Q2 2020 Delek Logistics Partners LP Earnings Call
[music].
Good morning, and welcome to the Telco just stick second quarter 2020 earnings conference call.
All participants will be in listen only mode. So do you need assistance. Please signally conference specialist by pressing star keep all that five year old. After today's presentation, there will be an opportunity to ask questions. Please note. This event is being recorded.
I'd now like turn the conference over to Blake Fernandez. Please go ahead.
Thank you and good morning, I would like to thank everyone for joining us on this webcast to discuss Delek logistics partners second quarter 2025 homes. All joining me on today's call will be who do you mean, our general partners, Chairman and CEO and robust Spiegel CFO as well as other members of our medical team.
A reminder, this conference call may contain forward looking statement at that time, it's fun to under Federal Securities Law. In addition to reporting financial result in accordance with generally accepted accounting principles are gap. We report says certain non-GAAP financial result.
Pastors are encouraged to view the reconciliation of these non-GAAP financial measures to comparable GAAP result, which can be found in the press release.
Which is posted on the Investor Relations section of our website, our prepared remarks being made assuming the earnings release has been reviewed and we're covering less segment than market information that is incorporated into the second quarter press release.
On today's call Rouven will begin with financial overview I will review the result, and who they will offer a few closing strategic remark with that I'll turn the call over to Reuben.
Thank you for like our second quarter performance on a year over year basis benefited from relatively stable baseline business operations.
Contribution from the recent also dropped all along with business initiatives an asset optimization.
Our distributable cash flow was approximately $57 million into second quarter of 2020 compared to 31 million in the second quarter of 2009 people.
The limited partner interest the net income increased approximately 107% over the year over the prior year period.
Our DCF coverage ratio was 1.58 times for the second quarter of 2020 compared to 1.08 times in the prior year period.
EBITDA was 65 million, which represents a 45% increase over the prior year period.
Based on our performance and outlook, we increased our quarterly distribution to 90 cents per limited partner unit for the quarter ended June Thirtyth 2020.
This distribution will be paid on August 12, 2020, and represents a 1.1% increase from the first quarter of 2020. This is our 29 consecutive quarterly increase 76% higher than our second quarter of 2019 distribution.
At June Thirtyth 2020 detailed a bigger airline has approximately 100 million off available capacity when our 815 million credit facility. Our total debt was approximately 995 million and the double leverage ratio was below for about 4.1 times, which is within the 5.5 times.
Currently allowable under our credit facility.
Oh I will return to go over to Greg will discuss the results. Thank driven for the second quarter 2020, Delek logistics reported net income attributable to all partners, a 44.4 million, which compares to 24.9 million in the prior year period Limited partners interested net income in the second quarter was 34.8 million or $1.18 per unit compared to say.
16.8 million or 69 cents per unit in the prior year, representing approximately 107% increase year over year in our pipelines and transportation segment.
Second quarter 2020 contribution margin was 43 million compared to 24 million in the second quarter 2019.
This increase was primarily attributable to the recent asset dropdowns, including the Permian gathering and trucking assets. Additionally, operating expenses decreased to 10 million in the second quarter 2020 from $13 million in the prior year.
In our wholesale marketing and Terminalling segment contribution margin was 19 million in the second quarter. This year, which was a decrease from 20 million in the prior year lower taxes wholesale margins and Terminalling volumes were the primary drivers behind the year over year decrease.
Operating expenses of 3 million were lower than the prior year period, our west Texas wholesale gross margin was 64 cents a barrel in the second quarter 2020 compared to $6 in 25 cents a barrel in the second quarter prior year.
Throughput in West, Texas was down 9000 barrels a day compared to 11000 barrels a day in the prior year period. During the same quarter 2020, our equity income from joint venture crude oil pipelines was approximately 6 million compared to income of 5 million in the prior year period.
