Q2 2026 Delek Logistics Partners, LP Earnings Call

August 5, 2026

Speaker #1: Hello everyone. Thank you for joining us, and welcome to the Delek Logistics Partners 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 Logistics Partners' 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 Chief Financial Officer. Robert, please go ahead.

Operator: Hello, everyone. Thank you for joining us, and welcome to the Delek Logistics Partners' 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 Chief Financial Officer. Robert, please 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 Chief Financial Officer.

Speaker #1: Robert, please go ahead.

Speaker #2: Good morning, and welcome to the Delek Logistics Partners Q2 earnings conference call. Participants joining me on today's call will include Avigal Soreq, President and Chairman; Mark Hobbs, EVP; as well as other members of our management team.

Robert Wright: Good morning, welcome to the Delek Logistics Partners' Q2 earnings conference call. Participants joining me on today's call will include Avigal Soreq, President and Chairman, Mark Hobbs, EVP, as well as other members of our management team. 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 Avigal for opening remarks. Avigal?

Robert Wright: Good morning, welcome to the Delek Logistics Partners' Q2 Earnings Conference Call. Participants joining me on today's call will include Avigal Soreq, President and Chairman, Mark Hobbs, EVP, as well as other members of our management team. 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 Avigal for opening remarks. Avigal?

Speaker #2: 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.

Speaker #2: Any forward-looking statements made during today's call will 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?

Speaker #3: Thank you, Robert. Today, DKL reported 144 million dollars in adjusted EBITDA in the second quarter. Reaffirming fully EBITDA guidance of 520 to 560 million dollars.

Avigal Soreq: Thank you, Robert. Today, DKL reported $144 million in adjusted EBITDA in Q2, reaffirming full EBITDA guidance of $520 to $560 million. DKL's strong results are a reminder of our advanced position as a premier full-service provider of crude, gas, and water in the Permian Basin. As of 1 July, Mark moved from his CFO position at Delek to lead role at Delek Logistics, and we recently brought on Kris Kindrick as our new SVP of Commercial. I'm highly confident that Mark, Kris, and the rest of the Delek Logistics team will deliver the next chapter of growth for DKL. All three of our segments are doing well, and I will provide more detail on each one of these segments. Starting with gas. We are nearing the completion of our integrated sour gas processing, treating, and handling solution of Libby Gas Complex.

Avigal Soreq: Thank you, Robert. Today, DKL reported $144 million in adjusted EBITDA in Q2, reaffirming full EBITDA guidance of $520 to 560 million. DKL's strong results are a reminder of our advanced position as a premier full-service provider of crude, gas, and water in the Permian Basin. As of 1 July, Mark moved from his CFO position at Delek to lead role at Delek Logistics, and we recently brought on Kris Kindrick as our new SVP of Commercial. I'm highly confident that Mark, Kris, and the rest of the Delek Logistics team will deliver the next chapter of growth for DKL. All three of our segments are doing well, and I will provide more detail on each one of these segments. Starting with gas. We are nearing the completion of our integrated sour gas processing, treating, and handling solution of Libby Gas Complex.

Speaker #3: DKL's strong results are a reminder of our advanced position as a premier full-service provider of crude, gas, and water in the Permian Basin. As of July 1, I took the lead role at Delek Logistics, and we recently brought on Chris Kendrick as our new SVP of Commercial.

Speaker #3: I'm highly confident that Mark, Chris, and the rest of the Delek Logistics team will deliver the next chapter of growth for DKL. All three of our segments are doing well, and I will provide more detail on each one of these segments.

Speaker #3: Starting with gas, we are nearing the completion of our integrated sour gas processing treating and in handling solution of PB gas complex. The comprehensive system will serve our customer by further supporting long-term oil and gas production growth in the dollar basin.

Avigal Soreq: The comprehensive system will serve our customer by further supporting long-term oil and gas production growth in the Delaware Basin. Moving to crude, both DPG and DDG continue to see strong performance, with DDG crude gathering delivering a record quarter. We look forward to further optimize and growing the system. Our water business continue to perform well, and we are continuing to explore growth opportunities in this space. Our combined gas, crude, and water offering in the Permian Basin has improved our competitive position and established a platform for future growth. We will continue to pursue growth opportunities in a disciplined manner while maintaining a focus on leverage and coverage. We'll also intend to remain a good steward of our stakeholders' capital. Our board of directors has approved our 54 consecutive quarterly distribution increase, raising the distribution to $1.13 and a half per unit.

Speaker #3: Moving to crude, both DPG and DGG continue to see strong performance, with DDG crude gathering delivering a record quarter. We look forward to further optimizing and growing the system.

Speaker #3: Our water business continue to perform well, and we are continuing to explore growth opportunities in this space. Our combined gas, crude, and water offering in the permanent basin has improved our competitive position and established a platform for future growth.

Speaker #3: We will continue to pursue growth opportunities and a disciplined manner while maintaining a focus on leverage and coverage. We will also intend to remain a good steward of our stakeholders, capital.

Speaker #3: Our board of directors has approved our 54 consecutive quarterly distribution increase. Raising the distribution to one dollar 13 cents and a half per unit.

Speaker #3: This is an extraordinary milestone and it reflects the exceptional work of our team and the financial disciplined that has brought us to this point.

