Delek Logistics Partners, LP Price & Performance (DKL)

Delek Logistics Partner had another record quarter.

Reported approximately $107,000,000 in quarterly adjusted EBITDA, 2024 has been transformational year for Delek Logistics. And we are pleased with its continued strong [indiscernible] In 2024, DKKL is taking key steps to becoming a premier Full service crude natural gas and water provider in the prolific permanent basin. And we expect to make further progress in 2025. I would like to take a moment to reflect on the things we were able to accomplish in 2024. We increased the financial and trading liquidity of DKL We will also the first MLP to do two primary [indiscernible] In a year since 2017. We amend and extend contact between DKL and DK for a period of up to seven years providing certainty around cash flows. We completed the acquisition of Delek, portion in Wink to Webster pipeline which increased the overall asset quality at DKL and enhanced DKL permit position. We announced two acquisitions in the Midland Basin Edge Draw Midstream and Gravity Water Midstream enhanced our competitive position in the Midland Basin significantly. We are excited about our combined offering and we are extremely pleased with the initial success we have seen so far, In the Datawave Basin, we are also making good progress in our processing plant expansion.

The expansion is set to complete on time and on budget in the first half of twenty twenty five. As we complete the plant expansion, we also announced an FID on acid gas injection [indiscernible] AGR wells and sour gas treating capabilities enhance our competitive position in the Delaware and provide a good runway of growth for Delek Logistics in the future. Looking forward in 2025, we'll continue to grow the partnership to prudent management leverage and coverage.

DKL also initiated a strong 2025 EBITDA guidance of $480,000,000 to $520,000,000 This represents around 20% growth over 2024 adjusted EBITDA. DKL continued to provide one of the best combination of yield and growth in the entire [indiscernible] We'll continue to encase our economic separation with our sponsor DK, We are progressing the economic separation in few different ways and today we have announced an additional tool to enable the deconsolidation. Our Board of Directors have authorized up to $150,000,000 Bybit formed our sponsor DK to enhance value for the DKL unit orders. Also pleased to announce that the Board of Directors has approved the 48 consecutive increase in the quarterly distribution to $1.1 and a half per unit. To conclude, we are very excited about the prospect of Telelogistics. We expect to continue on our value creation path moving forward and we will continue to grow our distribution in the future. I will now hand it over to Mark.

Thank you.

As Abigail mentioned, we are growing Delekle Delek Logistics with a prudent management of liquidity and leverage. We manage our financial liquidity throughout 2024 by accessing both Post the close of our acquisition of Gravity Water Mid we have approximately $530,000,000 of liquidity.

We are also managing our leverage as we complete several important organic growth projects this year. Moving on to our fourth quarter results.

The fourth quarter adjusted EBITDA was $107,200,000 compared to $100,900,000 in the same period of 2023.

Distributable cash flow as adjusted was $69,500,000 and the DCF coverage ratio was approximately 1.2 times. As mentioned previously, we expect this ratio to of 1.3 times in the second half of twenty twenty five. As for the Gathering and Processing segment, adjusted EBITDA for the quarter was $66,000,000 compared to $53,300,000 in the fourth quarter of twenty twenty three.

The increase was primarily due to higher throughput from Delek Logistics' Permian Basin Delek Of intercompany transactions. Storage and transportation adjusted EBITDA in the quarter was $17,800,000 compared with $17,500,000 in the fourth quarter of twenty twenty three. The increase was mainly driven by higher storage and transportation rates. Lastly, the investments in Pipeline Joint Venture segment contributed $11,300,000 this quarter compared with $8,500,000 in the fourth quarter of twenty twenty three. The increase was primarily due to the contribution from the Wink to Webster drop down in August. Moving on to capital expenditures. The capital program for the fourth quarter was $49,400,000 of which $42,100,000 was allocated to the new gas processing plant. The remainder of the spend in the quarter was for growth projects namely advancing new connections in the Midland and Delaware gathering systems. Along with initiating our full year EBITDA guidance approximately $500,000,000 at the midpoint, we have also announced today our 2025 capital guidance. In 2025, we expect to spend a total of approximately $75,000,000 On completing our Libbey processing plant expansion, and approximately $160,000,000 on growth in maintenance projects. With that, we can open the call for questions. Thank you. The floor is now open for questions.