Capital expenditures were approximately 1 billion second quarter 2020, which included the 300000 and discretionary spending 400000 sustaining maintenance for full year 2020, our gross capital expenditures forecast is 18 million.
This includes 13 million of discretionary and 6 million of maintenance Capex with that I'll turn the call over to who's the for his closing remarks.
Thanks, Blake and good morning, everybody.
Despite continued macro volatility associated with covered 19, DKL delivered stellar financial performance in the ticket core we announced at 29 consecutive increase in the core quarterly distribution and remain confident in delivering pots ascend distribution growth this year.
We exceeded our guidance for distribution coverage in the range of 1.4 to 1.5 time and achieved this well before the original dog based off year end.
We also expect our leverage ratio to continue trending now.
Our outlook into the second half of the year remains positive and we expect progressive improvement over second quarter levels.
We're seeing the impact of recent Asa drove down along with asset optimization and business initiatives such as the recent agreement with Jefferson Energy.
Disagreement improve the supply outlook for pay line and expanded three each by giving shipper has increased destination points for their crude.
Leading to bear flexibility for our customers.
Finally, the Red River pipeline expansion should enhance performance in the second half of the year with Dod operator can you. Please open the call for questions.
Well now begin to question and answer session to ask a question you May Press Star then one on your touched Ken.
If you are using his speakerphone. Please pick up your handset before passing the keys to withdraw your question. Please press Star then too.
At this time, we will pause momentarily to assemble the roster.
The first question today comes from Spiro Dounis of Credit Suisse. Please go ahead.
Hi, good morning, guys.
Well like I said, maybe start with results and then try and get a an early look how volumes look like so far in July I guess, what are your peers ticket big dip in the second quarter. That's all nice back in early parts to Threeq you guys don't seem to appear to take that big of a debt. So one just curious how you're able to to accomplish that and then as we're thinking about that.
Forward here, what are trends are going to Mike so far on the volume side here in July.
Hi, Good morning, Bill so.
Thank you have several components to your question. The first one is the.
Nvcs are the refineries as we mentioned.
The refineries.
Okay into second quarter above Nbcs. So there was no.
Issue over there in regard to the.
Gathering system well as discussed in the past the into my amount of.
Or every day and me.
We had to deal.
But since prices recovered in June and now in July we are back to Oh, almost no modesty quoted 90, 697% all the gathering.
It existed before.
The pandemic started.
Great and then as far as West, Texas margins and volumes go any any sense on where those are trending that look like what appeared to be without the rins that would've been negative is that still the case or do you see that bouncing back as well.
Good morning built it does he got so and we have season and doing the heat of depend they make a decline in demand mainly in if this is dan into second half of the quality of Q2 and in July we've seen we've seen a recovery more Walton omadacycline.
Well do a question, we see in recovery and that business unit.
Great last last one from me.
Now your your coverage target a lot sooner than expected.
Curious when you look out you think about reaching that 400 million dollar EBITDA in the next two to three years do you feel like now that's that's maybe leaning closer to your side and a three year side and with at least one of those big boxes checked I think leverage is the other target you're trying to achieve here.
How close you now that we're moving I'd ours are there any other boxes, you feel like you've got to check where you get there.
Well, we're looking at these are all the time as we mentioned we are committed very committed to decade and.
So where now close to four times and above the one five.
We're continuing to look I did the outlook.
For a decade, so far Luke.
Promising for the second part of the you.
So we wouldn't have continued to look into that.
All right. Thanks, guys all back in the gift.
Again, if you have a question. Please press Star then one.
The next question comes from net.
Fair enough of Wells Fargo. Please go ahead.
Hey, good morning, Thanks for taking the question one on the agreement with Jefferson Energy could you maybe provide additional details on the value of this arrangement.
Are there any volume commitments or is there any capex associated with connecting to to the terminal.
Oh I forgot why don't you take duck absent this morning.
So.
We usually do not disclose MVC and the Capex a regarding specific agreement, but I would say that these there.
