Q3 2019 Earnings Call

Ladies and gentlemen, thank you for standing by welcome to the first quarter earnings call for Delek Logistics Partners LP.

This time all participants are you noticing old B note. After the speakers presentation. There will be a question answer session to ask the question dream to fashion well need to press star one on your telephone. Please be advised that todays conference is being recorded if you require any further assistance. Please press bargain.

So I would like to have the conference over two years bigger today Mr. Blake Fernandez Senior Vice President of investors Relations market intelligence. Thank you. Please go ahead.

Thank you Jerome and good morning.

Okay. Thank everyone for joining us on this webcast to discuss luck Delek logistics partners third quarter 2019 financial result.

Joining me on today's call will be what do you mean, a general partners, chairman and CEO and off against bird CFO as well as other members of our management team.

As a reminder, this conference call may contain forward looking statements that term as defined under federal Securities laws for this purpose any statements made during this call that are not statements of historical facts may be deemed to be forward looking statement without limiting the poor going to words believes anticipates plans expects and similar expressions.

And are intended to identify forward looking statement.

You are cautioned that these statements may be affected by important factors set forth in our filings with the <unk> The Securities and Exchange Commission in our last earnings release.

As a result.

Actual operations are results may differ materially from the results discussed and forward looking statements.

We undertake no obligation to publicly update any forward looking statements, whether as a result of new information few future events or otherwise.

In addition to reporting financial result in accordance with generally accepted accounting principles are gap. We report certain non-GAAP financial result, investors are encouraged to review the reconciliation of these non-GAAP financial measures to the comparable GAAP result, which can be found in the press release, which is posted on the Investor Relations section of our website.

On today's call optimum give them with the financial review then I will review result, and then who the will offer a few closing strategic remarks with that I'll turn the call over to Aussie.

Thanks Blake.

Our third quarter performance benefited from a full quarter contribution from Red River JV acquisition completed in may of tissue.

And improved results from the baseline pipeline.

Used Texas marketing and sell it gathering system on a year over year basis.

Our DCF was approximately $33.7 million into third quarter 2018 <unk>.

Compared to $32.4 million into third quarter 2018.

Our DCF coverage was 1.11 times for the third quarter 2018, compared to 1.25 times in it probably your opinion.

You'd be that was a record $52 million, which represent 20% increase over there probably you'll get it.

Based on all performance and outlook, we increased our quarterly distribution to 88 cents per limited unit for the quarter ended September 32018.

This distribution will be paid on November 12, 2018.

And it's because we're gonna have to send to increase from the second quarter 2018.

This is they'll 27th consecutive quarterly increase and it's 11.4% higher than our third quarter 2018 distribution.

At September 32018, DKL pit approximately $254 million available capacity on our $850 million credit facility.

Our total debt was approximately $841 million.

And the total leverage ratio fell 4.6 times is within the 5.2 times currently allowable under our credit facility.

No I will turn to going over too big to discuss the results.

Thanks.

Thanks Dorothy.

The third quarter 2019, Delek logistics reported net income attributable to all partners of 30.5 million, which compares to 23.3 million in the prior year period Limited partners interested net income in the third quarter was 21.6 million or 89 cents per unit.

Compared to 16.7 million or 68 cents per unit in the prior year.

And our pipelines and transportation segment third quarter 2019 contribution margin was 27.1 million compared to 25.2 million in third quarter of last year. This increase was primarily attributable to improve performance from the pay line pipeline mainline pipeline benefited from a higher tariff after the incentive rate expired at the end of February of 29.

Teen operating expenses increased to 12, and a half million in the third quarter 2019 from 9.5 million in the prior year period, primarily due to outside services and employee expenses.

We expect elevated operating expenses in the fourth quarter due to some one off remediation expenses.

And our wholesale marketing and Terminalling segment contribution margin was 19.4 million in third quarter. This year, which was an increase from 17.9 million in the prior year.

This increase was due to higher east, Texas marketing gross margin trucking revenues and improved big spring Terminaling operations, including asphalt. This was partially offset by a lower gross margin in our west Texas operations operating expenses of 5.9 million were in line with the prior year period.

Our west, Texas wholesale growth margin was $4, an 82 cents per barrel third quarter compared to $4.65 per barrel third quarter of the prior year throughput in West, Texas was 9500 barrels per day compared to 12200 barrels per day in the prior year period.

