DKL
$29.35
Delek Logistics Partners LP
($.35)
(1.18%)
Earnings Details
1st Quarter March 2018
Monday, May 07, 2018 8:40:00 PM
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Summary

Delek Logistics Partners LP (DKL) Recent Earnings

Delek Logistics Partners LP (DKL) reported 1st Quarter March 2018 earnings of $0.59 per share on revenue of $167.9 million. The consensus earnings estimate was $0.55 per share on revenue of $154.6 million. Revenue grew 29.7% on a year-over-year basis.

Delek Logistics Partners LP is a limited partnership. It owns, operates, acquires and constructs crude oil and refined products logistics and marketing assets.

Results
Reported Earnings
$0.59
Earnings Whisper
-
Consensus Estimate
$0.55
Reported Revenue
$167.9 Mil
Revenue Estimate
$154.6 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Delek Logistics Partners, LP Reports First Quarter 2018 Results

  • Declared quarterly distribution of $0.75 per limited partner unit; increased by 8.7 percent year-over-year
  • Reported first quarter 2018 net cash from operating activities of $23.7 million and distributable cash flow of $27.3 million
  • Distributable cash flow coverage ratio for the first quarter 2018 was 1.14x
  • Acquired Big Spring logistics assets from Delek US with $40 million of forecasted annual EBITDA closed effective March 1

BRENTWOOD, Tenn., May 07, 2018 (GLOBE NEWSWIRE) -- Delek Logistics Partners, LP (NYSE:DKL) ("Delek Logistics") today announced its financial results for the first quarter 2018. For the three months ended March 31, 2018, Delek Logistics reported net income attributable to all partners of $20.0 million, or $0.59 per diluted common limited partner unit. This compares to net income attributable to all partners of $14.6 million, or $0.43 per diluted common limited partner unit, in the first quarter 2017. Distributable cash flow was $27.3 million in the first quarter 2018, compared to $18.4 million in the prior-year period.

For the first quarter 2018, earnings before interest, taxes, depreciation and amortization ("EBITDA") was $34.7 million compared to $23.9 million in the prior-year period. The contribution from the Big Spring logistics assets, higher gross margin per barrel in west Texas, improved performance from the Paline Pipeline and the East Texas marketing agreement were the primary factors in the year-over-year increase.

Uzi Yemin, Chairman and Chief Executive Officer of Delek Logistics' general partner, remarked: "During the first quarter, we achieved our highest quarterly EBITDA to date and our distributable cash flow coverage ratio was 1.14x, which was an improvement on a sequential and year-over-year basis. As of March 31, 2018, we had $205.3 million of capacity on our credit facility, following the completion of the Big Spring logistics acquisition. Our financial position supported the 8.7 percent year-over-year increase in our declared first quarter distribution."

Yemin concluded, "With the addition of the Big Spring logistics assets and expansion of the Paline pipeline to 42,000 barrels per day in March, we have created additional growth for Delek Logistics. Work continues on the announced joint venture with Green Plains Partners and its proposed purchase of two light product terminals from an affiliate of American Midstream as we move through the regulatory process. We continue to explore potential opportunities, including ways to partner with Delek US and third party growth options to create long-term value for our unit holders. We anticipate that the financial flexibility provided by our balance sheet and our focus on growth initiatives should support a distribution per limited partner unit increase of at least 10% annually through 2019."

Big Spring Logistics Asset Acquisition
The acquisition of the Big Spring logistics assets was effective March 1, 2018. These assets consist of storage tanks, salt wells and products terminals and a new marketing agreement associated with Delek US' Big Spring, Texas refinery. The expected annual EBITDA is approximately $40.2 million and the purchase price was $315.0 million, which equates to a 7.8x EBITDA multiple. This transaction was financed through a combination of cash on hand and borrowings on the revolving credit facility.

