Thank you for standing by. My name is Joel, and I will be your conference operator today. At this time, I would like to welcome everyone to the Delek Logistics Partners Q2 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. I would now like to turn the conference over to Robert Wright, Deputy CFO. You may begin.

Good morning, and welcome to the Delek Logistics Partners second quarter earnings conference call. Participants joining me 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 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. I will now turn the call over to Avigal for opening remarks.

Thank you, Robert. Delek Logistics Partners had another record quarter. We reported $102.4 million quarterly adjusted EBITDA. I am pleased with our continued performance. We have made several announcements today. DKL is a premier full-service crude water and natural gas provider in the prolific Permian Basin, and the transaction we have announced today will significantly enhance our position. First, let's talk about the contract between DKL, DK, and Wink to Webster pipeline. We announced an amendment and extension of the contract between DKL and DK. The extensions remove an overhang on the DKL unit. It moves away from a month-to-month to contract terms of up to seven years. These amendments allow us to acquire DK's interest in the W2W pipeline without significant strain on our balance sheet. W2W is a premier crude oil pipeline backed by investment-grade counterparties. It increases the overall asset quality at DKL and enhances DKL's Permian position. Second, DKL announced today an investment in the new gas processing plant. This plant is highly subscribed and is estimated to generate cash-on-cash returns of more than 20%. We are looking to complete the plant during the first half of 2025. The last transaction DKL announced today is the acquisition of H2O Midstream for $160 million in cash and $70 million preferred. The transaction is immediately accretive to DKL on an EBITDA and free cash flow basis. The acquired asset fits very well within DKL's existing footprint and further expands our capabilities to be a comprehensive provider of midstream services in the Permian Basin. Once this transaction is complete in the first half of 2025, a majority of DKL's EBITDA will be from non-related parties, making DKL mostly an independent midstream company. In July, the Board of Directors approved an increase in the quarterly distribution to $1.09 per unit. Delek Logistics has shown a strong track record of delivering value to unitholders. We are excited about the announcement we've made today and the opportunities ahead of us. I want to welcome the H2O team to the DKL family and wish them continued success and good luck. I will now hand it over to Reuven.

Thank you, Avigal. As Avigal mentioned, we are growing Delek Logistics with a prudent management of liquidity and leverage. The liquidity we created at the beginning of the year has allowed us to carry out a transaction we announced today. We are also managing our leverage, which has improved to 3.81 times at the end of the second quarter of 2024, down from its high point of 4.84 at the end of 2022 and 4.34 at the end of 2023. Moving on to our second quarter results, the second quarter adjusted EBITDA was $102.4 million, compared to $92.8 million in the same period of 2023. The distributable cash flow was $68 million, and the DCF coverage ratio was 1.32 times. For the Gathering and Processing segment, EBITDA for the quarter was $54.7 million, compared to $52.6 million in the second quarter of 2023. The increase was primarily due to higher throughput from Delek Logistics' Permian Basin assets. Wholesale Marketing and Terminalling EBITDA was $30.2 million, compared to $28 million in the prior year. The increase was primarily from higher terminal utilization. Storage and Transportation EBITDA in the quarter was $16.8 million, compared to $15 million in the second quarter of 2023. The increase was mainly driven by higher storage and transportation rates. Lastly, the investment in the pipeline joint venture segment contributed $7.9 million this quarter compared to $7.3 million in the second quarter of 2023. Moving on to capital expenditures, the capital program for the second quarter of 2024 was $10.2 million. Most of the spending in the quarter was for growth projects, namely advancing new connections in the Midland and Delaware gathering system. Along with our previously announced capital budget for 2024, we expect to spend $90 million to $100 million in the second half of 2024 on the new processing plant. With that, we can open the call for questions.

Hi, good afternoon. Thank you for your time. My first question is about the H2O Midstream acquisition, which appears very attractive. Could you elaborate on how the new full suite of services enhances short opportunities and how that might lead to future customer opportunities? Additionally, you mentioned potential near-term costs and revenue synergies, and I would like to hear more about that.

Absolutely, Neal. So, there are three aspects to that. One, the same customer you can have a more comprehensive view about deals that you are doing with customers. The second point around that is that basically, the operations are complementary, so you can be very efficient in the way you run your operations. And third, this infrastructure can be relevant for both services. So, this is an accretive deal for us, and it is extremely synergistic.

No, I would agree. Regarding the new Delaware gas plant, what could the timing be? I may be jumping in a bit here, but I believe there are future gas processing opportunities you might have in that area starting next year after you close. I'm curious about how soon you could foresee these future gas opportunities and what they might entail.

Yes. So, our gas plant is completely synergistic with the current gas plant we have. We said that we're going to complete the second one in the first half of 2025, and it's already been nicely subscribed. Odely, I don't know if you want to add to that.

Yes, just a little bit to your comments, Neal. To be honest, right now, we already have the associated need for additional capacity from what we're seeing with our producers currently and also going forward. So this is why we feel very comfortable with the volume on that new plant that is already highly subscribed, as Avigal mentioned. So we see that timing pretty much as soon as possible from our stance.

Great, guys. Nice additions on both sides. Thank you.

Hi. Thanks for the question. I just wanted to touch on the $55 million to $85 million EBITDA range you provided for the transaction this morning. I was wondering if you could talk about some of the assumptions for the high end versus the low end of that range. Is it mostly dependent on some of the H2O Midstream synergies, or are there maybe some other factors under consideration there? And then, should we expect that to be a good run rate for 2025? Or is that ramping over time?

So there are three main components around that, right, like we outlined. One is the DK contract. Second is the W, and third is the H2O Midstream, and fourth, the gas processing plant. What I think the majority of that is not coming from synergies but is coming from the base business. I think that a good estimation is to take the midpoint out of that; it's a good number to assume going forward.

Okay. Great. That's helpful. I was just wondering if you could provide a little more detail around the funding expectations for the cash component of these transactions. And if I look at Slide 6 in the presentation materials, it looks like maybe some units are changing hands here as part of the Wink to Webster and recontracting. Just wanted to clarify if I'm interpreting that correctly and if so, maybe get a little more detail around how that might play into the deconsolidation priorities of the DK.

Yeah. Absolutely. So there are units that are changing hands, but the net amount is not significant between the companies. So it's like we're exchanging value from one company to another, and we got it done pretty tax-efficiently. So that's good news. So we don't need to pay a lot of attention to that part of the equation. What we basically did, and you can appreciate that, I'm sure, is we put the right asset under the right ownership, putting W to W where it naturally belongs and exchanging it for a value that belongs to the refineries.

Got it. That's all for me. Appreciate the questions.

Thank you. I would like to express my gratitude to my leadership team, our employees, our Board of Directors, and our investors. Welcome to the H2O team and the Delek family. Thank you, everyone, and we will connect again next quarter.

This concludes today's conference call. You may now disconnect.