During the third quarter 2019, our equity income from joint venture crude oil pipelines was approximately 8.4 million compared to income from 1.9 million in the pre prior year period.

Total expenditures were approximately $4 million third quarter, 2019, including 281000 discretionary spending and 3.7 million of sustaining maintenance.

During the third quarter 2019, approximately 786000 was reimbursed by Delek us in third quarter 2018, total capital expenditures were 3 million.

For full year 2019, our gross Capex forecast is 9.8 million, which includes 1.5 million of discretionary and 8.3 million of maintenance Capex before reimbursement by Delek us.

Expect approximately 5 million of maintenance capital expenditures to be reimbursed in 2019 with that I will turn call over to boozy for his closing comments.

Thank you Blake and good morning, everybody.

<unk> transaction provided a fourth quarters contribution to decade and continues to perform well we expect increased cash flow generation upon completion of the expansion into first half of the of next year.

I would read regarding the portfolio. It provides the knicks dipping our growth we continue to evaluate options to simplify IDR well, Greg organic growth and drove down the opportunities from our response. So dk as Dk continues to focus on your utilizing company owned versus third party assets to meet their logistics needs.

It should increase the opportunity to partner with all responsive to provide future growth a decade.

With continued growth a decade this should support our annual distribution growth per limited partner unit or at least 10% through the year, a 49, dean while maintaining appropriate annual distribution coverage would dot over there can you. Please open the call for questions.

At this time on this I can't really at this time, if you look like to ask a question seems the press Star then to number one on your telephone keypad, well pause for just a moment to compound bikini roster.

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At this time I would like to remind everyone in order to ask a question. Please press Star then number one on your telephone keypad.

[noise].

There are no questions at this time please continue.

Well I'd like to I think everybody around the table for their hard work that they put together in this quarter that where the correct with work for our logistic segment.

Or began I'd love to a thing the board of director for the trucking and off.

Of course I'd like to thank.

Thank you I list and mainly invested for your continued fluff and in our company and continuing investing in our company ER and mainly I'd like to think each one of our.

Our employees for making this company the great company do.

Doctors don't have a great day. Thanks.

Thank you again for joining US today. This concludes todays conference call all disconnect have a great.

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Ladies and gentlemen, thank you for standing by welcome to the first quarter earnings calls for Delek Logistics Partners LP.

Hi, all participants are in listen only mode. After the speakers presentation. There will be a question answer session to ask a question during the session, we'll need to press star one on your telephone. Please be advised that todays conference is being recorded if you require any further assistance please spread volume.

Well I would've liked it had the conference over two years bigger today Mr. Blake Fernandez Senior Vice President of investors limitation market intelligence. Thank you. Please go ahead.

Thank you drone and good morning, I would like to thank everyone for joining us on this webcast to discuss what Delek logistics partners third quarter 2019 financial result.

Joining me on today's call will be what do you mean, a general partners, chairman and CEO and altogether Berg CFO as well as other members of our management team.

As a reminder, this conference call may contain forward looking statements that term as defined under federal Securities laws for this purpose any statements made during this call not statements of historical facts may be deemed to be forward looking statement without limiting before going to words believes anticipates plans expects and similar expressions.

And are intended to identify forward looking statement.

You are cautioned that these statements may be affected by important factors set forth in our filings with.

The Securities and Exchange Commission in our last earnings release.

As a result.

Actual operations are results may differ materially from the results discussed and forward looking statements.

We undertake no obligation to publicly update any forward looking statements whether as a result, new information few future events or otherwise.

In addition to reporting financial result in accordance with generally accepted accounting principles are gap. We report certain non-GAAP financial result, investors are encouraged to review the reconciliation of these non-GAAP financial measures to the comparable GAAP result, which can be found in the press release, which is posted on the Investor Relations section of our website.

On today's call optimum given with the financial review then our who will review result, and the new the will offer a few closing strategic remarks with that I will turn the call over to Aussie.

Thanks Blake.

Our third quarter performance benefited from a full quarter contribution from Red River JV acquisition completed in may of tissue.

And improved results from the baseline pipeline.

Restricts us marketing and selling gathering system on a year over year basis.

Our DCF was approximately $33.7 billion into third quarter 2018.

Fair to $32.4 million into third quarter 2018.

