$	18,684
4th Quarter						February 14, 2022						$	0.7374					$	18,684
2022
1st Quarter						May 13, 2022			(1)			$	0.7374					$	18,684

(1) This distribution was declared on April 6, 2022 and will be paid to unitholders of record as of April 29, 2022.

Redeemable Noncontrolling Interests

On September 23, 2019, we, through a subsidiary, Alkali Holdings, entered into an amended and restated Limited Liability Company Agreement of Alkali Holdings (the “LLC Agreement”) and a Securities Purchase Agreement (the “Securities Purchase Agreement”) whereby certain investment fund entities affiliated with Blackstone Alternative Credit Advisors LP, formerly known as “GSO Capital Partners LP” (collectively “BXC”) purchased $55.0 million (or 55,000 Alkali Holdings preferred units) and committed to purchase up to $350.0 million of Alkali Holdings preferred units, the entity that holds our trona and trona-based exploring, mining, processing, producing, marketing and selling business, including its Granger facility near Green River, Wyoming. Alkali Holdings has to date utilized the net proceeds from the preferred units to fund a portion of the anticipated cost of expansion of the Granger facility (the “Granger Optimization Project” or “GOP”).

On April 14, 2020, we entered into an amendment to our agreements with BXC to, among other things, extend the construction timeline of the GOP by one year, which we currently anticipate completing in the second half of 2023. In consideration for the amendment, we issued 1,750 Alkali Holdings preferred units to BXC, which was accounted for as issuance costs. As part of the amendment, the commitment period was increased to four years, and the total commitment of BXC was increased to, subject to compliance with the covenants contained in the agreements with BXC, up to $351.8 million preferred units (or 351,750 preferred units) in Alkali Holdings. As of March 31, 2022, there are 250,114 Alkali Holdings preferred units outstanding.

From time to time after we have drawn at least $251.8 million, we have the option to redeem the outstanding preferred units in whole for cash at a price equal to the initial $1,000 per preferred unit purchase price, plus no less than the greater of a predetermined fixed internal rate of return amount or a multiple of invested capital metric, net of cash distributions paid to date (“Base Preferred Return”). Additionally, if all outstanding preferred units are being redeemed, we have not drawn at least $251.8 million, and BXC is not a “defaulting member” under the LLC Agreement, BXC has the right to a make-whole amount on the number of undrawn preferred units.

Accounting for Redeemable Noncontrolling Interests

Classification

The Alkali Holdings preferred units issued and outstanding are accounted for as a redeemable noncontrolling interest in the mezzanine section on our Unaudited Condensed Consolidated Balance Sheets due to the redemption features for a change of control.

    Initial and Subsequent Measurement

We recorded the Alkali Holdings preferred units at their issuance date fair value, net of issuance costs. The fair value as of March 31, 2022 represents the carrying amount based on the issued and outstanding Alkali Holdings preferred units most probable redemption event on the six and a half year anniversary of the closing, which is the predetermined internal rate of return measure accreted using the effective interest method to the redemption value as of the reporting date. Net Loss Attributable to Genesis Energy, L.P. for the three months ended March 31, 2022 includes $7.8 million of adjustments, of which $6.6 million was allocated to the paid-in-kind (“PIK”) distributions on the outstanding Alkali Holdings preferred units and $1.2 million was attributable to redemption accretion value adjustments. Net Loss Attributable to Genesis Energy, L.P. for the three months ended March 31, 2021 includes $4.8 million of adjustments, of which $4.1 million was allocated to the PIK

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distributions and $0.7 million was attributable to redemption accretion value adjustments. We elected to pay distributions for the period ended March 31, 2022 in-kind to our Alkali Holdings preferred unitholders. The unitholders’ liquidation preference is increased by new issuances and PIK distributions and is reduced by tax distributions paid to the unitholders, which are required to be paid by us to fulfill the income tax liabilities of each holder of Alkali Holdings preferred units.

As of the reporting date, there are no triggering, change of control, early redemption or monetization events that are probable that would require us to revalue the Alkali Holdings preferred units.

If the Alkali Holdings preferred units were redeemed on the reporting date of March 31, 2022, the redemption amount would be equal to $289.8 million, which would be the multiple of invested capital metric applied to the Alkali Holdings preferred units outstanding plus the make-whole amount on the undrawn minimum Alkali Holdings preferred units.

