Delek Logistics Partners (DKL) Q3 2024 earnings summary

Executive summary

• Achieved record Q3 2024 adjusted EBITDA of $107 million, up 9% year-over-year, and net income of $33.7 million, reflecting strong operational performance and strategic acquisitions in the Permian Basin.

• Closed H2O Midstream and Wink to Webster (W2W) acquisitions, diversifying operations and expanding the customer base.

• Announced final investment decision on a new gas processing plant adjacent to the Delaware plant, with expansion on schedule for 2025.

• Board approved a quarterly distribution increase to $1.10 per unit, marking the 47th consecutive increase and a 5.3% year-over-year rise.

• Management remains focused on organic and inorganic growth, stable cash flows, and capitalizing on Permian Basin opportunities.

Financial highlights

• Q3 2024 adjusted EBITDA reached $107 million, up from $98.2 million; reported EBITDA was $69.2 million, impacted by transaction costs and lease accounting.

• Net income for Q3 2024 was $33.7 million ($0.71 per diluted unit); distributable cash flow (adjusted) was $62 million, with a coverage ratio of 1.1x.

• Gathering and processing segment adjusted EBITDA increased to $55 million; wholesale marketing and terminalling declined to $24.7 million; storage and transportation rose to $19.4 million; pipeline JV income increased to $15.6 million.

• Q3 2024 net revenues were $214.1 million, down 22.4% year-over-year; operating cash flow for nine months was $156.4 million, up from $110.6 million.

• Total debt as of September 30, 2024, was approximately $1.89 billion, with a leverage ratio of 4.15x and $695.1 million unused on the $1.15 billion credit facility.

Outlook and guidance

• Management expects DCF coverage ratio to return above the 1.3x target in the second half of 2025 as recent initiatives materialize.

• New gas processing plant in the Permian Basin expected to add $40 million in annual EBITDA upon completion in 2025.

• Anticipate continued distribution growth and value creation, leveraging recent equity offerings for further expansion.

• Strategic focus on expanding third-party business, leveraging joint ventures, and pursuing both organic and acquisition-driven growth.

• Built-in recessionary protections from minimum volume commitments support stable demand for liquid transportation fuels.