• Quarterly Adjusted EBITDA: $102.4 million, up from $92.8 million in Q2 2023.
• Distributable Cash Flow: $68 million.
• DCF Coverage Ratio: 1.32 times.
• Gathering and Processing Segment EBITDA: $54.7 million, up from $52.6 million in Q2 2023.
• Wholesale Marketing and Terminalling EBITDA: $30.2 million, up from $28 million in Q2 2023.
• Storage and Transportation EBITDA: $16.8 million, up from $15 million in Q2 2023.
• Pipeline Joint Venture Segment Contribution: $7.9 million, up from $7.3 million in Q2 2023.
• Leverage Ratio: Improved to 3.81 times from 4.34 at the end of 2023.
• Capital Expenditures: $10.2 million for Q2 2024, with $90 million to $100 million expected in the second half of 2024.
• Quarterly Distribution: Increased to $1.09 per unit.

• Warning! GuruFocus has detected 7 Warning Signs with DKL.

Release Date: August 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Delek Logistics Partners LP (NYSE:DKL) reported a record quarterly adjusted EBITDA of $102.4 million, showcasing strong financial performance.
• The company announced an extension of the contract with DK and Wink to Webster pipeline, securing long-term agreements of up to seven years.
• DKL's acquisition of H2O Midstream is immediately accretive on an EBITDA and free cash flow basis, enhancing its midstream service capabilities.
• The investment in a new gas processing plant is expected to generate cash on cash returns of more than 20%, with completion anticipated in the first half of 2025.
• The Board of Directors approved an increase in the quarterly distribution to $1.09 per unit, reflecting a strong track record of delivering value to unitholders.

Negative Points

• The company faces risks and uncertainties that may cause actual results to differ from forecasts, as highlighted in their forward-looking statements.
• Despite improvements, DKL's leverage remains a concern, although it has decreased to 3.81 times from a high of 4.84 at the end of 2022.
• The capital expenditure for the second quarter was $10.2 million, with expectations to spend $90 million to $100 million in the second half of 2024, indicating significant ongoing investment requirements.
• The EBITDA range for the recent transaction is broad ($55 million to $85 million), suggesting potential variability in expected financial outcomes.
• There are complexities involved in the exchange of units between companies as part of the Wink to Webster recontracting, which may impact financial reporting and tax efficiency.

Q & A Highlights

Q: Can you discuss the impact of the H2O Midstream acquisition on future customer opportunities and potential synergies? A: Avigal Soreq, President, explained that the acquisition allows for a more comprehensive view of customer deals, operational efficiencies, and infrastructure relevance for both services. This makes the deal highly accretive and synergistic for Delek Logistics Partners.

Q: What is the timeline for the new Delaware gas plant, and what future opportunities might it present? A: Avigal Soreq stated that the gas plant is expected to be completed in the first half of 2025 and is already highly subscribed. Odely Sakazi, SVP, added that there is an existing need for additional capacity, making the timing as soon as possible.

Q: Could you elaborate on the $55 million to $85 million EBITDA range for the recent transaction and the factors influencing this range? A: Avigal Soreq noted that the range is influenced by potential synergies from the H2O Midstream acquisition and other factors. The range is expected to be a good run rate for 2025, with potential for ramping over time.

Q: Can you provide details on the funding expectations for the cash components of the transactions, particularly regarding unit exchanges? A: Avigal Soreq clarified that units are changing hands, but the net amount is not significant. The transactions were structured to be tax-efficient, aligning assets with their natural ownership and exchanging value appropriately.

Q: How does the recent contract amendment with Wink to Webster pipeline affect Delek Logistics' position? A: Avigal Soreq highlighted that the contract amendment extends terms up to seven years, enhancing asset quality and strengthening Delek Logistics' position in the Permian Basin without straining the balance sheet.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.