and reducing our overall cost structure this quarter reinforced the importance of discipline in maintaining safe and reliable operation and making thoughtful capital allocation decisions this is especially important during periods of strong margins we will continue to apply the same prudent approach across our business capital deployment and corporate culture as we are creating sustainable long-term shareholder value as i mentioned during the last earning call the event in the middle east and east europe have created many ripple effects in the markets we continue to see steep recordation swing in crude differentials and shortage of transportation fuels in the current environment we continue to believe that access to crude high distillate yield and most importantly, the ability to respond quickly to changing in the market condition are critical to maintaining operational flexibility and delivering strong performance. We plan to continue navigating this environment with measured approach by, first, mitigating risk, and second, capturing the opportunities offered by the market. Now, I will cover some of our second quarter highlights and strategic initiatives in detail. Starting with refining, our refining system operated well, demonstrated by all four refineries. BigSpring has been running to our expectation since its turnaround. Post-turnaround, we are seeing improved reliability, higher crude slate flexibility, improvement in overall product yields, and higher octane and blending capabilities. We are very pleased with this improvement and are looking at finding additional opportunities to further improve this important asset in our portfolio. With no planned turnarounds for the rest of the year, our refining system is well positioned to capture the strength in the market. Moving to EOP, enterprise optimization plans continue to drive significant value. As a reminder, our enterprise optimization plan targets to increase our cash flow by at least $220 million on an annual run rate basis. During the second quarter of 2026, we estimate approximately $60 million of EOP contribution to our P&L. We are currently working on further advancing EOP to create an additional meaningful step change to our free cash flow profile. We'll provide more details on this in the near future. Our Sum of the Part initiative also continues to progress with raising strength of our midstream business. DKL today reaffirmed its 2026 EBITDA guidance of $520 million to $560 million. The tailwind we have been seeing in D.K.L. business continues to rise, and we are working hard to capture these opportunities. D.K.L. is close to completing its comprehensive gathering, treatment, processing, and acid gas injection solution. The sour gas solution will provide D.K.L. the ability to fully capitalize on its growth opportunities in the dollar basin and maintain its best-in-class EBITDA growth and yield. In 2026, on a performer basis, we continue to expect DKL, third-party EBITDA, to exceed 80%. This level of economic separation is a cornerstone of our sum-of-the-part strategy and continues to bring us closer to our deconsolidation goal. DKL is on the right path and we continue to work hard to write the next chapter in its gross story. As mentioned last quarter, we are pursuing a proactive strategy to manage our obligation under the RFS. The SRE provision in the RFS served the important purpose of mitigating the impact felt on small refineries from the RFS burden. RVO costs remain elevated, and the absence of SREs created a significant burden on small refineries like us. We expect the EPA to continue to provide relief to small refineries for the year of 2025 and beyond. Finally, we believe that the current administration, Senate, Congress, and EPA realize the importance of small refinery exemptions, not only for the refineries which qualify under the program, but also for the local communities they serve. The final piece of our strategy is being shareholder-friendly and having a strong balance sheet. During the quarter, we paid approximately $16 million in dividend and $20 million in buybacks. Our strong balance sheet, improved Reliability, EOP, and confident in our outlook continue to support disciplined approach to capital allocation through continued dividend and buybacks. We remain committed to a balanced and disciplined capital allocation strategy and look forward to continuing to reward our shareholders. In closing, thank you for our team for the hard work and dedication. I'm immensely proud of the progress DELEC has made, and I look forward to building on the momentum for the remainder of the year and beyond. Now, I will turn the call over to Robert, who will provide additional color on the quarter.

