Questions? +1 (202) 540-8337 Login
Trusted News Since 1995
A service for global professionals · Thursday, July 19, 2018 · 456,013,257 Articles · 3+ Million Readers

Delek Logistics Partners, LP Reports Second Quarter 2017 Results

  • Permian Basin position benefiting performance of operations on year-over-year basis
  • Declared quarterly distribution of $0.705 per limited partner unit; increased by 11.9 percent year-over-year
  • Reported second quarter 2017 net cash from operating activities of $23.9 million and distributable cash flow of $23.4 million
  • Increased potential dropdown inventory at Delek US following completion of the acquisition of Alon USA on July 1

BRENTWOOD, Tenn., Aug. 02, 2017 (GLOBE NEWSWIRE) -- Delek Logistics Partners, LP (NYSE:DKL) ("Delek Logistics") today announced its financial results for the second quarter 2017. For the three months ended June 30, 2017, Delek Logistics reported net income attributable to all partners of $19.0 million, or $0.59 per diluted common limited partner unit. This compares to net income attributable to all partners of $18.9 million, or $0.66 per diluted common limited partner unit, in the second quarter 2016. Distributable cash flow was $23.4 million in the second quarter 2017, compared to $23.7 million in the prior-year period. 

For the second quarter 2017, earnings before interest, taxes, depreciation and amortization ("EBITDA") was $30.3 million compared to $27.1 million in the prior-year period. Improved performance in the wholesale marketing and terminalling segment, led by a higher gross margin per barrel in west Texas, was the primary factor offsetting the effect of lower performance on a year-over-year basis from the SALA Gathering System and the Paline Pipeline.

Uzi Yemin, Chairman and Chief Executive Officer of Delek Logistics' general partner, remarked: "On July 1, our sponsor, Delek US, successfully completed the acquisition of Alon USA Energy, Inc. We believe this should provide a clear path for growth through future potential dropdowns, the ability to provide logistics support to a larger refining system of the combined company and by creating synergies with Delek US in west Texas. Our financial flexibility should support these growth opportunities, and we remain focused on creating long term value for our unit holders.  We anticipate that the financial flexibility provided by our balance sheet and focus on growth initiatives should support a distribution per limited partner unit increase of at least 10% annually through 2019."

Yemin concluded, "We experienced sequential improvement in our west Texas operations in the second quarter as drilling activity increased and light product demand was strong. This environment resulted in better margins in our west Texas wholesale operation. Crude oil price differentials in the market supported third party crude oil shipments to the Gulf Coast on the Paline Pipeline during the second quarter.  We completed our first high yield note offering in May with a $250.0 million issue and proceeds were used to reduce borrowings on our credit facility. We ended the quarter with approximately $539.0 million of capacity on our credit facility and a total leverage ratio of approximately 3.9 times. This financial position supported the 11.9 percent year-over-year increase in our declared second quarter distribution."

Distribution and Liquidity
On July 24, 2017, Delek Logistics declared a quarterly cash distribution for the second quarter of $0.705 per limited partner unit, which equates to $2.82 per limited partner unit on an annualized basis. This distribution is expected to be paid on August 11, 2017 to unitholders of record on August 4, 2017. This represents a 2.2 percent increase from the first quarter 2017 distribution of $0.69 per limited partner unit, or $2.76 per limited partner unit on an annualized basis, and an 11.9 percent increase over Delek Logistics’ second quarter 2016 distribution of $0.63 per limited partner unit, or $2.52 per limited partner unit annualized. For the second quarter 2017, the total cash distribution declared to all partners, including IDRs, was approximately $21.8 million. Based on the declared distribution for the second quarter 2017, the distributable cash flow coverage ratio for the second quarter was 1.07x.

As of June 30, 2017, Delek Logistics had total debt of approximately $396.9 million and cash of $4.9 million. Additional borrowing capacity, subject to certain covenants, under the $700.0 million credit facility was approximately $538.5 million. In May 2017, $250.0 million of 6.75 percent senior unsecured notes due 2025 were issued of which approximately $242.0 million were used to reduce borrowings on the credit facility.

Financial Results
Revenue for the second quarter 2017 was $126.8 million compared to $111.9 million in the prior year period. The increase in revenue is primarily due to higher sales prices in the west Texas wholesale business. Total operating expenses were $10.0 million, compared to $8.7 million in the second quarter 2016. This increase was primarily due to employee related expenses and contract services.  Total segment contribution margin was $31.8 million in the second quarter of 2017 compared to $30.0 million in the second quarter 2016. General and administrative expenses were $2.7 million for the second quarter 2017, which is in line with the prior-year period.