This acquisition includes the following assets and agreements:

Storage tanks and salt wells - Approximately 3.0 million barrels of aggregate shell capacity, consisting of 75 tanks, 4 salt wells and ancillary assets, including piping and pumps located at the refinery and at Duncan, Oklahoma.

Products terminals - An asphalt terminal that operated at 3,900 barrels per day during the second half of 2017 and a light products terminal with 54,000 barrels per day throughput capacity, which operated at 28,000 barrels per day during the second half of 2017.

Marketing agreement - A new wholesale marketing agreement under which Delek Logistics provides services necessary to market various refinery products produced at Delek US' Big Spring refinery. During the second half of 2017, total sales volume for products covered by this agreement was approximately 74,700 barrels per day.

Distribution and Liquidity
On April 26, 2018, Delek Logistics declared a quarterly cash distribution for the first quarter of $0.75 per limited partner unit, which equates to $3.00 per limited partner unit on an annualized basis. This distribution will be paid on May 15, 2018 to unitholders of record on May 7, 2018. This represents a 3.4 percent increase from the fourth quarter 2017 distribution of $0.725 per limited partner unit, or $2.90 per limited partner unit on an annualized basis, and an 8.7 percent increase over Delek Logistics’ first quarter 2017 distribution of $0.69 per limited partner unit, or $2.76 per limited partner unit annualized. For the first quarter 2018, the total cash distribution declared to all partners, including IDRs, was approximately $24.0 million. Based on the declared distribution for the first quarter 2018, the distributable cash flow coverage ratio for the first quarter was 1.14x.

As of March 31, 2018, Delek Logistics had total debt of approximately $737.7 million and cash of $4.8 million. Additional borrowing capacity, subject to certain covenants, under the $700.0 million credit facility was $205.3 million. The total leverage ratio for the first quarter 2018 was approximately 4.6 times, which is within the current requirements of the maximum allowable leverage of 5.5 times.

Financial Results
Revenue for the first quarter 2018 was $167.9 million compared to $129.5 million in the prior year period. The increase in revenue is primarily due to higher sales prices in the west Texas wholesale business and the completion of the Big Spring acquisition effective March 1, 2018. Total operating expenses were $12.6 million in the first quarter 2018, compared to $10.4 million in the first quarter 2017. This increase was primarily due to the contribution from the Big Spring acquisition and variable expenses. Total segment contribution margin was $36.3 million in the first quarter 2018 compared to $26.5 million in the first quarter 2017. General and administrative expenses were $3.0 million for the first quarter 2018, compared to $2.8 million in the prior year period.

Pipelines and Transportation Segment
Contribution margin in the first quarter 2018 was $19.7 million compared to $16.1 million in the first quarter 2017. This change was primarily due to the contribution from the Big Spring acquisition, combined with improved performance from the Paline Pipeline and Lion Pipeline system. These year-over-year improvements were partially offset by lower results from the SALA pipeline system. Operating expenses were $9.6 million in the first quarter 2017 compared to $8.2 million in the prior year period primarily due to the acquisition in March 2018 and variable costs.

Wholesale Marketing and Terminalling Segment
During the first quarter 2018, contribution margin was $16.7 million, compared to $10.4 million in the first quarter 2017. This increase was primarily due to improved performance in the west Texas wholesale operations, the contribution from the Big Spring acquisition, and East Texas marketing agreement on a year-over-year basis. Operating expenses increased to $3.0 million in the first quarter 2018, compared to $2.2 million in the prior year period primarily due to the acquisition in March 2018.

In the west Texas wholesale business, average throughput in the first quarter 2018 was 15,942 barrels per day compared to 14,467 barrels per day in the first quarter 2017. The wholesale gross margin in west Texas increased year-over-year to $5.16 per barrel and included approximately $1.2 million, or $0.81 per barrel, from renewable identification numbers (RINs) generated in the quarter. During the first quarter 2017, the wholesale gross margin was $2.72 per barrel and included $1.1 million from RINs, or $0.86 per barrel. On a year-over-year basis, continued growth in drilling activity in the Permian Basin increased fuel demand and improved the supply/demand balance, which led to improved performance in the west Texas wholesale business.