Thank you, Abigail. For the second quarter, DELEC reported net income of approximately $170 million, or $2.71 per share. On an adjusted basis, net income came in at approximately $344 million, or $5.48 per share, with adjusted EBITDA of approximately $639 million. Turning to slide four, we provide the breakout of adjusted EBITDA and adjusted EPS for the quarter. When we exclude the 50% RVO adjustment, adjusted EBITDA was approximately $490 million, and adjusted EPS was approximately $3.64 per share. Slide five walks through bridge and adjusted EBITDA, excluding the 50% RVO adjustment from the first quarter to the second quarter. The breakdown shows that there were three main drivers for the increase in EBITDA. Quarter-over-quarter, performance was led by stronger refining margins, helped by our robust distillate yields, along with higher throughput following the successful completion of the turnaround at Big Spring. In supply and marketing, we saw a $60 million increase versus the prior quarter. This improvement was driven primarily by wholesale marketing, which contributed $25 million to the improved results, partially offset by a $3 million reduction in asphalt contribution with the remainder of the change coming from supply. Our logistics segment posted its best quarterly results in our history, delivering approximately $144 million in adjusted EBITDA as momentum continued across all three of our Permian Basin offerings, crude gas and water. Let's move to slide 15 for a review of cash flow. Cash flow from operations was $263 million for the quarter. This reflects net income for the period, adjusted for non-cash items, along with $138 million net outflow from changes in working capital. Investing activities was a use of $176 million, reflecting our continued investment in growth. This includes second quarter capital purchases of $61 million at Delic Logistics, primarily for growth projects, and $55 million of purchases and refining, along with a quarter-over-quarter reduction of capital accruals, primarily related to the payments on the final expenditures of the Big Spring turnaround, which we completed safely, on schedule, and on budget. Financing activities was an outflow of $82 million, which reflects the paydown associated with the successful refinancing of our term loan from $920 million down to $850 million. It also includes approximately $16 million in dividend payments and approximately $22 million in DKL distribution payments to public unit holders. Slide 16 breaks out our net debt position between DELIC and DELIC Logistics. On a standalone basis, excluding DELIC Logistics, DELIC's net debt declined by $72 million, driven primarily by the term loan paydown completed as part of the successful refinancing of that facility. Now, turning to slide 17 on our outlook for the third quarter, our throughput guidance is as follows, Tyler 72 to 77,000 barrels per day, Eldorado 78 to 83,000 barrels per day, Big Spring 68 to 73,000 barrels per day, and Crott Springs 78 to 83,000 barrels per Taken together, this implies a system throughput target of 296 to 316,000 barrels per day for the third quarter. In addition to the throughput guidance, for the third quarter of 2026, we expect operating expenses to be between $220 and $230 million, G&A between $50 and $55 million, and D&A to be between $110 and $120 million. Additionally, beginning this quarter, we will provide interest expense guidance at both the DKL and standalone DK levels. This added disclosure reflects our continued focus on economic separation and capital discipline and underscores the progress we have made on both fronts. We expect net interest expense between $75 and $85 million, with DK contributing between $28 and $33 million, and DKL contributing between $47 and $52 million. With that, we will now open the call for questions.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. if you would like to ask a question please press star one to raise your hand and to withdraw your question press star one again we ask that you pick up your handset when asking a question to allow for optimum sound quality if you're muted locally please remember to unmute your device your first question comes from the line of doug leggett with wolf research your line is open please go ahead um thanks for taking my question this is ayush gupta on behalf of doug laguette at wolf research he sends his apologies for not making the call today um congrats on a great

quarter i have a few questions and i'll start off with the sres so can you offer any update on the current timing of 2025 and specifically can you clarify if sres are awarded what are the restrictions on value can you sell 2025 credits at 2026 prices and related you recently were awarded cross springs having previously being denied can you share the process that led to the change in decision and implications for what it might mean across the portfolio for 2026 point forward thanks yeah first of all thank you for joining us and please send our regards to Doug.

So let's start with a bigger discussion about small refinery exemptions. First, a small refinery exemption related to 2025, it's not a delicate situation. It's an industry, it's probably impact like, I would guess around 40 refineries across the nation, and they probably impact half of the industry. So it's well beyond us. The issue of small refinery exemptions, and I want you to remember one line here is disproportionate economic harm and the idea is to maintain high paying job local communities and the affordable fuels it supports the administration energy dominance the administration understand it very well Senate Congress and EPA and all understand that it needs to be resolved in a timely manner that allow us to comply as needed and Mohit I would like to chime in to give more color around this.

