Q4 2020 Delek Logistics Partners LP Earnings Call

Good day and welcome to the Delek logistics fourth quarter 2020 earnings Conference call.

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I would now like to turn the conference over to Blake Fernandez. Please go ahead Sir.

I would like to thank everyone for joining us on this webcast to discuss Delek logistics partners fourth quarter 2020 financial results. Joining me on today's call will be easy you mean, our general partners, Chairman and CEO and Reuven 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 Laws. 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 release has been reviewed and we are covering less segment and market information that is incorporated into the <unk> press release on today's call Ruben will begin with financial overview I will review results and Uzi will offer a few closing strategic remarks with that I will turn the call over to Ruth.

Thank you Blake, our fourth quarter performance on a year over year basis benefited from relatively stable baseline business operations contribution from the recent asset Dropdowns, along with business initiative and asset optimization, our distributable cash flow was approximately $56 million in the fourth quarter of 2020 compared to.

$33 million in the fourth quarter of 2019.

Net income attributable to all partners increased approximately 88% over the prior year period.

Our DCF coverage ratio was 141 for the fourth quarter of 2020 compared to 1.08 in the prior year period, EBITDA was 64 million, which represents a 48% increase over the prior year period.

Based on our performance and outlook, we increased our quarterly distribution to <unk> 91 per limited partner unit for the quarter ended December 31, 2020. This distribution was paid on February nine 2021, and represents a 0.6% increase from increase from the third quarter of 2020.

This is our 31 consecutive quarterly increase and a two 8% higher than our fourth quarter 2019 distribution.

At December 31, 2020, the KL had approximately $103 million of available capacity on our $850 million credit facility or.

Our total debt our total debt was approximately $1 billion and the total leverage ratio is 375 times, which is within the five five times currently allowable under our credit facility.

Finally, as a reminder, during the third quarter, we announced the elimination of the incentive distribution rights, which helped lower our cost of capital now.

Now I will turn the call over to Blake to discuss the results.

Thanks, Ruben and our pipelines and transportation segment, the fourth quarter of 2020 contribution margin was $44 million compared to $25 million in the fourth quarter of 2019. This increase was primarily attributable to the recent asset dropdowns, including Big spring gathering and trucking assets. Additionally, operating expenses decreased $10 million in the fourth quarter of 2020 from 19.

On the prior year period.

In our wholesale marketing and Terminalling segment contribution margin with $18 million on the fourth quarter of this year compared to $17 million on the prior year operating expenses came in $1 million higher than the same period in 2019.

During the fourth quarter of 2020 equity income from our crude oil joint ventures was approximately $6 million compared to $5 million on prior year period capital expenditures were approximately $8 5 million in the fourth quarter of 2020, which consisted of $7 million of discretionary spending and $1 5 million of sustaining maintenance for full year 2021, our total growth.

Capital expenditure forecast is $21 million, which includes $6 9 million of discretionary and $13 9 million of maintenance capital with that I will turn the call over to Lindsay for his closing comments. Thanks.

Thanks, Blake and good morning, everybody on.

Our fourth quarter results rounded up a stellar year for our company as we delivered strong relative stock performance. Despite macro headwinds for the industry net income and EBITDA in the fourth quarter increased approximately 88% on 48% respectively versus last year.

<unk> delivered on our commitment of 5% distribution growth on a full year basis, and we expect another five year increase in distribution in 2021.

This is underpinned by our outlook for continued strong operational performance.

We exceeded our year end distribution coverage on leverage ratio targets earlier than expected, creating tremendous flexibility as we progress into 2021.

Lastly, I would like to acknowledge that decade, one day entire without one recordable incident, which is a real testament to our employees with that operator would you. Please open the call for questions.

Absolutely we will now begin the question and answer session.

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To withdraw your question. Please press Star then two today.

Today's first question comes from Spiro <unk> with credit Suisse. Please go ahead.

Hey, Good morning, guys. First question just wanted to hit West, Texas margins, if we could maybe tie that to RIN prices last quarter and <unk> fairly strong I think you guys have talked about the run up in Rins kind of driving some of that and so we're a little surprised in the fourth quarter. When we look at the West, Texas marketing margins come down as much as they did.

Against the backdrop of RIN prices, increasing so I'm curious if you can address some of that variability and then as we look forward RIN prices continue to be pretty strong here into the new year I'm curious what you think that means for marketing margin so far in the first quarter and into the year.

Hey, this is of the all in value respond to that question specifically around the western wholesale as you've seen right from the volume standpoint, we still exactly the same as Q3.

Looking better but with that said, we had some hedging losses that will apply to Q4 that were lowered.

<unk> overall gross margin that we see now with the Tulsa compared to Q3 as we're looking on Q1, the marine still looking fairly strong.

Still looking on the associate hedging that will be contributing to Q1, but from a green standpoint, we felt that seem to see improvement.

Got it okay. So it sounds like hedging was the big driver there okay.

Next question maybe.

Maybe just taking a step back you guys are targeting 5% distribution growth again, just great to see how many companies are still growing in this market. It seems like you could easily achieve that just by working down some of your distribution coverage, but I suspect you actually want to grow EBITDA. So could you talk a little bit about some of the growth drivers that you're looking for this year in terms of how youre going to grow.

EBITDA to support a debt distribution and then more broadly and kind of tethered to this obviously you are undergoing a bit of an internal review right now at the Dk level.

Just curious.

The extent you can maybe give us an indication of anything at that level that could either help or hinder your goal to grow the MLP this year.

Well.

Good morning.

We do have several.

Organic.

Project that will come to fruition in the second quarter, we're not ready to disclose disclose them not because we don't know that we are very well identified as well as.

The allocation the problem is that we want to stay competitive in these initiatives just a little more before we jump in and give that to the market.

Feel very good about the 5%.

In light of these organic.

Project.

<unk> Dk or your question about dk, or obviously I'm not going to wear the dk had here on saying on behalf of detail, but one thing I do want to say.

Even at the Dk level, we have several ideas around several assets that may enhance the dk situation. Now obviously, we do have the wink to Webster pipeline that we have started to operate and will be fully operating in.

Fourth quarter of 2021 this year so.

If we decide to do a dropdown or something like that that's obviously going to make day.

Much stronger at this point we did.

We said, we did park the Krotz Springs.

Our dropdown however.

Margins improving.

Springs.

Ill.

Come back to play, we'll see we need to be patient and see how it plays itself but.

Just in a nutshell to answer your question.

We don't believe that day.

5%.

Is something that will.

Hurt both coverage or leverage ratio because of the organic growth projects.

Perfect that's great color, Thanks, Susie Hello, everybody.

And ladies and gentlemen, as a reminder, if you'd like to ask a question. Please press Star then one.

And this concludes the question and answer session I would like to turn the conference back over to get on management team for any final remarks.

Yes.

Like to think.

My colleagues around the table to board of directors I'd like to think.

Louise.

<unk>.

This great year detailed weighted tremendous year.

Sure.

With growth everywhere EBITDA.

Net income in the August stock performance, we are very proud of what we achieved.

But mainly we would like to thank you investors for cure.

<unk> and give you that.

The tweaking.

Treatment you gave us thank you have a great day.

Thank you ladies and gentlemen. This concludes today's conference call. Thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

Okay.

Okay.

Okay.