Hello, and thank you for joining us. My name is Regina, and I will be your conference operator today. I would like to welcome everyone to the Delek Logistics Partners First Quarter 2024 Earnings Conference Call. I will now turn the conference over to Rosy Zuklic, Vice President of Investor Relations. Please proceed.

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 partnership'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 partnership assumes no obligation to update any forward-looking statements or information, which speak as of the respective date. I'll now turn the call over to Avigal for opening remarks. Avigal?

Thank you, Rosy. Delek Logistics Partners reported a strong first quarter. We once again exceeded $100 million in quarterly EBITDA. I'm pleased with our consistent performance. We saw continued strong performance from our Midland Gathering operations and our operations in the Delaware Basin have started to exceed our expectations on a consistent basis. This validates our strong position in the Permian Basin. We have come a long way with DKL. Delek Logistics started back in 2012 as a classic drop-down story. It has evolved into something bigger. We started to develop a third-party business back in 2016, focusing on the Midland and the Delaware Basins. Today, approximately 50% of our EBITDA comes from third-party business. Our growth efforts have been focused on the gathering and processing segment. Our Midland Gathering system has premier assets in the heart of the Midland Basin. We built this system organically. It's now gathering up to 230,000 barrels per day and has around 350,000 acres of dedicated acreage contracted until 2030. It's an attractive asset that provides a growth engine for our Midland midstream operation. Moving to the Delaware Gathering business, we built this business both inorganically and organically. The system provides complete crude, gas, and water gathering for our customers. We have significant growth opportunities in our system. On capital structure, we improved Delek Logistics' financial strength and flexibility. Reuven will speak to this. The debt and equity offering improved our liquidity to approximately $800 million. I'm proud of the team for successfully executing these transactions. In May, the Board approved the 45th consecutive increase in the quarterly distribution to $1.07 per unit. Delek Logistics has shown a strong track record of delivering value to our unitholders. We feel confident in our ability to maintain strong distributions to our investors. I will now hand it over to Reuven.

Thank you, Avigal. Before I start the financial highlights, I wanted to give a little color on the recent debt and equity offerings. The combination of the primary equity issuance and extending our debt to 2029 improved Delek Logistics' ability to pursue its growth plans through improved leverage and financial liquidity. It also increased the float in the units, attracting new investors and increasing the daily volume traded. As Avigal mentioned, we increased liquidity to approximately $800 million. This was about $300 million prior to these transactions. In addition, we reduced the leverage ratio to 4.01 from 4.34 last quarter. We see a pathway to continued improvement in the leverage ratio through the balance of the year. Moving on to the quarter results. The first quarter EBITDA was $101.5 million compared to $93.2 million in the same period of '23. Distributable cash flow was $68 million and the DCF coverage ratio was 1.35x. For the Gathering and Processing segment, EBITDA for the quarter was $57.8 million compared to $55.4 million in the first quarter of '23. The increase was primarily due to higher throughput from Delek Logistics Permian Basin assets. Wholesale Marketing and Terminalling EBITDA in the first quarter was $25.3 million compared to $22 million in the prior year. The increase was primarily from higher terminalling utilization. Storage and Transportation EBITDA in the quarter was $18.1 million compared to $13.4 million in the first quarter of '23. The increase was mainly driven by higher storage and transportation rates. Lastly, the investment in pipeline joint venture segment contributed $8.5 million in this quarter compared to $6.3 million in the first quarter of '23. Moving on to capital expenditures, the capital program for the first quarter of '24 was $15 million. Most of the spend in the quarter was for growth projects, namely advancing new connections in the Midland and Delaware Gathering systems. With that, we can open the call for questions.

Our first question will come from Doug Irwin with Citigroup.

I just wanted to start with the recent offerings. Could you maybe provide a little bit more context just into the decision to issue DKL equity and then maybe if you could just talk to the flexibility and some of the growth opportunities that this increased liquidity might allow going forward? And then just a follow-up on that. As you recently issued another shelf offering. Are there any plans to issue more equity going forward? Or are you comfortable with where the balance sheet is today?