Avigal Soreq: This is an extraordinary milestone. It reflects the exceptional work of our team and the financial discipline that has brought us to this point. With the foundation we have built and the opportunities ahead, we are confident in our ability to continue delivering sustainable growth and long-term value for our unitholders. I will now turn it over to Mark, who will provide additional detail on our operations.

Speaker #3: With the foundation we have built, and the opportunities ahead, we are confident in our ability to continue delivering sustainable growth and long-term value for our unit holders.

Speaker #3: I will now turn it over to Mark, who will provide additional detail on our operations.

Speaker #2: Thank you, Avigal. I'm excited about the opportunity to join Delek Logistics and to work with the exceptional team that we have at DKL. I see tremendous growth potential for Delek Logistics, as we are uniquely positioned to meet our customers' increasing needs for midstream services across crude gas and water in the Permian basin.

Mark Hobbs: Thank you, Avigal. I am excited about the opportunity to join Delek Logistics and to work with the exceptional team that we have at DKL. I see tremendous growth potential for Delek Logistics as we are uniquely positioned to meet our customers' increasing needs for midstream services across crude, gas, and water in the Permian Basin. We continue to see heightened activity by producers in securing undeveloped acreage and future drilling locations in the Northern Delaware in Lea and Eddy counties. Higher crude prices as a result of the ongoing conflict in the Middle East, combined with strengthening Waha prices, as additional takeaway capacity comes online by early next year, should drive increased demand for our three-stream service platform, strategically centered in Lea County. As Avigal mentioned, our competitive position as a three-stream provider sets us up well for future growth.

Speaker #2: We continue to see heightened activity by producers in securing undeveloped acreage and future drilling locations in the northern Delaware, as well as Lea and Eddy counties.

Speaker #2: Higher crude prices as a result of the ongoing conflict in the Middle East, combined with strengthening Waha prices, as additional takeaway capacity comes online by early next year, should drive increased demand for our three-stream service platform, strategically centered in Lee County.

Speaker #2: As Avigal mentioned, our competitive position as a three-stream provider sets us up well for future growth. Our strong and growing third-party business continues to increase our economic separation from our sponsor, DK.

Mark Hobbs: Our strong and growing third-party business continues to increase our economic separation from our sponsor, DK. In 2026, on a pro forma basis, we continue to expect approximately 80% of our run rate EBITDA will come from third parties. Turning to our business. We operated well in Q2, delivering safe and reliable performance for our customers. We continue to see an increasing need for incremental sour gas gathering and processing capabilities in New Mexico to support our customers' growth plans. During Q2, we made great progress advancing our industry-leading sour gas solution in the Delaware Basin. With the increased capacity at our Libby processing complex and the completion of our first AGI well, we are focusing our efforts on building out our sour gas gathering infrastructure, including compressor stations.

Speaker #2: In 2026, on a pro forma basis, we continue to expect that approximately 80% of our run-rate EBITDA will come from third parties. Turning to our business, we operated well in the second quarter, delivering safe and reliable performance for our customers.

Speaker #2: We continue to see an increasing need for incremental sour gas gathering and processing capabilities in New Mexico to support our customers' growth plans. During the second quarter, we made great progress advancing our industry-leading sour gas solution in the Delaware Basin.

Speaker #2: With the increased capacity at our Libby processing complex and the completion of our first AGI well, we are focusing our efforts on building out our sour gas gathering infrastructure, including compressor stations.

Speaker #2: We are aligned with our customers and our sour solution will unlock future growth for producers in the region and demand for our services. We achieve higher volumes in the second quarter in our gas business versus the first quarter, and are expecting to see a step change in our utilization as our sour gas solution comes online later this year.

Mark Hobbs: We are aligned with our customers. Our sour solution will unlock future growth for producers in the region and demand for our services. We achieved higher volumes in Q2 in our gas business versus Q1 and are expecting to see a step change in our utilization as our sour gas solution comes online later this year. We continue to evaluate options for future investments that will support further expansions of the Libby complex based on anticipated customer needs for additional sour gas processing in the region. Moving to crude. Our Delaware crude gathering business achieved record volumes in Q2. Our crude gathering business in both the Delaware and the Midland are well-positioned, and our combined crude and water offering continues to yield great results.

Speaker #2: We continue to evaluate options for future investments that will support further expansions of the Libby complex, based on anticipated customer needs for additional sour gas processing in the region.

Speaker #2: Moving to crude, our Delaware crude gathering business achieved record volumes in the second quarter. Our crude gathering business in both the Delaware and the Midland are well positioned and our combined crude and water offering continues to yield great results.

Speaker #2: In our water business, we are seeing strong operating performance driven by the successful integration of the H2O and Gravity acquisitions in late 2024 and early last year, respectively.

Mark Hobbs: In our water business, we are seeing strong operating performance, driven by the successful integration of the H2O and Gravity acquisitions in late 2024 and early last year, respectively. Produced water handling and disposal continues to be a critical and increasing need of our customers. Our scale and capabilities across the Delaware and Midland basins present us with unique opportunities to drive future growth in our water business, and I look forward to updating the market as we advance these solutions. With that, I will pass it on to Robert.

Speaker #2: Produced water handling and disposal continues to be a critical and increasing need for our customers. Our scale and capabilities across the Delaware and Midland basins present us with unique opportunities to drive future growth in our water business.

