Q2 2026 Delek US Holdings Inc Earnings Call

August 5, 2026

Speaker #1: Hello, everyone. Thank you for joining us, and welcome to the Delek US Q2 2026 earnings call. After today's prepared remarks, we will host a Q&A session.

Operator: Hello everyone. Thank you for joining us and welcome to the Delek US Q2 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Robert Wright, EVP and CFO. Robert, go ahead.

Operator: Hello everyone. Thank you for joining us and welcome to the Delek US Q2 2026 earnings call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Robert Wright, EVP and CFO. Robert, go ahead.

Speaker #1: If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Robert Wright, EVP and CFO.

Speaker #1: Robert, go ahead.

Speaker #2: Good morning, and welcome to the Delek US Q2 earnings conference call. Participants joining me on today's call will include Avigal Soreq, President and CEO; Mohit Bhardwaj, EVP New Energy Strategy and Investor Relations; as well as other members of our management team.

Robert Wright: Good morning and welcome to the Delek US Q2 earnings conference call. Participants joining me on today's call will include Avigal Soreq, President and CEO, Mohit Bhardwaj, EVP, New Energy, Strategy, and Investor Relations, as well as other members of our management team. Today's presentation material can be found on the investor relations section of the Delek US website. Slide two contains our safe harbor statement regarding forward-looking information. As a reminder, this conference call will contain forward-looking information 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.

Speaker #2: Today's presentation material can be found on the Investor Relations section of the Delek US website. Slide 2 contains our Safe Harbor statement regarding forward-looking information.

Speaker #2: As a reminder, this conference call will contain forward-looking information as defined under the Federal Securities Laws, including statements regarding guidance and future business outlook.

Speaker #2: 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.

Speaker #2: The company assumes no obligation to update any forward-looking statements. I will now turn the call over to Avigal for opening remarks. Avigal?

Robert Wright: I will now turn the call over to Avigal for opening remarks. Avigal?

Speaker #3: Thank you, Robert. Good morning, and thank you for joining us today. I'm extremely pleased with our strong execution in the second quarter. The quarter further demonstrates our enhanced execution capabilities.

Avigal Soreq: Thank you, Robert. Good morning and thank you for joining us today. I am extremely pleased with our strong execution in the Q2. The quarter further demonstrates our enhanced execution capabilities. First, we successfully navigate the volatility in crude and product markets caused by the event in the Middle East. Second, we made further progress in increasing our free cash flow profile and reducing our overall cost structure. This quarter reinforced the importance of discipline in maintaining safe and reliable operation and making thoughtful capital allocation decisions. This is especially important during periods of strong margins. We'll continue to apply the same prudent approach across our business capital deployment and corporate culture as we are creating sustainable long-term shareholder value. As I mentioned during the last earning call, the event in the Middle East and East Europe have created many ripple effects in the markets.

Speaker #3: First, we successfully navigated the volatility in crude and product markets caused by the event in the Middle East. Second, we made further progress in increasing our free cash flow profile and reducing our overall cost structure.

Speaker #3: This quarter reinforced the importance of disciplined in maintaining safe and reliable operations and making thoughtful capital allocation decisions. This is especially important during periods of strong margins.

Speaker #3: We will continue to apply the same prudent approach across our business capital deployment and corporate culture as we are creating sustainable long-term shareholder value.

Speaker #3: As I mentioned, during the last earnings call, the events in the Middle East and Eastern Europe have created many ripple effects in the markets.

Speaker #3: We continue to see steep liquidation, swing in crude differentials, and shortage of transportation fuel. In the current environment, we continue to believe that access to crude, high distillate yield, and most importantly, the ability to respond quickly to changing in the market conditions are critical to maintaining operational flexibility and delivering strong performance.

Avigal Soreq: We continue to see steep liquidation, swing in crude differentials, and shortage of transportation fuel. In the current environment, we continue to believe that access to crude, high distillate yield, and most importantly, the ability to respond quickly to changing in the market condition are critical to maintaining operational flexibility and delivering strong performance. We plan to continue navigating this environment with measured approach by first mitigating risk, and second, capturing the opportunities offered by the market. Now, I will cover some of our Q2 highlights and strategic initiatives in detail. Starting with refining. Our refining system operated well, demonstrated by all four refineries. Big Spring has been running to our expectation since its turnaround. Post-turnaround, we are seeing improved reliability, higher crude slate flexibility, improvement in overall product yields, and higher octane and blending capabilities.

Speaker #3: We plan to continue navigating this environment with measured approach by first mitigating risk and second capturing the opportunities offered by the market. Now, I will cover some of our second quarter highlights and strategic initiatives in detail.

Speaker #3: Starting with refining, our refining system operated well demonstrated by all four refineries. Big Spring has been running to our expectations since its turnaround. Post-turnaround, we are seeing improved reliability, higher crude slate flexibility, improvement in overall product yields, and higher octane and blending capabilities.

Speaker #3: We are very pleased with this improvement and are looking at finding additional opportunities to further improve this important asset in our portfolio. With no planned turnarounds for the rest of the year, our refining system is well positioned to capture the strengths in the market.

Avigal Soreq: We are very pleased with this improvement and are looking at finding additional opportunities to further improve this important asset in our portfolio. With no planned turnarounds for the rest of the year, our refining system is well-positioned to capture the strengths in the market. Moving to EOP. Our Enterprise Optimization Plan continued to drive significant value. As a reminder, our Enterprise Optimization Plan target to increase our cash flow by at least $220 million on an annual run rate basis. During Q2 of 2026, we estimate approximately $60 million of EOP contribution to our P&L. We are currently working on further advancing EOP to create an additional meaningful step change to our free cash flow profile. We'll provide more details on this in the near future. Our sum of the parts initiative also continued to progress with raising strength of our midstream business.

Speaker #3: Moving to EOP, enterprise optimization plan continues to drive significant value. As a reminder, our enterprise optimization plan targets to increase our cash flow by at least 220 million dollars on an annual run rate basis.

Speaker #3: During the second quarter of 2026, we estimate approximately 60 million dollars of EOP contribution to our P&L. We are currently working on further advancing EOP to create an additional meaningful step change to our free cash flow profile.

Speaker #3: We'll provide more details on this in the near future. Some of the partner initiatives also continue to progress with raising strengths of our midstream business.

Speaker #3: DKL today reaffirmed its 2026 EBITDA guidance of 520 million dollars to 560 million dollars. The Tailwind we have been seeing in DKL business continues to rise and we are working hard to capture these opportunities.

Avigal Soreq: DKL today reaffirmed its 2026 EBITDA guidance of $520 million to $560 million. The tailwinds we have been seeing in DKL business continue to rise, and we are working hard to capture these opportunities. DKL is close to completing its comprehensive gathering, treatment, processing, and acid gas injection solution. The sour gas solution will provide DKL the ability to fully capitalize on its growth opportunities in the Delaware Basin and maintain its best-in-class EBITDA growth and yield. In 2026, on a pro forma basis, we continue to expect DKL third-party EBITDA to exceed 80%. This level of economic separation is a cornerstone of our sum of the parts strategy and continue to bring us closer to our deconsolidation goal. DKL is on the right path, and we continue to work hard to write the next chapter in its growth story.