Average terminalling throughput volume of 143,476 barrels per day during the quarter increased on a year-over-year basis from 114,900 barrels per day in the first quarter 2017 primarily due to higher throughput at the Tyler, Texas terminal and the addition of the Big Spring terminal. During the first quarter 2018, average volume under the East Texas marketing agreement with Delek US was 73,244 barrels per day compared to 63,396 barrels per day during the first quarter 2017.

First Quarter 2018 Results | Conference Call Information
Delek Logistics will hold a conference call to discuss its first quarter 2018 results on Tuesday, May 8, 2018 at 7:00 a.m. Central Time. Investors will have the opportunity to listen to the conference call live by going to www.DelekLogistics.com. Participants are encouraged to register at least 15 minutes early to download and install any necessary software. For those who cannot listen to the live broadcast, a telephonic replay will be available through August 8, 2018 by dialing (855) 859-2056, passcode 5745908. An archived version of the replay will also be available at www.DelekLogistics.com for 90 days.

Investors may also wish to listen to Delek US’ (NYSE:DK) first quarter 2018 earnings conference call on Tuesday, May 8, 2018 at 9:00 a.m. Central Time and review Delek US’ earnings press release. Market trends and information disclosed by Delek US may be relevant to Delek Logistics, as it is a consolidated subsidiary of Delek US. Investors can find information related to Delek US and the timing of its earnings release online by going to www.DelekUS.com.

About Delek Logistics Partners, LP
Delek Logistics Partners, LP, headquartered in Brentwood, Tennessee, was formed by Delek US Holdings, Inc. (NYSE:DK) to own, operate, acquire and construct crude oil and refined products logistics and marketing assets.

Safe Harbor Provisions Regarding Forward-Looking Statements
This press release contains “forward-looking” statements within the meaning of the federal securities laws. These statements contain words such as “possible,” “believe,” “should,” “could,” “would,” “predict,” “plan,” “estimate,” “intend,” “may,” “anticipate,” “will,” “if,” “expect” or similar expressions, as well as statements in the future tense, and can be impacted by numerous factors, including the fact that a substantial majority of Delek Logistics' contribution margin is derived from Delek US Holdings, thereby subjecting us to Delek US Holdings' business risks; risks relating to the securities markets generally; risks and costs relating to the age and operational hazards of our assets including, without limitation, costs, penalties, regulatory or legal actions and other effects related to releases, spills and other hazards inherent in transporting and storing crude oil and intermediate and finished petroleum products; the impact of adverse market conditions affecting the utilization of Delek Logistics' assets and business performance, including margins generated by its wholesale fuel business; an inability of Delek to successfully integrate the businesses of Delek and Alon USA Energy, Inc., to grow as expected and realize the synergies and the other anticipated benefits of its merger with Alon, which became effective as of July 1, 2017, as it relates to our potential future growth opportunities, including dropdowns, and other potential benefits; the results of our investments in joint ventures; adverse changes in laws including with respect to tax and regulatory matters and other risks as disclosed in our annual report on Form 10-K, quarterly reports on Form 10-Q and other reports and filings with the United States Securities and Exchange Commission. Forward looking statements include, but are not limited to, statements regarding future growth at Delek Logistics; expected EBITDA from the Big Spring logistics assets and new marketing agreement; the ability of the newly formed joint venture with Green Plains Partners LP to acquire additional assets, the amount and timing of such acquisition, and the potential benefits therefrom; expansion of the Paline Pipeline and potential benefits therefrom; distributions and the amounts and timing thereof; ability to create long-term value for our unit holders; financial flexibility and borrowing capacity; distribution growth of 10% or at all; and safe, continued and reliable operations. There can be no assurance that actual results will not differ from those expected by management or described in forward-looking statements of Delek Logistics. Delek Logistics undertakes no obligation to update or revise such forward-looking statements to reflect events or circumstances that occur, or which Delek Logistics becomes aware of, after the date hereof.

