Delek Logistics Partners, LP (NYSE:DKL) Q4 2023 Earnings Call Transcript
Delek Logistics Partners, LP (NYSE:DKL) Q4 2023 Earnings Call Transcript February 27, 2024
Delek Logistics Partners, LP misses on earnings expectations. Reported EPS is $0.51 EPS, expectations were $0.85. Delek Logistics Partners, LP isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning, ladies and gentlemen, and welcome to the Delek Logistics Partners' Fourth Quarter 2023 Conference Call. [Operator Instructions] This call is being recorded on Tuesday, February 27, 2024. I would now like to hand the conference over to Rosy Zuklic, VP of Investor Relations. Please go ahead.
Rosy Zuklic: Good day, and welcome to the Delek Logistics Partners fourth quarter earnings conference call. Participants on today's call will include Avigal Soreq, President; Joseph Israel, EVP Operations; Reuven Spiegel, EVP and Chief Financial Officer; and Odely Sakazi, SVP Delek Logistics. 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 partnership’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 partnership assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates. I'll now turn the call over to Avigal for opening remarks.
Avigal Soreq: Thank you, Rosy. Delek Logistics Partners finished 2023 strong. We delivered another record quarter and achieved a record year. DKL exceeds $100 million in adjusted EBITDA this quarter. We saw a substantial growth from our new connection in our mid and gathering operations further validating our strong position in the Permian Basin. I'm very proud of our employees, who are dedicated to making Delek Logistics succeed. It is their dedication to safe and reliable operation that makes our results possible. The team has gone without a lost time injury four years in a row and counting. We are also focused on growing third-party revenues, allocating capital in a disciplined manner and exploring natural gas opportunities in the Delaware Basin, where we see significant growth.
In January, the Board approved the 44th consecutive increase in the quarterly distribution to $1.055 per unit. Delek Logistics has shown a strong track record of delivering value to unitholders. We feel confident in our ability to maintain competitive distribution to our investors. I will now hand it over to Reuven.
Reuven Spiegel: Thank you, Avigal. The fourth quarter of 2023 adjusted EBITDA was $100.9 million compared with $92.5 million in the same period of 2022. The fourth quarter EBITDA was $86.1 million, which included a $14.8 million goodwill impairment related to some of our Delaware Gathering and processing assets. The impairment was primarily driven by a significant increase in interest rates. Our long-term outlook of the Delaware Gathering System remains unchanged. Distributable cash flow was $65 million and the DCF coverage ratio was 1.4%. For the Gathering and Processing segment, adjusted EBITDA for the quarter was $53.3 million compared with $48.1 million in the fourth quarter of 2022. The increase was primarily due to higher throughput from Delek Logistics Premium Basin assets.
Wholesale Marketing and Terminalling adjusted EBITDA in the fourth quarter of 2023 was $28.4 million compared with $23.3 million in prior year. The increase was primarily from higher terminal and utilization. Storage and Transportation adjusted EBITDA in the quarter was $17.5 million compared to $16.1 million in the fourth quarter of 2022. The increase was mainly driven by higher storage and transportation rates. And lastly, the investment in pipeline joint venture segment contributed $8.5 million this quarter compared with $9 million in the fourth quarter of 2022. Moving on to capital expenditures. The capital program for 2023 was $74 million. This includes $7 million of proceeds from producers to partially fund growth projects. Most of the spend throughout the year was for growth projects, namely advancing new connections in the Midland and Delaware gathering systems.
For 2024, Delek Logistics Partners expects the capital program to be about $70 million. This includes approximately $20 million of sustaining and regulatory capital and $50 million of growth capital. We will continue to advance new connection in our gathering system for the volume growth at the partnership. With that we can open the call for questions.
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