Company Announcements

Delek Logistics Partners, LP Reports First Quarter 2022 Results

  • Reported first quarter net income attributable to all partners of $39.5 million
  • EBITDA of $66.0 million represented an increase of 12% y/y
  • First quarter distributable cash flow coverage ratio of 1.21x and total leverage ratio of approximately 3.3x
  • Declared first quarter distribution of $0.98 per limited partner unit; reflects 6.5% increase y/y
  • Planned acquisition of 3Bear builds size and scale, offers geographic and product mix diversity and increases 3rd party revenue
  • Permian Gathering business witnessing strong producer activity
  • Delivered 37 consecutive quarters of distribution growth with recent quarterly increase to $0.98/unit
  • DKL volumes expected to benefit from a lack of major planned turnaround activity in Delek US system in 2022

BRENTWOOD, Tenn. , May 3, 2022 /PRNewswire/ -- Delek Logistics Partners, LP (NYSE: DKL) ("Delek Logistics") today announced its financial results for the first quarter 2022. For the three months ended March 31, 2022, Delek Logistics reported net income attributable to all partners of $39.5 million, or $0.91 per diluted common limited partner unit. This compares to net income attributable to all partners of $36.3 million, or $0.83 per diluted common limited partner unit, in the first quarter 2021. Net cash from operating activities was $47.9 million in the first quarter 2022 compared to $61.7 million in the first quarter 2021. Distributable cash flow was $51.7 million in the first quarter 2022, compared to $52.5 million in the first quarter 2021.   

For the first quarter 2022, earnings before interest, taxes, depreciation and amortization ("EBITDA") was $66.0 million compared to $58.7 million in the first quarter 2021. 

Uzi Yemin, Chairman, President and Chief Executive Officer of Delek Logistics' general partner, remarked: "Strong producer demand is prompting significant volume growth in our Permian Gathering System and we expect momentum to continue throughout the year. Complementing our existing gathering business is the planned acquisition of 3Bear Delaware HoldingNM, LLC. This transaction improves size and scale, increases third party revenue, diversifies geographic footprint within the Permian Basin, expands the product mix and is expected to be immediately accretive to distributable cash flow ratios."

Mr. Yemin continued, "With ongoing consolidation in the MLP space, DKL should screen more attractively to investors as a larger, more diversified company with increasing third-party revenue and a long track record of increasing shareholder returns. The recent announcement to increase the quarterly distribution to $0.98/unit marks the 37th consecutive increase in the quarterly distribution. The outlook for the company is bright with both organic and inorganic growth opportunities underway and a lack of major turnaround activity planned at Delek US in 2022, should translate into strong volumes throughout our system this year."

Distribution and Liquidity

On April 25, 2022, Delek Logistics declared a quarterly cash distribution of $0.98 per common limited partner unit for the first quarter 2022, which equates to $3.92 per common limited partner unit on an annualized basis. This distribution will be paid on May 12, 2022 to unitholders of record on May 5, 2022. This represents a 0.5% increase from the fourth quarter 2021 distribution of $0.975 per common limited partner unit, or $3.90 per common limited partner unit on an annualized basis, and a 6.5% increase over Delek Logistics' first quarter 2021 distribution of $0.92 per common limited partner unit, or $3.68 per common limited partner unit annualized. For the first quarter 2022, the total cash distribution declared to all partners was approximately $42.6 million, resulting in a distributable cash flow coverage ratio of 1.21x.

As of March 31, 2022, Delek Logistics had total debt of approximately $905.5 million and cash of $2.7 million. Additional borrowing capacity, subject to certain covenants, under the $850.0 million credit facility was $585.9 million. The total leverage ratio was well within the requirements of the maximum allowable leverage ratio under the credit facility.

Financial Results

Contribution margin in the first quarter 2022 was $62.3 million compared to $56.9 million in the first quarter 2021. Overall performance benefited from an increase in utilization on assets supporting the Big Spring Refinery and increased throughput on joint venture pipelines. 

Pipelines and Transportation Segment

Contribution margin in the first quarter 2022 was $43.2 million which is broadly in line compared to $41.7 million in the first quarter 2021.

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Wholesale Marketing and Terminalling Segment

During the first quarter 2022, contribution margin was $19.0 million compared to $15.2 million in the first quarter 2021. The increase was primarily driven by strong volumes at the Big Spring marketing and terminalling facilities.

Investments in Pipeline Joint Ventures Segment

During the first quarter 2022, income from equity method investments was $7.0 million compared to $4.0 million in the first quarter 2021, primarily driven by increased volumes at both Caddo and Red River.

