Good day. And welcome to the Delek Logistics Partners First Quarter 2023 Conference Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Rosy Zuklic. Please go ahead, ma’am.

Good morning. And welcome to the Delek Logistics Partners first quarter earnings conference call. Participants on today’s call will include Avigal Soreq, President; Joseph Israel, EVP, Operations; Reuven Spiegel, EVP and Chief Financial Officer; and Odely Sakazi, 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 actual results to differ from our forecast. For more information, please refer to the risk factors discussed in the company’s most recently filed annual report on Form 10-K 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 of their respective date. Before I turn the call over to Avigal, I just want to remind everyone of a reporting change we made last quarter. After the 3 Bear acquisition, we reorganized our business and changed the naming of Delek Permian Gathering to Midland Gathering. The 3 Bear Gathering assets are now referred to as Delaware Gathering. Avigal?

Thank you, Rosy. Delek Logistics Partners started 2023 with another record quarter. Our logistics system did well, contributing to a record EBITDA of over $93 million. Delek Logistics continued to deliver a solid operational performance and generate strong cash flow. This is due to the investments we have made to develop our assets. As an example, compared with last year, we have more than doubled the volume in the Midland Gathering system. In addition, during the quarter, Delek Logistics continued its track record of a safe and reliable operation. As of the end of March, DKL employees and contractors have worked a combined 4 million man hours with zero lost time injuries. I am extremely proud of our employees and contractors who continue to focus on safety and achieve milestones. On April 28th, our Board of Directors approved a 4.6% increase in the quarterly distribution to $1.025 per limited partner unit for the first quarter. This marks 41 consecutive quarterly distribution increases for the partnership and we are committed to continuing this trend. This increase demonstrates our commitment to our unitholders and our confidence in our business. We continue to be optimistic about the outlook for the midstream business and believe Delek Logistics is well positioned to continue its strong track record of growth. I will now hand it over to Reuven.

Thank you, Avigal. Total EBITDA for DKL was $93 million for the first quarter of 2023, compared with $66 million in the same period in 2022. For the first quarter of 2023, distributable cash flow was $62 million and the DCF coverage ratio was 1.38 times. For the Gathering and Processing segment, EBITDA this quarter was $55 million, compared with $32 million in the first quarter of 2022. The increase was primarily driven by a strong contribution from the Midland Gathering System, as well as Delaware Gathering, which was added in June of 2022. Throughput of the Midland Gathering averaged approximately 222,000 barrels per day for the first quarter of 2023. This was up from an average of about 100,000 barrels per day in the first quarter of 2022. The Wholesale Marketing and Terminalling segment had an EBITDA of $22 million for the quarter and was in line with our prior year. The Storage and Transportation segment had EBITDA of $13 million this first quarter, compared with $11 million during the same period last year. The increase was primarily due to higher utilization and fees. And lastly, the investment in Pipeline Joint Ventures segment contributed $6 million toward the first quarter of 2023, compared with $7 million in the first quarter of 2022. The decrease was due to lower throughput caused by the Delek Tyler Refinery turnaround in the first quarter of 2023. Going forward, we expect JV contributions to DKL to revert to normal levels of approximately $8 million a quarter. Moving to capital expenditure. First quarter of 2023 capital spending was $36 million, of which $33 million was for growth projects, namely advancing new connections in the Delaware and Midland Gathering system. For 2023, we maintain our capital outlook of $81 million. With that, we can open the call for questions.

Thank you. The first question will come from Justin Jenkins with Raymond James. Please go ahead.

Great. Thanks. I think we covered a good bit already on the DK call, but just a couple of high-level questions, if I could, probably for Avigal. First on Permian operations, just with the commodity price moves and rig count changes that we have seen. Can we get an update on what you are seeing in the overall operating environment and what happens for the volume outlook for both of the systems?

Yeah. Absolutely, Justin. Thanks for taking the time to join us this quarter and thank you for the question. So, over the last year, we have seen the Midland total production going up, let’s say, 10%, and in our area, we have seen that more than doubled. And that’s a great trend, and we are extremely happy with the results we are seeing, and we are very pleased with the relationship we have with the producers and the amount of rigs we see on site. So, it’s really encouraging, the results and the trend that we are seeing around the operation. I think that on the area side of the DPG, we got it right. Very happy with the performance that we see on what used to be 3 Bear, now the Delaware area, and that went extremely well for us. That will present, Justin, you know, a good opportunity and a good way to continue increasing the distribution, 41 quarters in a row, and we have a long way ahead of us to keep that trend going.

Perfect. I guess, second one, even more broad than my first question, just how you see, Avigal, DKL evolving here in 2023 and maybe what the overall M&A backdrop looks like as well?

So, we have demonstrated in the 3 Bear area that there is a gap between the private market and the public market. We think that DKL as a unit is a great unit to hold because of the distribution, because of how solid it is and because of the consistency we have shown. I am sure that we will find a pathway forward to keep bridging those gaps and bring investors good distribution and great performance going forward, really encouraging and good times.

Great. Thanks, Avigal. I will leave it there.

Thank you.

The next question will come from Doug Irwin with Citi. Please go ahead.

Hey. Thanks for the questions. Just want to start with the balance sheet. Maybe if we look at leverage this quarter, it moved a little bit lower, but the absolute debt level actually increased a bit. Can you maybe just talk about where you see leverage trending throughout the year and maybe give a little context about how much of that is driven by EBITDA growth versus maybe the ability to pay down some debt later this year?

Yeah. Thanks for the question, Doug. I will start and Reuven will continue. So the only reason we did draw some funds for capital projects was due to the improvement in the EBITDA, which was a good decision. Going forward towards the year, Doug, we see the leverage ratio going down and we have a good pathway for that. So we are optimistic on that as well. Reuven, do you want to add anything?

Just a little bit of color, $36 million of CapEx in the first quarter was 45% of our annual plan and we expect to stay within that guideline of $81 million. So that was one reason for the draw, especially since most of it was for growth capital projects. We do expect the trend of the leverage ratio to continue to go down every quarter.

Okay. Great. That’s helpful. Then just one maybe around costs. I know you have outlined a cost reduction initiative at the DK level. Just curious where DKL might fit into that if you are seeing any potential opportunities for cost reductions at the MLP level as well.

So, thanks and that’s a great question. We are looking at all areas of the business, how we can make it more efficient and productive. Obviously, DKL is part of that, and I am sure that we will see some improvement there as well. Odely, do you want to say anything around that? You are leading that business.

No. For sure. Just to give a little bit of color, we are looking at a couple of opportunities to achieve efficiency later in the year, specifically from efficiencies and capabilities that we are implementing, which will be reflected in both the gross margin and also on the OpEx, to ensure that we are doing everything right and safely. So it will definitely be applied. Most of the capital, as Reuven mentioned, was utilized primarily in Q1. As we move forward, we will see that reflected in lower costs, which will result in improvements in OpEx as well.

Got it. That’s all I had. Thanks for the time.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Avigal Soreq for any closing remarks. Please go ahead.

Yes. I would like to thank our DKL employees first for their safe and reliable operation. The mark of 4 million hours without lost time injury is really remarkable and we are looking forward to reaching 5 million now. I want to thank our employees, our investors, Board of Directors, and everyone that took the time to join us today for the call. It’s really an impressive time to have best quarter after best quarter and we are really enjoying the ride. Thank you so much and we will see you soon next quarter.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.