Q4 2021 Delek Logistics Partners LP Earnings Call

Good day and welcome to the Delek logistics fourth quarter 2021 conference call all participants will be in a listen only mode.

You need assistance. Please signal conference specialist by pressing the star followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question. You May Press Star then one on your telephone keypad and Swift draw. Your question. Please press Star then two.

Please note. This event is being recorded I would now like to turn the conference over to Mr. Blake Fernandez. Please go ahead.

Good morning, I would like to thank everyone for joining us on this webcast to discuss Delek logistics partners fourth quarter 'twenty, one financial results. Joining me on today's call will be Uzi, you mean, our general partners, Chairman and CEO and Reuven Spiegel CFO as well as other members of the management team. As a reminder, this conference call may contain forward looking statements as that term is.

Fine 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 posted on the Investor Relations website. Our prepared remarks are being assumed that the earnings.

Press release has been reviewed and we are covering less segment and market information that is incorporated into the press release.

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

Thank you Blake our distributable cash flow was approximately 54 million in the fourth quarter compared to 56 million in the fourth quarter of 2020.

Our DCF coverage ratio was one seven times for the fourth quarter compared to 141 in the prior year period.

EBITDA was $70 million, which represents a 9% increase.

A year period.

Our board approved an increase in the quarterly distributions of <unk> 97, five cents per limited partner unit for the quarter ended December 31st this distribution was paid on February eight.

They told US the record on February 1st and represents a two 6% increase from the third quarter and a seven 1% increase from the fourth quarter of 2000 and collect.

At December 31, 2021.

592 million of available capacity on our $850 million credit facility.

Our total debt was 899 million and total leverage ratio was 335 times, which is well within the five to five times currently allowable under our credit facility now.

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

Thanks, Ruben and our pipelines and transportation segment, the fourth quarter 21 contribution margin was $50 million compared to $44 million in the fourth quarter of 2020.

The increase was primarily attributable to higher pipeline throughput, partially offset by expenses related to pipeline integrity work.

In our wholesale marketing and Terminalling segment contribution margin was $17 million in the fourth quarter of this year.

Compared to $18 million in the fourth quarter of 2020 results were broadly in line with year ago levels. During the fourth quarter of 21 equity income from our crude oil pipeline JV was approximately $7 million compared to 6 million in the prior year.

Capital expenditures were approximately $12 9 million in the fourth quarter of 'twenty, one which consisted of $8 2 million of growth spending and $4 8 million of sustaining maintenance.

On a full year basis, our 'twenty one total gross capital expenditure was $27 5 million, which includes $22 million of growth and $7 3 million of maintenance capital. The outlook for 'twenty. Two includes total gross capital expenditures of $70 8 million, including $59 million of growth and $11 8 million of maintenance capital.

With that I will turn the call over to Ethan.

Thank you Blake and good morning, everybody.

<unk> delivered another strong performance in 2021, despite the personal dog time at multiple Delek U S facilities during the year.

The lack of major planned turnaround activity for Delek system in 2022 could benefit detail with growing volume flowing through our.

Our asset this year.

Activities once again accelerating in detail is forced to basically with increased demand in our gathering system.

We plan to expand this asset with a step up in growth capital in 2022.

We delivered on our 5% distribution growth commitment for 2021 with the recent quarterly distribution increase.

We expect another 5% increase in 2022 on a full year basis with that operator can you. Please open the call question.

Yes, Sir we will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys and to withdraw your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.

And the first question will come from Spiro <unk> with credit Suisse. Please go ahead.

Thanks, operator, good morning, guys.

First question on gross Capex, you just mentioned it the $59 million sounds like a lot of that is going to be directed towards the Permian gathering system can you give us a sense maybe for what else.

It is actually in that number or is that really all directed there and then just as you think about the commodity environment I think that guidance came out in December commodity obviously vastly improved even since then and so curious if you see any sort of upside SKU or bias to that number as the year progresses.

Okay. So your.

First of all good morning.

The 59.

Million dollar number essentially is all toward the PPG.

With few exceptions, but very few of them now let me share with you what we've seen independent.

It's basically.

Moving toward.

More spot.

Existing.

Producers.

Kim with their plan and shared them with us.

Our agreements with them and we're going to accommodate them. If there will be new producers, which we believe there will be more dedicated acreage in the in the future because of everything that is going on that number may go higher but we.

We just need to remember that with $100 or $90 $80 environment.

Spreads the gathering spreads are getting there.

We're meeting.

In summary, our 15% to 17% threshold.

And just to give you a point of reference I know that everybody is trying to get.

What would be the production in 2022.

We see until a week ago, which probably may change now to the upside we saw.

You look at the press release, we were gathering 83000 barrels.

In the fourth quarter.

In the first quarter, we're already.

125, or so quarter through trucking, because we need to build the infrastructure and then we expect in the fourth quarter as we exit the year.

Two weeks ago, 10 days ago, because we have an updated number with producers to double that.

83 number and go over 160 160000.

Living the <unk>.

Or exiting 2022 so.

Essentially in our case doubling production within the year.

Our idea until 10 days ago.

Wow, Okay. That's that's helpful color. Thanks Uzi.

Second question just on to something from the Dk press release, it talk a little bit about some opportunistic divestitures.

Dk all stock that probably continue to happen just given the success of that program. So far I guess, just curious is there a target ownership level that you all have in mind. The dk really just any color there and how youre thinking about executing these divestitures would be helpful.

Well.

We set was 43 $44 is a good number we obviously have limited downside if something happens to the units, but so far it's holding.

Okay, I think we actually have an upside based on today's numbers.

The color we're providing.

Both on the.

The <unk> thing and all for the Fleury.

Project. So we will continue to do that we don't think that we should.

B holding 79%, 80%, we'll do that in a timely manner you probably saw Dk press release, there is no need of cash over there.

As a matter of fact.

Prices of crude going up from working capital will continue to be.

Very positive for Dk, So, we'll do that as long as we think there's value in it.

But certainly we don't think that is a.

He is the right number.

But I don't see us going out with big blocks anytime soon.

Do it in a timely manner.

Under under the ATM program.

Got it okay. That's that's helpful last one if I could sneak it in just with respect to some of the customer contracts.

Like you had a few expire in November in Greenville, I think Theres, a few more coming up in April at Big Springs, just looking for any color you can provide in terms of how to think about the impact the renewal process and anything you can share on those.

Sure Spiro Hey, good morning Ali.

So basically all of those contracts are going to be renewed and working towards the <unk> conflict Committee.

Between both Dk and detail, we don't expect to have really an impact.

From the associated volume that we are seeing over there and also what we've seen so far and also from the <unk> standpoint, So really we don't see any impact going forward for those two.

Got it that's great. That's all I had today guys. Thanks for the time.

Thanks Darryl.

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

This concludes our question and answer session I would like to turn the conference back over to <unk> Amin for any closing remarks. Please go ahead Sir.

Okay. Thank you so much I would like to think up.

My colleagues around the table.

No.

The board of directors and you investors for.

And for your interest in our company.

Unique Q4 detail, we actually performed very well in the.

Stock market, but at the same time, we all saw at the same time, we built a foundation for future growth I think the price of.

Crude and the things that are happening in the energy sector, especially in the Permian.

Should benefit us.

Most of it I think each one of the employees of this great company and have a great day and we'll talk to you soon thank you.

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

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