Delek Logistics Partners LP Reports Mixed Q4 Results Amidst Growth and Challenges
Net Income: Q4 net income attributable to all partners decreased to $22.1 million from $42.7 million in Q4 2022.
Adjusted EBITDA: Q4 adjusted EBITDA rose to $100.9 million, up from $92.5 million in the same quarter last year.
Distributable Cash Flow (DCF): Increased to $64.6 million in Q4, with a DCF coverage ratio of 1.40x.
Revenue Growth: Growth driven by Midland gathering operations and terminalling and marketing rate increases.
Leverage Ratio: Improved to 4.34x from 4.89x at year-end 2022.
Capital Expenditures: Estimated at approximately $70 million for 2024.
Distribution: Increased quarterly distribution to $1.055 per unit, marking the 44th consecutive quarter of growth.
On February 27, 2024, Delek Logistics Partners LP (NYSE:DKL) released its 8-K filing, announcing financial results for the fourth quarter of 2023. The company, which owns and operates logistics and marketing assets for crude oil and intermediate and refined products, reported a decrease in net income attributable to all partners to $22.1 million, or $0.51 per diluted common limited partner unit, compared to $42.7 million, or $0.98 per diluted common limited partner unit, in the fourth quarter of 2022.
The decrease in net income was primarily due to higher interest expenses and a goodwill impairment charge in the fourth quarter of 2023. However, the company's adjusted EBITDA for the quarter increased to $100.9 million, up from $92.5 million in the same quarter of the previous year, reflecting higher contributions from the Midland Gathering and Delaware Gathering systems, terminalling and marketing rate increases, as well as continued strong throughput on joint venture pipelines.
Financial Performance and Capital Program
For the full year of 2023, Delek Logistics reported a net income attributable to all partners of $126.2 million and an adjusted EBITDA of $385.1 million. The company's distributable cash flow for the year was $248.2 million, with a DCF coverage ratio of 1.37x. The leverage ratio improved to 4.34x from 4.89x at the end of 2022, indicating a stronger balance sheet.
Delek Logistics' President, Avigal Soreq, commented on the results, stating,
I am pleased to say that Delek Logistics has exceeded quarterly earnings goals, and surpassed last year's strong performance."
He highlighted the substantial growth from new connections in the company's Midland gathering operations and the dedication of the workforce to safe and reliable operations.
The company's 2024 capital expenditures are estimated to be approximately $70 million, with a focus on new connections in the Midland and Delaware gathering systems to support customer growth and expand upon existing assets.
Segment Performance and Outlook
The Gathering and Processing Segment saw an increase in adjusted EBITDA to $53.3 million in Q4 2023, up from $48.1 million in Q4 2022, primarily due to higher throughput from Permian Basin assets. The Wholesale Marketing and Terminalling Segment also reported an increase in adjusted EBITDA to $28.4 million, while the Storage and Transportation Segment's adjusted EBITDA rose to $17.5 million.
Despite facing a goodwill impairment charge within the gathering and processing segment, Delek Logistics maintains a positive long-term outlook for its Delaware Gathering system. The company's distribution and liquidity remain strong, with a quarterly cash distribution increase to $1.055 per common limited partner unit for Q4 2023.
Delek Logistics' financial position at the end of 2023 included total debt of approximately $1.70 billion and cash of $3.8 million, with additional borrowing capacity under the $1.05 billion third-party revolving credit facility.
As Delek Logistics navigates through 2024, the company aims to maintain competitive distributions to investors and capitalize on growth opportunities, leveraging its strategic position in the Permian Basin and other key markets.
For more detailed financial information and analysis, investors and stakeholders are encouraged to review the full 8-K filing and attend the conference call scheduled for February 27, 2024, at 11:30 a.m. Central Time.
Explore the complete 8-K earnings release (here) from Delek Logistics Partners LP for further details.
This article first appeared on GuruFocus.