Speaker #3: DKL is close to completing its comprehensive gathering treatment processing and acid gas injection solution. The sour gas solution will provide DKL the ability to fully capitalize on its growth opportunities in the dollar basin and maintain its best-in-class EBITDA growth and yield.

Speaker #3: In 2026, on a performer basis, we continue to expect DKL third-party EBITDA to exceed 80 percent. This level of economic separation is a cornerstone of our some of the part strategy and continues to bring us closer to our deconciliation goal.

Speaker #3: DKL is on the right path and we continue to work hard to write the next chapter in its growth story. As mentioned last quarter, we are pursuing a proactive strategy to manage our obligation under the RFS.

Avigal Soreq: As mentioned last quarter, we are pursuing a proactive strategy to manage our obligation under the RFS. The SRE provision in the RFS serves the important purpose of mitigating the impact felt on small refineries from the RFS burden. RVO costs remain elevated, and the absence of SREs created a significant burden on small refineries like us. We expect the EPA to continue to provide relief to small refineries for the year of 2025 and beyond. Finally, we believe that the current administration, Senate, Congress, and EPA realize the importance of small refinery exemptions, not only for the refineries which qualify under the program, but also for the local communities they serve. The final piece of our strategy is being shareholder-friendly and having a strong balance sheet. During the quarter, we paid approximately $16 million in dividends and $20 million in buybacks.

Speaker #3: The SRE provision in the RFS serves the important purpose of mitigating the impact felt on small refineries from the RFS burden. RVO costs remain elevated and the absence of SREs created a significant burden on small refineries like us.

Speaker #3: We expect the EPA to continue to provide relief to small refineries for the year of 2025 and beyond. Finally, we believe that the current administration Senate, Congress, and EPA realize the importance of small refinery exemptions.

Speaker #3: Not only for the refineries which qualify under the program, but also for the local communities they serve. The final piece of our strategy is being shareholder friendly and having a strong balance sheet.

Speaker #3: During the quarter, we paid approximately 16 million dollars in dividend and 20 million dollars balance sheet improved reliability, EOP in confidence in our outlook continues to support disciplined approach to capital allocation through continued dividend and buybacks.

Avigal Soreq: Our strong balance sheet, improved reliability, EOP, and confidence in our outlook continue to support disciplined approach to capital allocation through continued dividends and buybacks. We remain committed to a balanced and disciplined capital allocation strategy and look forward to continuing to reward our shareholders. In closing, thank you for our team for the hard work and dedication. I am immensely proud of the progress Delek has made, and I look forward to building on the momentum for the remainder of the year and beyond. Now, I will turn the call over to Robert, who will provide additional color on the quarter.

Speaker #3: We remain committed to a balanced and disciplined capital allocation strategy. And look forward to continuing to reward our shareholders. In closing, thank you for our team for the hard work and dedication.

Speaker #3: I'm immensely proud of the progress Delek has made and I look forward to building on the momentum for the remainder of the year and beyond.

Speaker #3: Now, I will turn the call over to Robert, who will provide additional color on the quarter.

Speaker #4: Thank you, Avigal. For the second quarter, Delek reported net income of approximately 170 million dollars or 2 dollars and 71 cents per share. On an adjusted basis, net income came in at approximately 344 million dollars or 5 dollars and 48 cents per share.

Robert Wright: Thank you, Avigal. For Q2, Delek reported net income of approximately $170 million, or $2.71 per share. On an adjusted basis, net income came in at approximately $344 million, or $5.48 per share, with adjusted EBITDA of approximately $639 million. Turning to slide four, we provide the breakout of adjusted EBITDA and adjusted EPS for the quarter. When we exclude the 50% RVO adjustment, adjusted EBITDA was approximately $490 million, and adjusted EPS was approximately $3.64 per share. Slide five walks through the bridge in adjusted EBITDA, excluding the 50% RVO adjustment from Q1 to Q2. The breakdown shows that there were three main drivers for the increase in EBITDA. Quarter-over-quarter performance was led by stronger Refining margins, helped by our robust distillate yields, along with higher throughput following the successful completion of the turnaround at Big Spring.

Speaker #4: With adjusted EBITDA of approximately 639 million dollars. Turning to slide four, we provide the breakout of adjusted EBITDA and adjusted EPS for the quarter.

Speaker #4: When we exclude the 50 percent RVO adjustment, adjusted EBITDA was approximately 490 million dollars and adjusted EPS was approximately 3 dollars and 64 cents per share.

Speaker #4: Slide five walks through the bridge and adjusted EBITDA, excluding the 50 percent RVO adjustment from the first quarter to the second quarter. The breakdown shows that there were three main drivers for the increase in EBITDA.

Speaker #4: Quarter over quarter performance was led by stronger refining margins, helped by our robust distillate yields, along with higher throughput following the successful completion of the turnaround at Big Spring.

Speaker #4: In supply and marketing, we saw a 60 million dollar increase versus the prior quarter. This improvement was driven primarily by wholesale marketing, which contributed 25 million dollars to the improved results, partially offset by a 3 million dollar reduction in asphalt contribution with the remainder of the change coming from supply.

Robert Wright: In supply and marketing, we saw a $60 million increase versus the prior quarter. This improvement was driven primarily by Wholesale Marketing, which contributed $25 million to the improved results, partially offset by a $3 million reduction in asphalt contribution, with the remainder of the change coming from supply. Our Logistics segment posted its best quarterly results in our history, delivering approximately $144 million in adjusted EBITDA as momentum continued across all three of our Permian Basin offerings, crude gas, and water. Let's move to slide 15 for a review of cash flow. Cash flow from operations was $263 million for the quarter. This reflects net income for the period, adjusted for non-cash items, along with $138 million net outflow from changes in working capital. Investing activities was a use of $176 million, reflecting our continued investment in growth.

Speaker #4: Our logistics segment posted its best quarterly results in our history, delivering approximately 144 million dollars in adjusted EBITDA as momentum continued across all three of our permeum basin offerings, crude gas and water.

Speaker #4: Let's move to slide 15 for a review of cash flow. Cash flow from operations was $263 million for the quarter. This reflects net income for the period, adjusted for non-cash items, along with a $138 million net outflow from changes in working capital.

Speaker #4: Investing activities was the use of 176 million dollars, reflecting our continued investment in growth. This includes second quarter capital purchases of 61 million dollars at Delek Logistics, primarily for growth projects, and 55 million dollars of purchases in refining, along with a quarter over quarter reduction of capital accruals, primarily related to the payments on the final expenditures of the Big Spring turnaround, which we completed safely on schedule and on budget.

Robert Wright: This includes Q2 capital purchases of $61 million at Delek Logistics, primarily for growth projects, and $55 million of purchases in Refining, along with a quarter-over-quarter reduction of capital accruals, primarily related to the payments on the final expenditures of the Big Spring turnaround, which we completed safely, on schedule, and on budget. Financing activities was an outflow of $82 million, which reflects the paydown associated with the successful refinancing of our term loan from $920 million down to $850 million. It also includes approximately $16 million in dividend payments and approximately $22 million in DKL distribution payments to public unitholders. Slide 16 breaks out our net debt position between Delek and Delek Logistics. On a standalone basis, excluding Delek Logistics, Delek's net debt declined by $72 million, driven primarily by the term loan paydown completed as part of the successful refinancing of that facility.