Thanks, Avigal, and thanks, Ayush, for joining the call. Avigal is absolutely right. The SRE issue is about disproportionate economic harm, and you rightly pointed out in your question, the grant for KSR reflects that. Like, you know, our petition was strong, and EPA and the DOE, they both agree that, you know, we have disproportionate economic harm because of RFS, and that's why our petition was overturned. So as far as we are concerned, we are very excited about our 2025 petitions as well in terms of the strength of them, and we are looking forward to that announcement.

Perfect. Thank you. And I have a follow-up. Your refining probability is generally higher cost versus peers, and the cost allocated to DKL, can DK hedge margin strength, and what could that really look like?

Yeah, thank you for that question. Generally speaking, some of our investor thesis in getting into the refinery industry and for DK shares specifically is to get exposure to crack spread. So we going ahead and hedging debt is taking some of their thesis investment. So we are not doing that in any meaningful way. And we want to make sure that our investors are well rewarded and awarded for investing in our share, both on what we do on the capital allocation and not blocking the teasers around it. I hope it makes sense to you.

Thanks, Abigail. Thank you.

Your next question comes from Alexa Brenna with Goldman Sachs. Your line is open. Please go ahead.

Hey, good morning, team, and thanks for taking our question. We wanted to ask first, can you just talk a little bit more about your capital allocation strategy? You've got a good good amount of tailwinds coming in from a cash perspective. So how should we think about that, whether that be buybacks, a dividend, or any other M&A consideration, or any other allocation consideration?

Yeah, absolutely. Alexa, first of all, thank you for joining us call, and thank you for your support. So I will be very crisp around that, right? We had a very clear capital allocation strategy that they're working very well for us. We maintain dividend through the cycle very well towards that. And then we have a balanced approach between taking care of our balance sheet and buyback. We need to put things in perspective. We put around 10% of our company since the beginning of 2025. And we are one of the leading companies among our peers around the returning capital to our investors. We believe that being friendly to our investor and giving a good return to their investment is cornerstone in our strategy, and we'll keep doing that going forward.

That's helpful. And then just on a follow-up, can you talk a little bit more about EOP? Any places that it's surprising to the upside? And as you kind of think about, you always talk about it being ongoing and the next leg. Like, where are areas for further improvement?

Yeah, absolutely. EOP, it's a big deal, very big deal in our shop. And, you know, we spoke about it many times, you and I, how proud we are about the fact that the entire organization is behind it and showing a very good result. EOP, it's not a project, it's a lifestyle. That's something we do. We push the entire organization and the organization love it and come up with more and more idea initiative as we speak. You need to remember, and I'm sure you know that, that the whole point of EOP is to create a free cash flow at all market conditions in DK. And we helped you during the presentation put together, put a slide that show what happened in terms of EBITDA and free cash flow in a similar market condition and how well it positioned us going forward. Obviously, we started the program with around $100 million. We more than doubled that as we stand now. And I mentioned that in my prepared remark, I'm going to reiterate that, we are not stopping here, not even closely. We are working more about the more exciting things around EOP, and you need to stay attuned and expect some more good news to come after that. Mohit, why don't you chime in?

Yeah, and Alexa, I think Abigail is absolutely right. So, you know, from an upside standpoint, our confidence in our free cash flow profile on a mid-cycle basis is increasing. And we show in our slide deck around $650 to $700 million in free cash flow, including decaled distributions. And I think our confidence in that free cash flow, which is close to like a 15% to 20% free cash flow yield at current prices, is increasing. So we are very happy about EOP. As Avigal pointed out, we are very happy about the next phase of it. and we are very excited about the free cash flow situation that we have coming along for us post-EOP environment.

Thanks for the caller. We'll turn it back.

Your next question comes from Manav Gupta with UBS. Your line is open. Please go ahead.

Morning, guys. I'll pivot a little bit to midstream. You have a very strong sour gas presence. Can you give us an update on, in terms of completion of the Libby gas complex, when do you expect to get completed, and then should we expect a ramp into the fourth quarter and year-end, and how that further increases your position in the Permian sour gas opportunity?

