Delek Logistics Reports Fourth Quarter 2023 Results and 2024 Capital Program

Fourth Quarter

Net income attributable to all partners of $22.1 million
Quarterly EBITDA of $86.1 million, adjusted EBITDA of $100.9 million
Distributable cash flow of $64.6 million, DCF coverage ratio of 1.40x
Delivered 44 consecutive quarters of distribution growth with recent increase to $1.055/unit

2023 Full Year

Net income attributable to all partners of $126.2 million
EBITDA of $370.3 million, adjusted EBITDA of $385.1 million
Distributable cash flow of $248.2 million, DCF coverage ratio of 1.37x
Improved leverage ratio to 4.34x from 4.89x at year-end 2022
Grew Midland gathering & processing volumes nearly 80%
Rewarded unitholders with continued distribution growth

2024 Capital Program

2024 capital expenditures are estimated to be approximately $70 million

BRENTWOOD, Tenn., Feb. 27, 2024 /PRNewswire/ — Delek Logistics Partners, LP (NYSE:DKL) (“Delek Logistics”) today announced its financial results for the fourth quarter 2023, with reported net income attributable to all partners of $22.1 million, or $0.51 per diluted common limited partner unit. This compares to net income attributable to all partners of $42.7 million, or $0.98 per diluted common limited partner unit, in the fourth quarter 2022. The decrease in net income attributable to all partners was driven by higher interest expense and a fourth quarter 2023 goodwill impairment. Net cash provided in operating activities was $114.7 million in the fourth quarter 2023 compared to net cash used in operating activities of $105.3 million in the fourth quarter 2022. Distributable cash flow was $64.6 million in the fourth quarter 2023, compared to $51.4 million in the fourth quarter 2022.   

For the fourth quarter 2023, earnings before interest, taxes, depreciation and amortization (“EBITDA”) was $86.1 million.  Excluding the goodwill impairment, adjusted EBITDA was $100.9 million compared to $92.5 million in the fourth quarter 2022. 

“I am pleased to say that Delek Logistics has exceeded quarterly earnings goals, and surpassed last year’s strong performance,” said Avigal Soreq, President of Delek Logistics’ general partner. “We saw substantial growth from new connections in our Midland gathering operations, further validating our strong position in the Permian Basin.  The dedication of our workforce to having safe and reliable operations also contributed to our success.  I’m proud of the team that has gone without a lost time injury 4-years in a row and counting.  We are excited for Delek Logistics’ future and numerous growth opportunities. The business looks to utilize capital investments in 2024 to support customer growth and expand upon existing assets.”

“In January, the Board approved the 44th consecutive increase in the quarterly distribution to $1.055 per unit. Delek Logistics has a strong track record of delivering value to unitholders. We feel confident in our ability to maintain competitive distributions to our investors as we head into 2024,” Mr. Soreq concluded.

Distribution and Liquidity

On January 24, 2024, Delek Logistics declared a quarterly cash distribution of $1.055 per common limited partner unit for the fourth quarter 2023. This distribution was paid on February 12, 2024 to unitholders of record on February 5, 2024. This represents a 1.0% increase from the third quarter 2023 distribution of $1.045 per common limited partner unit, and a 3.4% increase over Delek Logistics’ fourth quarter 2022 distribution of $1.020 per common limited partner unit. For the fourth quarter 2023, the total cash distribution declared to all partners was approximately $46.0 million, resulting in a distributable cash flow (“DCF”) coverage ratio of 1.40x.

As of December 31, 2023, Delek Logistics had total debt of approximately $1.70 billion and cash of $3.8 million. Additional borrowing capacity, subject to certain covenants, under the $1.05 billion third party revolving credit facility was $269.5 million. The total leverage ratio as of December 31, 2023 of approximately 4.34x was within the requirements of the maximum allowable leverage ratio under the credit facility.

Consolidated Operating Results

Fourth quarter 2023 Adjusted EBITDA was $100.9 million compared with $92.5 million in the fourth quarter 2022. The $8.4 million increase reflects higher contributions from the Midland Gathering and Delaware Gathering systems, terminalling and marketing rate increases, as well as continued strong throughput on joint venture pipelines.  The increase was partially offset by higher operating expenses driven by the growth in operations.