Allow us to have very good doubtful paid on for the next day political for the foreseeable future. That's one and on the top that these allow if they line to have a a line by United system that have more than one destination. They allow it's much more flexibility going forward. So it's a very strategic and give us a.
Nice outlook in a more optimally into future.
[noise], Okay. That's it that's helpful and then a.
Question on Opex, It seems that Oh operating expenses declined quarter over quarter. Despite the addition of the big screen gathering assets and the trucking assets.
I was just wondering how sustainable that is for the remainder of the uranium 2021.
And then it's a daily I'm going to take that question. So as we kind of looking into the Q2, we took a very oh.
Cost control or on the entire operation in its obviously you can see that's affected thing to do it. We're looking on the remainder of the year. We're looking to probably have some of the integrity work, but as we looking into the extended things going to be a probably additional closed and millions for the quarter from those opex.
So with that said is gonna be still improvement from previous year, but there's going to be increase into the Q2 as we're going to do more of a I'll pick sale integrity work.
For the brand new here, but we continue to remain with the very strict control around a boat office in DNA.
Okay. That's great and then last one for me on on the trucking assets acquisition could you maybe provide the contribution from these assets in the quarter and do you plan to offer volume metrics related to this business going forward.
And that it's like so the answer to the last question is we're probably not going to give volume details going forward, but I can't offer you the contribution during the quarter was roughly $2 million from trucking and.
About 8 million, maybe just south of that for DPG for the gathering business. So.
Perfect. Thank you that's all I had.
This concludes our question and answer session I would like to turn the conference back over to management for any closing remarks.
Thank you.
That's what the wonderful a core for became despite the macro the rough Mark Ruelle bombing.
I think that our strategy all along was to continue to grow the midstream.
[laughter] segment of our business and I think because it's performed very well I'd love to think about management around the table for their hard work I'd like to think a you investors in believing enough.
Obviously, the board of directors for their confidence in our mainly our employees will make this company. What did you have a great day and we'll talk soon thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
[music].
[music].
Good morning, and welcome to the Delek logistics second quarter 2020, <unk> earnings Conference call.
All participants will be in listen only mode. So do you need assistance. Please signal I kind of green specialist.
Star keep all that five year old.
After today's presentation, there will be an opportunity to ask questions. Please note. This event is being recorded I would now like turn the conference over to Blake Fernandez. Please go ahead.
Thank you and good morning, I would like to thank everyone for joining us on the webcast to discuss Delek logistics partners second quarter 2020 financial result.
Joining me on today's call will be it would be you mean, our general partners, Chairman and CEO and ruin Spiegel CFO as well as other members of our medical.
As a reminder, this conference call may contain forward looking statement that target to find under federal Securities law.
In addition to reporting financial result in accordance with generally accepted accounting principles are GAAP reporting that certain non-GAAP financial result.
Those are encouraged to review the reconciliation of these non-GAAP financial measures to comparable GAAP result, what can be found in the press release.
It is posted on the Investor Relations section of our website, our prepared remarks being made assuming earnings really has been reviewed and we're covering what segment that market information that is incorporated into the second quarter press release.
On today's call Rouven will begin with financial overview I will review the result, and who they will offer a few clothing strategic remark with that I'll turn the call over to ruling.
Thank you Blake, our second quarter performance on a year over year basis benefited from relatively stable baseline business operation.
Contribution from the recent also dropped off along with business initiatives of asset optimization.
Our distributable cash flow was approximately $57 million in the second quarter of 2020 compared to 31 million into second quarter of 2009 people.
The limited partner interest the net income increased approximately the other than 7%.
The year over the prior year period.
DCF coverage ratio was 1.58 times for the second quarter of 2020 compared to 1.0 times in the prior year period.
EBITDA was 65 million, which represents a 45% increase over the prior year period.