Manav, good morning. Thank you for joining us. It's a great question. We are very excited about the progress we are doing at D.K.L. D.K.L. today on a performable basis is 80 percent third party. We have a clear, clean strategy of being a premier provider of crude, water and gas in the most prolific area of the Perman Basin. We have a very good growing engine, which is the gas that you just mentioned. We are very close to completing it. We see increased quarter over quarter on the gas we're processing. And lately, Mark took himself that responsibility of leading D.K.L. together with Chris, as I mentioned on my prepared remarks. So that's a very good story for us, and we are very excited about the generation. It's both showing on the D.K. and the D.K.L. unit and share. So, Mark, why don't you take it from here?

Yeah, thanks, Avgo. I'm going to have thanks for the question. What I'll start with is both our plants are running well, both Libby 1 and Libby 2, and as you know, we've discussed in the past, we're seeing increasingly more sour gas production from our customers versus sweet, and this trend does continue. And as you know, we've added not only the Libby II processing capacity, we've completed our AGI well and are now nearing completion of our sour gas gathering and compression offering, providing us with a much needed and unique sour gas solution in the Northern Delaware, which will help our customers continue to grow their production because we're, we're capable of handling that.

And look, we do see this driving a step change in our gas volumes as we move through the rest of the year and it positions us very well for future growth in the region. perfect my quick follow-up is a little bit on the refining macro uh given the amount of global capacity that's down do you expect the product markets to remain tight and if you could provide some commentary on how given your high diesel yield it really benefits you guys thank you yeah absolutely and that the topic came and obviously you will know was very well discussed over many calls.

And the high level comment I will provide is we have like 5 million barrels that are off capacity all in. Obviously, we believe that once the event ends, it's going to take a few quarters probably to everything to normalize. So it's not going to end very quickly in terms of the fact that we are short of a refined product across the world, actually. We obviously see a steep accudation versus historical standard. We have wide swing in crude differentials. And we believe that the structural shortage of product is going to last a little bit longer. Obviously, larger ENP are more disciplined and smaller and smaller are. We show an increase in terms of production. We saw the rigs count increase by around 20 since the event started, which is also another tool in our toolbox. And we obviously saw a brand TI widening in lieu of the different country risk we see now versus beginning of the year. So what does it mean for us? Let's bring it back home. We have a very good access to product, both Gulf Coast and the Mid-Continent, which is a positive. We have a highest among our peers. We provide you a slide, distillate and jet yield. And that's very good for us to be outside of turnaround cycle and be able to capture that. We have obviously access of domestic crude, which doesn't put us in working capital issues or in any other supply problems. And we have a very good midstream permanent exposure that allow the holder of DK share to enjoy both. So we are very well positioned around it, and we are very happy about where we are. Mohit, you want to chime in?

Yeah, Avikal, I think you covered a lot of ground there. I just want to emphasize some of the points that you talked about specifically to us. You're absolutely right with this macro environment that we have seen. You've seen that our producers have started at least completing their wells, and production outlook has increased both in the Midland and in the Delaware Basin. Mark talked about that, which is beneficial for our midstream business, and this is obviously very beneficial for our refining business as well because they have access to these barrels. Flexibility is the name of the game that Avikal talked about. So having high display yield, high jet yield, having different sourcing patterns, that really helps us. And last thing I really want to talk about is that there are a lot of product pipelines being talked about, which is going to clear our markets. That's also going to have a very positive impact, which has nothing to do with the crisis, but that is some of the macro trends that we are seeing in our markets. Hopefully that answers your question.

Thank you so much.

Your next question comes from Jason Gableman from TD Cowan. Your line is open. Please go ahead.

Yeah, hey, thanks for taking my questions. I wanted to go back to the SREs and specifically on crops and the recent award. How should we think about monetizing that award and the magnitude of cash you'll think you could get from that? And where is the priority in terms of where that cash goes?

Yeah. First of all, Jason, thank you for joining us on our call. We're going to stick to our capital, very strict capital guidance we provided about the dividend to maintain it all cycle and balance the approach between taking care of the balance sheet and buy back our shares. As Mohit alluded earlier, even in a mid-cycle basis, we are showing 600 to 700 free cash flow, which is 15% to 20% yield. So there is a lot of room in our share price to go up. We don't have any plan to have excess cash on our balance sheet, so I want to make it very clear on that. We are not going to hold excess cash just for the sake of holding it. So all of that coming together, it's pretty clear where it's going to come from this point on. Our strategy is to stay always with compliance, and I will let Mohit finish it.

