Q1 2022 Delek Logistics Partners LP Earnings Call

Please refer to the risk factors discussed in the company's most recent filings annual report or Form 10-K, and form 8-K filed with the SEC along with the associated press release. The company assumes no obligation to update any forward looking statements or information, which speak of respective dates on today's call.

Rubin 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 Ruben.

Thank you Blake our distributable cash flow was approximately $52 million in the first quarter of 2022 compared to $53 million in the first quarter of 'twenty, one our DCF coverage ratio was one to one for the first quarter compared to $1 three one in the prior year period.

<unk> was 66 million, which represents 12% increase over prior year period.

Our board approved an increase in the quarterly distribution to <unk> 98 per limited partner unit for the quarter ended March 31.

This distribution will be paid on May 12 to unitholders of record on may 5th and represent 0.5% increase from the fourth quarter of 2021, and six 5% increase from the first quarter of 2021.

At March 31, <unk> had $586 million of available capacity on our $850 million credit facility. Our total debt was $906 million and the total leverage ratio was approximately three three times, which is well within the 525 times currently allowable under our credit facility now.

Now I will turn the call over to Blake to discuss the results. Thanks, Ruben and our pipelines and transportation segment. The first quarter 'twenty to contribution margin was $43 2 million, which is broadly in line compared to $41 7 million in the first quarter of last year in our wholesale marketing and Terminalling segment. The contribution margin was $19 million for the first quarter.

This year compared to $15 million in the first quarter of 'twenty one.

The increase was primarily driven by stronger volumes in the big spring marketing and Terminalling facilities. During the first quarter of 'twenty to equity income from our crude oil joint venture pipelines was approximately 7 million compared to 4 million in the prior year period. This increase was largely driven by strong volumes at both Caddo and Red River.

Oint ventures.

Capital expenditures were approximately $9 1 million in the first quarter of 'twenty, two which consisted of $7 million of growth spending and $2 1 million of sustaining maintenance the outlook for 'twenty. Two includes total gross capital expenditures of $73 million, including $59 million of growth.

$14 million of maintenance capital as a reminder growth capital is predominantly being allocated towards the Permian gathering business. Please note full year guidance excludes capital associated with the planned three bear acquisition in the second half of the year.

With that I'll turn the call over to <unk> for his closing comments.

Yeah.

Thanks, Blake and good morning, everybody decay and is well positioned moving into 2022.

Our legacy Permian gathering business, you're seeing strong producer nominations, where we expect to at least double volumes from the fourth quarter of last year to the fourth quarter of this year.

This robust level of industry activity provided us.

<unk> to move forward with the planned acquisition of <unk>.

This acquisition provides us with multiple benefits, including more size and scale significantly increasing third party.

Revenue diversification into the Delaware portion of the Permian basin, and expanding our product mix into natural gas and water.

We see this as an attractive valuation multiple and the transaction is expected to be immediately accretive to our DCF ratios.

Finally, the recent increase in the quarterly distribution of <unk> 98.

Per unit March 37 consecutive quarters of distribution growth for our company.

Based on macro indicators and the lack of planned maintenance at the Delek U S. Refining system, we remain confident in our ability to continue rewarding our unitholders with that offer.

Operator can you please open the call for questions.

Yes, Sir we will now begin the question and answer session.

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

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 will pause momentarily to assemble our roster.

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

Hi, This is Chad on for Spiro.

It sounds like financing three bear acquisition will primarily be debt.

With leverage increasing in the future are you targeting getting back near that three three times leverage ratio reported in 122 are you comfortable running leverage at a higher rate than that longer term.

That's a great question good morning.

Let's.

Ticket into two phases.

The leverage is going up but.

Because of the three bed acquisition, but the business the underlying business because of the growth in the Permian and the gathering and the fact that there is no maintenance in decay.

Refineries.

Leverage over the next year.

With the underlying business.

Basic business.

I'll be fine then that makes us comfortable with the <unk> acquisition to be final.

With that.

That being said, we always said that we can go up but then.

<unk> tried to deleverage that we did in the last two years after equivalence dropdown.

So why.

What we expect.

To happen is we will go up with the leverage and then.

Because of the performance of the business because of the decay.

We found out is performing well and because of the growth in the <unk>.

Also in <unk>, we expect that leverage to come down.

Okay. That's helpful.

And then the second question does this financing and change the way you think about the timing of Dropdowns going forward or is your prior messaging around the.

<unk> identified asset drops still intact.

Well, we said all along that we.

We need to look at.

Cross carefully, but the wink to Webster.

We said that when it is going to be a fully vetted and.

Fully utilized which we expect sometime in 'twenty three and of course at that time.

Differentials are starting to open we expect this event to.

To be to happen over the next 12 to 18 months so sometimes in 'twenty three if things go the right way.

We should expect that the dropdown of Ww.

Okay, Great. That's really helpful. Thanks for the time today.

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 Mr. Uzi, you mean for any closing remarks. Please go ahead Sir.

Well first.

Thank you for taking the time to talk about this morning I've got to think.

<unk>.

People around the table my colleague.

I'd like to thank the board of directors I'd like to thank you investors.

For your <unk>.

Interest and confidence in us and our performance.

And in EBITDA and share performance.

Look really good, but mostly I'd like to think.

The employees of this great company.

What do you think you.

Have a great morning.

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

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Okay.

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Sure.