First Quarter 2022 Results | Conference Call Information

Delek Logistics will hold a conference call to discuss its first quarter 2022 results on Tuesday, May 3, 2022 at 9:30 a.m. Central Time. Investors will have the opportunity to listen to the conference call live by going to www.DelekLogistics.com. Participants are encouraged to register at least 15 minutes early to download and install any necessary software.  An archived version of the replay will also be available at www.DelekLogistics.com for 90 days.    

Investors may also wish to listen to Delek US Holdings, Inc.'s (NYSE: DK) ("Delek US") first quarter 2022 earnings conference call on Tuesday, May 3, 2022 at 11:00 a.m. Central Time and review Delek US' earnings press release. Market trends and information disclosed by Delek US may be relevant to Delek Logistics, as it is a consolidated subsidiary of Delek US. Investors can find information related to Delek US and the timing of its earnings release online by going to www.DelekUS.com.

About Delek Logistics Partners, LP

Delek Logistics Partners, LP, headquartered in Brentwood, Tennessee, was formed by Delek US and owns, operates, acquires and constructs crude oil, natural gas and refined products logistics and marketing assets.

Safe Harbor Provisions Regarding Forward-Looking Statements

This press release contains forward-looking statements that are based upon current expectations and involve a number of risks and uncertainties. Statements concerning current estimates, expectations and projections about future results, performance, prospects, opportunities, plans, actions and events and other statements, concerns, or matters that are not historical facts are "forward-looking statements," as that term is defined under the federal securities laws. These statements contain words such as "possible," "believe," "should," "could," "would," "predict," "plan," "estimate," "intend," "may," "anticipate," "will," "if,"  "expect" or similar expressions, as well as statements in the future tense, and can be impacted by numerous factors, including the fact that a substantial majority of Delek Logistics' contribution margin is derived from Delek US, thereby subjecting us to Delek US' business risks; risks relating to the securities markets generally; risks and costs relating to the age and operational hazards of our assets including, without limitation, costs, penalties, regulatory or legal actions and other effects related to releases, spills and other hazards inherent in transporting and storing crude oil and intermediate and finished petroleum products; the impact of adverse market conditions affecting the utilization of Delek Logistics' assets and business performance, including margins generated by its wholesale fuel business; the impact of the COVID-19 outbreak on the demand for crude oil, refined products and transportation and storage services; uncertainties regarding future decisions by OPEC regarding production and pricing disputes between OPEC members and Russia; an inability of Delek US to grow as expected as it relates to our potential future growth opportunities, including dropdowns, and other potential benefits; scheduled turnaround activity; the results of our investments in joint ventures; adverse changes in laws including with respect to tax and regulatory matters; and other risks as disclosed in our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other reports and filings with the United States Securities and Exchange Commission. Forward-looking statements include, but are not limited to, statements regarding future growth at Delek Logistics; distributions and the amounts and timing thereof; potential dropdown inventory; expected earnings or returns from joint ventures or other acquisitions; expansion projects; ability to create long-term value for our unit holders; financial flexibility and borrowing capacity; and distribution growth of 5% or at all. Forward-looking statements should not be read as a guarantee of future performance or results and will not be accurate indications of the times at, or by, which such performance or results will be achieved.  Forward-looking information is based on information available at the time and/or management's good faith belief with respect to future events, and is subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements.  Delek Logistics undertakes no obligation to update or revise any such forward-looking statements to reflect events or circumstances that occur, or which Delek Logistics becomes aware of, after the date hereof, except as required by applicable law or regulation

Non-GAAP Disclosures:

Our management uses certain "non-GAAP" operational measures to evaluate our operating segment performance and non-GAAP financial measures to evaluate past performance and prospects for the future to supplement our GAAP financial information presented in accordance with U.S. GAAP. These financial and operational non-GAAP measures are important factors in assessing our operating results and profitability and include:

  • Earnings before interest, taxes, depreciation and amortization ("EBITDA") - calculated as net income before net interest expense, income tax expense, depreciation and amortization expense, including amortization of customer contract intangible assets, which is included as a component of net revenues in our accompanying condensed consolidated statements of income.
  • Distributable cash flow - calculated as net cash flow from operating activities plus or minus changes in assets and liabilities, less maintenance capital expenditures net of reimbursements and other adjustments not expected to settle in cash. Delek Logistics believes this is an appropriate reflection of a liquidity measure by which users of its financial statements can assess its ability to generate cash.
  • EBITDA and distributable cash flow are non GAAP supplemental financial measures that management and external users of our condensed consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:
  • Delek Logistics' operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or, in the case of EBITDA, financing methods;
  • the ability of our assets to generate sufficient cash flow to make distributions to our unitholders;
  • Delek Logistics' ability to incur and service debt and fund capital expenditures; and
  • the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

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Delek Logistics believes that the presentation of EBITDA, distributable cash flow and distributable cash flow coverage ratio provide useful information to investors in assessing its financial condition, its results of operations and the cash flow its business is generating. EBITDA, distributable cash flow and distributable cash flow coverage ratio should not be considered in isolation or as alternatives to net income, operating income, cash flow from operating activities or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP. 