Based on our performance and outlook, we increased our quarterly distribution to 90 cents per limited partner unit for the quarter ended June Thirtyth 2020.
This distribution will be paid on August 12, 2001 thing that will present, a 1.1% increase.
The first quarter of 2001.
This is our 29 consecutive quarterly increase 76% higher than our second quarter 2019 distribution.
At June Thirtyth, 2000, and Twentys detailed a DKL had approximately 100 million off available capacity.
850 million credit facility.
Total debt was approximately 995 million and the total leverage ratio would be low for about 4.1 times of which is with them to 5.5 times broadly allowable under our credit facility.
Oh I will return to go over to Greg will discuss the results. Thank driven for the second quarter 2020, Delek logistics reported net income attributable to all partners, a 44.4 million, which compares to 24.9 million in the prior year period Limited partners interested net income in the second quarter was 34.8 million or $1.18 per unit compared to six.
18.8 million or 69 cents per unit in the prior year, representing approximately 107% increase year over year.
And our pipelines and transportation segment.
Second quarter 2020 contribution margin was 43 million compared to 24 million in the second quarter 2019.
Increase was primarily attributable to the recent asset dropdowns, including the Permian gathering and trucking assets. Additionally, operating expenses decreased to 10 million in the second quarter 2020 from 13 million in the prior year.
And our wholesale marketing and Terminalling segment contribution margin was 19 million in the second quarter. This year, which was a decrease from 20 million in the prior year lower taxes wholesale margins and Terminalling volumes were the primary drivers behind the year over year decrease.
Operating expenses of 3 million were lower than the prior year period, our west Texas wholesale gross margin was 64 cents a barrel in the second quarter 2020 compared to $6 in 25 cents apparel in the second quarter prior year.
Throughput of West, Texas was down 9000 barrels a day compared to 11000 barrels a day in the prior year period. During the same quarter 2020, our equity income from joint venture crude oil pipelines with approximately 6 million compared to income of 5 million in the prior year period.
Capital expenditures were approximately 1 billion the second quarter 2020, which included a 300000 in discretionary spending 400000 sustaining maintenance for full year 2020, our gross capital expenditures forecast is $18 million.
Which includes 13 million of discretionary and 6 million of maintenance Capex with that I'll turn the call over to the for his closing remarks.
Thanks, Blake and good morning, everybody.
Despite continued macro volatility associated with called 19, Decaire delivered stellar panache outperformance in the second quarter, we're now up to 49th consecutive increase in the quarter quarterly distribution and remain confident in delivering 5% distribution growth this year.
We exceeded our guidance for distribution coverage in the range of 1.4 to 1.5 time and achieved this well before the originally thought.
We have your end.
Well I expect our leverage ratio to continue trending down.
Our outlook into the second half of the year remains positive and we expect progressive improvement over the second one level.
Were seeing the impact of recent opposite dropped off a lot would also optimization and business initiative.
The recent agreement would Jefferson energy.
Disagreement improved the supply outlook for pay line and expanded reach by giving ship or the increase destination points for their crude.
Leading to better flexibility for our customer.
Finally, the Red River pipeline expansion should then have performance in the second half of the year.
Dot operator can you. Please open the call for questions.
We'll now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using you speakerphone. Please pick up your handset before passing the keys to withdraw your question. Please press Star then too.
At this time, we will pause momentarily to assemble the roster.
The first question today comes from Spiro Dounis of Credit Suisse. Please go ahead.
Hi, good morning, guys.
Well I'd like to maybe start with results and then try and get an early look on what volumes look like so far in July I guess, what are your peers ticket dip in the second quarter. That's all nice back in early parts of Threeq, you guys don't seem to fit that take that big of a debt. So.
One just curious how you're able to to accomplish that and then as we're thinking about the go forward here what are trends looking like so far on the volume side here in July.
Hi, Good morning, Bill so.
Thank you have several components to your question. The first one is the.
And we fees are the refineries that we mentioned.