Speaker #2: And I look forward to updating the market as we advance these solutions. With that, I will pass it on to Robert. Thank you, Mark.

Robert Wright: Thank you, Mark. As Avigal and Mark highlighted, we are pleased to report another exceptionally strong quarter for the partnership, with adjusted EBITDA reaching a quarterly record of approximately $144 million. Importantly, we are delivering this growth while staying focused and disciplined on our long-term leverage and coverage targets. We ended the quarter with a leverage ratio of 4.23 times, up modestly from Q1. This uptick reflects capital investments we are making that are expected to generate up to $75 million of run rate EBITDA, a highly attractive return on our $180 to $190 million growth capital program for the year. We exited the quarter with a strong balance sheet. During the quarter, we proactively refinanced our high-yield capital structure to lower our cost of debt, issuing a new $800 million senior note due 2034, fully retiring our 2028 notes and partially redeeming our 2029 notes.

Speaker #2: As Avigal and Mark highlighted, we are pleased to report another exceptionally strong quarter for the partnership, with adjusted EBITDA reaching a quarterly record of approximately $144 million.

Speaker #2: Importantly, we are delivering this growth while staying focused and disciplined on our long-term leverage and coverage targets. We ended the quarter with a leverage ratio of 4.23x, up modestly from the first quarter.

Speaker #2: This uptick reflects capital investments we are making that are expected to generate up to $75 million of run-rate EBITDA, a highly attractive return on our $180 to $190 million growth capital program for the year.

Speaker #2: We exited the quarter with a strong balance sheet, during the quarter we proactively refinanced our high-yield capital structure to lower our cost of debt issuing a new 800 million dollar senior note due 2034, fully retiring our 2028 notes and partially redeeming our 2029 notes.

Speaker #2: Together, these transactions reduce annual interest costs and extend our maturity profile. Liquidity remains robust at approximately $1.1 billion. Turning to our results, adjusted EBITDA for the quarter was approximately $144 million, compared to $127 million in the same period last year.

Robert Wright: Together, these transactions reduce annual interest costs and extend our maturity profile. Liquidity remains robust at approximately $1.1 billion. Turning to our results, adjusted EBITDA for the quarter was approximately $144 million, compared to $127 million in the same period last year. Distributable cash flow, as adjusted, came in at approximately $81 million, and our DCF coverage ratio held steady at approximately 1.33 times. We are also proud to announce our 54th consecutive distribution increase, which brings the quarterly distribution to $1.135 per unit. As to our segment results, starting with gathering and processing, adjusted EBITDA for Q2 was $104 million, up from $78 million in Q2 2025. The improvement was driven primarily by higher utilization at the Libby Gas Complex, along with stronger realized margins in our Permian Basin crude business.

Speaker #2: Distributed cash flow, as adjusted, came in at approximately 81 million dollars and our DCF coverage ratio held steady at approximately 1.33 times. We are also proud to announce our 54th consecutive distribution increase, which brings the quarterly distribution to a dollar and 13 and a half cents per unit.

Speaker #2: As to our segment results, starting with gathering and processing, adjusted EBITDA for the second quarter was 104 million dollars, up from 78 million dollars in the second quarter of 2025, the improvement was driven primarily by higher utilization at the Libby gas complex along with stronger realized margins in our Permian basin crude business.

Speaker #2: In Wholesale Marketing and Terminaling, adjusted EBITDA was approximately $13 million versus $23 million a year ago, with the decline largely attributable to the effects of the 2024 amended extend agreement with Delek.

Robert Wright: In wholesale marketing and terminaling, adjusted EBITDA was approximately $13 million versus $23 million a year ago, with the decline largely attributable to the effects of the 2024 amend and extend agreement with Delek. Storage and transportation delivered adjusted EBITDA of $16 million, compared with $17 million in the prior period. The modest decrease primarily reflects the January 2026 related party transaction. Finally, our investments in pipeline joint venture segment contributed $21 million this quarter, up from $17 million in Q2 2025, led by continued strong results from the Wink to Webster joint venture. Moving now to capital expenditures. Total capital spending for Q2 was approximately $61 million, of which $51 million was for growth capital. That spend was primarily directed toward the drilling of our first AGI well and continued build-out of newer sour gas gathering infrastructure.

Speaker #2: Storage and transportation delivered adjusted EBITDA of $16 million, compared with $17 million in the prior period. The modest decrease primarily reflects the January 2026 related party transaction.

Speaker #2: And finally, our investments in the pipeline joint venture segment contributed $21 million this quarter, up from $17 million in the second quarter of 2025, led by continued strong results from the Wink to Webster joint venture.

Speaker #2: Moving now to capital expenditures, total capital spending for the second quarter was approximately $61 million, of which $51 million was for growth capital.

Speaker #2: That spend was primarily directed toward the drilling of our first AGI well and continued build-out of new sour gas gathering infrastructure. The balance funded other growth initiatives including work to advance reliable power solutions for the Libby gas complex.

Robert Wright: The balance funded other growth initiatives, including work to advance reliable power solutions for the Libby Gas Complex. Looking ahead to the remainder of 2026, as Avigal noted, our confidence in the earnings trajectory of the partnership remain intact, and we are reaffirming our full year 2026 adjusted EBITDA guidance range of $520 to $560 million. With that, we will now open the call for questions. Good morning and welcome to the Delek Logi-

Speaker #2: Looking ahead to the remainder of 2026, as Avigal noted, our confidence in the earnings trajectory of the partnership remained intact and we are reaffirming our full year 2026 adjusted EBITDA guidance range of 520 to 560 million dollars.

