Delek Logistics Partners, LP (NYSE:DKL) Q3 2023 Earnings Call Transcript

Delek Logistics Partners, LP (NYSE:DKL) Q3 2023 Earnings Call Transcript November 7, 2023

Delek Logistics Partners, LP beats earnings expectations. Reported EPS is $0.8, expectations were $0.78.

Operator: Good day and welcome to the Delek Logistics Partners’ Third Quarter 2023 Conference Call. [Operator Instructions] 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.

Rosy Zuklic: Good day and welcome to the Delek Logistics Partners’ third 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 as of their respective dates. I’ll now turn the call over to Avigal for opening remarks. Avigal?

Avigal Soreq: Thank you, Rosy. Delek Logistics Partners delivered another record quarter with over $98 million in EBITDA. We have been pleased to see the consistent performance of our team and assets. We are very proud to be able to deliver that value back to our unitholders. This is a result of our dedication to the company’s strategic objectives, growing third-party revenues, maintaining multiyear MVC contracts and keeping a focus on growth opportunities. Midland Gathering achieved a record throughput this quarter as a result of our investment in the system. With the Delaware Gathering system, we were able to support our objective, diversifying revenue stream and increasing third-party business. Given our strong performance this quarter, we are confident in our ability to exceed $100 million in a quarterly EBITDA run rate by Q4 of this year.

Aerial view of a natural gas production facility with travelling pipelines extending from it.

I am also very proud to say that DKL recently received operational award of excellence from the National Safety Council, demonstrating our team’s dedication to safety and operational excellence. On October 25, our Board of Directors approved 5.6% increase in the quarterly distribution from prior year to $1.045 per limited partner unit for the third quarter of this year, highlighting our commitment to increasing the quarterly distribution. I will now hand it over to Reuven.

Reuven Spiegel: Thank you, Avigal. Total EBITDA for DKL was $98 million for the third quarter of ‘23 compared with $89 million for the same period in ‘22. For the third quarter of ‘23, distributable cash flow was $61 million and the DCF coverage ratio was 1.35x. For the Gathering and Processing segment, EBITDA this quarter was $53 million. The EBITDA for the third quarter of ‘22 was $57 million, which benefited from a onetime credit. Excluding this, third quarter ‘23 results were higher than last year due to increased throughput from our Permian assets. Throughput of Midland Gathering averaged approximately 250,000 barrels per day for the third quarter, more than twice the average of 121,000 barrels per day in the third quarter of ‘22.

The Wholesale Marketing and Terminalling segment EBITDA was $28 million for the quarter compared to $20 million in the third quarter of ‘22. The increase was due to higher utilization in our terminalling operations and improved margins in wholesale. The Storage and Transportation segment EBITDA was $18 million in the quarter compared with $15 million in the third quarter of ‘22. This segment benefited from recent industry-wide fee escalations. And lastly, the investment in pipeline joint venture segment contributed $9 million toward the second quarter of ‘23, slightly up from third quarter of ‘22. Moving on to capital expenditures. Third quarter ‘23 capital spending was $15 million. Most of that spend was for growth projects, namely advancing new connection in both the Midland and Delaware Gathering systems.

For ‘23, we expect capital expense to be in the range of $85 million to $90 million, with approximately $10 million of growth CapEx to be partially funded by the producers. Including this, net capital expenditures for the year is in the range of $75 million to $80 million. With that, we can open the call for questions.

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