Q2 2021 Delek Logistics Partners LP Earnings Call

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Good morning, and welcome to the Delek logistics second quarter 2021 conference call all participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the stark he followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question you May Press Star then 1.

On your Touchtone phone to withdraw from the question queue. Please press Star then 2 please note. This event is being recorded I would now like to turn the conference over to Blake Fernandez SVP of Investor Relations. Please go ahead.

Morning, I would like to thank everyone for joining us on this webcast to discuss Delek logistics partners second quarter 2021 financial results. Joining me on today's call will be Uzi, you mean, our general partners, Chairman and CEO and Rubens Segal CFO as well as the other members of the 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 for 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.

X 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.

I was on a 20.

Our DCF coverage ratio was 132 for the second quarter compared to $1.5 8 in the prior year period.

<unk> was 67 million, which represents 3% increase over the prior year period.

We increased our quarterly distribution to <unk> 94 per limited partner unit for the quarter ended June 30th.

This distribution is to be paid on August 11, 21, and represents a 2.2% increase from the first quarter of 2021 and $4.4 per cent increase from the second quarter of 2020 at June 30th decal at the KL had approximately $561 million of available capacity on our 800.

$50 million credit facility, our total debt was approximately $929 million and the total leverage ratio is 3.6 times, which is within the 5.25 times currently allowable under our credit facility.

Now I will turn the call over to Blake to discuss the results. Thanks, Ruben and our pipelines and transportation segment. The second quarter contribution margin was $45 million compared to 43 million on the second quarter of last year. This increase was primarily attributable to the dropdown of the trucking assets dropped on May 1.2020 and pay line pipeline performed in our <unk>.

Sales marketing and Terminalling segment, the contribution margin was $19 million in the second quarter of this year compared to $19 million in the second quarter of last year.

During the second quarter of 2021 equity income from our crude oil joint venture pipelines was approximately $7 million, which was flat with the prior year period.

Capital expenditures were approximately $2.6 million in the second quarter, which consisted of $1.5 million of discretionary spending and $1.1 million of sustaining maintenance for full year 'twenty..1 our total growth capital expenditure forecast is $29 million, which includes $18 for millions of discretionary and $1$1.1 million of maintenance capital.

That I will turn the call over to Uzi for his closing comments.

Yes.

Thank you Blake and good morning, everybody.

We witnessed a strong sequential increase in performance in the second quarter based on the lack of winter weather impact.

Lower turnaround activity and no maintenance or debate on pipeline that occurred in the credit score.

We successfully raised $400 million of debt to our senior note offering creating flexibility and extending our maturity.

We continue our long history of distribution growth with a third third third consecutive increase and we remain committed to delivering a 5% increase when the full year basis.

Our distribution coverage and leverage ratios remained healthy and our sponsor Delek U S. No major maintenance planned for the rest of the year with that operator can you. Please open the call for questions.

We will now begin the question and answer session to ask a question you May Press Star then 1 on your Touchtone phone.

Youre using a speakerphone please pick up your handset before pressing the keys to withdraw from the question queue. Please press Star then 2.

Yes.

The first question comes from Spiro <unk> of Credit Suisse. Please go ahead.

Hey, good morning, guys.

Uzi firsthand for you I was hoping to hear your thoughts on the macro setup here in the back half of the year.

Was it a lot of green shoots out there on energy towards for the exception on the Delta very driving from Lockdowns overseas.

But even before that you had always been kind of a bit cautious on demand.

And the rebound there in 'twenty, 1 I think you start more of a 2022 story just curious is that more or less materializing kind of like how you expected really just any thoughts on the set up from JMP and downstream. Please for second half would be great.

Yes.

Good morning, Spiro, Thanks again for.

For your interests.

You asked similar question for Larry Let me try to answer each 1 of them and if I did for job just push back and ask for more info.

You may have.

These are V D. The demand situation.

I have not changed my mind, we have not changed our mind.

And we think that the demand situation.

Situation, but we'll get back to normality.

On the 2022.

I don't know that the Delta variant is is a big factor here I don't know it may be but at this point I see it being contained.

For the for the time being.

I think that is value is already giving a third vaccine, we'll see how it works.

So I think the rebound the big rebound.

Being expenses.

We expected to.

For the end of this year 21, and 22 I do think that 'twenty 2 will be as we said in the past.

Very very strong probably the strongest we've seen just because of the fact that people will get died after being at home for.

Almost 2 years I think employers.

We are anxious to see.

Their employees back to the office and I do believe that that would happen to the demand.

<unk> situation.

Is getting there you know we see the demand where it was 5% to 7% below low below 2019.

I think we will get back to normality towards the end of this year and early next year.

You're asking about the activities in the energy sector. We also on the acquisition of <unk>.

Or the merger of HFC, and Sinclair and I think that there will be more and more on.

On merger and acquisitions energy sector is.

Is ripe for for changes.

I must say debt.

1 you've talked about the energy transformation.

Think debt.

We are well.

For our business.

Too fast to come to conclusions that.

Fossil fuels.

Is out of the picture I think we have a menu the angle for us.

Obviously with the changing market.

Book capture as well as.

ESG, but.

Still drove my car here to the office this morning.

That will change over the next 5 years.

Last you asked about our situation and we haven't changed our mind much.

We still have the organic growth that we mentioned the flooring project.

Red River that came to fruition the bailout situation that is getting there obviously with fixing on the RIN.

And.

Towards the end of next year.

2022.

We need to look carefully at.

Dropping down.

Wink to Webster I think our hope I answered every question that you had.

Yes, no known each other I appreciate it great.

Great color.

Your last comments there.

And then my next question, which is on these growth projects.

I think you had said that you'd want to see a lot of the organic growth that you've got going on out there.

For dropping down for its spring sounds like Wink to Webster to your point as kind of a next year event.

Just curious where we're at in terms of timing some of these growth projects organically before moving on the price range.

Well.

Krotz Springs is a different.

Dave will discuss it.

They are on today, but with the Supreme Court decision.

Okay.

And sorry is it cross either on the top of the.

Lift if you will even with the administration.

B to grant.

Yes.

We've been granted the exemption of book.

At Krotz then causes are certainly very good refinery and then we should consider.

Carefully.

Dropping down the assets of Cogs.

And of course, then I mentioned, the Wink to Webster and other may be organic or inorganic.

As we look forward.

For 2 an improving market.

Perfect.

Hey, guys. Thank you.

Thank you for you.

Again, if you have a question. Please press Star then 1.

There are no other questions at this time. This concludes our question and answer session I would like to turn the conference back over to Uzi, you mean for closing remarks.

Yes. Thank you.

I'd like to thank everybody around the table for being such great colleagues I'd like to think.

You investors for your trust in US you continue to show that you believe in our company.

And I'd like to thank you for that I'd like to think of.

And board of Directors on board of directors for supporting what management wants to do but mainly I'd like to thank each 1 of these.

Each 1 of the this company employees.

Each 1 of them makes this company.

The Great company it is and we couldn't do it without you having.

Have a great morning, we'll talk soon thank you guys.

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