Speaker #2: With that, we will now open the call for questions. Good morning, and welcome to Delek.

Speaker #1: We will now begin the question and answer session. 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. If you would like to ask a question, please press star one to raise your hand. 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 are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question from the line of Doug Irwin from Citigroup. Doug, your line is open. Please go ahead.

Speaker #1: 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 are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Doug Irwin from Citigroup.

Speaker #1: Doug, your line is open. Please go ahead.

Speaker #3: Hey team, thanks for the question. I just want to start with the gathering and processing segment. Yeah, thanks. You called out some stronger margins on gathering and processing for the quarter.

Doug Irwin: Hey, team, thanks for the question. Just want to start with gathering and processing segment.

Robert Wright: Go ahead, Doug.

Doug Irwin: Yeah. Thanks. You called out some stronger margins on gathering and processing on the quarter. Just wondering if you could help unpack what drove that strength a little bit more here. Just curious how much of that is tied to the commodity environment and just generally how durable you see that margin strength being from here.

Speaker #3: Just wondering if you could help unpack what drove that strength a little bit more here. Just curious how much that is tied to the commodity environment and just generally how durable you see that margin strength being from here.

Speaker #4: Yeah, so we are very confident about the results we see in the second quarter. Obviously, we are starting the year very well. We are very confident about the guidance we are seeing.

Avigal Soreq: Yeah. We are very confident about the results we see in the Q2. Obviously, we are starting the year very well. We are very confident about the guidance we are seeing. As I said on my prepared remarks, both DPG and DDG performed very well. I think the DDG had a record number around it. We are very happy about the process that we are seeing on the gas plant that increases quarter-over-quarter-over-quarter. As we said on the prepared remarks, we are very close to completing the gas treating solution on the sour side, which will take us to, as Mark said, to a step change, and we will let Mark to complete.

Speaker #4: As I said in my prepared remarks, both DPG and DDG performed very well. I think the DDG had a record number around it. We are very happy about the progress that we are seeing on the gas plant, which increased quarter over quarter over quarter.

Speaker #4: As I said on the prepared remarks, we are very close to completing the gas treating solution on the sour side. It will take us to a smart set to a step change.

Speaker #4: And I will let Mark to complete.

Speaker #2: Yeah, yeah. Thanks, Avigal. Yeah, Doug, I'll just touch on the business performance. Across the board, we're performing well in the second quarter and continue to do so.

Mark Hobbs: Yeah. Thanks, Avigal. Yeah, Doug, look, I will just touch on the business performance. Like across the board, we are performing well in the Q2 and continue to do so. We have great infrastructure, which as you know, is strategically positioned in the right location, and we continue to see a lot of activity amongst our customers in the Northern Delaware with close proximity to our assets. As Avigal mentioned, our Delaware crude business had a record volume in Q2 at over 157,000 barrels per day, up from around 129 in Q1. Our produced water volumes in both the Midland and Delaware increased as well to over 687,000 barrels a day, up from 557 in Q1. As Avigal mentioned, our gas volumes continue to ramp.

Speaker #2: We have great infrastructure which, as you know, is strategically positioned in the right location and we continue to see a lot of activity amongst our customers in the northern Delaware.

Speaker #2: With close proximity to our assets and as Avigal mentioned, our Delaware crude business had a record volume in Q2 at over 157,000 barrels per day up from around 129 in Q1.

Speaker #2: And our produced water volumes in both the Midland and Delaware increased as well, to over 687,000 barrels a day, up from 557,000 in Q1.

Speaker #2: And as Avigal mentioned, our gas volumes continue to ramp. We were over 80 million cubic feet per day in Q2, up from around 64 in Q1, and we continue to see that trend continue in Q3.

Mark Hobbs: We were over 80 million cubic feet a day in Q2, up from around 64 in Q1, we continue to see that trend continue in Q3. Both Libby One and Libby Two plants are running well. The volumes are increasing. As we said in our prepared remarks, we are nearing the completion of our full sour gas solution build-out. We do expect to see a step change in our gas volumes through the rest of the year.

Speaker #2: Both Libby 1 and Libby 2 plants are running well. The volumes are increasing, and as we said in our prepared remarks, we're nearing the completion of our full sour gas solution build-out, and we do expect to see a step change in our gas volumes through the rest of the year.

Speaker #3: Yeah, that's helpful. And maybe tying into that a little bit as it relates to guidance for the rest of the year. If I were to just look at your second quarter results and extend that through the year, you're already kind of pointing towards the high end of your guidance range based on those numbers and then you kind of pointed to an expected ramp with Libby.

Doug Irwin: Yeah, that's helpful. Maybe tying into that a little bit as it relates to guidance for the rest of the year. If I were to just look at your Q2 results and extend that through the year, you're already kind of pointing towards the high end of your guidance range based on those numbers. Then you kind of pointed to an expected ramp with Libby. Just kind of curious how you're thinking about potential upside here is kind of the midpoint of guidance, potentially pretty conservative here, and just kind of how you're thinking about what could potentially drive either end of the range.