Pipelines and Transportation Segment
The contribution margin in the second quarter 2017 was $17.9 million compared to $20.3 million in the second quarter 2016. This change was primarily due to reduced performance on the Paline Pipeline.  During the second quarter 2017, the Paline Pipeline was a FERC regulated pipeline with a tariff established for potential shippers, compared to the prior year period when the pipeline capacity was under contract with two third-parties for a monthly fee.  Also, lower volume on the SALA Gathering System on a year-over-year basis was a factor in the change in contribution margin. Operating expenses were $7.9 million in the second quarter 2017 compared to $6.9 million in the prior year period.

Wholesale Marketing and Terminalling Segment
During the second quarter 2017, contribution margin was $13.9 million, compared to $9.7 million in the second quarter 2016. This increase was primarily due to improved performance in the west Texas wholesale operations and east Texas marketing agreement on a year-over-year basis. Operating expenses increased to $2.0 million in the second quarter 2017, compared to $1.8 million in the prior year period.

In the west Texas wholesale business, average throughput in the second quarter 2017 was 13,422 barrels per day compared to 12,594 barrels per day in the second quarter 2016. The wholesale gross margin in west Texas increased year-over-year to $4.26 per barrel and included approximately $1.2 million, or $1.00 per barrel, from renewable identification numbers (RINs) generated in the quarter.  During the second quarter 2016, the wholesale gross margin was $2.13 per barrel and included $1.3 million from RINs, or $1.12 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 higher margins in the west Texas wholesale business.

Average terminalling throughput volume of 128,111 barrels per day during the quarter increased on a year-over-year basis from 126,476 barrels per day in the second quarter 2016 primarily due to higher throughput at the Tyler, Texas terminal, partially offset by a decline at other locations. During the second quarter 2017, average volume under the east Texas marketing agreement with Delek US was 77,878 barrels per day compared to 70,188 barrels per day during the second quarter 2016.

Second Quarter 2017 Results | Conference Call Information
Delek Logistics will hold a conference call to discuss its second quarter 2017 results on Thursday, August 3, 2017 at 8:00 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 November 3, 2017 by dialing (855) 859-2056, passcode 56760801. 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) second quarter 2017 earnings conference call on Thursday, August 3, 2017 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. 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, 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 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)
    June 30,   December 31,
    2017   2016
         
    (In thousands)
ASSETS        
Current assets:        
Cash and cash equivalents   $ 4,899     $ 59  
  Accounts receivable   18,270     19,202  
Accounts receivable from related parties   4,158     2,834  
Inventory   6,522     8,875  
Other current assets   1,388     1,071  
Total current assets   35,237     32,041  
Property, plant and equipment:        
Property, plant and equipment   347,303     342,407  
Less: accumulated depreciation   (101,684 )   (91,378 )
Property, plant and equipment, net   245,619     251,029  
Equity method investments   104,659     101,080  
Goodwill   12,203     12,203  
Intangible assets, net   13,888     14,420  
Other non-current assets   3,926     4,774  
Total assets   $ 415,532     $ 415,547  
LIABILITIES AND DEFICIT        
Current liabilities:        
Accounts payable   $ 10,176     $ 10,853  
Excise and other taxes payable   4,714     4,841  
Tank inspection liabilities   939     1,013  
Pipeline release liabilities   1,072     1,097  
Accrued expenses and other current liabilities   4,350     2,925  
Total current liabilities   21,251     20,729  
Non-current liabilities:        
Long-term debt   396,897     392,600  
Asset retirement obligations   3,918     3,772  
Other non-current liabilities   14,545     11,730  
Total non-current liabilities   415,360     408,102  
Total liabilities   436,611     428,831  
Deficit:        
Common unitholders - public; 9,067,411 units issued and outstanding at June 30, 2017
(9,263,415 at December 31, 2016)
  177,532     188,013  
Common unitholders - Delek;  15,294,046 units issued and outstanding at June 30, 2017
(15,065,192 at December 31, 2016)
  (192,348 )   (195,076 )
General partner - 497,172 units issued and outstanding at June 30, 2017 (496,502 at December
31, 2016)
  (6,263 )   (6,221 )
Total deficit   (21,079 )   (13,284 )
Total liabilities and deficit   $ 415,532     $ 415,547  