    The following table shows the change in our redeemable noncontrolling interest balance from December 31, 2021 to March 31, 2022:

Balance as of December 31, 2021						$	259,568
Issuance of preferred units, net of issuance costs(1)						3,646
PIK distribution						6,596
Redemption accretion						1,227
Tax distributions(1)						(3,795)
Balance as of March 31, 2022						$	267,242

(1)During the period ended March 31, 2022, we issued 3,720 Alkali Holdings preferred units to BXC to satisfy the Company’s obligation to pay tax distributions.

Noncontrolling Interests

On November 17, 2021, we, through a subsidiary, sold 36% of the membership interests in CHOPS for proceeds of approximately $418 million. We retained 64% of the membership interests in CHOPS and remain the operator of the CHOPS pipeline and associated assets. We also own an 80% membership interest in Independence Hub, LLC. For financial reporting purposes, the assets and liabilities of these entities are consolidated with those of our own, with any third party or affiliate interest in our Unaudited Condensed Consolidated Balance Sheets amounts shown as noncontrolling interests in equity.

Basic net loss per common unit is computed by dividing Net Loss Attributable to Genesis Energy, L.P., after considering income attributable to our Class A preferred unitholders, by the weighted average number of common units outstanding.

The dilutive effect of our Class A Convertible Preferred Units is calculated using the if-converted method. Under the if-converted method, the Class A Convertible Preferred Units are assumed to be converted at the beginning of the period (beginning with their respective issuance date), and the resulting common units are included in the denominator of the diluted net income per common unit calculation for the period being presented. Distributions declared in the period and undeclared distributions that accumulated during the period are added back to the numerator for purposes of the if-converted calculation. For the three months ended March 31, 2022 and 2021, the effect of the assumed conversion of the 25,336,778 Class A Convertible Preferred Units was anti-dilutive and was not included in the computation of diluted earnings per unit.

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The following table reconciles Net loss attributable to Genesis Energy, L.P. and weighted average units used in computing basic and diluted net loss per common unit (in thousands):

									Three Months Ended March 31,
															2022						2021
Net loss attributable to Genesis Energy, L.P.															$	(5,250)					$	(34,224)
Less: Accumulated distributions attributable to Class A Convertible Preferred Units															(18,684)						(18,684)
Net loss attributable to common unitholders															$	(23,934)					$	(52,908)
Weighted average outstanding units															122,579						122,579
Basic and diluted net loss per common unit															$	(0.20)					$	(0.43)

We currently manage our businesses through four divisions that constitute our reportable segments:

•Offshore pipeline transportation – offshore transportation of crude oil and natural gas in the Gulf of Mexico;

•Sodium minerals and sulfur services – trona and trona-based exploring, mining, processing, producing, marketing and selling activities, as well as the processing of high sulfur (or “sour”) gas streams for refineries to remove the sulfur and the selling of the related by-product, NaHS;

•Onshore facilities and transportation – terminalling, blending, storing, marketing and transporting crude oil and petroleum products (primarily fuel oil, asphalt and other heavy refined products); and

•Marine transportation – marine transportation to provide waterborne transportation of petroleum products and crude oil throughout North America.

Substantially all of our revenues are derived from, and substantially all of our assets are located in, the United States.

We define Segment Margin as revenues less product costs, operating expenses (excluding non-cash gains and charges, such as depreciation, depletion, amortization and accretion) and segment general and administrative expenses, net of the effects of our noncontrolling interests, plus our equity in distributable cash generated by our equity investees. In addition, our Segment Margin definition excludes the non-cash effects of our long-term incentive compensation plan and includes the non-income portion of payments received under our previously owned direct financing lease.

Our chief operating decision maker (our Chief Executive Officer) evaluates segment performance based on a variety of measures including Segment Margin, segment volumes, where relevant, and capital investment. 

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Segment information for the periods presented below was as follows:

			Offshore Pipeline Transportation						Sodium Minerals & Sulfur Services						Onshore Facilities & Transportation						Marine Transportation						Total
Three Months Ended March 31, 2022
Segment Margin(1)			$	70,904					$	67,375					$	7,036					$	12,137					$	157,452
Capital expenditures(2)			$	35,441					$	26,326					$	737					$	10,059					$	72,563
Revenues:
External customers			$	68,068					$	288,008					$	220,295					$	55,576					$	631,947
Intersegment(3)			—						(2,334)						2,136						198						—
Total revenues of reportable segments			$	68,068					$	285,674					$	222,431					$	55,774					$	631,947
Three Months Ended March 31, 2021
Segment Margin(1)			$	84,269					$	43,720					$	20,999					$	7,109					$	156,097
Capital expenditures(2)			$	11,528					$	10,038					$	1,099					$	11,714					$	34,379
Revenues:
External customers			$	64,384					$	229,306					$	188,150					$	39,379					$	521,219
Intersegment(3)			—						(2,019)						1,067						952						—
Total revenues of reportable segments			$	64,384					$	227,287					$	189,217					$	40,331					$	521,219

(1)A reconciliation of Net loss attributable to Genesis Energy, L.P. to total Segment Margin for the periods is presented below.