Yeah, and Jason, as Abigail just pointed out, we don't have a strategy of holding excess cash on our balance sheet. So, you know, you've seen our history. We've done a lot of return of capital to shareholders, and that's something that will continue. As far as KSR and the petition is concerned, we are very happy with the outcomes and this shows the point around disproportionate economic harm that I was making earlier. As far as we are concerned, that reflects well as far as our petitions for 2025 are concerned and we are excited to see what EPA says. It's important to understand for people like us who stay in compliance, we buy rents and and you know this is a return of those rents back to us so it is important that it's not like you know somebody's giving us cash it's the cash that we have already invested in is being returned to us okay i yeah i guess i'm wondering is there any friction time in terms of receiving those rings and then monetizing them or is that a pretty immediate event yeah so jason i think you've gone through this rodeo based upon you know how this plays out last time you a very good strategy around this we have a very good team who manages our rent purchases and disposals if any required so we have a very good strategy around it we are not concerned about it but you know as i said sres is an issue around disproportionate economic harm and we are glad that epa took the right decision okay and then my uh follow-up is just on kind of near-term uh refining margin capture dynamics.

Obviously, 2Q, you add a pretty steep backwardation. It seemed like the curve is eased here in 3Q. Should we expect that to be kind of a one-to-one benefit in terms of kind of the backwardation in 2Q going to easing in 3Q flowing to your refining margin? Thanks.

Yeah, that's pretty much it. You got it right. So a dollar in the The valuation is dollar that doesn't reflect itself into the crack and vice versa. You are absolutely right. We see a pretty flat curve now. Maybe on the front, we see like around buck 50 or something like that. So that's a pretty flat versus the six, seven dollars. Even more we have seen in Q2. And that's obviously reflecting the crack spread. So you're absolutely right.

All right. Thanks.

Thank you.

Your next question comes from Joe Lage with Morgan Stanley. Your line is open. Please go ahead.

Hey, good morning, Avigal and team, and thanks for taking my questions. So I wanted to start on the sum of the parts side. Could you just talk through how you're thinking about the current deconsolidation and value unlock options here? You've done a good job with bolt-ons and organic growth in the past at DKL, and the currency at DKL has certainly strengthened this year, so I'm curious about the M&A landscape as well.

Yeah, absolutely. Absolutely. So I will start by saying the journey of some of the parts. We need to remember the objective is to make sure that the value that we are creating in DKAL show both in the share price and unit price. We obviously made progress with that, and there is more steps that we are doing as we speak. What we need to remember here that today we are standing with around 80% third-party income on the D.K.L. side. On a performer basis, we are standing in a very, very good location, both on the Delaware side and in the Midland side. And Mark gave his remark about the gas plant, which is a very good, unique opportunity. We obviously have a very good asset quality as we stand now on all aspects, DPG on the crude side, Libby on the gas side, and also the former H2O and Gravity that we bought them around five to six times, probably the valuation now is around 10, I would guess. Another dynamic in the market, Joe, that you're probably aware of, that we have seen the recent transactions are low to mid-tins, that if you're doing the intrinsic value, there is very high upside about where we are. As I said in the past, all options are on the table and we are promoting one or more of them, either the decals sell, asset sell, obviously continue doing a bolt-on acquisition or do a buyback between DK and DK, like we did in the past, which is to remind you of free tax exercise. In terms of the M&A itself, the market is very good for sellers today, and you can take that comment wherever you believe to. On the top of that, we are not going to do a position, if it's not accretive, to leverage coverage ratio, and it's going to be strategic. So we are looking at all options and we are staying very, very tuned.

Thank you. That's helpful. And then shifting to refining just on the utilization side. So it looked like the system ran well overall across all of the refineries. And you've had some initiatives and turnarounds in recent years to improve the competitiveness of the assets. As we think about the path forward, is there more work to conduct across this system, or is it in a place now where it's more about just operational execution?