Non-GAAP measures have important limitations as analytical tools, because they exclude some, but not all, items that affect net income and net cash provided by operating activities. These measures should not be considered substitutes for their most directly comparable U.S. GAAP financial measures. Additionally, because EBITDA and distributable cash flow may be defined differently by other partnerships in its industry, Delek Logistics' definitions of EBITDA and distributable cash flow may not be comparable to similarly titled measures of other partnerships, thereby diminishing their utility. See the accompanying tables in this earnings release for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures. 

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Delek Logistics Partners, LP

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except unit and per unit data)



March 31, 2022


December 31, 2021

ASSETS





Current assets:





     Cash and cash equivalents


$                    2,726


$                    4,292

     Accounts receivable


20,350


15,384

     Inventory


1,779


2,406

     Other current assets


1,466


951

          Total current assets


26,321


23,033

Property, plant and equipment:





     Property, plant and equipment


724,921


715,870

     Less: accumulated depreciation


(276,587)


(266,482)

          Property, plant and equipment, net


448,334


449,388

Equity method investments


249,893


250,030

Operating lease right-of-use assets


19,135


20,933

Goodwill


12,203


12,203

Marketing contract intangible, net


114,774


116,577

Rights-of-way


39,705


37,280

Other non-current assets


24,901


25,627

          Total assets


$                 935,266


$                 935,071






LIABILITIES AND DEFICIT





Current liabilities:





     Accounts payable


$                  12,627


$                    8,160

     Accounts payable to related parties


50,282


64,423

     Interest payable


16,317


5,024

     Excise and other taxes payable


4,023


5,280

     Current portion of operating lease liabilities


6,688


6,811

     Accrued expenses and other current liabilities


6,327


7,117

          Total current liabilities


96,264


96,815

Non-current liabilities:





     Long-term debt


905,536


898,970

     Asset retirement obligations


6,600


6,476

     Operating lease liabilities, net of current portion


12,401


14,071

     Other non-current liabilities


20,987


22,731

          Total non-current liabilities


945,524


942,248

          Total liabilities


1,041,788


1,039,063

Equity (Deficit):





     Common unitholders - public; 9,162,504 units issued and outstanding at March 31, 2022 (8,774,053 at
     December 31, 2021)


170,696


166,067

     Common unitholders - Delek Holdings; 34,311,278 units issued and outstanding at March 31, 2022
     (34,696,800 at December 31, 2021)


(277,218)


(270,059)

          Total deficit


(106,522)


(103,992)

          Total liabilities and deficit


$                 935,266


$                 935,071

 

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Delek Logistics Partners, LP

Condensed Consolidated Statements of Income (Unaudited)

(In thousands, except unit and per unit data)


Three Months Ended March 31,


2022


2021

Net revenues:




     Affiliate

$           123,754


$             96,194

     Third-party

82,827


56,719

Net revenues

206,581


152,913

Cost of sales:




     Cost of materials and other

126,194


81,171

     Operating expenses (excluding depreciation and amortization presented below)

17,543


14,250

     Depreciation and amortization

9,861


10,247

          Total cost of sales

153,598


105,668

     Operating expenses related to wholesale business (excluding depreciation and amortization presented below)

564


561

     General and administrative expenses

5,095


4,105

     Depreciation and amortization

474


492

     Other operating expense (income), net

12


(83)

          Total operating costs and expenses

159,743


110,743

     Operating income

46,838


42,170

     Interest expense, net

14,250


9,737

     Income from equity method investments

(7,026)


(4,049)

     Other (income) expense, net

(1)


31

          Total non-operating expenses, net

7,223


5,719

Income before income tax expense

39,615


36,451

Income tax expense

101


184

Net income attributable to partners

$             39,514


$             36,267

Comprehensive income attributable to partners

$             39,514


$             36,267





Net income per limited partner unit:




Common units - basic

$                 0.91


$                 0.83

Common units - diluted

$                 0.91


$                 0.83





Weighted average limited partner units outstanding:




Common units - basic

43,471,536


43,443,336

Common units - diluted

43,481,572


43,449,059





Cash distribution per limited partner unit

$                 0.98


$                 0.92

 

5 | 

 

Delek Logistics Partners, LP

Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands)



Three Months Ended March 31,



2022


2021

Cash flows from operating activities





Net income


$          39,514


$          36,267

  Adjustments to reconcile net income to net cash provided by operating activities:





  Depreciation and amortization


10,335


10,739

  Non-cash lease expense


1,798


2,018

  Amortization of customer contract intangible assets


1,803


1,803

  Amortization of deferred revenue


(444)


(538)

  Amortization of deferred financing costs and debt discount


847


625

  Income from equity method investments


(7,026)


(4,049)

  Dividends from equity method investments


6,613


3,730

  Other non-cash adjustments


492


274

  Changes in assets and liabilities:





     Accounts receivable


(4,966)


3,354

     Inventories and other current assets


112


1,020

     Accounts payable and other current liabilities


14,157


(390)

     Accounts receivable/payable to related parties


(14,141)


7,359

     Non-current assets and liabilities, net


(1,174)


(480)

Changes in assets and liabilities


(6,012)


10,863

               Net cash provided by operating activities


47,920


61,732

Cash flows from investing activities





Purchases of property, plant and equipment


(10,613)


(6,119)

Proceeds from sales of property, plant and equipment


12


83

Purchases of intangible assets


(2,425)


(474)

Distributions from equity method investments


550


3,924

Equity method investment contributions



(1,379)

               Net cash used in investing activities


(12,476)


(3,965)

Cash flows from financing activities





Distributions to common unitholders - public


(8,570)


(7,914)

Distributions to common unitholders - Delek Holdings


(33,830)


(31,619)

Proceeds from revolving credit facility


113,600


77,500

Payments on revolving credit facility


(107,500)


(86,600)

Payments on finance lease


(710)


               Net cash used in financing activities


(37,010)


(48,633)

Net (decrease) increase in cash and cash equivalents


(1,566)


9,134

Cash and cash equivalents at the beginning of the period


4,292


4,243

Cash and cash equivalents at the end of the period


$            2,726


$          13,377

Supplemental disclosures of cash flow information:





Cash paid during the period for:





     Interest


$            2,110


$            4,937

Non-cash investing activities:





     Increase in accrued capital expenditures in accounts payable/receivable related parties


$                 —


$            3,119

     Decrease in accrued capital expenditures and other


$           (1,527)


$           (1,439)

Non-cash financing activities:





     Non-cash lease liability arising from obtaining right of use assets during the period


$                 —


$            2,623

 

6 | 

 

Delek Logistics Partners, LP

Reconciliation of  Amounts Reported Under U.S. GAAP

(In thousands)


Three Months Ended March 31,


2022


2021

Reconciliation of Net Income to EBITDA:




Net income

$             39,514


$             36,267

     Add:




     Income tax expense

101


184

     Depreciation and amortization

10,335


10,739

     Amortization of customer contract intangible assets

1,803


1,803

     Interest expense, net

14,250


9,737

EBITDA

$             66,003


$             58,730





Reconciliation of net cash from operating activities to distributable cash flow:




Net cash provided by operating activities

$             47,920


$             61,732

     Changes in assets and liabilities

6,012


(10,863)

     Non-cash lease expense

(1,798)


(2,018)

     Distributions from equity method investments in investing activities

550


3,924

     Maintenance and regulatory capital expenditures

(807)


(515)

     (Refund to) reimbursement from Delek Holdings for capital expenditures 

(15)


359

     Accretion of asset retirement obligations

(124)


(115)

     Deferred income taxes


(65)

     Other operating (expense) income, net

(12)


83

Distributable Cash Flow

$             51,726


$             52,522

 

Delek Logistics Partners, LP

Distributable Coverage Ratio Calculation

(In thousands)


Three Months Ended March 31,

Distributions to partners of Delek Logistics, LP

2022


2021

Total distributions to be paid

$             42,604


$             39,968





Distributable cash flow

$             51,726


$             52,522

Distributable cash flow coverage ratio (1)

1.21x


1.31x



(1)

Distributable cash flow coverage ratio is calculated by dividing distributable cash flow by distributions to be paid in each respective period.

