Q2 2025 Delek Logistics Partners LP Earnings Call
Thank you for standing by. My name is Jael, and I will be your conference operator today.
At this time, I would like to welcome everyone to the Delek Logistics Partners Second Quarter 2025 Earnings Call.
All lines have been placed on mute to prevent any background noise.
After the speaker's remarks, there will be a question and answer session.
If you'd like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again.
I now look to turn the conversation over to Robert Wright, Chief Financial Officer. You may begin.
Good morning and welcome to the Delek Logistics Partners second quarter earnings conference call. Participants joining me on today's call will include Abigail Thorek, President, and Reuven Spiegel, EVP.
As a reminder, this conference call will contain forward-looking statements as defined under the federal securities laws, including statements regarding guidance and future business outlook.
Any forward-looking statements made during today's call involve risks and uncertainties that may cause actual results to differ materially from today's comments.
Factors that could cause actual results to differ are included in our SEC filings. The company assumes no obligation to update any forward-looking statements.
I will now turn the call over to Aval for opening remarks.
Thank you. All.
Logistics partner had another record call.
We reported approximately $120 million in quarterly adjusted debt.
DKL is on track to deliver its full EBITDA guidance of $480 million to $520 million.
The Electoral Logistics continue to make substantial progress in improving its position. As a premier pool, Service could provide natural gas and water in the most politic areas of the permanent basin.
During the quarter, we successfully completed the commissioning of the newly planted.
We are very excited about the opportunities this expansion has opened for us, and we expect to fill the plan to capacity in the second half of 2025.
This expansion and our ongoing efforts on acid, gas injection, and sour gas handling capabilities will further improve our natural gas offering in the Door Basin.
I'm also very pleased with our cold and water gathering operations.
Both DPG and DDG crude gathering operations have started the second half of the year strong, with both showing a significant rise in volume.
We look forward to continuing to build on our strengths through the remainder of 2025 and beyond.
Between our $2 million, water acquisition, and increasing dedication, we expect to grow our competitive position in both Midland and the Dal bases.
As we have demonstrated in the past, we will continue to grow our partnership to ensure prudent management of leverage and coverage.
We not only intend to remain good stewards of stakeholder capital, but we also intend to continue to reward them through our peer-leading distributions.
I am pleased to announce that both of our directors have approved the 50th consecutive increase in quarterly distribution to $1.11 and a half per unit.
This is an extraordinary achievement.
And we are extremely proud of our team and financial prudence that have gotten us here.
To conclude.
We are very excited about the prospect of the electoral districts.
We expect to continue our value creation, moving forward, and we will continue to grow our distribution in the future.
I will now hand it over to Robin, who will provide more details on our operations.
Thank you, Abigail. As Abigail mentioned, our excitement about future details is growing, and we continue to work diligently to strengthen our advantage in every position.
Since then, we have completed the commissioning and transferred the plan to operations. The plan is performing according to expectations, as Avigal mentioned. We expect to fill up the plant over the remainder of the year.
As we also mentioned in our last call, blend capex for Libby included investments that will support future expansions of the Libby complex.
Our current focus around the Libby complex is to continue progressing our sour gas treating and acid gas injection capabilities.
We continue to believe that our expanded gas processing and sour gas handling capabilities provide a unique offering to our customers and give us a long runway of growth in the Delaware Basin.
Additionally, since we are one of the few companies that can handle all three streams—gas, water, and our natural gas—GMPP expansion is opening additional opportunities for us in crude and water gathering in the Delaware Basin.
As I have mentioned, we have seen our crude gathering volumes rise to start the third quarter, and we expect to continue to see this trend going forward.
On the Midland side, the integration of the two water gathering systems from H2O and Gravity is progressing well, and we expect to use our larger footprint to enhance our combined crude and water offerings in the Howard, Martin, and Glasco counties.
Finally, we continue to look for opportunities to make our operations more efficient with Target to improve margins across our operations. With that, I will pass it on to Robert.
Thank you. As both a call and Reuven have mentioned, we are continuing the growth story of Dilo Logistics.
We remain focused on maintaining healthy liquidity to support this growth while ensuring that our leverage aligns with our long-term targets.
Specifically, the success of our high-yield notes offering completed earlier this summer increased our availability by $700 million to over $1 billion.
Moving on to our second quarter results, the second quarter adjusted EBITDA was approximately $120 million compared to $102 million in the same period of 2024.
Distributable cash flow, as adjusted, was $73 million, and the DCF coverage ratio was approximately 1.22 times.
We expect this ratio to continue to rise throughout the remainder of the year as our growth projects, including the Levy 2 gas plant, start to meaningfully contribute to our results.
For the Gathering and Processing segment, adjusted EVA for the quarter was $78 million compared to $55 million. In the second quarter of 2024, the increase was primarily due to the acquisitions of H2O and Gravity.
Wholesale marketing and terming. Adjusted EVA was $23 million compared to $30 million in the prior year. The decrease was primarily due to the impacts of last summer's amendment extend agreements.
Storage and transportation adjusted. EVA in the quarter was $17 million compared with $17 million in the second quarter of 2024.
And lastly, the investments in the pipeline joint venture segment contributed $11 million this quarter, compared with $8 million in the second quarter of 2024.
The increase was primarily due to the wink to Webster drop down in August of last year.
Moving on to capital expenditures, the capital program for the second quarter was approximately $119 million.
$150 million of this capital spend relates to growth capex, with around $48 million attributed to the completion of the levy and two gas processing plants.
The project was very successful and finished on track from both the timing and cost perspective.
The remainder of the capital spend for the period was on other growth projects, namely advancing new connections in the Midland and Delaware Gathering systems.