(2)Capital expenditures include maintenance and growth capital expenditures, such as fixed asset additions (including enhancements to existing facilities and construction of growth projects) as well as contributions to equity investees, if any.

(3)Intersegment sales were conducted under terms that we believe were no more or less favorable than then-existing market conditions.

Total assets by reportable segment were as follows:

			March 31, 2022						December 31, 2021
Offshore pipeline transportation			$	2,101,728					$	2,103,140
Sodium minerals and sulfur services			2,149,589						2,132,588
Onshore facilities and transportation			1,014,005						923,064
Marine transportation			698,209						703,030
Other assets			55,668						43,979
Total consolidated assets			$	6,019,199					$	5,905,801

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Reconciliation of Net loss attributable to Genesis Energy, L.P. to total Segment Margin:

									Three Months Ended March 31,
															2022						2021
Net loss attributable to Genesis Energy, L.P.															$	(5,250)					$	(34,224)
Corporate general and administrative expenses															15,721						11,152
Depreciation, depletion, amortization and accretion															72,948						68,997
Interest expense															55,104						57,829
Adjustment to exclude distributable cash generated by equity investees not included in income and include equity in investees net income(1)															6,574						8,856
Other non-cash items(2)															(3,571)						18,444
Distribution from unrestricted subsidiaries not included in income(3)															—						17,500
Loss on extinguishment of debt(4)															—						1,627
Differences in timing of cash receipts for certain contractual arrangements(5)															8,230						299
Change in provision for leased items no longer in use															(431)						604
Redeemable noncontrolling interest redemption value adjustments(6)															7,823						4,791
Income tax expense															304						222
Total Segment Margin															$	157,452					$	156,097

(1)Includes distributions attributable to the quarter and received during or promptly following such quarter.

(2)The three months ended March 31, 2022 includes $6.2 million in unrealized gains from the valuation of our commodity derivative transactions (excluding fair value hedges) and an unrealized loss of $4.3 million from the valuation of the embedded derivative associated with our Class A Convertible Preferred Units. The three months ended March 31, 2021 includes an unrealized loss of $18.4 million from the valuation of the embedded derivative associated with our Class A Convertible Preferred Units. Refer to Note 15 and Note 16 for details.

(3)The three months ended March 31, 2021 include $17.5 million in cash receipts not included in income associated with principal repayments on our previously owned NEJD pipeline. We received the principal payment associated with our previously owned NEJD pipeline in the fourth quarter of 2021. Genesis NEJD Pipeline, LLC is defined as an unrestricted subsidiary under our credit facility.

(4)Refer to Note 9 for details surrounding the extinguishment of our 2023 Notes.

(5)Includes the difference in timing of cash receipts from customers during the period and the revenue we recognize in accordance with GAAP on our related contracts.

(6)Includes PIK distributions attributable to the period and accretion on the redemption feature.

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The transactions with related parties were as follows:

									Three Months Ended March 31,
															2022						2021
Revenues:
Revenues from services and fees to Poseidon(1)															$	3,238					$	3,786
Revenues from product sales to ANSAC															88,182						67,955
Costs and expenses:
Amounts paid to our CEO in connection with the use of his aircraft															$	165					$	165
Charges for services from Poseidon(1)															255						240
Charges for services from ANSAC															845						178

(1)We own a 64% interest in Poseidon.

Our CEO, Mr. Sims, owns an aircraft which is used by us for business purposes in the course of operations. We pay Mr. Sims a fixed monthly fee and reimburse the aircraft management company for costs related to our usage of the aircraft, including fuel and the actual out-of-pocket costs. Based on current market rates for chartering of private aircraft under long-term, priority arrangements with industry recognized chartering companies, we believe that the terms of this arrangement are no worse than what we could have expected to obtain in an arms-length transaction.