Our DCF coverage was 1.11 times for the third quarter 219, compared to 1.25 times and it probably your period.

EBITDA was a record $52 million, which represent a 20% increase over the prior year period.

Based on all performance and outlook, we increased our quarterly distribution to 88 cents per limited unit for the quarter ended September 32 wouldn't make Tim.

These distribution will be paid on November 20, making.

And it's because we're going to help us an increase from the second quarter 2019.

Because they'll 27th consecutive quarterly increase and it's 11.4% higher than our third quarter 2018 distribution.

At September 32018, DKL pit approximately $254 million.

City, one hour, aged $15 billion credit facility.

Our total debt was approximately $841 million.

And the total leverage ratio of 4.6 times, usually within the 5.2 times called me allowable under our credit facility.

No I will turn the call over too big to discuss the results.

Thanks.

Thanks, opting for the third quarter 2019, Delek logistics reported net income attributable to all partners of 30.5 million, which compares to 23.3 million in the prior year period Limited partners interest and net income in the third quarter was 21.6 million or 89 cents per unit.

Compared to 16.7 million or 68 cents per unit in the prior year.

And our pipelines and transportation segment third quarter 2019 contribution margin was 27.1 million compared to 25.2 million in third quarter of last year. This increase was primarily attributable to improve performance from the pay lied pipeline mainline pipeline benefited from a higher tariff after the incentive rate expired at the end of February 29.

Team.

Operating expenses increased to 12, and a half million in the third quarter 2019 from 9.5 million in the prior year period, primarily due to outside services and employee expenses.

We expect elevated operating expenses in the fourth quarter due to some one off remediation expenses.

And our wholesale marketing and Terminalling segment contribution margin was 19.4 million in third quarter. This year, which was an increase from 17.9 million in the prior year.

This increase was due to higher east, Texas marketing growth margin trucking revenues and improved big spring Terminaling operations, including asphalt. This was partially offset by a lower gross margin in our west Texas operations operating expenses of 5.9 million were in line with the prior year period.

Our west, Texas wholesale growth margin was $4, an 82 cents per barrel third quarter compared to $4.65 per barrel third quarter. The prior year throughput in West, Texas was 9500 barrels per day compared to 12200 barrels per day in the prior year period.

During the third quarter 2019, our equity income from joint venture crude oil pipelines with approximately 8.4 million compared to income from 1.9 million in the prior year period.

Capital expenditures were approximately $4 million third quarter of 2019, including 281000 discretionary spending and 3.7 million of sustaining maintenance.

During the third quarter 2019, approximately 786000 with reimbursed by Delek Us and third quarter 2018, total capital expenditures were 3 million.

For full year 2019, our growth Capex forecast is 9.8 million, which includes 1.5 million of discretionary and 8.3 million of maintenance Capex before reimbursement by Delek US, we expect approximately $5 million of maintenance capital expenditures to be reimbursed in 2019 with that I will turn call over to who the for his closing costs.

Yes.

Thank you Blake and good morning, everybody.

The rhetoric that transaction provided a fort worth contribution to decade and continues to perform well we expect increased cash flow generation. Upon completion of the expansion into first half of the of mix here with regard to portfolios provides the next step in our growth we continue to evaluate options to simplify IDR or Greg.

Organic growth and dropdown opportunities from our response to a decade as Dk continues to focus on utilizing company owned versus third party assets to meet their logistics needs.

It should increase the opportunity to partner with our sponsor to provide future growth decade.

With continued growth decade, this should support our annual distribution growth per limited partner unit or at least 10%.

The year of 2019, while maintaining appropriate then your distribution coverage with dot operator can you. Please open the call for questions.

At this time.

At this time, if you were glad you asked a question simply press Star then to number one on your telephone keypad Pos for just a moment the composite Kuni Foster there are no questions. At this time. Please continue.

Well I'd like to thank everybody around the table for their hard work that they put together in this quarter that where the correct click work for our logistic segment.

Or de Gale.

Good luck to.

I think the board of director for the truck and off.

Of course I'd like to.

Thank you I list and mainly investor for your continued.

And.

In our company and continuing investing in our company.

And mainly I'd like to think each one of.

Our employees for making this company the great company do.

Doctors don't have a great day. Thank you.

Thank you again for joining US today. This concludes todays conference call all disconnect have great.