Q3 2020 Delek Logistics Partners LP Earnings Call

Logistics third quarter 2020, <unk> earnings conference call today, all participants will be in a listen only mode.

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After todays presentation, there will be an opportunity to ask questions. Please note that today's event is being recorded.

At this time I would like to turn the conference ever to Blake Fernandez Senior Vice President of Investor Relations. Please go ahead.

Good morning, I would like to thank everyone for joining us on this webcast to discuss Delek logistics partners third quarter 2020 financial results. Joining me on today's call <unk> gain our general partners, Chairman and CEO and Rouven Spiegel CFO as well as other members of our management team. As a reminder, this conference call may contain forward looking statements as that term is defined.

Under Federal Securities Law.

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

Made assuming that the earnings press release has been reviewed and we're covering less segment and market information that is incorporated into the third quarter press release.

On today's call Ruben will begin with financial overview I will review results and Newsy will offer a few closing strategic remarks with that I will turn the call over to Rouven.

Thank you Blake.

Our third quarter performance on a year over year basis benefited from relatively stable baseline business operations contribution from the recent asset dropdowns, along with business initiatives and asset optimization.

Our distributable cash flow was approximately $59 million in the third quarter 2020, compared to $34 million in the third quarter of 2019.

Net income attributable attributable to all partners increased approximately 52% over the prior year period.

Our DCF coverage ratio was 1.5 times for the third quarter 2020, compared to 1.1 times in the prior year period, maybe.

EBITDA was $68 million, which represents 32% increase over prior year period.

Based on our performance and outlook, we increased our quarterly distribution to 90.5 cents per limited partner unit for the quarter ended September Thirtyth 2020. This.

This distribution will be paid on November 12, 2020, and represents a 0.6% increase from second quarter of 2020. This.

This is our thirtyth consecutive quarterly increase and he is 2.8% higher than our third quarter 2019 distribution.

At September Thirtyth, 2020, DKL had approximately $89 million of available capacity on our 850 million credit facility.

Our total debt was approximately $1 billion and total leverage ratio was 3.9 times, which is within the 5.555 0.5 times currently allowable under our credit facility. Finally during the quarter, we announced the elimination of incentive distribution rights and conversion of the 2% general partner interest held by our.

Sponsored the gate into non economic interest in exchange for 14 million newly issued DKL units and $45 million in cash now I will turn the call over to Blake to discuss the results.

Thanks revenue and our pipelines and transportation segment. The third quarter 2020 contribution margin was $46 million compared to $27 million in third quarter of 2019. This increase was primarily attributable to the recent asset dropdowns, including the big spring gathering and trucking assets. Additionally, operating expenses decreased to 11 million in the third quarter of 2020 from third.

$10 million in the prior year period in our wholesale marketing and Terminalling segment contribution margin was $21 million in the third quarter. This year compared to 19 million in the prior year operating expenses came in $2 million lower than the same period of 2019.

During the third quarter equity income from our crude oil joint venture was approximately $5 million compared to income of $8 million in the prior year period capital expenditures were approximately 3.2 million in the third quarter, which consisted of 3.1 million a discretionary spending and 100000 from sustaining maintenance.

For full year 2020, our total gross capital expenditure forecast is $21 million, which includes $16.5 million of discretionary and $4.5 million of maintenance capital with that I will turn the call over to Uzi for his closing.

Thank you Blake and good morning, everybody.

Dk comp.

We continue to deliver consistent operational performance, despite the difficult macro environment for energy.

We announced at 30 consecutive increase in the quarterly distribution and we remain on track to deliver 5% distribution growth. This year, while achieving our year end guidance level for distribution coverage and leverage ratio the.

The Red River pipeline expansion came online during the quarter and we continue to develop in terms of business initiative.

And cost optimization that should drive longer term value for shareholders.

Additionally, the simplification of the IDR lowered our cost of capital and their position is off to profit growth opportunity lumpy I would encourage you to review our new with Delek sustainability report property in Denver, which includes decade with Dot operator can you. Please open the call for questions.

We will now begin the question and answer session.

You ask a question you May press Star then one on your Touchtone phone.

As a reminder, if you are using a speakerphone. Please pick up your handset before pressing the keys.

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At this time, we will pause momentarily to assemble our roster.

Today's first question comes from Spiro Dounis with Credit Suisse. Please go ahead Sir.

Hi, good morning, guys.

I'd like to start out with West, Texas marketing margins came back pretty aggressively this quarter hi, since we've seen since about Threeq you last year can you just walk through some of the driving factors behind why came back so much even beyond first quarter levels and then how sustainable you think that is going forward.

Phil Good morning. This movie I'm sure our legato was put on more color into it if needed.

Rob.

You, probably remember that the west Texas market thrive.

When I ran spice and go up.

Is.

We have the space and that market.

A market, where we sell it to go with the Rins. So.

I don't know how sustainable it is.

In terms of the Rins, but as long as the reinstate elevated.

Which would benefit from that.

Thank you for the questions.

Yes, okay perfect that makes sense second question.

Just.

Thinking about your growth longer term obviously great.

Great stuff year for refining in general.

Yes, it has been kind of a stand out amongst a lot of challenges just curious how you're thinking about your goal to get to 400 million of EBITDA over the next two to three years, just given all those challenges more broadly and thinking about specifically around crowed springs, and the over $100 million of midstream opportunities that revenue today.

I hope.

That helps.

Yes, no that was great color exactly what I was looking for so I appreciate it thats. It from me guys. Thanks.

We will.

Your next question comes from.

<unk> backlog with Wells Fargo. Please proceed.

Hi, good morning, Thanks for taking the question could you share your latest thoughts on the MLP strategy. You have previously talked about a potential roll up is one alternative and you have also considered monetization of Ah.

The reason why we.

Should itself.

Unit just because.

During that $30. Because we are we are we do get decay getting 12% return which is.

More and more or less.

What dk, what dk wants to get.

Rolling it out.

We made this strategic decision to three years ago before all this started that MLP or logistics assets would be a priority for our company.

Oh Eve and the support of the unit holders and our share.

Our board of directors.

We are very proud of what we achieve in this.

Tough environment have a great day, we'll talk to you soon thank you.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.