Speaker #4: Financing activities was an outflow of $82 million, which reflects the paydown associated with the successful refinancing of our term loan from $920 million down to $850 million.

Speaker #4: It also includes approximately 16 million dollars in dividend payments and approximately 22 million dollars in DKL distribution payments to public unit holders. Slide 16 breaks out our net debt position between Delek and Delek Logistics.

Speaker #4: On a standalone basis, excluding Delek Logistics, Delek's net debt declined by 72 million dollars, driven primarily by the term loan paydown completed as part of the successful refinancing of that facility.

Speaker #4: Now turning to slide 17 and our outlook for the third quarter, our throughput guidance is as follows. Tyler, 72 to 77 thousand barrels per day.

Robert Wright: Now turning to slide 17 on our outlook for Q3, our throughput guidance is as follows. Tyler, 72 to 77,000 barrels per day. El Dorado, 78 to 83,000 barrels per day. Big Spring, 68 to 73,000 barrels per day. Krotz Springs, 78 to 83,000 barrels per day. Taken together, this implies a system throughput target of 296 to 316,000 barrels per day for Q3. In addition to the throughput guidance, for Q3 2026, we expect operating expenses to be between $220 and $230 million, G&A between $50 and $55 million, and D&A to be between $110 and $120 million. Additionally, beginning this quarter, we will provide interest expense guidance at both the DKL and standalone DK levels. This added disclosure reflects our continued focus on economic separation and capital discipline and underscores the progress we have made on both fronts.

Speaker #4: El Dorado, 78 to 83 thousand barrels per day. Big Spring, 68 to 73 thousand barrels per day. And Cross Springs, 78 to 83 thousand barrels per day.

Speaker #4: Taken together, this implies a system throughput target of 296 to 316 thousand barrels per day for the third quarter. In addition to the throughput guidance, for the third quarter of 2026, we expect operating expenses to be between 220 and 230 million dollars.

Speaker #4: G&A between 50 and 55 million dollars. And D&A to be between 110 and 120 million dollars. Additionally, beginning this quarter, we will provide interest expense guidance at both the DKL and standalone DK levels.

Speaker #4: This added disclosure reflects our continued focus on economic separation and capital discipline, and underscores the progress we have made on both fronts. We expect net interest expense between 75 and 85 million dollars.

Robert Wright: We expect net interest expense between $75 and $85 million, with DK contributing between $28 and $33 million and DKL contributing between $47 and $52 million. With that, we will now open the call for questions.

Speaker #4: With DK contributing between 28 and 33 million dollars, and DKL contributing between 47 and 52 million dollars. With that, we will now open the call for questions.

Speaker #1: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand.

Operator: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand, and to withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you're muted locally, please remember to unmute your device. Your first question comes from the line of Doug Leggate with Wolfe Research. Your line is open. Please go ahead.

Operator: We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand, and to withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you're muted locally, please remember to unmute your device. Your first question comes from the line of Doug Leggate with Wolfe Research. Your line is open. Please go ahead.

Speaker #1: And to withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.

Speaker #1: If you're muted locally, please remember to unmute your device. Your first question comes from the line of Doug Leggett with Wolf Research. Your line is open.

Speaker #1: Please go ahead.

Speaker #5: Hi team. Thanks for taking my question. This is Ayush Gupta on behalf of Doug Leggett at Wolf Research. He sends his apologies for not making the call today.

Ayush Gupta: Hi, team. Thanks for taking my question. This is Ayush Gupta on behalf of Doug Leggate at Wolfe Research. He sends his apologies for not making the call today. Congrats on a great quarter. I have a few questions. I'll start off with the SREs. Can you offer any update on the current timing of 2025? Specifically, can you clarify if SREs are awarded, what are the restrictions on value? Can you sell 2025 credits at 2026 prices? Related, you recently were awarded Krotz Springs, having previously being denied. Can you share the process that led to the change in decision and implications for what it might mean across the portfolio for 2026 point forward? Thanks.

Aayush Gupta: Hi, team. Thanks for taking my question. This is Aayush Gupta on behalf of Doug Leggate at Wolfe Research. He sends his apologies for not making the call today. Congrats on a great quarter. I have a few questions. I'll start off with the SREs. Can you offer any update on the current timing of 2025? Specifically, can you clarify if SREs are awarded, what are the restrictions on value? Can you sell 2025 credits at 2026 prices? Related, you recently were awarded Krotz Springs, having previously being denied. Can you share the process that led to the change in decision and implications for what it might mean across the portfolio for 2026 point forward? Thanks.

Speaker #5: Congrats on a great quarter. I have a few questions, and I'll start it off with the SREs. So can you offer any update on the current timing of 2025, and specifically, can you clarify if SREs are awarded?

Speaker #5: What are the restrictions on value? Can you sell 2025 credits at 2026 prices? And related, you recently were awarded Cross Springs having previously been denied.

Speaker #5: Can you share the process that led to the change in decision and implications for what it might mean across the portfolio for 2026 point forward?

Speaker #5: Thanks.

Speaker #6: Yeah, first of all, thank you for joining us, and please send our regards to Doug. So let's start with the bigger discussion about small refinery exemptions.

Avigal Soreq: Yeah. First of all, thank you for joining us, and please send our regards to Doug. Let's start with a bigger discussion about small refinery exemptions. First, small refinery exemption in related to 2025, it's not a Delek situation. It's a industry, it's probably impact like I would guess around 40 refineries across the nation and probably impact half of the industry, so it's well beyond us. The issue of small refinery exemptions, and I want you to remember one line here, is disproportionate economic harm. The idea is to maintain high-paying job, local communities, and affordable fuels. It support the administration energy dominance. The administration understand it very well. Senate, Congress, and EPA, and all understand that it need to be resolved in a timely manner that allow us to comply as needed.

Speaker #6: First, small refinery exemption in related for 2025, it's not a Delek situation. It's a industry, it's probably impact like I would guess around 40 refineries across the nation.

Speaker #6: And probably impact half of the industry, so it's well beyond us. The issue of small refinery exemption, and I want you to remember one line here, is disproportionate economic harm.

Speaker #6: And the idea is to maintain high paying job, local communities, and affordable fuels. It support the administration energy dominance, the administration understand it very well, Senate, Congress, and EPA, and all understand that it's need to be resolved in a timely manner that allow us to comply as needed.

Speaker #6: And Mohit, I would like to chime in to give more color around that.

Avigal Soreq: Mohit, I would like you to chime in to give more color around this.

Speaker #3: Yeah. Thanks, Avigal, and thanks, Ayush, for joining the call. Avigal is absolutely right. The SRE issue is about disproportionate economic harm. And you rightly pointed out in your question the grant for KSR reflects that.

Mohit Bhardwaj: Yeah. Thanks, Avigal, and thanks, Ayush, for joining the call. Avigal is absolutely right. The SRE issue is about disproportionate economic harm. You rightly pointed out in your question, the grant for KSR reflects that. Our petition was strong, and EPA and the DOE, they both agree that we have disproportionate economic harm because of RFS, and that's why our petition was overturned. As far as we are concerned, we are very excited about our 2025 petitions as well in terms of the strength of them, and we are looking forward to that announcement.

Speaker #3: Like you know, our petition was strong, and EPA and the DOE, they both agree that, you know, we have disproportionate economic harm because of RFS.