Refineries.
Okay, and the second quarter.
Bob Nbcs, so there was no.
Issue over there.
Regarding to the.
During system well as discussed in the past.
The into my amount of.
Or.
And maybe.
We had the deep.
But since prices recovered in June and now in July we are back to you.
Almost no modify the quota 90, 697% or the gathering.
It existed before.
The pandemics targets.
Great and then as far as West, Texas margins and volumes go any any sense on where those are trending that look like what appeared to be without the rins that would have been negative is that still the case or do you see that bouncing back as well.
Good morning, built that we've got so we have seen they're doing the heat up dip and then make.
Declining demand, mainly an exit than in the second half of the quality of Q2 and in July we've seen we've seen a recovery mobile wallets normality.
A question, we see recovery in that business unit.
Great last one from me you've now your coverage target a lot sooner than expected.
Curious when you look out you think about reaching that 400 million dollar EBITDA in the next two to three years do you feel like now that that's maybe winning closer to your side than a three year side and with at least one of those big boxes. Jack I think leverage is the other target you're trying to achieve here.
Well see an out at permitting I'd ours are there any of the boxes you feel like you got to check where you get there.
Well, we're looking at these are all the die.
As we mentioned we are committed very committed to dedicated and.
So we're now close to four times and above the one five.
Continuing to look at it the outlook.
For a decade, so far Luke.
Promising for the second part of the year.
So while we will continue to look into that.
All right thanks, guys back in the gift.
Again, if you have a question. Please press Star then one.
Your next question comes from net.
Pharma of Wells Fargo. Please go ahead.
Hey, good morning, Thanks for taking the question.
One on the agreement with Jefferson Energy could you maybe provide additional details on the value of this arrangement are there any volume commitments or is there any capex associated with connecting to to the terminal.
Oh, I forgot what don't you dig dug up.
So.
Usually do not disclose NBC and the Capex said regarding specific agreement, but I would say that the the.
Allow us to have very good doubtful pay that for the next the political for the foreseeable future Thats why and on the top of debt due to allow at Bay lines will have a a line by United States that have more than one destination and they allow us much more flexibility going forward. So it's a very strategic and give us a.
Nice outlook in bulk Jonathan in the future.
Okay. That's it that's helpful and then a.
Question on Opex, It seems that operating expenses declined quarter over quarter. Despite the addition of the big spring gathering assets and the trucking assets.
I was just wondering how sustainable that is for the remainder of the year ending 2021.
And then into daily I'm going to take that question. So as we kind of looking into the Q2, we took a very.
Cost control or on the entire operation.
In that obviously you can see that affected in Q2. It was looking on the remainder of the year. We're looking to probably have some of the integrity work, but as we looking into the extended things going to be probably additional of call. It the million for the quarter from the Opex. We so with that said is going to be still equipment from previous years.
But there's going to be increase into the Q2 as we're going to do more of I'll pick sale integrity work for the brand to here, but we continue to remain with the very strict control around a boat office in DNA.
Okay, that's great and then last one.
Me on on the trucking assets acquisition could you maybe provide the contribution from these assets in the quarter and do you plan to offer volume metrics related to the business going forward.
Hey, Natus Blake.
The answer to the last questions, we're probably not going to give volume details going forward, but I can offer you. The contribution during the quarter was roughly $2 million from trucking and just about a million maybe just south of that for DPG for the gathering business. So.
Perfect. Thank you that's all I had.
This concludes our question and answer session I would like to turn the conference back over to management for any closing remarks.
Thank you.
Well, it's a wonderful corporate began despite the macro.
Rob Mcleod involvement.
I think that our strategy all along was to continue to grow the midstream.
Sales segment of our business and I think DKL performed very well I've got to think got management around the table for their hard work I think you invest in believing not obviously the board of directors.
For their confidence in.
Mainly our employees will make this company what did you.
Have a great day, and we'll talk soon thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.