Transactions with Unconsolidated Affiliates

Poseidon

We provide management, administrative and pipeline operator services to Poseidon under an Operation and Management Agreement. Currently, that agreement automatically renews annually unless terminated by either party (as defined in the agreement). Our revenues for the three months ended March 31, 2022 and 2021 include $2.4 million and $2.4 million, respectively, of fees we earned through the provision of services under that agreement. At March 31, 2022 and December 31, 2021, Poseidon owed us $1.3 million and $2.4 million, respectively, for services rendered.

ANSAC

We (through a subsidiary of our Alkali Business) are a member of the American Natural Soda Ash Corp. (“ANSAC”), an organization whose purpose is promoting and increasing the use and sale of natural soda ash and other refined or processed sodium products produced in the U.S. and consumed in specified countries outside of the U.S. Members sell products to ANSAC to satisfy ANSAC’s sales commitments to its customers. ANSAC passes its costs through to its members using a pro rata calculation based on sales. Those costs include sales and marketing, employees, office supplies, professional fees, travel, rent and certain other costs. Those transactions do not necessarily represent arm's length transactions and may not represent all costs we would otherwise incur if we operated our Alkali Business on a stand-alone basis. We also benefit from favorable shipping rates for our direct exports when using ANSAC to arrange for ocean transport.

ANSAC is considered a variable interest entity (VIE) because we experience certain risks and rewards from our relationship with them. As we do not exercise control over ANSAC and are not considered its primary beneficiary, we do not consolidate ANSAC. The ANSAC membership agreement provides that in the event an ANSAC member exits or the ANSAC cooperative is dissolved, the exiting members are obligated for their respective portion of the residual net assets or deficit of the cooperative. As of March 31, 2022, such amount is not material to us.

Net Sales to ANSAC were $88.2 million during the three months ended March 31, 2022 and were $68.0 million during the three months ended March 31, 2021. The costs charged to us by ANSAC, included in sodium minerals and sulfur services operating costs, were $0.8 million during the three months ended March 31, 2022 and were $0.2 million during the three months ended March 31, 2021.

    

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Receivables from and payables to ANSAC as of March 31, 2022 and December 31, 2021 are as follows:

			March 31,						December 31,
			2022						2021
Accounts receivable - trade, net:
ANSAC			$	68,758					$	64,799
Accounts payable - trade:
ANSAC			$	845					$	116

The following table provides information regarding the net changes in components of operating assets and liabilities.

 

			Three Months Ended March 31,
			2022						2021
(Increase) decrease in:
Accounts receivable			$	(131,249)					$	(99,504)
Inventories			(282)						27,450
Deferred charges			12,805						7,731
Other current assets			(2,677)						(2,294)
Increase (decrease) in:
Accounts payable			107,747						38,994
Accrued liabilities			(15,513)						22,561
Net changes in components of operating assets and liabilities			$	(29,169)					$	(5,062)

Payments of interest and commitment fees were $69.8 million and $35.4 million for the three months ended March 31, 2022 and March 31, 2021, respectively. The increase in interest payments during 2022 is primarily related to the timing of interest payments on our senior unsecured notes, specifically our 2027 Notes, as we made an interest payment in January 2022. The first interest payment made on our 2027 Notes was in July 2021. We capitalized interest of $2.0 million and $0.7 million during the three months ended March 31, 2022 and March 31, 2021, respectively.

At March 31, 2022 and March 31, 2021, we had incurred liabilities for fixed and intangible asset additions totaling $45.0 million and $27.1 million, respectively, that had not been paid at the end of the quarter. Therefore, these amounts were not included in the caption “Payments to acquire fixed and intangible assets” under Cash Flows from Investing Activities in the Unaudited Condensed Consolidated Statements of Cash Flows. The increase in this amount is principally due to the increase in capital expenditures associated with our GOP (Note 10) and certain of our offshore growth capital expenditures.

