Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Delek Logistics Partners reported a strong first quarter with over $100 million in quarterly EBITDA, demonstrating consistent performance.
- Significant growth in the Midland and Delaware basins, with about 50% of EBITDA now generated from third-party business.
- Successful capital structure improvements, including a debt and equity offering that increased liquidity to approximately $800 million and reduced leverage ratio.
- 45th consecutive increase in quarterly distribution to $1.7 per unit, reflecting a strong track record of delivering value to unitholders.
- Strategic investments in growth projects, particularly in the Midland and Delaware Gathering Systems, enhancing infrastructure and service capabilities.
Negative Points
- Forward-looking statements indicate potential risks and uncertainties that could affect future results.
- Dependence on the performance of assets in the Permian Basin, which could be impacted by regional market dynamics or operational challenges.
- The need for continuous capital investments to sustain growth and expand operations, which could strain financial resources if not managed effectively.
- Ongoing necessity to manage and renegotiate MVC contracts, which could affect stability and predictability of cash flows.
- Potential market and operational risks associated with expanding both organically and inorganically, requiring careful strategic planning and execution.
Q & A Highlights
Q: Can you provide more context on the decision to issue DKL equity and discuss the flexibility and growth opportunities this increased liquidity might allow?
A: Avigal Soreq, President of Delek Logistics, explained that the equity offering improved the leverage ratio, availability, and public unit float, enhancing operational activities. Reuven Spiegel, CFO, added that the timing was chosen based on market conditions, and while the initial goal was not fully met, the outcome was satisfactory. They plan to be opportunistic with future offerings.
Q: Could you discuss the growth outlook for the [GNT] business, particularly whether growth is geared more towards the Delaware or the Midland?
A: Avigal Soreq highlighted Delek's track record in both inorganic and organic growth, expressing confidence in future opportunities. Odely Sakazi, SVP, noted significant growth opportunities in both the Delaware and Midland areas, emphasizing the need for infrastructure across all lines in Delaware.
Q: Can you talk about your MVC contracts, particularly any updates on Tyler or El Dorado, and your strategy for other major prospective MVC contracts?
A: Avigal Soreq stated that Delek Logistics intends to renew these contracts, with ongoing negotiations involving the conflicts committees between DK and DKL.
Q: What opportunities are you advancing near the 3 Bear area, and is there a need to bolt on any assets there to boost margins?
A: Avigal Soreq mentioned significant growth and opportunities in the area, emphasizing a strategic approach to acquisitions that are accretive to unitholders. He noted the unique value proposition of their services in crude, gas, and water, and their strategic infrastructure location.
Q: Regarding the recent offerings, could you provide more details on the flexibility and growth opportunities that the increased liquidity might allow going forward?
A: Avigal Soreq and Reuven Spiegel discussed how the recent equity and debt offerings have enhanced financial flexibility, allowing Delek Logistics to pursue growth plans more aggressively. They emphasized being opportunistic in future financial strategies.
Q: Could you elaborate on the decision-making process behind the recent equity offering and its impact on Delek Logistics' operations?
A: Reuven Spiegel explained the historical context of the equity offering, which was initially planned to finance an acquisition. The offering was delayed due to market conditions, and they waited for an optimal time, which has positively impacted their operational capabilities and financial health.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