 

7 | 

 

Delek Logistics Partners, LP

Segment Data (unaudited)

(In thousands)


Three Months Ended March 31,


2022


2021

     Pipelines and Transportation




     Net revenues:




          Affiliate

$             71,023


$             63,048

          Third party

4,782


1,927

     Total pipelines and transportation

75,805


64,975

          Cost of sales:




          Cost of materials and other

19,602


13,079

          Operating expenses (excluding depreciation and amortization)

12,958


10,172

     Segment contribution margin

$             43,245


$             41,724

Capital spending (1)

$               8,149


$               5,845





     Wholesale Marketing and Terminalling




     Net revenues:




           Affiliates (2)

$             52,731


$             33,146

          Third party

78,045


54,792

     Total wholesale marketing and terminalling

130,776


87,938

          Cost of sales:




          Cost of materials and other

106,592


68,092

          Operating expenses (excluding depreciation and amortization)

5,149


4,639

     Segment contribution margin

$             19,035


$             15,207

Capital spending (1)

$                  937


$               1,954





Investments in Pipeline Joint Ventures




          Income from equity method investments

$              (7,026)


$              (4,049)

          Equity method investments contributions

$                    —


$              (1,379)





Consolidated




Net revenues:




       Affiliates

$           123,754


$             96,194

       Third party

82,827


56,719

          Total consolidated

206,581


152,913

     Cost of sales:




       Cost of materials and other

126,194


81,171

       Operating expenses (excluding depreciation and amortization presented below)

18,107


14,811

      Contribution margin

62,280


56,931

     General and administrative expenses

5,095


4,105

     Depreciation and amortization

10,335


10,739

     Other operating expense (income), net

12


(83)

     Operating income

46,838


42,170

Interest expense, net

14,250


9,737

Income from equity method investments

(7,026)


(4,049)

Other (income) expense, net

(1)


31

          Total non-operating expenses, net

7,223


5,719

Income before income tax expense

39,615


36,451

Income tax expense

101


184

Net income attributable to partners

$             39,514


$             36,267

Capital spending (1)

$               9,086


$               7,799



(1)

There were no capital contributions to equity method investments for the three months ended March 31, 2022. Capital spending for the three months ended March 31, 2021 excludes contributions to equity method investments in the amount of $1.4 million.

(2)

Affiliate revenue for the wholesale marketing and terminalling segment is presented net of amortization expense pertaining to the Marketing Contract Intangible Acquisition.

 

8 | 

 

Delek Logistics Partners, LP

Segment Capital Spending (1)

 (In thousands)


Three Months Ended March 31,

Pipelines and Transportation

2022


2021

Maintenance capital spending

$               1,280


$                  477

Discretionary capital spending

6,869


5,368

Segment capital spending

8,149


5,845

Wholesale Marketing and Terminalling




Maintenance capital spending

792


39

Discretionary capital spending

145


1,915

Segment capital spending

937


1,954

Consolidated




Maintenance capital spending

2,072


516

Discretionary capital spending

7,014


7,283

Total capital spending

$               9,086


$               7,799



(1)

Capital spending excludes the capital contributions to our equity method investments. There were no equity method investments capital contributions for the three months ended March 31, 2022. The equity method investments capital contributions were $1.4 million for the three months ended March 31, 2021.

 

Delek Logistics Partners, LP




Segment Data (Unaudited)





Three Months Ended March 31,


2022


2021

Pipelines and Transportation Segment:




Throughputs (average bpd)




El Dorado Assets:




    Crude pipelines (non-gathered)

72,872


44,118

    Refined products pipelines to Enterprise Systems

59,522


26,349

El Dorado Gathering System

16,156


11,880

East Texas Crude Logistics System

16,056


26,075

Permian Gathering System (1)

100,325


73,724

Plains Connection System

162,007


108,361

Trucking Assets

9,306


10,187





Wholesale Marketing and Terminalling Segment:




East Texas - Tyler Refinery sales volumes (average bpd) (2)

70,578


71,963

Big Spring marketing throughputs (average bpd)

75,549


72,927

West Texas marketing throughputs (average bpd)

9,913


10,138

West Texas gross margin per barrel

$                 3.04


$                 3.42

Terminalling throughputs (average bpd) (3)

137,622


144,539



(1)

Formerly known as the Big Spring Gathering System. Excludes volumes that are being temporarily transported via trucks while connectors are under construction.



(2)

Excludes jet fuel and petroleum coke.



(3)

Consists of terminalling throughputs at our Tyler, Big Spring, Big Sandy and Mount Pleasant, Texas, El Dorado and North Little Rock, Arkansas and Memphis and Nashville, Tennessee terminals.

 

Information about Delek Logistics Partners, LP can be found on its website (www.deleklogistics.com), investor relations webpage (ir.deleklogistics.com), news webpage (www.deleklogistics.com/news) and its Twitter account (@DelekLogistics).

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SOURCE Delek Logistics