On August 6, 2024, Delek Logistics Partners LP (DKL, Financial) released its 8-K filing reporting record second-quarter results. Delek Logistics Partners LP owns and operates logistics and marketing assets for crude oil and intermediate and refined products. The company's segments include Pipelines and Transportation, and Investments in Pipeline Joint Ventures, with maximum revenue generated from the Pipelines and Transportation segment.
Performance Overview
Delek Logistics Partners LP reported net income attributable to all partners of $41.1 million, or $0.87 per diluted common limited partner unit, surpassing the analyst estimate of $0.81 per share. This marks a significant increase from the $31.9 million, or $0.73 per diluted common limited partner unit, reported in the second quarter of 2023. The company also reported quarterly EBITDA of $102.4 million, up from $92.8 million in the same period last year.
Strategic Moves and Financial Achievements
Following the end of the second quarter, Delek Logistics announced several strategic moves, including the acquisition of H2O Midstream for $230 million and Delek US' interest in the Wink to Webster pipeline. These acquisitions are expected to enhance the company's service capabilities in the Permian Basin. Additionally, Delek Logistics amended and extended agreements with Delek US for up to seven years and announced a final investment decision on a new gas processing plant adjacent to the existing Delaware plant.
Delek Logistics improved its leverage ratio to 3.81x from 4.34x at year-end 2023 and delivered distribution growth with a recent increase to $1.090 per unit. The distributable cash flow for the second quarter was $67.8 million, resulting in a DCF coverage ratio of 1.32x.
Income Statement Highlights
| Metric | Q2 2024 | Q2 2023 |
|---|---|---|
| Net Income | $41.1 million | $31.9 million |
| EBITDA | $102.4 million | $92.8 million |
| Distributable Cash Flow | $67.8 million | $60.5 million |
Segment Performance
The Gathering and Processing segment reported EBITDA of $54.7 million, up from $52.7 million in Q2 2023, driven by higher throughput from Permian Basin assets. The Wholesale Marketing and Terminalling segment saw an increase in EBITDA to $30.2 million from $28.0 million, primarily due to higher terminalling utilization. The Storage and Transportation segment also experienced growth, with EBITDA rising to $16.8 million from $15.0 million, attributed to increased storage and transportation rates.
Balance Sheet and Liquidity
As of June 30, 2024, Delek Logistics had total debt of approximately $1.57 billion and cash of $5.1 million. The company had additional borrowing capacity of $819.8 million under its $1.15 billion third-party revolving credit facility. The total leverage ratio of 3.81x was within the requirements of the maximum allowable leverage ratio under the credit facility.
Commentary and Future Outlook
“Delek Logistics made several strategic announcements today: (i) Delek Logistics & Delek US amended and extended certain contracts for a duration of up to seven years, (ii) The FID (final investment decision) on a new gas processing plant, (iii) Acquisition of H2O Midstream and (iv) Acquisition of Delek US' interest in the Wink to Webster pipeline. These strategic actions position Delek Logistics as a premier, full-service, midstream provider in the prolific Permian Basin,” said Avigal Soreq, President of Delek Logistics' general partner.
Delek Logistics Partners LP's strong financial performance and strategic acquisitions underscore its commitment to growth and value creation for its unitholders. The company's ability to exceed earnings estimates and improve its leverage ratio highlights its robust operational capabilities and financial health.
Explore the complete 8-K earnings release (here) from Delek Logistics Partners LP for further details.