Speaker #3: So just kind of curious how you're thinking about potential upside here is kind of the midpoint of guidance potentially pretty conservative here and just kind of how you're thinking about what could potentially drive either end of the range.

Speaker #4: Yeah, and you are very you're correct. The math that you are doing is absolutely right and I will give you some more context around it.

Avigal Soreq: Yeah, you are correct. The math that you are doing is absolutely right. I will give you some more context around it. We are very happy about the results we have. We are very happy about the business we have, each one of them, the strategy that we put together working extremely well. We are very happy about the management team that we have over there. We're going to follow the same sequence that we had in the last year, on Q4 call, we are submitting the guidance. If we see a way to upgrade the guidance, we did it last year in Q3. Stay tight, and more news to come.

Speaker #4: We are very happy about the results we have. We are very happy about the business we have. Each one of them, the strategy that we put together working extremely well and we are very happy about the management team that we have over there.

Speaker #4: We're going to follow the same sequence that we had last year. On the Q4-on-Q4 call, we are submitting the guidance, and if we see a way to upgrade the guidance, we're going to do it. We did it last year in Q3.

Speaker #4: So stay tuned, and more news to come.

Speaker #3: Fair enough. Thanks for the time.

Doug Irwin: Fair enough. Thanks for the time.

Speaker #1: Your next question from the line of Gabe Maureen. With Mizuho. Gabe, your line is open. Please go ahead.

Operator: Your next question from the line of Gabe Moreen with Mizuho. Gabe, your line is open. Please go ahead.

Speaker #5: Hey, good morning everyone.

Gabe Moreen: Hey, good morning, everyone.

Avigal Soreq: Hey, Gabe. Good morning. Hey, there we go.

Speaker #4: Hey, good morning.

Speaker #5: Hey, Avigal.

Speaker #2: Quick question, I guess, in terms of the interplay on commodity prices. I just wonder if I could maybe put a finer point on things.

Gabe Moreen: Quick question, I guess, in terms of the interplay on commodity prices. I just wonder if I could maybe put a finer point on things. Waha has clearly traded better. Crude oil prices have come up, although pulled back a bit here. I'm just wondering your latest expectations around customer conversations and what you're seeing heading into 2027, whether you're seeing some rigs potentially being added back to some of your acreage relative to your expectations. I'm just curious. Then also whether, again, I think you mentioned last quarter Waha shutdowns didn't really impact you, but whether that's having any impact on volumes with pricing being better here.

Speaker #2: Waha has clearly traded better. Crude oil prices have come up, although they've pulled back a bit here. So I'm just wondering about your latest expectations around customer conversations and what you're seeing heading into 2027—whether you're seeing some rigs potentially being added back to some of your acreage relative to your expectations.

Speaker #2: I'm just curious, and then also whether—again, I think you mentioned last quarter Waha shut and it didn't really impact you—but whether that's having any impact on volumes, with pricing being better here.

Speaker #4: Yeah, absolutely. So you touch a very good point. Obviously, we are in close touch with our customer on a daily, weekly basis and they are very excited about their business, which make us very excited about our business.

Avigal Soreq: Yeah, absolutely. You touch a very good point. Obviously, we are in close touch with our customer on a daily, weekly basis, and they are very excited about their business, which make us very excited about our business. I've seen your note earlier about the rigs in the area and the wells that we have in our acreage, and that's very good to see how detailed it's become, the discussion. We are very optimistic about where we are. We have a prime location. We have very good producer in our acreage. You've seen the statistics about the Permian Basin as a general, going from the beginning of the event to now by around 20 rigs. We see increase in the increased forecast in our acreage as well. We are very optimistic about where we are and who do we do business with.

Speaker #4: I've seen your note earlier about the rigs and the area and the wells that we have in our acreage and that's a very good to see how detail it become the discussion.

Speaker #4: So we are very optimistic about where we are. We have a prime location, and we have very good producers in our acreage. You've seen the statistics about the Permian Basin as a general, going from the beginning of the event to now by around 20 rigs.

Speaker #4: We see an increase in increased forecast in our acreage as well. So we are very optimistic about where we are and who do we do business with.

Speaker #4: So stay tuned and more to come. Mahiti, you want to talk about the Waha?

Avigal Soreq: Stay tuned, and more to come. Mohit, you want to talk about the Waha?

Mohit Bhardwaj: Yeah. I think, Avigal, you covered it very well. Gabe, you and I have discussed this previously as well. There are two positive effects happening at the same time. First is, there is some strength in the commodity prices, and based on that, we have seen incremental production. Because of that, we've seen forecasts for not only H2 2026, but 2027 rise. Second is this development around Waha. Waha prices have strengthened. This is a minor positive for us just from a results standpoint, but it's a much bigger positive from a volume standpoint, and we should see that reflected. Beyond that, we've talked about in the past that we are working on $185 million of growth CapEx, which will yield $75 million in EBITDA 15 in 2026 and 16 2027.

Speaker #2: Yeah.

Speaker #3: Yeah. I think Avigal, you covered it very well. And Gabe, you and I have discussed this previously as well. So there are two positive effects happening at the same time.

Speaker #3: First, there is some strength in commodity prices, and based on that, we have seen incremental production. Because of that, we've seen forecasts for not only the second half of 2026 but also 2027 rise.

Speaker #3: And second is this development around Waha, Waha prices have strengthened. This is a minor positive for us just from a results standpoint, but it's a much bigger positive from a volume standpoint.