Your first question comes from the line of Doug Irwin of Citi. Your line is open. [indiscernible] good morning, Patrick. Hi, thanks for the questions. Good morning. EBITDA guidance here. Just looking at some of the prior benchmarks you've put around the acquisitions and the process and plant expectations, It points to a relatively conservative guide, at least at the low end of the range. So I was just curious if you could maybe talk a little bit about what might drive the high end for the low end tier? And then maybe kind of where you see yourself exiting the year given some of the moving pieces throughout? Hey, Doug, thanks for the question and listen, that's the first time we're giving guidance DKL obviously is a growing company as we demonstrate and as you can well Obviously, we are increasing the economical separation between DK and DKL in every step that we are doing and for sure with the step that we announced today of the $150,000,000 buyback from our sponsor, And we want to help you and others to model us better that's what we try to do today. We feel confident with the guidance we gave today And obviously, we are looking forward to update you down the road.

If there is more modeling question, obviously, you can follow-up with more hits for more detailed questions how to get the exact model, but that's where we are today. Obviously, there is always opportunities in the future.

Understood. Yes, appreciate the first time guidance. Maybe a follow-up on the buyback program, maybe a two part question here. Just first, just curious how quickly you you expect to be able to execute on that $150,000,000 And then second, just how you're thinking about funding these buybacks? Are you looking to potentially fund it all internally with free cash flow or you may be willing to use debt here given the discounted yield relative to where the equity is trading? And if so, just curious where you see leverage over the near term?

Yes, absolutely. So if we are looking at that from a free cash flow standpoint, Doug, and I'm sure that you can appreciate it, Our cost of capital on the debt side is around 7%. And what we see here today at $40 is close to 11 So that's obviously very beneficial from a free cash flow standpoint for DKL and that's something that our partnership I liked a lot. Also you can for sure appreciate that the deconsolidation effort is an initiative of both companies, both DKL and DK. And the reason that it will allow DKair to completely fulfill its potential results sponsor. So those two initiatives are very well embedded in that. We are not going to give guidance specific guidance It's going to be subject to market condition and DK are offering that to DK. But that's something that we definitely look very closer and working hard on that. But I will let Tehuvan to chime in more depth and to give some more color.

Well, just two bullet points. One, it's a two year program.

And we have to do execute that while complying with the company covenants and leverage ratio target.

And obviously, that will be in place as long as the decaled share price makes sense from free cash flow accretive for the company.

Understood. Thanks.

Thank you.

Your next question comes from the line of Neil Dingmann of Truist Securities. Your line is open.

Morning. Thanks for the time guys. My question is a little bit about the same good Love to see the guidance. Obviously, it looks great on EBITDA. I'm just wondering besides you mentioned the release, which nice to see the upside that's going to happen around the Libbey plant expansion. Could you speak to maybe just maybe other notable drivers you would share with us that's driving this upside potential around the EBITDA you're showing this year?

Yes. So we have many chips in this guidance, right? We obviously finished the gravity deal, we finished the H2O deal. Announced the Libya plant, we announced the AGR and the sour effort. And obviously, there are synergies among all of that. And we have W2W So there is really a mix of transactions we have done and we felt, Neil, that it's very much necessary to give you guys a clear guidance and making your life just a little bit easier and terms of where we land. And I think it's very important to investors to see how much our currency is cheap versus the entire ASDI index. And how good of a position it is.

So I think that's the reason we decided to give that. Because of the amount of transaction we did, and to reflect more how discounted we think our currency is so that's the reason we did it and I'm sure that you can appreciate it.

I would definitely appreciate it and the discount is definitely obviously seen out there right now. And then my follow-up would be, on the key three bear assets here, which continue to be so good. Just wondered how is when you look at those assets, just wondering is demand and utilization of these assets looking?

Yes. So we would not expand those assets if you wouldn't see a strong demand. Obviously, the gas in the Delaware area is looks very good. We have many discussions with our producer that we have a clear adjudication with. But another point I would like to highlight for you, Neil, is our comprehensive offering of crude, gas and water proves itself very nicely in the Delaware and that's part of the reasoning that we implemented the same concept also on the Midland Basin. So that's a paying us dividends and we are very happy about that. That's the reason we Delek confident with Libby two. Or the expansion and we went also to the solar. So we feel confident and to our tactics and also to the strategy.

Very good. Thank you.

You bet.

With no further questions, that concludes our Q and A session.

I'll now turn the conference back over to Avigas Sorek for closing remarks.

Yes, absolutely. Thank you today. I would like to thank my colleagues around the table I would like to thank the entire Stellus Logistics employees our Board of Directors and for you investors and we meet again in the next quarter. Thank you.

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