Non-GAAP Disclosures:
EBITDA (defined as net income (loss) before net interest expense, income tax expense, depreciation and amortization expense, including amortization of customer contract intangible assets which is included as a component of net sales in our accompanying condensed consolidated statements of income), distributable cash flow and distributable cash flow coverage ratio are non-U.S. GAAP supplemental financial measures that management and external users of our combined financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:

  • Delek Logistics' operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or, in the case of EBITDA, financing methods;
     
  • the ability of our assets to generate sufficient cash flow to make distributions to Delek Logistics' unitholders;
     
  • Delek Logistics' ability to incur and service debt and fund capital expenditures; and
     
  • the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

Delek Logistics believes that the presentation of EBITDA, distributable cash flow and distributable cash flow coverage ratio provide useful information to investors in assessing its financial condition, its results of operations and the cash flow its business is generating. EBITDA, distributable cash flow and distributable cash flow coverage ratio should not be considered in isolation or as alternatives to net income, operating income, cash from operations or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP. EBITDA, distributable cash flow and distributable cash flow coverage ratio have important limitations as analytical tools because they exclude some, but not all items that affect net income and net cash provided by operating activities. Additionally, because EBITDA and distributable cash flow may be defined differently by other partnerships in its industry, Delek Logistics' definitions of EBITDA and distributable cash flow may not be comparable to similarly titled measures of other partnerships. Please see the tables below for a reconciliation of EBITDA and distributable cash flow to their most directly comparable financial measures calculated and presented in accordance with U.S. GAAP. Also, please see the accompanying table providing the calculation of distributable cash flow coverage ratio.

 
Delek Logistics Partners, LP
Condensed Consolidated Balance Sheets (Unaudited)
 
  March 31, December 31,
  2018 2017
     
  (In thousands)
ASSETS    
Current assets:    
Cash and cash equivalents $4,787  $4,675 
Accounts receivable 25,365  23,013 
Accounts receivable from related parties 16,995  1,124 
Inventory 13,116  20,855 
Other current assets 545  783 
Total current assets 60,808  50,450 
Property, plant and equipment:    
Property, plant and equipment 445,235  367,179 
Less: accumulated depreciation (120,918) (112,111)
Property, plant and equipment, net 324,317  255,068 
Equity method investments 105,630  106,465 
Goodwill 12,203  12,203 
Intangible assets, net 159,446  15,917 
Other non-current assets 3,542  3,427 
Total assets $665,946  $443,530 
LIABILITIES AND DEFICIT    
Current liabilities:    
Accounts payable $19,717  $19,147 
Excise and other taxes payable 5,373  4,700 
Tank inspection liabilities 902  902 
Pipeline release liabilities 1,087  1,000 
Accrued expenses and other current liabilities 10,790  6,033 
Total current liabilities 37,869  31,782 
Non-current liabilities:    
Long-term debt 737,694  422,649 
Asset retirement obligations 4,910  4,064 
Other non-current liabilities 16,119  14,260 
Total non-current liabilities 758,723  440,973 
Total liabilities 796,592  472,755 
Deficit:    
Common unitholders - public; 9,088,587 units issued and outstanding at March 31, 2018 (9,088,587 at December 31, 2017) 173,197  174,378 
Common unitholders - Delek; 15,294,046 units issued and outstanding at March 31, 2018 (15,294,046 at December 31, 2017) (296,015) (197,206)
General partner - 497,604 units issued and outstanding at March 31, 2018 (497,604 at December 31, 2017) (7,828) (6,397)
Total deficit (130,646) (29,225)
Total liabilities and deficit $665,946  $443,530 
         
         