Commodity Derivatives

We have exposure to commodity price changes related to our inventory and purchase commitments. We utilize derivative instruments (exchange-traded futures, options and swap contracts) to hedge our exposure to commodity prices, primarily of crude oil, fuel oil, natural gas and petroleum products. Our decision as to whether to designate derivative instruments as fair value hedges for accounting purposes relates to our expectations of the length of time we expect to have the commodity price exposure and our expectations as to whether the derivative contract will qualify as highly effective under accounting guidance in limiting our exposure to commodity price risk. Most of the petroleum products, including fuel oil that we supply, cannot be hedged with a high degree of effectiveness with exchange-traded derivative contracts; therefore, we do not designate derivative contracts utilized to limit our price risk related to petroleum products as hedges for accounting purposes. Typically, we utilize crude oil and other petroleum products futures and option contracts to limit our exposure to the effect of fluctuations in petroleum products prices on the future sale of our inventory or commitments to purchase petroleum products, and we recognize any changes in fair value of the derivative contracts as increases or decreases in our cost of sales. The recognition of changes in fair value of the derivative contracts not designated as hedges for accounting purposes can occur in reporting periods that do not coincide with the recognition of gain or loss on the actual transaction being hedged.

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Therefore, we will, on occasion, report gains or losses in one period that will be partially offset by gains or losses in a future period when the hedged transaction is completed.

We have designated certain crude oil futures contracts as hedges of crude oil inventory due to our expectation that these contracts will be highly effective in hedging our exposure to fluctuations in crude oil prices during the period that we expect to hold that inventory. We account for these derivative instruments as fair value hedges under the accounting guidance. Changes in the fair value of these derivative instruments designated as fair value hedges are used to offset related changes in the fair value of the hedged crude oil inventory. Any hedge ineffectiveness in these fair value hedges and any amounts excluded from effectiveness testing are recorded as a gain or loss within “Onshore facilities and transportation costs - product costs” in the Unaudited Condensed Consolidated Statements of Operations.

In accordance with exchange requirements, we fund the margin associated with our exchange-traded commodity derivative contracts. The amount of the margin is adjusted daily based on the fair value of the commodity derivative contracts. Margin requirements are intended to mitigate a party’s exposure to market volatility and counterparty credit risk. We offset fair value amounts recorded for our exchange-traded derivative contracts against required margin funding in “Current Assets - Other” in our Unaudited Condensed Consolidated Balance Sheets.

Additionally, we utilize swap arrangements. Our Alkali Business relies on natural gas to generate heat and electricity for operations. We use a combination of commodity price swap contracts, future purchase contracts and option contracts to manage our exposure to fluctuations in natural gas prices. The swap contracts fix the basis differential between NYMEX Henry Hub and NW Rocky Mountain posted prices. We do not designate these contracts as hedges for accounting purposes. We recognize any changes in fair value of natural gas derivative contracts as increases or decreases within “Sodium minerals and sulfur services operating costs” in the Unaudited Condensed Consolidated Statements of Operations.

At March 31, 2022, we had the following outstanding commodity derivative commodity contracts that were entered into to economically hedge inventory, fixed price purchase commitments or forecasted purchases.

						Sell (Short) Contracts						Buy (Long) Contracts
Designated as hedges under accounting rules:
Crude oil futures:
Contract volumes (1,000 Bbls)						62						—
Weighted average contract price per Bbl						$	103.28					$	—
Not qualifying or not designated as hedges under accounting rules:
Crude oil futures:
Contract volumes (1,000 Bbls)						54						51
Weighted average contract price per Bbl						$	107.63					$	107.92
Natural gas swaps:
Contract volumes (10,000 MMBtu)						—						367
Weighted average price differential per MMBtu						$	—					$	0.03
Natural gas futures:
Contract volumes (10,000 MMBtu)						155						459
Weighted average contract price per MMBtu						$	4.91					$	4.14
Natural gas options
Contract volumes (10,000 MMBtu)						26						8
Weighted average premium received/paid						$	0.16					$	0.03
Crude oil options:
Contract volumes (1,000 Bbls)						8						—
Weighted average premium received/paid						$	12.47					$	—

Financial Statement Impacts

Unrealized gains are subtracted from net income and unrealized losses are added to net income in determining cash flows from operating activities. To the extent that we have fair value hedges outstanding, the offsetting change recorded in the fair value of inventory is also eliminated from net income in determining cash flows from operating activities. Changes in the

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cash margin balance required to maintain our exchange-traded derivative contracts also affect cash flows from operating activities.

