Delek Logistics Partners LP

NYSE:DKL

Earnings Call Transcript 2023-Q2

[Operator]

Good day, and welcome to the Delek Logistics Partners Second Quarter Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Rosy Zuklic, Vice President of Investor Relations. Please go ahead.

[Rosy Zuklic, executive]

Welcome to the Delek Logistics Partners Second Quarter Earnings Conference Call.

Participants on today's call will include Avigal Soreq, President; Joseph Israel, EVP, Operations; Reuven Spiegel, EVP and Chief Financial Officer; and Odely Sakazi, SVP, Delek Logistics.

As a reminder, this conference call will contain forward-looking statements as defined under the federal securities laws, including without limitation statements regarding guidance and future business outlook. These statements involve risks and uncertainties that may cause actual results to differ from our forecast. For more information, please refer to the risk factors discussed in the company's most recently filed annual report on the Form 10-K and quarterly report on Form 10-Q filed with the SEC, along with the press release associated with this call. The company assumes no obligation to update any forward-looking statements or information, which speaks as of their respective dates.

I'll now turn the call over to Avigal for opening remarks.

[Avigal Soreq, executive]

Thanks, Rosy.

Delek Logistics Partners delivered another great quarter with $93 million of EBITDA. Delek Logistics has been able to provide consistent results and stable cash flow. We are encouraged by our positive outlook.

As the production in the Permian Basin ramps up, we continue on our promising growth path with increased scale and efficiency. We are proud to say that our acreage has outperformed average growth in the basin. The Midland Gathering System volumes have more than doubled from a year ago, and we are excited to identify more value-add opportunities with our producers. Our Delaware Gathering Assets are performing well and meeting our expectations. We now expect to exceed $100 million a quarter EBITDA run rate by Q4 of this year.

On July 26, our Board of Directors approved 5.1% increase in the quarterly distribution from prior year to $1.035 per limited partner unit for the second quarter of 2023. We are committed to continuing increasing the quarterly distribution.

I will now hand it over to Reuven.

[Reuven Spiegel, executive]

Thank you, Avigal.

Total EBITDA for logistics was $93 million for the second quarter of '23 compared with $65 million for the same period in '22. For the second quarter of '23, distributable cash flow was $60 million and the DCF coverage ratio was 1.34x.

For the gathering and processing segment, EBITDA this quarter was $53 million compared with $38 million in the second quarter of '22. The increase was primarily driven from strong contributions by the Midland Gathering System as well as Delaware Gathering. Throughput for the Midland Gathering averaged approximately 222,000 barrels per day for the second quarter of '23, more than twice the average 100,000 barrels per day in the second quarter of '22.

The wholesale marketing and terminalling segment EBITDA of $28 million for the quarter compared with $19 million in the second quarter of '22. The increase was due to higher terminalling throughput in East Texas and higher gross margin in our West Texas operation.

The storage and transportation segment had EBITDA of $15 million this quarter, which is in line with the last year results. And lastly, the investment in pipeline joint ventures segment contributed $7 million toward the second quarter of '23, flat with the second quarter of '22.

Moving on to capital expenditures. Second quarter of '23 capital spending was $19 million. Most of that spend was for growth projects, namely advancing new connections in the Delaware and Midland Gathering Systems. For 2023, we maintained with our capital outlook of $81 million.

With that, we can open the call for questions.

[Operator]

[Operator Instructions] Since we have no questions at this time, we will turn the conference over back to Avigal Soreq for any closing remarks.

[Avigal Soreq, executive]

So I want to thank the executives around the table, to our employees, to the Board of Directors, and to you, investor, for another great quarter of DKL. We are very much committed to the path we are at. We see a sustainable growth and we are committed to run the course. And we'll talk again in the next quarter.

Thank you.

[Operator]

And this ends the conference today. Thank you for attending today's presentation. You may now disconnect.