Speaker #3: And we should see that reflected. Beyond that, we have talked about in the past that we are working on $185 million of growth capex, which will yield $75 million in EBITDA—$15 million in 2026 and $16 million in 2027.

Speaker #3: So our setup on a go-forward basis is very, very strong. So we are very excited about the things that we are seeing.

Mohit Bhardwaj: Our setup on a go-forward basis is very, very strong. We are very excited about the things that we are seeing.

Gabe Moreen: Excellent. Then maybe I could just follow up. Remind me on your contracting behind your water assets, to what degree things are volumetric versus take or pay, and is there any change or shift in your contracting strategy going forward?

Speaker #2: Excellent. And then maybe I could just follow up. Remind me, on your contracting behind your water assets, to what degree things are volumetric versus take-or-pay? And is there any change or shift in your contracting strategy going forward?

Speaker #4: Yeah, yeah, Gabe, I can answer that. So we don't really share our contracting strategy, but we're very excited about our produced water gathering business, as Mark alluded to in his prepared remarks and also in an answer to the previous question.

Mohit Bhardwaj: Gabe, I can answer that. We don't really share our contracting strategy, but we're very excited about our produced water gathering business, as Mark alluded in his prepared remarks, and also as an answer to the previous question. We have scale in the business. We are seeing a three-stream service, gas, water, and crude, really reaping results. Even in the Midland there, we just have two streams, crude and water. We are seeing incremental positive results. We are very excited about the water business that we have. We're building upon it, and we'll share more details around this when we are ready.

Speaker #4: We have scale in the business. We are seeing three stream service, gas, water, and crude really reaping results. And even in the middle and there, we just have two streams, crude and water.

Speaker #4: We are seeing incremental, positive results, so we are very excited about the water business that we have. We are building upon it, and we'll share more details around this when we are ready.

Speaker #2: Great. Thanks, everyone.

Gabe Moreen: Great. Thanks, everyone.

Speaker #4: Thank you.

Avigal Soreq: Thank you.

Speaker #1: Your final question from the line of Ivan Scotto with UBS. Ivan, your line is open. Please go ahead.

Operator: Your final question from the line of Ivan Scotto with UBS. Ivan, your line is open. Please go ahead.

Speaker #3: Hey, team.

Ivan Scotto: Hey, team.

Speaker #4: Hi, Evan.

Avigal Soreq: Hi, Ivan.

Speaker #3: Thanks for taking the question. Thank you, thank you, and congrats on the strong quarter. It's good to hear about the integrated completion on the Lab Libby Gas Complex, but I'm just wondering how you're thinking about capitalizing on sour gas treating and AGI demand over the long term.

Ivan Scotto: Thanks for taking the question.

Avigal Soreq: Welcome. Absolutely.

Ivan Scotto: Thank you. Congrats on the strong quarter. It's good to hear about the integrated completion on the Libby Gas Complex. Just wondering how you're thinking about capitalizing on sour gas treating and AGI demand over the long term, including any possible expansions to Libby. What would need to happen, or what would you need to see in the market to make you comfortable commissioning that?

Speaker #3: Including any possible expansion. So Libby, what would need to happen, or what would you need to see in the market, to make you comfortable kind of commissioning that?

Speaker #4: Yeah, obviously, the king here is the Rock. And we think the Rock going a bit sour, and the second part of that is our ability—our drilling of the AGI well and building a sour complex.

Avigal Soreq: Obviously, the king here is the rock, we're seeing the rock going a bit sour. The second part of that is our drilling of AGI well and building a sour complex. The combination of that make us very uniquely positioned that we have three things coming together, our location, the sour gas that we see coming out of the ground, and our infrastructure all coming together very nicely. That give us competitive advantage, we are very excited about that. I will let Mark share some of his thoughts.

Speaker #4: So, the combination of that makes us very uniquely positioned in that we have three things coming together: our location, the rock, the gas—the sour gas that we see coming out of the ground—and our infrastructure, all coming together very nicely.

Speaker #4: That gives us a competitive advantage, and we are very excited about that. I will let Mark, who is very close to it, share some of his thoughts.

Speaker #3: Yeah, thanks, Avigal.

Mark Hobbs: Thanks, Avigal. Look, as we've mentioned in the past, we are seeing increasingly more sour gas production from our customers moving from sweet to sour. As you rightfully said, we're seeing that trend continue, we've added a lot of capacity, in preparation to handle that. As you know, adding Libby Two, completing the AGI Well, as Avigal mentioned. We're now near completion of our sour gas gathering and adding compression. This is going to provide us with the much needed sort of unique sour gas solution in the Northern Delaware, which will support our customers' future production growth plans. Not only will we see a step change in our gas volumes because of this capability, but it positions us extremely well for future growth in the region.

Speaker #2: As we've mentioned in the past, we're seeing increasingly more sour gas production from our customers as they move from sweet to sour. And as you rightfully said, we’re seeing that trend continue.

Speaker #2: And we've added a lot of capacity in preparation to handle that. As you know, adding Libby 2, completing the AGI well as Avigal mentioned, and we're now near completion of our sour gas gathering and adding compression.

Speaker #2: And this is going to provide us with the much-needed, sort of unique, sour gas solution in the northern Delaware, which will support our customers' future production growth plans.