The following tables reflect the estimated fair value position of our derivatives at March 31, 2022 and December 31, 2021:

Fair Value of Derivative Assets and Liabilities

			Unaudited Condensed Consolidated Balance Sheets Location						Fair Value
									March 31, 2022						December 31, 2021
Asset Derivatives:
Natural Gas Swap (undesignated hedge)			Current Assets - Other						300						1,867
Commodity derivatives - futures and put and call options (undesignated hedges):
Gross amount of recognized assets			Current Assets - Other						$	6,856					$	310
Gross amount offset in the Unaudited Condensed Consolidated Balance Sheets			Current Assets - Other						(837)						(310)
Net amount of assets presented in the Unaudited Condensed Consolidated Balance Sheets									$	6,019					$	—
Commodity derivatives - futures (designated hedges):
Gross amount of recognized assets			Current Assets - Other						$	688					$	49
Gross amount offset in the Unaudited Condensed Consolidated Balance Sheets			Current Assets - Other						(504)						(49)
Net amount of assets presented in the Unaudited Condensed Consolidated Balance Sheets									$	184					$	—
Liability Derivatives:
Preferred Distribution Rate Reset Election(2)			Other long-term liabilities						(87,468)						(52,372)
Natural Gas Swap (undesignated hedge)			Current Liabilities -Accrued Liabilities						(946)						(608)
Commodity derivatives - futures and put and call options (undesignated hedges):
Gross amount of recognized liabilities			Current Assets - Other(1)						$	(837)					$	(2,380)
Gross amount offset in the Unaudited Condensed Consolidated Balance Sheets			Current Assets - Other(1)						837						2,380
Net amount of liabilities presented in the Unaudited Condensed Consolidated Balance Sheets									$	—					$	—
Commodity derivatives - futures (designated hedges):
Gross amount of recognized liabilities			Current Assets - Other(1)						$	(504)					$	(209)
Gross amount offset in the Unaudited Condensed Consolidated Balance Sheets			Current Assets - Other(1)						504						209
Net amount of liabilities presented in the Unaudited Condensed Consolidated Balance Sheets									$	—					$	—

(1) These derivative liabilities have been funded with margin deposits recorded in our Unaudited Condensed Consolidated Balance Sheets under “Current Assets - Other”.

(2)Refer to Note 10 and Note 16 for additional discussion surrounding the Preferred Distribution Rate Reset Election derivative.

 

Our accounting policy is to offset derivative assets and liabilities executed with the same counterparty when a master netting arrangement exists.  Accordingly, we also offset derivative assets and liabilities with our cash margin balance.  Our exchange-traded derivatives are transacted through brokerage accounts and are subject to margin requirements as established by the respective exchange.  On a daily basis, our account equity (consisting of the sum of our cash margin balance and the fair value of our open derivatives) is compared to our initial margin requirement resulting in the payment or return of variation margin.  As of March 31, 2022, we had a net broker receivable of approximately $3.8 million (consisting of initial margin of $2.0 million increased by $1.8 million variation margin).  As of December 31, 2021, we had a net broker receivable of approximately $2.9 million (consisting of initial margin of $2.1 million increased by $0.8 million of variation margin).  At

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March 31, 2022 and December 31, 2021, none of our outstanding derivatives contained credit-risk related contingent features that would result in a material adverse impact to us upon any change in our credit ratings. 

Preferred Distribution Rate Reset Election    

A derivative feature embedded in a contract that does not meet the definition of a derivative in its entirety must be bifurcated and accounted for separately if the economic characteristics and risks of the embedded derivative are not clearly and closely related to those of the host contract. For a period of 30 days following (i) September 1, 2022 and (ii) each subsequent anniversary thereof, the holders of our Class A Convertible Preferred Units may make a one-time election to reset the quarterly distribution amount (a “Rate Reset Election”) to a cash amount per Class A Convertible Preferred Unit equal to the amount that would be payable per quarter if a Class A Convertible Preferred Unit accrued interest on the Issue Price at an annualized rate equal to three-month LIBOR plus 750 basis points; provided, however, that such reset rate shall be equal to 10.75% if (i) such alternative rate is higher than the LIBOR-based rate and (ii) the then market price for our common units is then less than 110% of the Issue Price. The Rate Reset Election of our Class A Convertible Preferred Units represents an embedded derivative that must be bifurcated from the related host contract and recorded at fair value on our Unaudited Condensed Consolidated Balance Sheet. Corresponding changes in fair value are recognized in “Other income (expense)” in our Unaudited Condensed Consolidated Statement of Operations. At March 31, 2022, the fair value of this embedded derivative was a liability of $87.5 million. See Note 10 for additional information regarding our Class A Convertible Preferred Units and the Rate Reset Election.