/EIN News/ --

Delek Logistics Partners, LP        
Condensed Consolidated Statements of Income (Unaudited)        
    Three Months Ended June
30,
  Six Months Ended June
30,
     
    2017   2016   2017   2016
                 
    (In thousands, except unit and per unit data)
Net sales:                
Affiliate   $ 39,824     $ 36,694     $ 76,443     $ 75,454  
Third-party   86,945     75,159     179,799     140,455  
Net sales   126,769     111,853     256,242     215,909  
Operating costs and expenses:                
Cost of goods sold   85,039     73,101     177,629     139,854  
Operating expenses   9,966     8,730     20,324     19,194  
General and administrative expenses   2,656     2,698     5,504     5,611  
Depreciation and amortization   5,742     4,812     10,935     9,808  
(Gain) loss on asset disposals   (5 )       7     (44 )
Total operating costs and expenses   103,398     89,341     214,399     174,423  
Operating income   23,371     22,512     41,843     41,486  
Interest expense, net   5,462     3,284     9,533     6,483  
(Income) loss from equity method investments   (1,176 )   206     (1,421 )   435  
Income before income tax expense   19,085     19,022     33,731     34,568  
Income tax expense   108     129     159     227  
Net income attributable to partners   18,977     18,893     33,572     34,341  
Comprehensive income attributable to partners   $ 18,977     $ 18,893     $ 33,572     $ 34,341  
                 
Less: General partner's interest in net income, including incentive distribution rights   4,552     2,791     8,661     5,044  
Limited partners' interest in net income   $ 14,425     $ 16,102     $ 24,911     $ 29,297  
                 
Net income per limited partner unit:                
Common units - (basic)   $ 0.59     $ 0.66     $ 1.02     $ 1.23  
Common units - (diluted)   $ 0.59     $ 0.66     $ 1.02     $ 1.22  
Subordinated units - Delek (basic and diluted)   $     $     $     $ 1.09  
                 
Weighted average limited partner units outstanding:                
Common units - basic   24,335,338     24,281,930     24,331,991     20,653,210  
Common units - diluted   24,375,946     24,367,091     24,371,540     20,735,389  
Subordinated units - Delek (basic and diluted)               3,626,149  
                 
Cash distribution per limited partner unit   $ 0.705     $ 0.630     $ 1.395     $ 1.240  


Delek Logistics Partners, LP
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
                   
            Six Months Ended June 30,  
            2017   2016  
                   
Cash Flow Data          
Net cash provided by operating activities   $ 47,411     $ 57,589    
Net cash used in investing activities   (8,804 )   (35,919 )  
Net cash used in financing activities   (33,767 )   (21,670 )  
  Net increase in cash and cash equivalents   $ 4,840     $    


Delek Logistics Partners, LP
Reconciliation of  Amounts Reported Under U.S. GAAP
    Three Months Ended
June 30,
  Six Months Ended
June 30,
($ in thousands)   2017   2016   2017   2016
Reconciliation of net income to EBITDA:                
Net income   $ 18,977     $ 18,893     $ 33,572     $ 34,341  
Add:                
Income tax expense   108     129     159     227  
Depreciation and amortization   5,742     4,812     10,935     9,808  
Interest expense, net   5,462     3,284     9,533     6,483  
EBITDA   $ 30,289     $ 27,118     $ 54,199     $ 50,859  
                 
Reconciliation of net cash from operating activities to distributable cash flow:                
Net cash provided by operating activities   $ 23,937     $ 31,215     $ 47,411     $ 57,589  
Changes in assets and liabilities   881     (7,133 )   (2,681 )   (12,534 )
Maintenance and regulatory capital expenditures   (2,070 )   (897 )   (4,313 )   (1,633 )
Reimbursement from Delek for capital expenditures   784     593     3,835     802  
Accretion of asset retirement obligations   (73 )   (64 )   (146 )   (131 )
Deferred income taxes   (94 )       (119 )    
Gain (loss) on asset disposals   5         (7 )   44  
Distributable Cash Flow   $ 23,370     $ 23,714     $ 43,980     $ 44,137  
                 


Delek Logistics Partners, LP
Distributable Coverage Ratio Calculation
 (In thousands)
    Three Months Ended
June 30,
  Six Months Ended
June 30,
Distributions to partners of Delek Logistics, LP   2017   2016   2017   2016
Limited partners' distribution on common units   $ 17,175     $ 15,310     $ 33,962     $ 30,119  
General partner's distributions   350     313     692     615  
General partner's incentive distribution rights   4,258     2,462     8,153     4,446  
Total Distributions to be paid   $ 21,783     $ 18,085     $ 42,807     $ 35,180  
                 