Speaker #3: And that's why our petition was overturned. So as far as we are concerned, we are very excited about our 2025 petitions as well in terms of, you know, the strength of them and we are looking forward to that announcement.

Speaker #5: Perfect. Thank you. And I have a follow-up. Your refining profitability is generally higher cost versus peers, and the cost allocated to DKL, can DK hedge margin strength and what could that really look like?

Ayush Gupta: Perfect. Thank you. Now I have a follow-up. Your refining profitability is generally higher cost versus peers and the cost allocated to DKL. Can DK hedge margin strength, and what could that really look like?

Aayush Gupta: Perfect. Thank you. Now I have a follow-up. Your refining profitability is generally higher cost versus peers and the cost allocated to DKL. Can DK hedge margin strength, and what could that really look like?

Speaker #6: Yeah, thank you. For that question, generally speaking, some of our investors see us getting into the refinery industry, and for DK shares specifically, it is to get exposure to Cross Spring.

Avigal Soreq: Yeah. Thank you for that question. Generally speaking, some of our investor sees us in getting into the refinery industry, and for DK shares specifically, is to get exposure to crack spreads. We going ahead, and hedging that is taking some of the thesis investment. We are not doing it in any meaningful way, and we want to make sure that our investor are well rewarded and awarded for investing in our share. Both on what we do on the capital allocation and not blocking the thesis around it. I hope it makes sense to you.

Speaker #6: So we going ahead, and hedging that is taking some of their teasers investment. So we are not doing that in any meaningful way. And we are want to make sure that our investor are well rewarded and awarded for investing in our share.

Speaker #6: Both on what we do on the capital allocation and not blocking the teasers around it. I hope it makes sense to you.

Speaker #5: Thanks, Avigal. Thank you.

Ayush Gupta: Thanks, Avigal. Thank you.

Aayush Gupta: Thanks, Avigal. Thank you.

Speaker #1: Your next question comes from Alexa Brenna with Goldman Sachs. Your line is open. Please go ahead.

Operator: Your next question comes from Alexa Brenna with Goldman Sachs. Your line is open. Please go ahead.

Speaker #7: Hey, good morning team, and thanks for taking our question. We wanted to ask first, can you just talk a little bit more about your capital allocation strategy?

Alexa Brenna: Hey, good morning, team, and thanks for taking our question. We wanted to ask first, can you just talk a little bit more about your capital allocation strategy? You've got a good amount of tailwinds coming in from a cash perspective. How should we think about that, whether that be buybacks, a dividend, or any other M&A consideration, or any other allocation consideration?

Speaker #7: You've got a good amount of tailwinds coming in from a cash perspective. So how should we think about that, whether that be buybacks, a dividend, or any other M&A consideration, or any other allocation consideration?

Speaker #6: Yeah, absolutely. Alexa, first of all, thank you for joining us call, and thank you for your support. So I will be very crisp around that, right?

Avigal Soreq: Absolutely. Alexa, first of all, thank you for joining this call, and thank you for your support. I will be very crisp around it, right? We had a very clear capital allocation strategy that working very well for us. We maintain dividend through the cycle very well towards that. We have a balanced approach between taking care of our balance sheet and buyback. We need to put things in perspective. We put around 10% of our company since the beginning of 2025, and we are one of the leading companies among our peers around returning capital to our investors. We believe that being friendly to our investor and giving a good return to their investment is cornerstone in our strategy, and we'll keep doing that going forward.

Speaker #6: We had a very clear capital allocation strategy that is working very well for us. We maintain the dividend through the cycle very well towards that. And then we have a balanced approach between taking care of our balance sheet and buyback.

Speaker #6: We need to put things in perspective. We put around 10% of our company since the beginning of 2025, and we are one of the leading companies in our among our peers around the returning capital to our investors.

Speaker #6: We believe that being a friendly to our investor and giving a good return to their investment is cornerstone in our strategy. And we'll keep doing that going forward.

Speaker #7: That's helpful. And then just on a follow-up, can you talk a little bit more about EOP? Any places that it's surprising to the upside, and as you kind of think about, you always talk about it being ongoing in the next leg.

Alexa Brenna: That's helpful. Just on a follow-up, can you talk a little bit more about EOP? Any places that it's surprising to the upside, and as you kind of think about, you always talk about it being ongoing in the next leg. Where are areas for further improvement?

Speaker #7: Where are areas for further improvement?

Speaker #6: Yeah, absolutely. EOP—it's a big deal, a very big deal in our shop. And, you know, we spoke about that many times, you and I.

Avigal Soreq: Absolutely. EOP, it's a big deal. Very big deal in our shop. We spoke about it many times, you and I, how proud we are about the fact that the entire organization is behind it, and they're showing a very good results. EOP, it's not a project, it's a lifestyle. That's something we do. We push it to the entire organization, and the organization love it and come up with more and more idea initiative as we speak. You need to remember, I'm sure you know that the whole point of EOP is to create a free cash flow at all market condition in DKL. We helped you, doing the presentation, put together, put a slide that show what happened in terms of EBITDA and free cash flow in a similar market condition, and how well it position us going forward.

Speaker #6: How proud we are about the fact that the entire organization is behind it and showing a very good results. EOP, it's not a project, it's a lifestyle.

Speaker #6: That's something we do. We push that to the entire organization, and the organization loves it and comes up with more and more ideas and initiatives as we speak.

Speaker #6: You need to remember, and I'm sure you know that, that the whole point of EOP is to create a free cash flow at all market condition in DK, and we helped you during the presentation and put together, we put a slide that show what happened in terms of EBITDA and free cash flow in a similar market condition, and how well it position us going forward.

Speaker #6: Obviously, we started the program with around $100 million. We've more than doubled that as we stand now. And as I mentioned in my preparatory remarks, I'm going to reiterate that.

Avigal Soreq: Obviously, we started the program with around $100 million. We more than doubled that as we stand now. I mentioned that in my prepared remark. I'm going to reiterate it. We are not stopping here, not even closely. We are working more about the more exciting things around EOP, you need to stay tuned and expect some more good news to come after that. Mohit, why don't you chime in?

Speaker #6: We are not stopping here, not even close. We are working on even more exciting things around EOP. You need to stay tuned and expect some more good news to come after that.

Speaker #6: Mohit, why don't you chime in?

Speaker #3: Yeah, and Alexa, I think Avigal is absolutely right. So, you know, from an upside standpoint, our confidence in our free cash flow profile on a mid-cycle basis is increasing.

Mohit Bhardwaj: Yeah. Alexa, I think Avigal is absolutely right. From an upside standpoint, our confidence in our free cash flow profile on a mid-cycle basis is increasing. We show in our slide deck around $650 to 700 million in free cash flow, including DKL distributions. I think our confidence in that free cash flow, which is close to like a 15% to 20% free cash flow yield at current prices, is increasing. We are very happy about EOP. As Avigal pointed out, we are very happy about the next phase of it. We are very excited about the free cash flow situation that we have coming along for us post EOP environment.

Speaker #3: And we show in our slide deck around $650 to $700 million. And free cash flow, including DKL distributions, and I think our confidence in that free cash flow—which is close to like a 15% to 20% free cash flow yield.

Speaker #3: At current prices, is increasing. So we are very happy about EOP. As Avigal pointed out, we are very happy about, you know, the next phase of it.