Yeah, I will tie two answers together. The one answer, we are obviously happy about where we are in terms of reliability and the progress we have done. We have completed the successful turnaround on budget, on time, and most importantly, safely. So we are happy about that. But now I'm going to take the other portion of the answer is an enterprise optimization plan is well tied into that. And Joe, you know that we are never going to be happy about where we are with EOP. We made progress to $220 million, $60 million this quarter. But the entire organization, and it's coming from all levels, are fully committed to write the next chapter of EOP. And don't be surprised if we'll come back to you quickly with another level of improvement that we see, either in the gross margin, in the product we make, in the location we are selling them, in the more area of the business. So stay tuned. Thank you.

Your next question comes from Matthew Blair with TPH. Your line is open. Please go ahead.

Great. And good morning, everyone. Thanks, Matt. thanks for coming um so uh for marketing and supply in the second quarter apologies if i missed this but do you have the breakout that that includes the details on you know wholesale marketing asphalt and and your supply activities and then for the the third quarter do you have any general commentary on on the trends that you're seeing you know for example with with crude prices moving back up. Would that be a headwind to asphalt so far in Q3?

Go ahead, Moit. Yeah, Matt. Thanks for the question. So as we've talked about multiple times, our supply and marketing line item, which we call internally the DKTS, is doing very well. You know, we have new leadership in place. We have done, you know, as we've talked about multiple times, we have tried to improve our wholesale business, our asphalt business, trying to create more value out of it. And you saw the results in the second quarter versus where we were in the first quarter. Results improved markedly, despite all the volatility that we are seeing, which you're also referring to as far as your ask for the 3Q forecast is concerned. Wholesale is doing very well. We are very optimistic about the improvements that we've been making, and they should continue in the third quarter as well. Asphalt, we'll still have to see as to how prices settle. Prices have seen a lot of volatility, but as far as even asphalt is concerned, you should have some catch-up based upon the time that has passed since the start of the conflict, but it's all going to depend upon the volatility. So overall, we are very happy with how the business is performing, both in wholesale and asphalt, and we expect improvements all along. We just cannot talk about the volatility around it.

Okay. Sounds good. And then on the SRE proceeds, could you just clarify? So for like 2025, I think we're estimating that if you receive partial waivers at all four-year refineries, it's just about $600 million. If you receive full waivers, it would be double, like $1.2 billion. is there a tax that you would have to pay on that just because you bought RINs at a lower price and then theoretically be selling them at a higher price? So do you have any estimates on what a potential tax impact might look like?

Yeah, so obviously we are not going to give a specific guidance on that. We still need to make sure 2025 come as we expected and we're going to follow the capital allocation strategy that we have, and let's stay tuned around that, and we are very optimistic about those partitions. Mohit, why don't you finish?

Yeah, Avikal, thanks for that, and Robert will answer the exact strategy around tax management, which is not just tied to SREs, but as far as your comments were concerned, So we have given the number out for total RBO obligation in 2025 was $468.4 million. And that was around a ring price of a dollar a gallon. So you can make your own assumptions beyond that. That was the 2025 pricing in that number. As far as our overall tax allocation strategy is concerned, we're not going to discuss it on the call. But Robert, do you have any comments to make on that?

No, I think Avigol addressed it right. I think, you know, we have a lot of levers that we can play to minimize our tax expense on this and obviously the current economics and profitability that the business is seeing. So nothing to model or share right now, but, you know, tax minimization is a key strategy of ours, and we'll employ that on any SREs that we're granted.

Yeah, it's just a whole, you know, it's just not tied to the SREs, but overall tax minimization is our strategy. And for us, we are very happy about, you know, our cash flow situation and where we are in the cycle right now.

Great. Thank you.

Thank you. There are no further questions at this time. I will now turn the call back to Abigail Sarek, CEO, for closing remarks.

So I want to thank my colleague here around the table for another great quarter. I want to thank the board of directors for trusting us, to thank you, the investors, for sticking to the story and supporting us. and most importantly to our employees who make this company the great company we are privileged to manage. We'll talk again in the next quarter and have a safe day.

This concludes today's call. Thank you for attending. You may now disconnect.