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Delek Logistics Partners, LP (NYSE:DKL) Q4 2022 Earnings Call Transcript

Delek Logistics Partners, LP (NYSE:DKL) Q4 2022 Earnings Call Transcript February 28, 2023

Operator: Good day, and welcome to the Delek Logistics Partners Fourth Quarter 2022 Earnings Call. 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: Good afternoon, and welcome to the Delek Logistics Partners Fourth Quarter Earnings Conference Call. Participants on today's call will include Avigal Soreq, President; Todd O'Malley, EVP and Chief Operating Officer; Reuven Spiegel, EVP and Chief Financial Officer; as well as other management team members. 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 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 speak as of their prospective date. I'll now turn the call over to Avigal for opening remarks.

Truck, Transport, Cargo
Truck, Transport, Cargo

Photo by Gabriel Santos on Unsplash

Avigal Soreq: Thanks, Rosy. Delek Logistics Partners ended the year with a record growth. Our logistics system end extremely well this quarter, contributing to a record EBITDA of $92.5 million, 33% higher than a record. A big driver for the increase was the successful integration of the 3 Bear asset. We are very pleased with the integration of 3 Bear and consider the integration phase complete. Their logistics had a safe and reliable operation all year long. This was a direct result of dedicated employees and contractors. We achieved 3 million man hours worked without a lost time injury, a great milestone we aim to continue. Our Board approved an increase in the quarterly distribution to $1.02 per unit for the fourth quarter.

This marks 40 consecutive quarterly distribution increases. We successfully achieved our goal to deliver a 5% distribution increase in 2022 and expect to continue this trend into 2023. From a macro perspective, we are optimistic on the outlook for the midstream business. Delek Logistics is well positioned to continue its strong track record to grow and to be long-term significant midstream player. I will now hand it over to Todd.

Todd O'Malley: Thanks, Avigal. Starting this quarter, we changed our reporting segments to better align our financial reporting with how we manage the business. Change primarily centered around reporting the results from our Delek Permian gathering system and 3 Bear assets in 1 new segment called Gathering and Processing. Total EBITDA per DKL was $92.5 million for the fourth quarter of '22 compared with $70 million for the same period of 2021. The fourth quarter of 2022, distributable cash flow was $51 million and the DCF coverage ratio was 1.16x. For the Gathering and Processing segment, EBITDA this quarter was $48 million compared with $34 million in the fourth quarter of '21. The increase was primarily driven from strong contributions by the Delek Permian Gathering System as well as the 3 Bear assets.

Wholesale Marketing and Terminalling segment contributed $23 million of EBITDA this fourth quarter compared with $19 million in the same period last year. The main driver for the increase year-over-year was due to our West Texas Wholesale business. The Storage and Transportation segment had EBITDA of $16 million this fourth quarter, in line with the fourth quarter of '21. And lastly, the investments in Pipeline Joint Venture segment contributed $9 million towards the fourth quarter of '22 compared with $7 million in the fourth quarter of '21, primarily due to increased volumes at the Red River and Caddo joint ventures. Moving to capital expenditures. For the full year of '22, we spent $131 million, excluding the 3 Bear acquisition, of which $120 million was earmarked for growth.

For 2023, we have a capital budget of $81 million, of which $66 million is earmarked for growth. With that, operator, we can open the call for questions.

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To continue reading the Q&A session, please click here.

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