Speaker #2: And not only will we see a step change in our gas volumes because of this capability, but it also positions us extremely well for future growth in the region.

Speaker #3: Got it, that makes sense. And then, just turning to leverage and coverage targets, is there anything to note on how you're working toward achieving these long-term targets?

Ivan Scotto: Got it. That makes sense. Just turning to leverage and coverage targets. Anything to note on how you're working toward achieving these long-term targets? I know you hit 1.3x coverage this quarter, curious if there were any initiatives that you want to highlight that helped you achieve that, or just any general comments on how you're working toward achieving these targets would be great.

Speaker #3: I know you hit 1.3x coverage this quarter, but I’m curious if there were any initiatives that you want to highlight that helped you achieve that, or just any general comments on how you're working toward achieving these targets would be great.

Speaker #4: Yeah, so obviously, we are very disciplined around our capital deployment. As you can see, we are very disciplined around what we did with M&A, right?

Avigal Soreq: Obviously we are very disciplined around our capital deployment. As you can see, we are very disciplined around what we did with M&A, right? We did both water, both on acquisition around 5 to 6x, where they traded now around probably 9 to 10x. We are not going to do something which is not accretive to leverage ratio, coverage ratio, free cash flow and not supported by our strategy. The answer is the combination of extremely disciplined on one side, but on the other side extremely aggressive of getting the company towards the right direction, and very disciplined around capital allocation. I will let Robert to chime in.

Speaker #4: We did both water bolt-on acquisitions around five to six times where they trade now around probably nine to ten. So we are not going to do something which is not accretive to leverage ratio, coverage ratio, free cash flow, and not supported by our strategy.

Speaker #4: So the combined answer is the combination of being extremely disciplined on one side, but on the other side, being extremely aggressive in getting the company toward the right direction.

Speaker #4: And very disciplined around capital allocation. And I will let Robert chime in.

Speaker #2: Yeah, thanks, Avigal. Yeah, Ivan, great question. We continue to remain comfortable in our long-term leverage target of 3.5 times. We're seeing significant growth opportunities, and similar to what we've said in the past.

Robert Wright: Yeah, thanks, Avigal. Yeah, Ivan, great question. We continue to remain comfortable in our long-term leverage target of 3.5x. We're seeing significant growth opportunities and similar to what we've said in the past. Because of that, we will manage our leverage ratio around that 4x as we grow. As we said on the prepared remarks, our leverage ratio right now does sit around the 4.23x, and that's largely due to a lot of the growth spend that Mo had talked about. We expect return up to $75 million in EBITDA on spend of around $180 to $190 million. Very low multiple there. Considering this, we expect to manage our leverage ratio down as we start to realize this EBITDA in our results. It's probably also just important to note that despite all this recent growth spending, we've maintained a strong balance sheet.

Speaker #2: Because of that, we will manage our leverage ratio around that four times as we grow, as it does sit around the 4.23 times. And that's largely due to a lot of the growth spend that Mohit talked about.

Speaker #2: We expect a return of up to $75 million in EBITDA on a spend of around $180 to $190 million. So, a very low multiple there. And considering this, we expect to manage our leverage ratio down as we start to realize this EBITDA in our results.

Speaker #2: It's probably also just important to note that despite all this recent growth spending, we've maintained a strong balance sheet. We have over a billion dollars of availability.

Robert Wright: We have over a billion dollars of availability, which will facilitate our continued growth trajectory into the future.

Speaker #2: Which will facilitate our continued growth trajectory into the future.

Speaker #3: Awesome. Super helpful. Thank you.

Ivan Scotto: Awesome. Super helpful. Thank you.

Speaker #4: Thanks, Ivan.

Avigal Soreq: Thanks, Ivan.

Speaker #1: Your next question comes from the line of Gabe Dowd with Truist. Gabe, your line is open. Please go ahead.

Operator: Your next question from the line of Gabe Daoud with Truist. Gabe, your line is open. Please go ahead.

Gabe Daoud: Thanks, operator. Hey, everyone. Just wanted to maybe follow up a little bit on the comments around what you're seeing on the ground as you progress through 2026. Obviously, some pretty big outperformance in the quarter and just kind of looking at third-party data suggests that you've already tied in on the gas side a decent amount of wells, especially relative to what you did last year. Could you maybe just comment on that and how should we think about well connects on the gas side as you progress through the year? I guess similarly, how should we expect Libby Two to ramp in the H2?

Speaker #4: I just wanted to maybe follow up a little bit on the comments around what you're seeing on the ground as you progress through 2026. Obviously, it's some pretty big outperformance in the quarter, and just kind of looking at third-party data, it suggests that you've already tied in, on the gas side, a decent amount of wells—especially relative to what you did last year.

Speaker #4: So, could you maybe just comment on that, and how should we think about well connects on the gas side as you progress through the year?

Speaker #4: And I guess, similarly, how should we expect Libby 2 to ramp in the back half? Yeah, absolutely. I will start and let Mark chime in.

Avigal Soreq: Yeah, absolutely. I would start and let Mark chime in. Obviously, the connections that we are seeing on the ground now are going very well, both on the compressor side and on the plant itself. We have a very good, close relationship with our producers, and we are committed to give the best service we can on time, on budget, and making sure it all ties together with the right offering between sweet and sour. We have seen increases, we mentioned earlier, between Q1 to Q2 and between Q2 to Q3. We'll see more progression around that once we are completing our sour gas offerings. Why don't you chime in, Mark?

