Genesis Energy is poised to generate higher earnings and free cash flow following the successful startup of the Shenandoah and Salamanca floating production units (FPUs) in the Gulf of Mexico, CEO Grant Sims said during the company’s quarterly earnings call October 30.
At Shenandoah, operated by Beacon Offshore Energy, four Phase 1 wells completed their ramp-up to the unit’s targeted rate of 100 Mb/d in early October. That came within 75 days of the wells’ initial startup. At Salamanca, operated by LLOG, initial production from the first of three wells began at the end of September, with plans to ramp-up production from all three to about 40 Mb/d. A fourth well is planned to be drilled and completed in Q2 2026, at which point Salamanca production is anticipated to approach the original design capacity of 50 Mb/d. Mechanical issues in the first half of the year delayed the initial production from both units.
The Shenandoah and Salamanca units are tied into Genesis’ 100% owned and operated SYNC and SEKCO laterals, respectively, for further transportation to shore through its 64% owned and operated CHOPS and Poseidon crude oil pipelines.
“There is no doubt these two developments will contribute to a significant increase in the future financial performance of our offshore pipeline transportation segment,” Sims said. “When combined with minimal future growth capital expenditures, and the expected steady, if not marginally growing, performance from our other businesses, we remain well-positioned to generate increasing amounts of free cash flow in excess of the cash costs of running our businesses.”
As we noted in Back to Life, Genesis sold the former Independence gas and condensate hub to LLOG in April 2022 for about $40 million. It then underwent upgrades to turn it into the Salamanca FPU. The hull, topside truss, cranes and lifeboats were reused with minor modifications. All other topside equipment, including piping, instrumentation and electrical systems, is new and designed for the FPU’s new purpose.