As to our outlook for the balance of the year, we continue to remain on track for the EVA guidance we laid out for the full year of $480 million to $520 million.
With that, we can now open the call for questions.
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Your first question comes from the line of Doug Irwin of City. Your line is open.
More treating capacity, along with more processing.
Yeah, dog. Thank you for joining us. And, uh, see you, as we said on the proper remarks, we're really excited about the the operation, and what we have done their, both on the capital side and the operation side, and it's all coming together. Very, very nicely. And we are very happy about that. So with that said, I will let the Roven.
That takes the lead around that activity. Let me give some more color.
Thank you, Abigail, and thanks for the question. As Abigail said, the plant was completed on time. The commissioning phase takes some time, but it was done according to our planned schedule.
And with a big focus on reliability, as we're speaking right now, we are flowing gas. We're doing it gradually and we expect to run full by year, end, uh, the execution of this project within the timeline and the budget is, what gives us the confidence and the Comfort to reaffirm our guideline of 480. To 520, in addition to that our focus is now on um the sour gas uh, processing. And we're working we already uh,
Uh, we constructed the, uh, unit and now we're working on drilling the AGI wells. Uh,
We are executing on other infrastructure-related projects associated with the sour. So we are on track with that project as well. We are coordinating the timeline and the efforts with their producers.
For most development, you have to say for more development. We have to stay tight; we obviously have the opportunity. We said in the previous call that we have made some investment, but we will announce that once we feel that we are ready to announce that, not and not announce it before. So, that's very much on our mind.
Understood um and and maybe just a follow up on the the sour gas treating side. Uh we obviously saw some assets change hands in the Delaware recently. Just curious your view of that deal. How kind of those assets? Might compare to your footprint right there in the Delaware as well. And just, you're used to some of the broader competitive environment for for treating capacity in the Delaware, as it, it seems like it's becoming an increased Focus for for some players in the basin.
Yeah, Dagger, I think you're absolutely right. You cover the sector very well, and you are dead on. Obviously, North Wind, you are probably referring to. That is a very closed system to us. There is some similarity in configuration, but we also have capabilities that are not necessarily in North Wind, and Mohit will cover that in a second. With that said, the
Every time we see such a high multiple in our neighborhood, it's a good thing for us. It shows the intrinsic value that we see in the Delek asset, and we are very proud and excited to develop them to full capacity to the benefit of the unit holders. If you want to explain the difference between the systems,
Yeah, thanks. So Doug. I think, you know, we've talked about this multiple times in the past, um, this transaction is a great reaffirmation of our strategy and as far as uh, the gas processing Gathering and our entire business, and the delivery is concerned. So we're very happy to see that Benchmark. And I think I mentioned this on on, on earlier de call. I don't know if you got a chance to listen to it uh Northwind. Uh just has trading capacity, they don't have processing capacity. We have are have a much bigger Fuller strategy around natural gas uh including SAR gas Gathering trading processing and we like our comprehensive system, a lot better. But you know, this definitely provides us a benchmark. We uh, we followed the transaction very closely and uh and I think it's a great reaffirmation of our strategy as I mentioned before
Understood. That's all for me. Thanks for your time. Thank you, Doug.
Your next question comes from line of Gabe Moiraine of Mizuho. Your line is open.
Hey Gabe. How are you?
Good. How we going? How are you doing? I'm doing well. Thank you, good. Just wanted to stay on the m&a, topic. Just kind of wandering your latest thoughts in terms of what you're seeing out there in the market. Obviously you've got a lot of liquidity now at the decal side post to high yield offerings,
Uh, so just wondering what you’re seeing out there, whether in the Delaware Midland, water, crude, or gas, or otherwise.
Market when we are looking on m&a, uh, we are looking at these things. It seems to be free cash, flow accretive it's easy to be accretive to leverage ratio. It seems to be a creative for coverage ratio and it seemed to fit our strategy. We are always looking. And if the opportunity presented itself, we are not trying. We are not trying to make to make to make a move. But we are also on the same side if
Opportunity presents itself on the other side.
We can do that the other way around, so we are not. I want you to fully understand that we are not married to an asset. Our only purpose in life is to create value, and as we have demonstrated in the last year, we can play on each side of the table by creating huge value for investors. So I think that's the message.
Perfect. Thanks. And then, maybe if we can talk about just what you're hearing from producers and their plans. Clearly, there's been a lot of volatility in commodity prices.
Volatility where you're feeling about where you may come in in the 480 to 520 range for guidance. Um, just maybe your latest thoughts there given all the the the shifting background there. Yeah, absolutely. So let's start with the easy 1. Let's talk about producers. So we are as I said many time in the past, we are in the most prolific area of the permanent Basin. We feel very good with our guidance, 4805 to 520. And I think what we are 1 of the a few the 3 iterations versus the sector that took some some breathing room on the guidance and took them down.
Down just a little bit. So you need to feel very good with that.
You probably also heard me saying, on the prepared remark that we see optic in volume, on a Q3, on a crude both on the D system, the ddg and the and the Midland system DPG. So, that's another thing that you need to feel good about. Uh, we are very, we have a very good relationship with our customer. We have a mature customer, we have a great Rock to work with our Break, Even in our area are low. So um I don't think that any there is no where code is 65 stable kind of a deal. I don't see any problem with we are where we are giving the lowest break even so we feel very good with Where We Are.
Perfect. Thanks. Abigail
Thank you.
Is there? No further questions? That concludes our Q&A session. We'll now turn the comments back over to acts for closing remarks.
Thank you. So I would like to thank my colleagues here around the table. I would like to thank you. The investors sales side by side and I would like to take the boat to take the boat of directors and and and mostly to thank our entire employees that make our partnership as good as it is. So thank you.
This concludes today's conference call. You may now disconnect.