Thank you, Doug. It's Avigal. I will start and then Reuven can add more color into that. So our offering that Reuven and his team did actually checks all the boxes that we need. It's improving leverage ratio, improving availability and getting more float on the public units. So it checks many boxes to enhance the great activity that we have on the operations side. So it's a complementary action to the operations side to enhance the equity side and the balance sheet side. On the shelf offering that we have, obviously, that's the best practice to have a good chunk of offerings for many reasons. Reuven, I don't know if you want to add a few words into that?

Yes. The equity offering actually has a history. On June 30, 2022, we closed on 3 Bear and we communicated back then to the market that we intended to finance the acquisition by $400 million of high yield and $200 million of equity issuance. However, both high-yield markets and the equity issuance were shut down at the time, and we had to be patient and look for the right time and the right opportunity, which we found in the last equity issuance. Given it was the first one, we couldn't go all the way to $200 million, but I think we're happy with the outcome of the first one. Going forward, we'll just be opportunistic about it.

Great. That's some helpful context around 3 Bear. And then just as a follow-up, maybe pivot into the growth outlook. Could you maybe just talk about the opportunity set you're seeing for the GMP business moving forward as growth may be geared more towards the Delaware or the Midland and then maybe if you could just talk about how you're thinking about organic growth versus maybe the opportunity to do some additional acquisitions moving forward?

Yes, Doug, that's another great question. I will start, and then I will let Odely to finish the answer. So it's easier to talk about the partners in the future for obvious reasons. But I think we demonstrated to the market that we actually know how to do both, inorganically and organically. We demonstrated that the DPG asset in the Permian Basin can be very attractive, and we developed that over time into something we are really proud of. We also developed the Delaware asset too and exceeded our expectations as well. So we have a good track record. We are at a point that we are aggressive around it, but we always want to make sure that whatever we are doing is attractive to both DKL unitholders and our shareholders. Odely, please?

Thank you, Avigal, and good to hear from you. It's Odely. As Avigal mentioned, I think that on the inorganic side, we are always opportunistic and always looking for opportunities, and we're going to continue to do that. And obviously, it has to be something that makes sense and is also accretive for us. So we're always going to continue to look at that. On the organic side, definitely, as you know, both the Delaware and Midland are both locations where we continue to put capital in and see a significant opportunity from a growth standpoint. Specifically on the Delaware, we feel that there is needed infrastructure in all lines on the water side, the gas, and the crude. We're able to execute across the board in all our segments in the Delaware side on DDG and we see from our producers the continued need, specifically in the locations where we have a coined acreage with the 3 Bear formula acquisition to continue to focus on that location on all three streams. I think this is an area where there is a significant need for continued growth, and we are definitely going to continue to look for organic opportunities in all streams.

Your next question will come from the line of Neal Dingmann with Truist Securities.

Maybe just talk about your MVC contracts. Any update, particularly on Tyler or El Dorado? And then just, again, how are you looking at other contracts? Are you trying to extend the duration or where do you sit with most of these other prospective MVC contracts?

Yes. So Neal, the intent of DKL is to renew these contracts, and that's something that DKL is working on.

And is there any timeline for the Tyler or El Dorado negotiations?

So obviously, that requires the conflict committees between DK and DKL. So this is the process, but you understand the intention.

Sure. Okay. And then just lastly, kind of bolting onto the prior question. What opportunities are you advancing at 3 Bear? Are there opportunities to bolt on some assets? Or I guess maybe let me ask another way. Is there any need to bolt on any assets, do you believe up there? And sort of what are you doing to boost the margins in that area?

I'm not going to talk about the margin. The margin is where the margin is in this area. What I can say is that we see significant growth and opportunities in the area, and we will elect to do something that's going to be accretive to our unitholders. We see the demand for the service that we know how to provide. Obviously, as I said before, we know how to provide in the areas of crude, gas, and water. That's a pretty unique value proposition. Our infrastructure in the area is in a unique strategic location. So if we see something that is synergistic and makes a lot of sense with the current offerings we have and the physical asset, we will not hesitate to do something as long as it's accretive to unitholders.

Great to hear guys. I think it's the right strategy.

We have no further questions at this time. I will now hand the call back to Avigal for closing remarks.

So thank you. I want to thank our employees for their commitment and hard work. I want to thank our unitholders for their trust and interest in our partnership. I want to thank our customers for their trust in us, and I want to thank our Board of Directors for their continued support. We'll talk next quarter. Thank you.

And this will conclude our call today. Thank you all for joining. You may now disconnect.