Effect on Operating Results 

																		Amount of Gain (Loss) Recognized in Income
			Unaudited Condensed Consolidated Statements of Operations Location												Three Months Ended March 31,
																					2022						2021
Commodity derivatives - futures and call options:
Contracts designated as hedges under accounting guidance			Onshore facilities and transportation product costs																		$	(1,170)					$	(5,897)
Contracts not considered hedges under accounting guidance			Onshore facilities and transportation product costs, Sodium minerals and sulfur services operating costs																		6,048						(3,921)
Total commodity derivatives																					$	4,878					$	(9,818)
Natural Gas Swap			Sodium minerals and sulfur services operating costs																		$	(1,102)					$	(67)
Preferred Distribution Rate Reset Election			Other expense																		$	(4,258)					$	(18,438)

We classify financial assets and liabilities into the following three levels based on the inputs used to measure fair value:

(1)Level 1 fair values are based on observable inputs such as quoted prices in active markets for identical assets and liabilities;

(2)Level 2 fair values are based on pricing inputs other than quoted prices in active markets for identical assets and liabilities and are either directly or indirectly observable as of the measurement date; and

(3)Level 3 fair values are based on unobservable inputs in which little or no market data exists.

As required by fair value accounting guidance, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Our assessment of the significance of a particular input to the fair value requires judgment and may affect the placement of assets and liabilities within the fair value hierarchy levels.

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The following table sets forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2022 and December 31, 2021. 

						March 31, 2022																		December 31, 2021
Recurring Fair Value Measures						Level 1						Level 2						Level 3						Level 1						Level 2						Level 3
Commodity derivatives:
Assets						$	7,544					$	300					$	—					$	359					$	1,867					$	—
Liabilities						$	(1,341)					$	(946)					$	—					$	(2,589)					$	(608)					$	—
Preferred Distribution Rate Reset Election						$	—					$	—					$	(87,468)					$	—					$	—					$	(83,210)

Rollforward of Level 3 Fair Value Measurements

The following table provides a reconciliation of changes in fair value at the beginning and ending balances for our derivatives classified as level 3:

Balance as of December 31, 2021									$	(83,210)
Net loss for the period included in earnings									(4,258)
Balance as of March 31, 2022									$	(87,468)

Our commodity derivatives include exchange-traded futures and exchange-traded options contracts. The fair value of these exchange-traded derivative contracts is based on unadjusted quoted prices in active markets and is, therefore, included in Level 1 of the fair value hierarchy. The fair value of the swaps contracts was determined using market price quotations and a pricing model. The swap contracts were considered a level 2 input in the fair value hierarchy at March 31, 2022.

The fair value of the embedded derivative feature is based on a valuation model that estimates the fair value of our Class A Convertible Preferred Units with and without a Rate Reset Election. This model contains inputs, including our common unit price relative to the issuance price, the current dividend yield, the discount yield (which is adjusted periodically for relevant changes associated with the industry’s credit markets), default probabilities, equity volatility, U.S. Treasury yields and timing estimates which involve management judgment. Our equity volatility rate used to value our embedded derivative feature was 50% at March 31, 2022. A significant increase or decrease in the value of these inputs could result in a material change in fair value to this embedded derivative feature. Due to a decrease in our discount yield compared to the preceding quarter, we recorded an unrealized loss of $4.3 million for the three months ended March 31, 2022. Due to a decrease in our discount yield compared to preceding quarter, we recorded an unrealized loss of $18.4 million for the three months ended March 31, 2021. These effects are all recorded within “Other expense” on the Unaudited Condensed Consolidated Statements of Operations.

See Note 15 for additional information on our derivative instruments.

Other Fair Value Measurements

We believe the debt outstanding under our senior secured credit facility approximates fair value as the stated rate of interest approximates current market rates of interest for similar instruments with comparable maturities. At March 31, 2022 and December 31, 2021 our senior unsecured notes had a carrying value and fair value of approximately $3.0 billion. The fair value of the senior unsecured notes is determined based on trade information in the financial markets of our public debt and is considered a Level 2 fair value measurement.

We are subject to various environmental laws and regulations. Policies and procedures are in place to aid in monitoring compliance and detecting and addressing releases of crude oil from our pipelines or other facilities and from our mining operations relating to our Alkali Business; however, no assurance can be made that such environmental releases may not substantially affect our business.

We are subject to lawsuits in the normal course of business and examination by tax and other regulatory authorities. We do not expect such matters presently pending to have a material effect on our financial position, results of operations, or cash flows.

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