Delek Logistics Partners, LP Q2 FY2023 Earnings Call

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

Welcome to the Delek Logistics Partners second 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. I’ll now turn the call to Avigal for opening remarks.

Thanks, Rosy. Delek Logistics Partners delivered another great quarter with $93 million of EBITDA. Delek Logistics has been able to provide consistent results and stable cash flow. We are encouraged by our positive outlook. As production in the Permian Basin ramps up, we continue on our promising growth track with increased scale and efficiency. We are proud to say that our acreage is outperforming average growth in the basin. The Midland Gathering System volume has more than doubled from a year ago, and we are excited to identify more value-add opportunities with our producers. Our Delaware Gathering assets are performing well and meeting our expectations. We now expect to exceed a $100 million quarterly EBITDA run rate by Q4 of this year. On July 26, our Board of Directors reported a 5.1% increase in the quarterly distribution from a prior year to $1.035 per limited partner unit for the second quarter of 2023. We are committed to continuing to increase the quarterly distribution. I will now hand it over to Reuven.

Thank you, Avigal. Total EBITDA for Logistics was $93 million for the second quarter of ‘23 compared with $65 million for the same period in ‘22. For the second quarter of ‘23, distributable cash flow was $60 million, and the DCF coverage ratio was 1.34x. For the Gathering and Processing segment, EBITDA this quarter was $53 million, compared with $38 million in the second quarter of ‘22. The increase was primarily driven by strong contributions from the Midland Gathering System as well as Delaware Gathering. Throughput for the Midland Gathering averaged approximately 222,000 barrels per day for the second quarter of ‘23, more than twice the average 100,000 barrels per day in the second quarter of ‘22. The Wholesale Marketing and Terminaling segment had an EBITDA of $28 million for the quarter, compared with $90 million in the second quarter of ‘22. The increase was due to higher terminaling throughput in East Texas and higher gross margin in our West Texas operation. The Storage and Transportation segment had an EBITDA of $15 million this quarter, which is in line with last year's results. Lastly, the Investment in Pipeline Joint Venture segment contributed $7 million toward the second quarter of ’23, flat with the second quarter of ‘22. Moving on to capital expenditures, for the second quarter of ‘23, capital spending was $19 million, most of which was for growth projects, namely advancing new connections in the Delaware and Midland Gathering Systems. For 2023, we maintained our capital outlook of $81 million. With that, we can open the call for questions.

Since we have no questions at this time, we will turn the conference back over to Avigal Soreq for any closing remarks.

So I want to thank the executives around the table, our employees, the board of directors, and you, investors, for another great quarter of DKL. We are very much committed to the path we are on. We see sustainable growth, and we are committed to running the course. We'll talk again in the next quarter. Thank you.

And this ends the conference today. Thank you for attending today's presentation. You may now disconnect.