Speaker #3: And we are very excited about the free cash flow situation that we have, coming along for us post EOP environment.

Speaker #7: Thanks for the caller. We'll turn it back.

Alexa Brenna: Thanks for the color. We'll turn it back.

Speaker #1: Your next question comes from Manav Gupta with UBS. Your line is open. Please go ahead.

Operator: Your next question comes from Manav Gupta with UBS. Your line is open. Please go ahead.

Manav Gupta: Morning, guys. I'll pivot a little bit to midstream. You have a very strong sour gas presence. Can you give us an update on, in terms of completion of the Libby Gas Complex, when do you expect to get completed? Should we expect a ramp into Q4 and year-end? How that further increases your position in the Permian sour gas opportunity.

Speaker #5: Morning, guys. I'll pivot a little bit to midstream. You have a very strong S&R gas presence. Can you give us an update in terms of completion of the Libby Gas Complex?

Speaker #5: When do you expect to get completed? And then should we expect a ramp into the fourth quarter and year end? And how that further increases your position in the Permian Sour gas opportunity?

Speaker #6: Manav, good morning. Thank you for joining us. It's a great question. We are very excited about the progress we are making. At DKL today, on a pro forma basis, 80% is third-party.

Avigal Soreq: Manav, good morning. Thank you for joining us. It's a great question. We are very excited about the progress we are doing at DKL. DKL today on a pro forma basis, 80% third party. We have a clear, clean strategy of being a premier provider of crude, water, and gas in the most prolific area of the Permian Basin. We have a very good growing engine, which is the gas that you just mentioned. We are very close to completing it. We see increased quarter-over-quarter on the gas we're processing. Lately, Mark took himself that responsibility of leading DKL together with Chris, as I mentioned on my prepared remarks. That's a very good story for us, and we are very excited about the generation. It's both showing on the DK and the DKL unit and share. Mark, why don't you take it from here?

Speaker #6: We have a clear, clean strategy of being a premier provider of crude, water, and gas in the most prolific area of the Permian Basin.

Speaker #6: We have a very good growing engine. Which is the gas that you just mentioned, we are very close to completing it. We see increased quarter over quarter on the gas we processing.

Speaker #6: And lately, Mark took himself that responsibility of leading DKL together with Chris, that I mentioned on my preparatory mark. So that's a very good story for us.

Speaker #6: And we are very excited about the generation. It's both showing on the DK and the DKL unit and share. So Mark, why don't you take it from here?

Mark Hobbs: Yeah. Thanks, Manav. Thanks for the question. Look, what I'll start with is both our plants are running well, both Libby One and Libby Two. As you know, we've discussed in the past, we are seeing increasingly more sour gas production from our customers versus sweet, and this trend does continue. As you know, we've added not only the Libby Two processing capacity, we've completed our AGI well, and are now nearing completion of our sour gas gathering and compression offering, providing us with a much needed and unique sour gas solution in the Northern Delaware, which will help our customers continue to grow their production because we're capable of handling that. Look, we do see this driving a step change in our gas volumes as we move through the rest of the year, and it positions us very well for future growth in the region.

Speaker #2: Yeah, thanks, Manav. Thanks for the question. Look, well, I'll start with is both our plants are running well, both Libby One and Libby Two.

Speaker #2: And as you know, we've discussed in the past, we are seeing increasingly more sour gas production. From our customers versus sweet. And this trend does continue.

Speaker #2: And as you know, we've added not only the Libby Two processing capacity, we've completed our AGI well. And are now nearing completion of our sour gas gathering and compression offering.

Speaker #2: Providing us with a much needed and unique sour gas solution. In the northern Delaware, which will help our customers continue to grow their production because we're capable of handling that.

Speaker #2: And look, we do see this driving a step change in our gas volumes as we move through the rest of the year. And it positions us very well for future growth in the region.

Speaker #5: Perfect. My quick follow-up is a little bit on the refining macro. Given the amount of global capacity that's down, do you expect the product markets to remain tight?

Manav Gupta: Perfect. My quick follow-up is a little bit on the refining macro. Given the amount of global capacity that's down, do you expect the product markets to remain tight? If you could provide some commentary on how, given your high diesel yield, it really benefits you guys. Thank you.

Speaker #5: And if you could provide some commentary on how, given your high diesel yield, it really benefits you guys? Thank you.

Speaker #6: Yeah, absolutely. And that topic came up and, obviously, as you will know, was very well discussed over many calls. The high-level comment I will provide is we have, like, 5 million barrels that are off capacity, all in.

Avigal Soreq: Yeah, absolutely. That topic, Manav, as you will know, was very well discussed over many calls. The high level comment I will provide is, we have 5 million barrels that are off capacity all in. Obviously, we believe that once the event ends, it's going to take a few quarters probably to everything to normalize. It's not going to end very quickly in terms of the fact that we are short of a refined product across the world, actually. We obviously see a steep predation versus historical standard. We have wide swing in crude differentials. We believe that the structural shortage of product is going to last a little bit longer. Obviously, a larger E&P are more disciplined than smaller. Smaller, we show an increase in terms of production.

Speaker #6: Obviously, we believe that once the event ends, it's going to take a few quarters probably to everything to normalize. So it's not going to end very quickly in terms of the fact that we are short of a refined product across the world actually.

Speaker #6: We obviously see a steep accreditation with versus historical standard. We have wide swing in crude differentials. And we believe that the structural shortage of product going to last a little bit longer.

Speaker #6: Obviously, larger E&Ps are more disciplined than smaller ones; smaller ones are showing an increase in terms of production. We saw the rig count increase by around 20 since the event started, which is also another tool in our toolbox.

Avigal Soreq: We saw the rigs count increase by around 20 since the event started, which is also another tool in our toolbox. We obviously saw a Brent-WTI widening in lieu of the different country risk we see now versus beginning of the year. What does it mean for us? Let's bring it back home, Manav. We have a very good access to product, both Gulf Coast and the Midcontinent, which is a positive. We have highest among our peers. We provide you slide, distillate, and jet yield, and that's very good for us to be outside of turnaround cycle and be able to capture that. We have obviously excess of domestic crude, which doesn't put us in working capital issues or in any other supply problems. We have a very good midstream permanent exposure that allow the holder of a DK share to enjoy both.

Speaker #6: And we obviously saw a brand TI widening in light of the different country risk we see now versus the beginning of the year. So what does it mean for us?

Speaker #6: Let's bring it back home, Manav. We have a very good access to product, both Gulf Coast and mid-continent, which is a positive. We have a highest among our peers.

Speaker #6: We provide you a slide distillate and jet yield, and that's a very good for us to be outside of turnaround cycle and be able to capture that.

Speaker #6: We have obviously access of domestic crude, which doesn't put us in a working capital issues, or in any other supply problems. And we have a very good midstream permanent exposure that allow the holder of DK share to enjoy both.

Speaker #6: So we are very well positioned around it, and we are very happy about where we are. Moit, do you want to chime in?

Avigal Soreq: We are very well positioned around it, and we are very happy about where we are. Mohit, you want to chime in?

Speaker #3: Yeah, Avigal, I think you covered a lot of ground there. I just want to emphasize some of the points that you talked about specifically to us.