Distributable Cash Flow   $ 23,370     $ 23,714     $ 43,980     $ 44,137  
Distributable cash flow coverage ratio (1)   1.07x     1.31x     1.03x     1.25x  
(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   Six Months Ended
    June 30,   June 30,
    2017   2016   2017   2016
Pipelines and Transportation                
Net sales:                
  Affiliate   $ 27,668     $ 26,136     $ 54,168     $ 52,442  
  Third party   2,555     5,874     4,732     12,351  
  Total pipelines and transportation   30,223     32,010     58,900     64,793  
  Operating costs and expenses:                
  Cost of goods sold   4,403     4,814     8,808     9,590  
  Operating expenses   7,933     6,899     16,088     14,639  
  Segment contribution margin   $ 17,887     $ 20,297     $ 34,004     $ 40,564  
Total Assets   $ 338,781     $ 309,678          
                 
Wholesale Marketing and Terminalling                
Net sales:                
  Affiliate   $ 12,156     $ 10,558     $ 22,275     $ 23,012  
  Third party   84,390     69,285     175,067     128,104  
  Total wholesale marketing and terminalling   96,546     79,843     197,342     151,116  
  Operating costs and expenses:                
  Cost of goods sold   80,636     68,287     168,821     130,264  
  Operating expenses   2,033     1,831     4,236     4,555  
  Segment contribution margin   $ 13,877     $ 9,725     $ 24,285     $ 16,297  
Total Assets   $ 76,751     $ 72,093          
                 
Consolidated                
Net sales:                
  Affiliate   $ 39,824     $ 36,694     $ 76,443     $ 75,454  
  Third party   86,945     75,159     179,799     140,455  
  Total consolidated   126,769     111,853     256,242     215,909  
  Operating costs and expenses:                
  Cost of goods sold   85,039     73,101     177,629     139,854  
  Operating expenses   9,966     8,730     20,324     19,194  
  Contribution margin   31,764     30,022     58,289     56,861  
  General and administrative expenses   2,656     2,698     5,504     5,611  
  Depreciation and amortization   5,742     4,812     10,935     9,808  
  (Gain) loss on asset disposals   (5 )       7     (44 )
  Operating income   $ 23,371     $ 22,512     $ 41,843     $ 41,486  
Total Assets   $ 415,532     $ 381,771          


Delek Logistics Partners, LP
Segment Capital Spending
 (In thousands)
    Three Months Ended
June 30,
  Six Months Ended
June 30,
Pipelines and Transportation   2017   2016   2017   2016
Maintenance capital spending   $ 1,355     $ 714     $ 3,043     $ 1,225  
Discretionary capital spending   305     4     754     199  
Segment capital spending   $ 1,660     $ 718     $ 3,797     $ 1,424  
Wholesale Marketing and Terminalling                
Maintenance capital spending   $ 214     $ 56     $ 417     $ 72  
Discretionary capital spending   245     74     696     436  
Segment capital spending   $ 459     $ 130     $ 1,113     $ 508  
Consolidated                
Maintenance capital spending   $ 1,569     $ 770     $ 3,460     $ 1,297  
Discretionary capital spending   550     78     1,450     635  
Total capital spending   $ 2,119     $ 848     $ 4,910     $ 1,932  
                 


Delek Logistics Partners, LP
Segment Data (Unaudited)
         
    Three Months Ended
June 30,
  Six Months Ended
June 30,
    2017   2016   2017   2016
Pipelines and Transportation Segment:                
Throughputs (average bpd)                
Lion Pipeline System:                
  Crude pipelines (non-gathered)   59,953     56,302     59,351     56,322  
  Refined products pipelines   49,820     53,670     50,583     53,725  
SALA Gathering System   15,957     18,288     16,242     18,645  
East Texas Crude Logistics System   13,591     12,909     14,876     11,127  
El Dorado Rail Offloading Rack                
                 
Wholesale Marketing and Terminalling Segment:                
East Texas - Tyler Refinery sales volumes (average bpd)   77,878     70,188     70,677     68,301  
West Texas marketing throughputs (average bpd)   13,422     12,594     13,942     13,482  
West Texas marketing margin per barrel   $ 4.26     $ 2.13     $ 3.44     $ 1.00  
Terminalling throughputs (average bpd)   128,111     126,476     122,026     122,645  


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

Primary Logo

Powered by EIN News