$3.11
$29.33
bear $3.11
base $16.73
bull $29.33
margin of safety $8.50
market price* $14.24
Genesis Energy, L.P. (GEL) is a Gulf Coast midstream partnership. Its common units are limited partnership units. Since selling its Wyoming soda ash business for $1.425 billion in February 2025, it has three businesses. Offshore pipeline transportation (2025 segment margin $386 million) moves Gulf of Mexico deepwater crude through CHOPS (64% owned), Poseidon (64% owned) and the SYNC and SEKCO lines. Marine transportation ($116 million) runs 87 barges, 43 push/tow boats and the tanker M/T American Phoenix. Onshore transportation and services ($76 million) covers crude pipelines, terminals and the sodium hydrosulfide (NaHS) sulfur-services business, which sells to copper miners in the western U.S., Canada, Mexico, Peru and Chile. How we measured earning power. We started with owner earnings for the continuing business only: operating cash flow, less swings in working capital, less unit-based compensation, less only the capital spending needed to maintain the existing assets. Spending on new capacity (Shenandoah, Salamanca and the CHOPS expansion) is treated as investment. We then valued the business before its lenders and preferred holders. To do that we added back the cash interest that ran through operating cash flow ($208 million in 2023, $247 million in 2024 and $266 million in 2025; interest capitalized into construction was left out because it never reduced operating cash flow). We also added back the distributions to preferred holders. We then subtracted the cash distributed to the outside owners of 36% of CHOPS and 20% of Independence Hub ($45 million, $37 million and $59 million), because that cash never reaches Genesis unitholders. On that basis the business produced about $459 million in 2023, $284 million in 2024 and $431 million in 2025, or $3.75, $2.32 and $3.52 per common unit. We used 2023 to 2025 because earlier years include the soda ash business, which is a different company. The starting level is the middle year, $431 million ($3.52 per unit). 2024 was depressed by producer well shut-ins and a contractual rate step-down on a ten-year-old life-of-lease dedication. 2025 still carried one-time sale costs and only about one quarter of the new deepwater volumes. We could not split 2023 maintenance spending between soda ash and the continuing business from the filings, so that year uses an estimate. It does not affect the starting level. What changed in 2026. Shenandoah (first oil July 2025, life-of-lease dedicated to SYNC and CHOPS, with minimum volume commitments) ran above 90,000 barrels a day by late 2025. Salamanca reached a steady 40,000 to 42,000 barrels a day after a fourth well in the second quarter of 2026. In the first half of 2026 the same measure ran at about $498 million a year. Offshore segment margin was up 32% year on year in the second quarter, while marine was down 14%. Our base case therefore starts at $490 million ($4.00 per unit) for the coming year. That is 14% above the 2025 level, against the 52% actual rise from 2024 to 2025, and it is backed by two reported quarters rather than a forecast. What it owes. At June 30, 2026 Genesis had $3.15 billion of senior notes, $99.5 million drawn on a receivables facility and nothing on its $800 million revolver. It also had about $325 million of Class A convertible preferred units ranking ahead of the common, carried at roughly their redemption value. The notes carry coupons well above our 6% rate: 8.25% due January 2029 ($600 million), 8.875% due April 2030 ($500 million), 7.875% due 2032 ($700 million), 8.00% due 2033 ($600 million) and 6.75% due 2034 ($750 million, issued February 2026 to retire the 7.75% 2028 notes). We added about $234 million, the present value of that extra interest to each maturity. We added about $22 million for the roughly 10.8% preferred distribution until those units are retired; Genesis has been buying them back quickly, $262.5 million in 2025 and about $218 million in the first half of 2026. The total is about $3.83 billion, or $31.29 per common unit. Covenant headroom is modest: bank leverage was 5.0 times against a 5.5 times limit. The February 2026 refinancing at 6.75% shows the partnership can currently roll its debt. Base case (median). The coming year produces $490 million. Offshore holds level for three more years because Salamanca's four wells are producing and Shenandoah's Monument tie-back wells are under way under the existing dedication, offsetting natural decline. We did not credit a fifth Salamanca well, Shenandoah South or the planned 140,000 barrel-a-day facility expansion; they are not yet in hand. Offshore then declines 3% a year through year 10 and 4% a year after that. This reflects the legacy decline visible in the filings: cash distributions from joint-venture pipelines fell from $65 million in 2023 to $47 million in 2025. It also reflects life-of-lease rate step-downs of the kind that began in 2024. Marine and onshore ease 1% a year in years 5 to 10 and then hold, because the assets are maintained out of the cash flow already charged. The story ends after 35 years. The business is worth about $5.88 billion ($48.02 per unit). It owes $3.83 billion ($31.29 per unit), which leaves $16.73 per unit. About 41% of the business value comes after year 10. Bear case (roughly the 10th percentile). The coming year produces $460 million because of hurricane or producer downtime like 2024 and 2025. Offshore volumes decline 5% a year for a decade and 8% a year after that as Gulf fields deplete without replacement. Marine day rates fall back toward 2023 levels, so marine and onshore are 10% lower from year two. Because leverage is already near the covenant limit, maturing notes are refinanced at 8% rather than 6.75% for five years after each maturity, which adds about $199 million to what is owed. The business is worth about $4.41 billion ($36.02 per unit) against $4.03 billion owed ($32.91 per unit), leaving about $3.11 per unit. In this case the business still covers its roughly $253 million annual interest bill by a wide margin for the first decade. That only holds if the surplus is used to pay down debt rather than paid out as distributions. If it is not, the common units could be worth little or nothing. Bull case (roughly the 90th percentile). Genesis's producers carry out the steps they have already named: a fifth Salamanca well lifting volumes toward the 60,000 barrel-a-day design, Monument and two more Shenandoah wells in 2027, and Shenandoah South with the 140,000 barrel-a-day expansion in 2028. The stream rises to about $570 million by year four and holds through year six. Offshore then declines 2% a year through year 10 and 3% a year to year 40. The business is worth about $7.42 billion ($60.61 per unit). It owes $3.83 billion, leaving $29.33 per unit. Change from our previous estimate. We previously put the units at about $13, $28.57 and $37. That estimate valued the cash left after interest as if today's debt would roll forever on today's terms. It also counted the outside owners' share of CHOPS as if it belonged to Genesis unitholders, and it held offshore earnings level indefinitely. We now value the business first and subtract everything owed ahead of the common, including the above-market cost of the notes. We deduct the cash paid to CHOPS and Independence Hub partners. We let depleting offshore volumes fade on the evidence of the joint-venture decline. Against that, we now credit the higher cash flow the new deepwater connections produced in 2026, and the preferred buybacks that reduced what ranks ahead of the common. The net effect is a lower estimate. What would make this wrong. Values would rise if new Gulf of Mexico tie-backs keep replacing depleted volumes, as they have for two decades on CHOPS and Poseidon, or if the preferred units are fully retired. Values would fall if a producer shut-in or a hurricane season repeats the 2024 trough while leverage is near its covenant limit. The common units carry roughly $31 per unit of debt and senior claims, so modest changes in business value produce large changes in unit value. The margin-of-safety price is about $8.50 per unit, a deep discount to the base case, because the bear case leaves little for common holders.