Gathering and Processing Segment

Adjusted EBITDA in the fourth quarter 2023 was $53.3 million compared with $48.1 million in the fourth quarter 2022. The increase was primarily due to higher throughput from Permian Basin assets.

During the fourth quarter 2023, Delek Logistics recorded a $14.8 million impairment charge related to the Delaware Gathering reporting unit within the gathering and processing segment. The impairment was primarily driven by the significant increase in interest rates and timing effect of system connections with producer customers.  The Partnership’s long-term outlook of its Delaware Gathering system remains unchanged.

Wholesale Marketing and Terminalling Segment

Adjusted EBITDA in the fourth quarter 2023 was $28.4 million, compared with fourth quarter 2022 Adjusted EBITDA of $23.3 million. The increase was primarily due to higher terminalling utilization.

Storage and Transportation Segment

Adjusted EBITDA in the fourth quarter 2023 was $17.5 million, compared with $16.1 million in the fourth quarter 2022. The increase was primarily due to increased storage and transportation rates.

Investments in Pipeline Joint Ventures Segment

During the fourth quarter 2023, income from equity method investments was $8.5 million compared to $9.0 million in the fourth quarter 2022.

Corporate

Adjusted EBITDA in the fourth quarter 2023 was a loss of $6.9 million compared to a loss of $4.0 million in the fourth quarter 2022.

Capital Program

Delek Logistics Partners expects the 2024 Capital Program to be approximately $70 million, with approximately $20 million for sustaining and regulatory projects and $50 million for growth projects. The 2024 Capital Program compares with the 2023 Capital Program of $74 million, which includes $7 million of capital partially funded by producers. Excluding these proceeds, 2023 capital expenditures were $81 million.

2024 growth capital will be to advance new connections in both the Midland and Delaware gathering systems, enabling continued volume growth at the Partnership.

Fourth Quarter 2023 Results | Conference Call Information

Delek Logistics will hold a conference call to discuss its fourth quarter 2023 results on Tuesday, February 27, 2024 at 11:30 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.    

About Delek Logistics Partners, LP

Delek Logistics is a midstream energy master limited partnership headquartered in Brentwood, Tennessee. Through its owned assets and joint ventures located primarily in and around the Permian Basin, the Delaware Basin and other select areas in the Gulf Coast region, Delek Logistics provides gathering, pipeline and other transportation services primarily for crude oil and natural gas customers, storage, wholesale marketing and terminalling services primarily for intermediate and refined product customers, and water disposal and recycling services. Delek US Holdings, Inc. (“Delek US”) owns the general partner interest as well as a majority limited partner interest in Delek Logistics, and is also a significant customer.

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 significant portion of Delek Logistics’ revenue 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; risks and uncertainties related to the integration of the 3 Bear business following the recent acquisition; 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; projected capital expenditures, 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; projected benefits of the Delaware Gathering acquisition; 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. 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 consolidated statements of income.
Adjusted Earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) – EBITDA adjusted to exclude the impairment of goodwill associated with our Delaware Gathering reporting unit.
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.
Distributable cash flow, as adjusted for transaction costs, or Distributable cash flow, as adjusted – distributable cash flow adjusted to exclude significant, infrequently occurring transaction costs.

Our EBITDA, Adjusted EBITDA and distributable cash flow measures are non GAAP supplemental financial measures that management and external users of our 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 and Adjusted EBITDA, financing methods;
the ability of our assets to generate sufficient cash flow to make distributions to our unitholders on a current and on-going basis;
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.

We believe that the presentation of EBITDA, Adjusted EBITDA and distributable cash flow measures provide information useful to investors in assessing our financial condition and results of operations and assists in evaluating our ongoing operating performance for current and comparative periods.  EBITDA, Adjusted EBITDA and distributable cash flow should not be considered 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.  EBITDA, Adjusted EBITDA and distributable cash flow 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. Additionally, because EBITDA, Adjusted EBITDA and distributable cash flow may be defined differently by other partnerships in our industry, our definitions of EBITDA, Adjusted EBITDA and distributable cash flow may not be comparable to similarly titled measures of other partnerships, thereby diminishing their utility.  For a reconciliation of EBITDA, Adjusted EBITDA and distributable cash flow to their most directly comparable financial measures calculated and presented in accordance with U.S. GAAP, please refer to “Results of Operations” below.  See the accompanying tables in this earnings release for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures. 

Full story available on Benzinga.com