Delek Logistics Partners Q3 2023 Earnings Call Transcript

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November 7, 2023

There are 6 speakers on the call.

Operator

Good day, and welcome to the Delek Logistics Partners Third Quarter 2023 Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Rosie Zuklic, Vice President of Investor Relations. Please go ahead.

Speaker 1

Good day, and welcome to the Delek Logistics Partners Third Quarter Earnings Conference Call. Participants on today's call will include Abigail Sorek, President Joseph Israel, EVP, Operations Ruben Spiegel, EVP and Chief Financial Officer and Odeli Sakhazi, SVP, Delek Logistics. As a reminder, this conference call will contain forward looking statements as defined under the federal securities laws, including without limitation, statements regarding guidance and future business outlook. These statements involve risks and uncertainties that may cause For more information, please refer to the risk factors discussed in the company's most recently filed annual report on Form 10 ks and quarterly report on Form 10 Q filed with the SEC, along with the press release associated with this call. The company assumes no obligation to update any forward looking statements or information, which speak as of their respective dates.

Speaker 1

I'll now turn the call over to Avigal for opening remarks. Avigal?

Speaker 2

Thank you, Ozi. Delek Logistics Partners Delivered another record quarter with over $98,000,000 in EBITDA. We have been pleased to see the consistent performance of our team and assets. We are very proud to be able to deliver that value back to our unitholders. This is a result of our dedication to the company's strategic objectives: Growing third party revenues, maintaining multiyear MVC contracts and keeping a focus on growth opportunities.

Speaker 2

Midland Gathering achieved a record throughput this quarter as a result of our investment in the system. With the Delaware gathering system, we were able to support our objective, diversifying revenue stream and increasing third party business. Given our strong performance this quarter, we are confident in our ability to exceed $100,000,000 in a quarterly EBITDA run rate by Q4 of this year. I'm also very proud to say that DKL recently Received operational award of excellence concert from the National Safety Council, demonstrating our team dedication to safety and operational excellence. On October 25th, our Board of Directors approved 5.6% increase in the quarterly distribution from prior year to $1.045 per limited partner unit for the Q3 of this year, highlighting our commitment to increasing the quarterly distribution.

Speaker 2

I will now hand it over to Ruben.

Speaker 3

Thank you, Avigal. Total EBITDA for DKL was $98,000,000 for the Q3 of 'twenty 3 compared with $89,000,000 for the same period in 2022. For the Q3 of 2023, distributable cash flow was $61,000,000 and the DCF coverage ratio was 1.35 times. For the Gathering and Processing segment, EBITDA this quarter was 53,000,000 The EBITDA for the Q3 of 'twenty two was $57,000,000 which benefited from a one time credit. Excluding this, 3rd quarter 'twenty three results were higher than last year due to increased throughput from our Permian assets.

Speaker 3

Throughput of Midland Gathering averaged approximately 250,000 barrels per day for the 3rd quarter, more than twice the average 121,000 barrels per day in the Q3 of 'twenty 2. The Wholesale Marketing and Terminalling segment EBITDA was $28,000,000 for the quarter compared to $20,000,000 in the Q3 of 2022. The increase was due to higher utilization in our terminalling operations and improved margins in wholesale. The Storage and Transportation segment EBITDA was $18,000,000 in the quarter compared with $15,000,000 in the Q3 of 2022. This segment benefited from recent industry wide fleet escalations.

Speaker 3

And lastly, the investment in Pipeline Joint Venture segment contributed $9,000,000 toward the Q2 of 2023, slightly up from Q3 of Moving on to capital expenditures. 3rd quarter 'twenty three capital spending was 15,000,000 Most of that spend was for growth projects, namely advancing new connection in both the Midland and Delaware gathering systems. For 2023, we expect capital expense to be in the range of $85,000,000 to $90,000,000 with approximately $10,000,000 of growth CapEx to be partially funded by the producers. Including this, net capital expenditures For the year is in the range of $75,000,000 to $80,000,000 With that, we can open the call for questions.

Operator

We will now begin the question and answer session. Our first question comes from Doug Irwin with Citi. Please go ahead.

Speaker 4

Excellent question. I just wanted to start with Permian volumes. We saw some really strong results in the mid-1 this quarter. If you look at the Delaware, it lagged a little bit. I'm just curious if you ran into some of the same issues around extreme heat and Compression constraints that we heard some peers talk about this cycle, and if so, if this issue has been resolved.

Speaker 2

Hi, Doug. It's Avigal. Thanks for jumping on the call. And we are not going to be specific on the numbers, but we are going to give you some Highlights. We've seen the Permian Basin, our DPG legacy gathering system is performing very well, And we are very pleased with the acreage we have and our investment over there over the yields are yielding us very nicely.

Speaker 2

That investment is absolutely going as we wanted. On the DDG, former Dreiber, we Also seeing a very stable operation. We are pleased with the progress of the team and the assets and it's trending in the right direction for sure. I allowed Odeli to give you more color, if you can.

Speaker 5

Yes. Thank you, Avigail. And Doug, good to hear you again. This is Odeli. So talking about those two segments you mentioned around the Midland Gathering, as you've seen, we got our volume almost double than last year and also exceeded Last quarter, this is basically benefiting us from the previous capital deployment we had both this year and also last year.

Speaker 5

So we start to benefit Those on the volume side in DPG and also the associated infrastructure is very solid close to our refinery and what we've built in And to your question around the DDG around the Delaware gathering assets, we still Have been able to perform better than last year, but slightly lower than last quarter. And this is I think something that you probably also heard from others as we face both us and also our producers as well and also the area with a lot of issue from a weather situation, both on the storm impact and also excessive heat during this time that impact both electricity and also availability for producers. So that's something

Operator

This concludes our question and answer session. I would like to turn the conference back over to Abhikal SORIC for any closing remarks.

Speaker 3

Thank you.

Operator

We were having technical difficulties, and I am bringing in Abigail Sorek, for any closing remarks.

Speaker 2

Thank you, Dave, for the call. Thank you to the team over here in the room That's prepared and worked so hard. Thank you for the Board of Directors, our employees and the unitholders. And we are very excited about where DKL is and looking forward talking to you again next quarter. Thank you, Dave.

Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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Delek Logistics Partners Q3 2023
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