Q1 2023 Delek Logistics Partners LP Earnings Call
Risks and uncertainties that may cause actual results to differ from our forecast for more information. Please refer to the risk factors discussed in the company's most recently filed annual report on Form 10-K, and quarterly report on Form 10-Q filed with the SEC.
Long with the press release associated with this call.
The company assumes no obligation to update any forward looking statements or information, which speak of their respective dates.
Before I turn the call over to <unk> I, just want to remind everyone of a reporting change we made last quarter. After the three bear acquisition, we reorganized our business and changed the naming of Delek Permian gathering to Midland gathering.
<unk> gathering assets are now referred to as Delaware gathering <unk>. Thanks.
Thank you Jose.
Logistics partners, both the 2020 was another record quarter.
Logistics system contributing to our record will be resolved over $93 million.
Delek logistics continued to deliver a solid operational performance and generating strong cash flow.
This is due to investments we have made to develop our assets.
As an example, compared with last year, we have more than doubled the volume in the Midland gathering system. In addition, during the quarter. Therefore, just to continue its track record.
Have a safe and reliable operations.
As of the end of March <unk> employees and contractors have booked.
Combined are 4 million man hours with zero lost time injuries.
I am extremely proud of our employees and contractors, who continue to focus on safety and achieve milestones.
On April 28, our board of directors approved a four 6% increase in.
In the quarterly distribution to $1 and $2.05 per limited partner unit for the first quarter.
This marks 41 consecutive quarterly distribution increases for the partnership and we are committed to continuing this trend.
This increase demonstrates our commitment to our unit holders and our confident in our business.
We continue to be optimistic on the outlook for the midstream business and believe Delek logistics is well positioned to continue its strong track record of growth.
I will now hand, it over to <unk>.
Thank you Rodrigo.
Total EBITDA for <unk> was $93 million for the first quarter of 2003 compared with $66 million in the same period in 2002 for.
For the first quarter of 'twenty, three distributable cash flow was $62 million in the DCF coverage ratio was 138 times.
The gathering and processing segment EBITDA this quarter was $55 million compared with $32 million in the first quarter of 'twenty two.
The increase was primarily driven by strong contribution by the Midland gathering system as well as Delaware gathering, which was added in June of 'twenty two.
Throughput of the Midland gathering averaged approximately 222000 barrels per day for the first quarter of 'twenty. Three this was up from an average of about 100000 barrels per day in the first quarter of 'twenty two.
The wholesale marketing and Terminalling segment, EBITDA of $22 million for the quarter and rose in line with our prior year.
The storage and transportation segment had EBITDA of 13 million this first quarter compared with $11 million. During the same period last year. The increase was primarily from higher utilization and fees.
And lastly, the investment in pipeline joint venture segment contributed $6 million toward the first quarter of <unk> 23, compared to the $7 million in the first quarter of 'twenty. Two the decrease was from lower throughput due to the Delek <unk> Tyler refinery turnaround in the first quarter of 'twenty three going forward, we expect JV contribution to detail to revert to <unk>.
Normal levels of approximately $8 million per quarter.
Moving to capital expenditure first quarter of 'twenty three capital spending was 36 million of which 33 million was for growth projects, namely advancing new connections in the Delaware and Midland gathering system for 'twenty, three we maintain with our capital outlook of $81 million.
With that we can open the call for questions.
Thank you we will now begin the question and answer session.
To ask a question you May press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys. Please limit yourself to one question and one follow up 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 Justin Jenkins with Raymond James. Please go ahead.
Great. Thanks, I think we covered a good bit already on the Teekay call, but just a couple of high level question, if I could probably probable.
First on Permian operations, just with the commodity price moves and rig count changes that can we get an update on what youre seeing in the overall operating environment and what that means for the volume outlook for both of the system.
Yes, absolutely circumstance for taking the time joining us this call and thank you for the question.
So all of that.
Although the last year, we have seen the Midland the total production going up call it 10%.
And in our.
In our area, we have seen that more than doubled.
And that's a great trend and we are extremely happy with the results, we're seeing and we're extremely happy with the relationship we have with the producer and the amount of rigs we see on site. So it's really encouraging the results and the trends that we're seeing around the harder rock and around the operation. So.
I think that on the earlier side of <unk>, we got it right very happy with the performance that we see on what used to be three bear now the Delaware area.
They went extremely well for us that will present jumped in and you know thats, a good opportunity and a good way to going forward.
Increasing the distribution 41 quarters in a row and we have.
As a long way ahead of us to continue that trend.
Perfect I guess second one even even more broad than my first question just how you see avid I'll detail evolving here in 2023, and maybe what the overall M&A backdrop looks like as well.
So we are demonstrating the threep area that they're at.
As a gap between the private market and the public market, we think that the DKNY.
As the unit has a greater unit to hold because of distribution because of the how solid it is and because of the consistency that we did over that.
And I'm sure that we'll find a pathway forward to keep.
Bridging those gaps and they bring the investors the gate.
Greater distribution and get good performance going forward.
Namely.
Encouraging in good times.
Great. Thanks, I'll leave it there thank you.
You.
The next question will come from Doug Irwin with Citi. Please go ahead.
Hey, Thanks for the question just wanted to start with the balance sheet, maybe if we kind of look at leverage this quarter it moves a little bit lower.
The absolute debt level actually increased a bit could you maybe just talk about where you see leverage trending throughout the year and maybe give a little context about kind of how much of that is driven by EBITDA growth versus maybe the ability to pay down some debt later this year.
Yes, thanks for the thanks for the question Doug I'll start in Logan will continue so the unreasoning we.
We did draw some.
Some funds for capital projects, which well very nice philosophy.
And the EBITDA. So that was a good decision going forward towards the year that we see the leverage ratio going down and we have a good pathway for that so we're optimistic on that as well I don't know if you want to add anything.
Just.
Little bit of color of $36 million of Capex in the first quarter was 45% of our annual plan and we.
Say.
We expect to stay within that guideline of $81 million. So that was one reason why the draw, especially that most of the draw was for growth capital projects.
And we do expect the trend of.
The leverage ratio to continue to go down every quarter.
Okay, Great. That's helpful and then just.
One maybe around costs salaries outlines kind of the cost reduction initiatives at the dk level, just curious kind of where teekay al might fit into that and that you are seeing any kind of potential opportunities for cost reductions at the MLP level as well.
So thanks.
And Thats a great question, we are looking on all areas of the business, how we can make it more.
Right.
Focus and they are productive.
Obviously, the detail as part of that and I'm sure that we'll see some improvement over the elsewhere.
But then you want to say anything on that you are leading that the spirit no no for sure just to give a little bit color. We do looking on a couple of opportunity to be able to achieve littered the year, specifically from efficiencies and also capabilities that were doing that obviously reflected both in the gross margin, but also on the opex to make sure that we're doing everything right in phase. So it's definitely will be <unk>.
Most of the capital as Ruben mentioned was done per million Q1 size, we're going to move forward, we're going to see that.
Started with lower so thats going to be.
It resolved, but also improvement opex as well.
Got it that's all I had thanks for the time.
Thank you.
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> <unk> for any closing remarks. Please go ahead.
Yes, so I would like to thank <unk> employees for their safe and.
Reliable operation the Mark of 4 million hours without lost time injury is really remarkable and we are looking forward to hit the 5% now.
So first of all our employees our investors.
Board of directors and everyone that took the time to join US today for the call.
Really impressive time.
The best quarter after last quarter and really enjoying the right. Thank you so much and we'll see you soon next quarter.
Okay.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
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