Mohit Bhardwaj: Yeah. Avigal, I think you covered a lot of ground there. I just want to emphasize some of the points that you talked about specifically to us. You're absolutely right. With this macro environment that we have seen, we have seen that our producers have started at least completing their wells, and production outlook has increased both in the Midland and in the Delaware Basin. Mark talked about that, which is beneficial for our midstream business. This is obviously very beneficial for our refining business as well because they have access to these barrels. Flexibility is the name of the game that Avigal talked about. Having high distillate yield, high jet yield, having different sourcing patterns, that really helps us. Last thing I really want to talk about is that there are a lot of product pipelines being talked about, which is going to clear our market.

Speaker #3: You're absolutely right. With this macro environment that we have seen, our producers have at least started completing their wells, and the production outlook has increased both in the Midland and in the Delaware Basin.

Speaker #3: Mark talked about that, which is beneficial for our midstream business. And this is obviously very beneficial for our refining business as well, because they have access to these barrels.

Speaker #3: Flexibility is the name of the game that Avigal talked about. So having high distillate yield, high jet yield, and different sourcing patterns really helps us.

Speaker #3: And last thing, I really want to talk about is that there are a lot of product pipelines being talked about, which is going to clear our markets.

Speaker #3: That's also going to have a very positive impact which has nothing to do with the crisis, but that is some of the macro trends that we are seeing in our markets.

Mohit Bhardwaj: That's also going to have a very positive impact, which has nothing to do with the crisis, but that is some of the macro trends that we are seeing in our market. Hopefully, that answers your question.

Speaker #3: Hopefully that answers your question.

Speaker #5: Thank you so much.

Manav Gupta: Thank you so much.

Speaker #1: Your next question comes from Jason Gableman from TD Cowan. Your line is open. Please go ahead.

Operator: Your next question comes from Jason Gabelman from TD Cowen. Your line is open. Please go ahead.

Speaker #4: Yeah, hey, thanks for taking my questions. I wanted to go back to the SREs and specifically on a cross in the recent award. How should we think about monetizing that award and the magnitude of cash?

Jason Gabelman: Yeah. Hey, thanks for taking my questions. I wanted to go back to the SREs, and specifically on Krotz and the recent award. How should we think about monetizing that award and the magnitude of cash you think you could get from that, and where is the priority in terms of where that cash goes?

Speaker #4: You'll think you could get from that and where is the priority in terms of where that cash goes?

Avigal Soreq: Yeah. First of all, Jason, thank you for joining our call. We're going to stick to our very strict capital guidance we provided about the dividend, to maintain its own cycle and the balance approach between taking care of the balance sheet and the buyback our shares. As Mohit alluded earlier, even in a mid-cycle basis, we are showing $600 to $700 free cash flow, which is 15% to 20% yield. There is a lot of room in our share price to go up. We don't have any plan to have excess cash on our balance sheet. I want to make it very clear on that. We are not going to hold excess cash just for the sake of holding it. All of that coming together is pretty clear where it's going to come from this point on.

Speaker #6: Yeah, first of all, Jason, thank you for joining our call. We're going to keep stick to our capital very strict capital guidance we provided.

Speaker #6: About the dividend to maintain it all cycle and the balanced approach between taking care of the balance sheet and the buyback our shares. As Moit alluded earlier, even in a mid cycle, basis we are showing 600 to 700, 600 to 700 free cash flow, which is 15 to 20% yields.

Speaker #6: So there is a lot of room in our share price to go up. We don't have any plan to have excess cash on our balance sheet.

Speaker #6: I want to make that very clear. We are not going to hold excess cash just for the sake of holding it.

Speaker #6: So, all of that coming together, it's pretty clear where it's going to come from at this point on. Our strategy is to always stay with compliance.

Avigal Soreq: Our strategy is to stay always with compliance. I will let Mohit to finish it.

Speaker #6: And I will let Moit to finish it.

Speaker #3: Yeah, and Jason, as Avigal just pointed out, we don't have a strategy of holding excess cash on our balance sheet. So you know you've seen our history.

Mohit Bhardwaj: Yeah. Jason, as Avigal just pointed out, we don't have a strategy of holding excess cash on our balance sheet. You've seen our history. We've done a lot of return of capital to shareholders, and that's something that will continue. As far as KSR and the petition is concerned, we are very happy with the outcomes. This shows the point around disproportionate economic harm that I was making earlier. As far as we are concerned, that reflects well as far as our petitions for 2025 are concerned. We are excited to see what EPA says. It's important to understand, for people like us who stay in compliance, we buy RINs, and this is a return of those RINs back to us. It is important that it's not like somebody's giving us cash.

Speaker #3: We've done a lot of return to capital return of capital to shareholders, and that's something that will continue. As far as KSR and the petition is concerned, we are very happy with the outcomes.

Speaker #3: And this shows the point around disproportionate economic harm that I was making earlier. As far as we are concerned, that reflects well as far as our petitions for 2025 are concerned.

Speaker #3: And we are excited to see what EPA says. It's important to understand, for people like us who stay in compliance, we buy RINs and, you know, this is a return of those RINs back to us.

Speaker #3: So it is important that it's not like you know somebody is giving us cash. It's the cash that we have already invested in is being returned to us.

Mohit Bhardwaj: It's the cash that we have already invested in is being returned to us.

Speaker #4: Okay, yeah, I guess I'm wondering, is there any friction time in terms of receiving those rents and then monetizing them, or is that a pretty immediate event?

Jason Gabelman: Okay. Yeah. I guess I'm wondering, is there any friction time in terms of receiving those RINs and then monetizing them, or is that a pretty immediate event?

Speaker #3: Yeah, so Jason, I think you've gone through this rodeo based upon you know how this plays out last time. We have a very good strategy around this.

Mohit Bhardwaj: Yeah, Jason, I think we've gone through this rodeo based upon how this plays out last time. We have a very good strategy around this. We have a very good team who manages our RIN purchases and disposals if any required. We have a very good strategy around it. We are not concerned about it. As I said, SREs is an issue around disproportionate economic harm, and we are glad that EPA took the right decision.

Speaker #3: We have a very good team who manages our rent purchases and disposals, if any are required. So we have a very good strategy around it.

Speaker #3: We are not concerned about it, but you know as I said, SREs is an issue around disproportionate economic harm. And we are glad that EPA took the right decision.

Speaker #4: Okay, and then my follow-up is just on kind of near-term refining margin capture dynamics. Obviously, QQ, you add a pretty steep backwardation. It seemed like the curve is eased here in 3Q.

Jason Gabelman: Okay. My follow-up is just on kind of near term refining margin capture dynamics. Obviously, Q2, you had a pretty steep backwardation. It seemed like the curve has eased here in Q3. Should we expect that to be kind of a one-to-one benefit, in terms of the backwardation in Q2 going to easing in Q3 flowing to your refining margin? Thanks.

Speaker #4: Should we expect that to be kind of a one-to-one benefit? In terms of kind of the backwardation in 2Q going to easing in 3Q flowing to your refining margin?

Speaker #4: Thanks.

Speaker #6: Yeah, that's pretty much it. You got it right. So a dollar in the backwardation is a dollar that doesn't reflect itself into the crack and vice versa.