  
Delek Logistics Partners, LP 
Condensed Consolidated Statements of Income (Unaudited) 
          
  Three Months Ended March 31, 
  2018 2017 
      
  (In thousands, except unit and per unit data)
Net sales:     
Affiliate $61,644  $36,619  
Third-party 106,277  92,854  
Net sales 167,921  129,473  
Operating costs and expenses:     
Cost of goods sold 119,032  92,590  
Operating expenses 12,577  10,358  
General and administrative expenses 2,975  2,848  
Depreciation and amortization 6,000  5,193  
Loss on asset disposals 60  12  
Total operating costs and expenses 140,644  111,001  
Operating income 27,277  18,472  
Interest expense, net 8,062  4,071  
Income from equity method investments (858) (245) 
Income before income tax expense 20,073  14,646  
Income tax expense 78  51  
Net income attributable to partners $19,995  $14,595  
Comprehensive income attributable to partners $19,995  $14,595  
      
Less: General partner's interest in net income, including incentive distribution rights 5,630  4,109  
Limited partners' interest in net income $14,365  $10,486  
      
Net income per limited partner unit:     
Common units - (basic) $0.59  $0.43  
Common units - (diluted) $0.59  $0.43  
      
Weighted average limited partner units outstanding:     
Common units - basic 24,382,633  24,328,607  
Common units - diluted 24,393,746  24,380,770  
      
Cash distribution per limited partner unit $0.75  $0.69  
          
          


 
Delek Logistics Partners, LP
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
          
      Three Months Ended March 31, 
      2018 2017 
          
Cash Flow Data     
Operating activities $23,656  $23,474  
Investing activities (219,097) (5,414) 
Financing activities 195,553  (18,086) 
Net increase (decrease) $112  $(26) 
          
          


  
Delek Logistics Partners, LP 
Reconciliation of Amounts Reported Under U.S. GAAP 
  
  Three Months Ended March 31, 
($ in thousands) 2018 2017 
Reconciliation of net income to EBITDA:     
Net income $19,995  $14,595  
Add:     
Income tax expense 78  51  
Depreciation and amortization 6,000  5,193  
Amortization of customer contract intangible assets 601    
Interest expense, net 8,062  4,071  
EBITDA $34,736  $23,910  
      
Reconciliation of net cash from operating activities to distributable cash flow:     
Net cash provided by operating activities $23,656  $23,474  
Changes in assets and liabilities 3,706  (3,562) 
Maintenance and regulatory capital expenditures (324) (2,243) 
Reimbursement from Delek for capital expenditures 391  878  
Accretion of asset retirement obligations (78) (73) 
Deferred income taxes   (25) 
Gain on asset disposals (60) (12) 
Distributable Cash Flow $27,291  $18,437  
      


  
Delek Logistics Partners, LP 
Distributable Coverage Ratio Calculation 
(In thousands) 
  
  Three Months Ended March 31, 
Distributions to partners of Delek Logistics, LP 2018 2017 
Limited partners' distribution on common units $18,287  $16,787  
General partner's distributions 373  342  
General partner's incentive distribution rights 5,337  3,895  
Total distributions to be paid $23,997  $21,024  
      
Distributable cash flow $27,291  $18,437  
Distributable cash flow coverage ratio (1) 1.14x  0.88x  
  

(1) Distributable cash flow coverage ratio is calculated by dividing distributable cash flow by distributions to be paid in each respective period.