Speaker #4: So obviously, the connections that we are seeing on the ground are going very well. Both on the compressor side and on the plant itself, we have a very good close relationship with our producers.

Speaker #4: And we are committed to give the best service we can. On time, on budget, and making sure it's all ties together with the right offering between sweet and sour.

Speaker #4: We have seen increases, as we mentioned earlier, between Q1 and Q2, and between Q2 and Q3. And we'll see more progression around that once we complete our sour gas offering.

Speaker #4: But why do you chime in, Mark?

Speaker #2: Sure, Avigal. Yeah, look, I think Avigal said it well. Gabe, look, we're seeing this shift from sweet to sour. And so we've seen our gas kind of ramp up as we've built out our capabilities.

Mark Hobbs: Sure, Avigal. Yeah, look, I think Avigal said it well, Gabe. We're seeing this shift from sweet to sour. We've seen our gas kind of ramp up as we've built out our capabilities. We're optimizing our system around compression, and look forward to, like I said, a step change in our volumes as we move through some of that completion here in Q3 as we move into Q4. I think we're on a great trajectory to really increase the utilization of our plants as we move through the year.

Speaker #2: We're optimizing our system. Around compression, and look forward to, like I said, a step change in our volumes as we move through some of that completion here in the third quarter as we move into the fourth quarter.

Speaker #2: So, I think we're on a great trajectory to really increase the utilization of our plants as we move through the year.

Speaker #4: Got it. Got it. Okay. That's great color. Thanks, guys. And then just a quick follow-up. What do you see on the inorganic opportunity front?

Gabe Daoud: Got it. Okay. That's a great color. Thanks, guys. Just a quick follow-up. What are you seeing on the inorganic opportunity front? Is that something that would still be attractive to you, or do you think you have enough organic opportunity to keep you busy over the next couple of years?

Speaker #4: Is that something that would still be attractive to you, or do you think you have enough organic opportunity to keep you busy over the next couple of years?

Speaker #4: Yeah. So obviously, we have all the time our eyes open around inorganic opportunities. As I said in the past, in order for something to get to the finish line, it seemed to be accretive to leverage ratio, coverage ratio, and free cash flow.

Avigal Soreq: Yeah. Obviously we have all the time our eyes open around inorganic opportunities. As I said in the past, in order for something to get to the finish line, it needs to be accretive to leverage ratio, coverage ratio, and free cash flow. We are extremely disciplined around that. When we saw those opportunities coming our way, we didn't hesitate. We act on that very quickly and aggressively as needed. The inorganic, that's not the objective. The objective is to grow the company in a measured, disciplined, smart way. On the other side, we can be very happy if you're putting on the intrinsic value that we see on our asset. We bought something around five to six times, probably now it's around 10 times.

Speaker #4: So that we are extremely disciplined around that. When we saw those opportunities coming our way, we did not hesitate; we acted on that very quickly and aggressively as needed.

Speaker #4: But the inorganic—it's not the objective. The objective is to grow the company in a measured, disciplined, smart way. On the other side, we can be very happy if you're putting on the intrinsic value that we see in our assets.

Speaker #4: We bought something around five to six times; probably now it's around ten times. And we have seen lately the gas deal that was in the market was mid-low to mid-teens.

Avigal Soreq: We have seen lately the gas deal that was in the market was mid Low to mid teens, which if you're doing the intrinsic value of each one of our assets as it stands now, and with including the development that we are now doing, you will get to a very high unit price. There is a tremendous amount of value that we created versus where the market is now. Our commitment to the market is still to create additional, more value. We grew that company 15% year over year in the last few years, and we increased distribution 54 quarters in a row. All of that is probably the best combination between growth and yield to our investors, although we are very proud of what we do, and we'll keep doing it.

Speaker #4: If you're calculating the intrinsic value of each one of our assets as it stands now, and including the development that we are now doing, you will get to a very high unit price.

Speaker #4: So, there is a tremendous amount of value that we created versus where the market is now. And our commitment to the market is to create additional, more value.

Speaker #4: We grew that company 15% year over year in the last few years, and we increased distribution for 54 quarters in a row. All of that is probably the best combination between growth and yield to our investors.

Speaker #4: So we are very proud of what we do, and we'll keep doing it. That's great color. Thanks, Avigal. Thanks, everyone. Thank you.

Gabe Daoud: That's a great color. Thanks, Avigal. Thanks, everyone.

Avigal Soreq: Thank you.

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

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

Speaker #4: Thank you. I would like to thank my colleagues around the table for their hard work and dedication. I would also like to thank our board for their trust and support.

Avigal Soreq: Thank you. I would like to thank my colleagues around the table for the hard work and dedication. I would like to thank to our board for their trust and support. I would like to thank you, the investor, of seeing that nice, huge transformation in DKL. Most importantly, I would like to thank the entire employees of making this company as good as we possibly can every day. Thank you.

Speaker #4: I would like to thank you, the investor of seeing that nice huge transformation in DKL. And most importantly, I would like to thank the entire employees of making this company as good as we possibly can every day.

Speaker #4: Thank you.

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

Q2 2026 Delek Logistics Partners, LP Earnings Call

Request DemoDemo

Delek Logistics Partners LP

Earnings