Avigal Soreq: Yeah, that's pretty much it. You got it right. A dollar in the backwardation is a dollar that doesn't reflect itself into the crack and vice versa. You are absolutely right. We see a pretty flat curve now. Maybe on the front, we see around $1.50 or something like that. That's a pretty flat versus the $6, $7, even more we have seen in Q2, and that's obviously reflecting in the crack spread. You're absolutely right.

Speaker #6: You are absolutely right. We see a pretty flat curve now, maybe on the front we see like around back 50 or something like that.

Speaker #6: So that's a pretty flat versus the 6, 7 dollars, even more we have seen in Q2. And that's obviously reflecting the crack spot. So you're absolutely right.

Speaker #4: All right, thanks.

Jason Gabelman: All right. Thanks.

Speaker #6: Thank you.

Avigal Soreq: Thank you.

Speaker #1: Your next questions comes from Joe Lage with Morgan Stanley. Your line is open. Please go ahead.

Operator: Your next question comes from Joseph Silich with Morgan Stanley. Your line is open. Please go ahead.

Joseph Silich: Hey. Good morning, Avigal and team, thanks for taking my questions.

Speaker #7: Hey, hey, good morning, Avigal and team. And thanks for taking my questions. So I wanted to start on some of the part side. Could you just talk through how you're thinking about the current deconsolidation and value unlock options here?

Avigal Soreq: Good morning, Joe.

Joseph Silich: I wanted to start on the sum of the parts side. Could you just talk through how you're thinking about the current deconsolidation and value unlock options here? You've done a good job with bolt-ons and organic growth in the past at DKL. The currency at DKL has certainly strengthened this year, curious about the M&A landscape as well. Thank you.

Speaker #7: You've done a good job with Boltons and organic growth in the past at DKL and the currency at DKL has certainly strengthened this year.

Speaker #7: So we're curious about the M&A landscape as well. Thank you.

Speaker #6: Yeah, absolutely. So I will start by saying the journey of some of the part we need to remember the objective is to make sure that the value that we are creating in DKL show both in the share price and unit price.

Avigal Soreq: Yeah, absolutely. I will start by saying the journey of sum of the parts. We need to remember the objective is to make sure that the value that we are creating in DKL show both in the share price and unit price. We obviously made progress with that, there is more steps that we are doing as we speak. What we need to remember here that today we are standing with around 80% third-party income on the DKL side. On a pro forma basis, we are standing in a very good location, both on the Delaware side and in the Midland side. Mark gave his remark about the gas plant, which is a very good, unique opportunity.

Speaker #6: We obviously made progress with that and there is more steps that we are doing as we speak. What we need to remember here that today we are standing with around 80% third-party income on the DKL side.

Speaker #6: On a performer basis, we are standing in a very, very good location. Both on the dollar side and in the middle side and Mark gave is remark about the gas plant which is a very good unique opportunity.

Speaker #6: We obviously have very good asset quality as we stand now. On all aspect, DPG on DGG on the crude side, Libby on the gas side, and also the former H2O and Gravity that we bought them around 5 to 6 time, probably the valuation now is around 10, I would guess.

Avigal Soreq: We obviously have a very good asset quality as we stand now, on all aspects, DPG, on DGG on the crude side, Libby on the gas side, and also the former H2 and Gravity, that we bought them around five to six times. Probably the valuation now is around 10, I would guess. Another dynamic in the market, Joe, that you're probably aware of, that we have seen the recent transaction are low to mid-teens, that if you're doing the intrinsic value, there is very high upside about where we are. As I said in the past, all options are on the table, and we are promoting one or more of them. Either the DKL's asset sale, obviously continue doing a bolt-on acquisition, or do a buyback like between DK and DKL like we did in the past, which is, to remind you, a free tax exercise.

Speaker #6: And other dynamic, dynamic in the market, Joe, that you probably aware of, that we have seen the recent transaction are low to mid teens.

Speaker #6: That if you're doing the intrinsic value, there is very high upside about where we are. As I said in the past, all options are on the table and we are promoting one or more of them either the DKL's sell asset sell.

Speaker #6: Obviously continue doing a Bolton acquisition or do a buyback like between DK and DK like we did in the past, which is to remind you a free tax exercise.

Speaker #6: In terms of the M&A itself, the market is very good for a seller today. And you can take that comment wherever you believe to.

Avigal Soreq: In terms of the M&A itself, the market is very good for sellers today. You can take that comment wherever you believe to. On the top of that, we are not going to do acquisition if it's not accretive to leverage coverage ratio and it's going to be strategic. We are looking at all options, and we are staying very tuned.

Speaker #6: And on the top of that, we are not going to do a position if it's not accretive to leverage coverage ratio and it's going to be strategic.

Speaker #6: So we are looking at all options. And we are staying very, very tuned.

Speaker #7: Thank you. That's helpful. And then shifting to refining, just on the utilization side. So it looked like a system ran well overall across all of the refineries.

Joseph Silich: Thank you. That's helpful. Shifting to refining, just on the utilization side. It looked like the system ran well overall across all of the refineries, and you've had some initiatives and turnarounds in recent years to improve the competitiveness of the assets. As we think about the path forward, is there more work to conduct across this system, or is it in a place now where it's more about just operational execution?

Speaker #7: And you've had some initiatives and turnarounds in recent years to improve the competitiveness of the assets. As we think about the path forward, is there more work to conduct across this system or is it in a place now where it's more about just operational execution?

Speaker #6: Yeah, I will tie two answers together. The one answer is that we are obviously happy about where we are in terms of reliability and the progress we have made.

Avigal Soreq: I will tie two answers together. One answer, we are obviously happy about where we are in terms of reliability and the progress we have done. We have completed the third successful turnaround, on budget, on time, and most importantly, safely. We are happy about that. Now I'm going to take the other portion of the answer is an Enterprise Optimization Plan is well tied into that. Joe, you know that we are never going to be happy about where we are with EOP. We made progress to $120 million, $60 million this quarter. The entire organization, and it's coming from all levels, are fully committed to write the next chapter of EOP.

Speaker #6: We are completed the third successful turnaround. On budget, on time, and most importantly safe, safe, safely. So we are happy about that. But now I'm going to take the other portion of the answer is enterprise optimization plan is well tied into that.

Speaker #6: And Joe, you know that we are never going to be happy about where we are with EOP. We made progress to 120 million dollars, 60 million dollars this quarter.

Speaker #6: But the entire organization—and it’s coming from all levels—are fully committed to bringing to write the next chapter of EOP. And don’t be surprised if we’ll come back to you quickly with another level of improvement that we see.

Avigal Soreq: Don't be surprised if we come back to you quickly with another level of improvement that we see, either in the gross margin, in the product we make, in the location we are selling them, in the more area of the business. Stay tuned.

Speaker #6: Either in the gross margin, in the product we make, or in the location we are selling them, and in more areas of the business. So stay tuned.

Speaker #7: Great, that's helpful. Thank you.

Joseph Silich: Great. That's helpful. Thank you.

Speaker #6: Thank you.

Avigal Soreq: Thank you.

Speaker #1: Your next question comes from Matthew Blair with TPH. Your line is open. Please go ahead.

Operator: Your next question comes from Matthew Blair with TPH&Co.. Your line is open. Please go ahead.

Speaker #4: Great, thanks. And good morning, everyone.

Matthew Blair: Great. Thanks, good morning, everyone.

Speaker #6: Thanks, Matt. Thanks for coming.