  
  
Delek Logistics Partners, LP 
Segment Data (unaudited) 
 
(In thousands) Three Months Ended March 31, 
  2018 2017 
Pipelines and Transportation     
Net sales:     
Affiliate $29,462  $26,500  
Third party 4,251  2,177  
Total pipelines and transportation 33,713  28,677  
Operating costs and expenses:     
Cost of goods sold 4,441  4,405  
Operating expenses 9,622  8,155  
Segment contribution margin $19,650  $16,117  
Total Assets $417,781  $338,072  
      
Wholesale Marketing and Terminalling     
Net sales:     
Affiliate $32,182  $10,119  
Third party 102,026  90,677  
Total wholesale marketing and terminalling 134,208  100,796  
Operating costs and expenses:     
Cost of goods sold 114,591  88,185  
Operating expenses 2,955  2,203  
Segment contribution margin $16,662  $10,408  
Total Assets $248,165  $75,531  
      
Consolidated     
Net sales:     
Affiliate $61,644  $36,619  
Third party 106,277  92,854  
Total consolidated 167,921  129,473  
Operating costs and expenses:     
Cost of goods sold 119,032  92,590  
Operating expenses 12,577  10,358  
Contribution margin 36,312  26,525  
General and administrative expenses 2,975  2,848  
Depreciation and amortization 6,000  5,193  
(Gain) on asset disposals 60  12  
Operating income $27,277  $18,472  
Total Assets $665,946  $413,603  
          
          


  
Delek Logistics Partners, LP 
Segment Capital Spending 
(In thousands) 
  
  Three Months Ended March 31, 
Pipelines and Transportation 2018 2017 
Maintenance capital spending $517  $1,688  
Discretionary capital spending 891  449  
Segment capital spending $1,408  $2,137  
Wholesale Marketing and Terminalling     
Maintenance capital spending $202  $203  
Discretionary capital spending 587  451  
Segment capital spending $789  $654  
Consolidated     
Maintenance capital spending $719  $1,891  
Discretionary capital spending 1,478  900  
Total capital spending $2,197  $2,791  
      
      


  
Delek Logistics Partners, LP 
Segment Data (Unaudited) 
  
  Three Months Ended March 31, 
  2018 2017 
Pipelines and Transportation Segment:     
Throughputs (average bpd)     
Lion Pipeline System:     
Crude pipelines (non-gathered) 54,728  58,744  
Refined products pipelines 49,754  51,355  
SALA Gathering System 16,672  16,531  
East Texas Crude Logistics System 18,062  16,176  
      
Wholesale Marketing and Terminalling Segment:     
East Texas - Tyler Refinery sales volumes (average bpd) (1) 73,244  63,396  
Big Spring Marketing - Refinery sales volume (average bpd) (for period owned) (2) 75,139    
West Texas marketing throughputs (average bpd) 15,942  14,467  
West Texas marketing margin per barrel $5.16  $2.72  
Terminalling throughputs (average bpd) (3) 143,476  114,900  
        

(1) Excludes jet fuel and petroleum coke.

(2) Throughputs for the three months ended March 31, 2018 are for the 31 days we marketed certain finished products produced at or sold from the Big Spring Refinery following the execution of the Big Spring Marketing Agreement, effective March 1, 2018.

(3) Consists of terminalling throughputs at our Tyler, Big Spring, Big Sandy and Mount Pleasant, Texas, our El Dorado and North Little Rock, Arkansas and our Memphis and Nashville, Tennessee terminals. Throughputs for the Big Spring terminal are for the 31 days we operated the terminal following its acquisition effective March 1, 2018. Barrels per day are calculated for only the days we operated each terminal. Total throughput for the three months ended March 31, 2018 was 11.3 million barrels, which averaged 125,639 bpd for the 90 day period.

      
      
Big Spring Logistics Acquisition and Marketing Agreement 
Reconciliation of Forecasted Annualized EBITDA to Forecasted Net Income 
      
($ in thousands) Tanks, Terminals and Marketing Agreement 
    
Forecasted Net income $13,300  
Add:   
Income tax expense   
Depreciation and amortization 5,100  
Amortization of customer contract intangible assets 7,200  
Interest expense, net 14,600  
Forecasted EBITDA $40,200  
    

Investor / Media Relations Contact:
Keith Johnson
Vice President of Investor Relations
615-435-1366

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Source: Delek Logistics Partners, LP