Delek Logistics Partners (DKL) Q2 2024 earnings summary

Executive summary

• Achieved record Q2 2024 results with net income of $41.1 million, up from $31.9 million year-over-year, and quarterly Adjusted EBITDA of $102.4 million, reflecting strong operational performance and growth initiatives.

• Announced major transactions including the $230 million H2O Midstream acquisition, a new gas processing plant investment, and acquisition of a 15.6% interest in the Wink to Webster Pipeline.

• Amended and extended contracts with Delek Holdings for up to seven years, aiming to increase third-party EBITDA and enhance independence.

• Increased quarterly distribution to $1.09 per unit, marking the 46th consecutive increase and continuing value delivery to unitholders.

• Focused on stable cash flow, distribution growth, and expanding third-party business in the Permian and Delaware Basins.

Financial highlights

• Q2 2024 Adjusted EBITDA was $102.4 million, up from $92.8 million in Q2 2023; net income was $41.1 million, up from $31.9 million; distributable cash flow was $67.8 million with a DCF coverage ratio of 1.32x.

• Q2 2024 net revenues increased 7.2% to $264.6 million; YTD net revenues up 5.4% to $516.7 million.

• Distribution yield improved to 10.42% in Q2 2024.

• Leverage ratio improved to 3.81x at Q2 2024, down from 4.84x at end of 2022 and 4.34x at end of 2023.

• Total liquidity at June 30, 2024 was $824.9 million, with total indebtedness at $1.58 billion.

Outlook and guidance

• New gas processing plant in the Delaware Basin expected to be completed in 1H 2025, already highly subscribed, with further expansion opportunities.

• H2O Midstream acquisition and new gas plant are expected to be immediately accretive to distributable cash flow and support long-term growth.

• Two-thirds of EBITDA projected to come from third parties by 2H 2025, up from 50% currently.

• Capital expenditures for the second half of 2024 expected to be $90–$100 million, mainly for the new processing plant.

• Management expects continued strong demand for liquid transportation fuels, supported by minimum volume commitments and dedicated acreage agreements.