Avigal Soreq: Thanks, Matt. Thanks for calling.

Speaker #4: So from marketing and supply in the second quarter, apologies if I missed this, but do you have the breakout that includes the details on wholesale marketing, asphalt, and your supply activities?

Matthew Blair: For marketing and supply in Q2, apologies if I missed this, but do you have the breakout that includes the details on wholesale marketing, asphalt, and your supply activities? For Q3, do you have any general commentary on the trends that you are seeing, for example, with crude prices moving back up? Would that be a headwind to asphalt so far in Q3?

Speaker #4: And then for the third quarter, do you have any general commentary on the trends that you're seeing? For example, with crude prices moving back up, would that be a headwind to asphalt so far in Q3?

Speaker #6: Go ahead, Moit.

Avigal Soreq: Go ahead, Mohit.

Speaker #2: Yeah, yeah, Matt. Thanks for the question. So as we have talked about multiple times, our supply and marketing line item, which we call internally the DKTS, is doing very well.

Mohit Bhardwaj: Yeah, Matt, thanks for the question. As we've talked about multiple times, our supply and marketing line item, which we call internally the DKTS, is doing very well. We have new leadership in place. As we've talked about multiple times, we have tried to improve our wholesale business, our asphalt business, trying to create more value out of it. You saw the results in Q2 there versus where we were in Q1. Results improved markedly despite all the volatility that we are seeing, which is you are also referring to as far as your ask for the Q3 forecast is concerned. Wholesale is doing very well. We are very optimistic about the improvements that we've been making, and they should continue in Q3 as well. Asphalt, we'll still have to see as to how prices settle. Prices have seen a lot of volatility.

Speaker #2: We have new leadership in place. We have done as we have talked about multiple times, we have tried to improve our wholesale business, our asphalt business, trying to create more value out of it.

Speaker #2: And you saw the results in the second quarter where versus where we were in the first quarter, results improved markedly despite all the volatility that we are seeing, which is you're also referring to as far as your ask for the 3Q forecast is concerned.

Speaker #2: Wholesale is doing very well. We are very optimistic about the improvements that we've been making, and they should continue in the third quarter as well.

Speaker #2: Asphalt—we'll still have to see how prices settle. Prices have seen a lot of volatility. But as far as even asphalt is concerned, you should have some catch-up based upon the time that has passed since the start of the conflict.

Mohit Bhardwaj: As far as even asphalt is concerned, you should have some catch up based upon the time that has passed since the start of the conflict. It's all going to depend upon the volatility. Overall, we are very happy with how the business is performing, both in wholesale and asphalt, and we expect improvements all along. Just cannot talk about the volatility around it.

Speaker #2: But it's all going to depend upon the volatility. So overall, we are very happy with how the business is performing both in wholesale and asphalt.

Speaker #2: And we expect improvements all along. Just cannot talk about the volatility around it.

Speaker #4: Okay. That sounds good. And then on the SRE proceeds, could you just clarify? So for like 2025, I think we're estimating that if you receive partial waivers at all four of your refineries, it's just about 600 million.

Matthew Blair: Okay. Sounds good. On the SRE proceeds, could you just clarify? For 2025, I think we're estimating that if you receive partial waivers at all four refineries, it is just about $600 million. If you receive full waivers, it would be double, like $1.2 billion. Is there a tax that you would have to pay on that just because you bought RINs at a lower price and then theoretically be selling them at a higher price? Do you have any estimates on what a potential tax impact might look like?

Speaker #4: If you receive full waivers, it would be double, like 1.2 billion. Is there a tax that you would have to pay on that just because you bought rims at a lower price and then theoretically be selling them at a higher price?

Speaker #4: So do you have any estimates on what a potential tax impact might look like?

Speaker #6: Yeah, so obviously we are not going to give a specific guidance around that. We still need to make sure 2025 comes as we expected and we're going to follow the capital allocation strategy that we have.

Avigal Soreq: Yeah. Obviously, we are not going to give a specific guidance around it. We still need to make sure 2025 comes as we expected, and we are going to follow the capital allocation strategy that we have, and let's stay tuned around it, and we are very optimistic about those petitions. Mohit, why don't you finish?

Speaker #6: And let's stay tuned around that and we are very optimistic about those partitions. Moit, why don't you finish?

Speaker #2: Yeah. Avigal, thanks for that. And Robert will answer the exact strategy around tax management, which is not just tied to SREs, but as far as your comments were concerned.

Mohit Bhardwaj: Yeah. Avigal, thanks for that. Robert will answer the exact strategy around tax management, which is not just tied to SREs. As far as your comments were concerned, we have given the number out for total RVO obligation in 2025 was $468.4 million, and that was around a rent price of $1 a gallon. You can make your own assumptions beyond that. That was the 2025 pricing in that number. As far as our overall tax allocation strategy is concerned, we are not going to discuss it on the call. Robert, do you have any comments to make on that?

Speaker #2: So, we have given the number out for the total RVO obligation in 2025 was $468.4 million, and that was around a RIN price of $1.00 a gallon.

Speaker #2: So you can make your own assumptions beyond that. That was the 2025 pricing in that number. As far as our overall tax allocation strategy is concerned, we're not going to discuss it on the call, but Robert, do you have any comments to make on that?

Speaker #3: No, I think Avigal addressed it right. I think we have a lot of model levers that we can play to minimize our tax expense on this.

Robert Wright: No, I think Avigal addressed it right. I think we have a lot of model levers that we can play to minimize our tax expense on this, and obviously the current economics and profitability that the business is seeing. Nothing to model or share right now, but tax minimization is a key strategy of ours, and we will employ that on any SREs that we are granted.

Speaker #3: And obviously the current economics and profitability that the business is seeing. So nothing to model or share right now, but tax minimization is a key strategy of ours.

Speaker #3: And we'll employ that on any SREs that we're granted.

Speaker #2: Yeah, it's just a whole it's just not tied to the SREs, but overall tax minimization is our strategy. And for us, we are very happy about our cash flow situation and where we are in the cycle right now.

Mohit Bhardwaj: Yeah, it's just not tied to the SREs, but overall, tax minimization is our strategy. For us, we are very happy about our cash flow situation and where we are in the cycle right now.

Speaker #4: Great, thank you.

Robert Wright: Great. Thank you.

Speaker #6: Thank you.

Avigal Soreq: Thank you.

Speaker #1: There are no further questions at this time. I will now turn the call back to Avigal Soreq, CEO, for closing remarks.

Operator: There are no further questions at this time. I will now turn the call back to Avigal Soreq, CEO, for closing remarks.

Speaker #6: So I want to thank my colleagues here around the table for another great quarter. I want to thank the Board of Directors for trusting us, and thank you, the investors, for sticking to the story.

Avigal Soreq: I want to thank my colleague here around the table for another great quarter. I want to thank the Board of Directors for trusting us, to thank you, the investors, for sticking to the story and supporting us, most importantly, to our employees who make this company the great company we are privileged to manage. We'll talk again in the next quarter. Have a safe day.

Speaker #6: And supporting us and most importantly to our employees who make this company the great company we are privileged to manage. We'll talk again in the next quarter and have a safe day.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

Q2 2026 Delek US Holdings Inc Earnings Call

Request DemoDemo

Delek US

Earnings