Delek Logistics Reports Second Quarter 2023 Results

• Net income attributable to all partners of $31.9 million
• EBITDA of $92.8 million
• Distributable cash flow of $60.5 million
• Adjusted distributable cash flow coverage ratio of 1.34x
• Delivered 42 consecutive quarters of distribution growth with recent increase to $1.035/unit

BRENTWOOD, Tenn., Aug. 7, 2023 /PRNewswire/ -- Delek Logistics Partners, LP (NYSE: DKL) ("Delek Logistics") today announced its financial results for the second quarter 2023, with reported net income attributable to all partners of $31.9 million, or $0.73 per diluted common limited partner unit. This compares to net income attributable to all partners of $32.2 million, or $0.74 per diluted common limited partner unit, in the second quarter 2022. Net cash provided in operating activities was $34.6 million in the second quarter 2023 compared to net cash provided by operating activities of $85.1 million in the second quarter 2022. Distributable cash flow was $60.5 million in the second quarter 2023, compared to $55.6 million in the second quarter 2022.

For the second quarter 2023, earnings before interest, taxes, depreciation and amortization ("EBITDA") was $92.8 million compared to $64.5 million in the second quarter 2022.

"Delek Logistics operated well and delivered another great quarter," said Avigal Soreq, President of Delek Logistics' general partner. "Delek Logistics has provided consistent results and stable cash flows. We have more than doubled the volume in the Midland Gathering compared with the same time last year. As Permian Basin production continues to ramp up, we see a pathway to increase Delek Logistics' scale and efficiency, providing additional support to earnings and cash flows."

"In July, the Board approved the 42nd consecutive increase in the quarterly distribution to $1.035 per unit. The Board continues to demonstrate its commitment to unitholders and confidence in the underlying asset base of Delek Logistics," Mr. Soreq concluded.

Distribution and Liquidity

On July 26, 2023, Delek Logistics declared a quarterly cash distribution of $1.035 per common limited partner unit for the second quarter 2023. This distribution will be paid on August 14, 2023 to unitholders of record on August 7, 2023. This represents a 1.0% increase from the first quarter 2023 distribution of $1.025 per common limited partner unit, and a 5.1% increase over Delek Logistics' second quarter 2022 distribution of $0.985 per common limited partner unit. For the second quarter 2023, the total cash distribution declared to all partners was approximately $45.1 million, resulting in a distributable cash flow coverage ratio of 1.34x.

As of June 30, 2023, Delek Logistics had total debt of approximately $1.74 billion and cash of $7.7 million. Additional borrowing capacity, subject to certain covenants, under the $900.0 million revolving credit facility was $89.0 million. The total leverage ratio as of June 30, 2023 of approximately 4.66x was within the requirements of the maximum allowable leverage ratio under the credit facility.

Consolidated Operating Results

Second quarter 2023 EBITDA of $92.8 million benefited from increased contribution from the Delek Permian Gathering system, Delaware Gathering (formerly 3 Bear) acquisition, and continued strong throughput on joint venture pipelines as compared to EBITDA of $64.5 million in the second quarter 2022. Net income attributable to all partners for the second quarter 2023 of $31.9 million reflected a decrease of $0.3 million compared to the second quarter 2022.

Gathering and Processing Segment

EBITDA in the second quarter 2023 was $52.7 million compared with $38.5 million in the second quarter 2022. The increase was primarily driven from strong contributions from the Midland Gathering System, as well as the Delaware Gathering Assets.

Wholesale Marketing and Terminalling Segment

EBITDA in the second quarter 2023 was $28.0 million, approximately in line with second quarter 2022 EBITDA of $18.8 million. The increase was primarily due to strong throughputs and increased West Texas margins.

Storage and Transportation Segment

EBITDA in the second quarter 2023 was $15.0 million compared with $14.5 million in the second quarter 2022. The increase was primarily due to higher utilization and fees.

Investments in Pipeline Joint Ventures Segment

During the second quarter 2023, income from equity method investments was $7.3 million compared to $7.1 million in the second quarter 2022.

Corporate

EBITDA in the second quarter 2023 was a loss of $10.1 million compared to a loss of $14.4 million in the second quarter 2022.

Second Quarter 2023 Results | Conference Call Information

Delek Logistics will hold a conference call to discuss its second quarter 2023 results on Monday, August 7, 2023 at 11:30 a.m. Central Time. Investors will have the opportunity to listen to the conference call live by going to www.DelekLogistics.com. Participants are encouraged to register at least 15 minutes early to download and install any necessary software. An archived version of the replay will also be available at www.DelekLogistics.com for 90 days.

About Delek Logistics Partners, LP

Delek Logistics is a midstream energy master limited partnership headquartered in Brentwood, Tennessee. Through its owned assets and joint ventures located primarily in and around the Permian Basin, the Delaware Basin and other select areas in the Gulf Coast region. Delek Logistics provides gathering, pipeline and other transportation services primarily for crude oil and natural gas customers, storage, wholesale marketing and terminalling services primarily for intermediate and refined product customers, and water disposal and recycling services. Delek US Holdings, Inc. ("Delek US") owns the general partner interest as well as a majority limited partner interest in Delek Logistics, and is also a significant customer.

Safe Harbor Provisions Regarding Forward-Looking Statements

This press release contains forward-looking statements that are based upon current expectations and involve a number of risks and uncertainties. Statements concerning current estimates, expectations and projections about future results, performance, prospects, opportunities, plans, actions and events and other statements, concerns, or matters that are not historical facts are "forward-looking statements," as that term is defined under the federal securities laws. These statements contain words such as "possible," "believe," "should," "could," "would," "predict," "plan," "estimate," "intend," "may," "anticipate," "will," "if," "expect" or similar expressions, as well as statements in the future tense, and can be impacted by numerous factors, including the fact that a substantial majority of Delek Logistics' contribution margin is derived from Delek US, thereby subjecting us to Delek US' business risks; risks relating to the securities markets generally; risks and costs relating to the age and operational hazards of our assets including, without limitation, costs, penalties, regulatory or legal actions and other effects related to releases, spills and other hazards inherent in transporting and storing crude oil and intermediate and finished petroleum products; the impact of adverse market conditions affecting the utilization of Delek Logistics' assets and business performance, including margins generated by its wholesale fuel business; risks and uncertainties related to the integration of the 3 Bear business following the recent acquisition; uncertainties regarding future decisions by OPEC regarding production and pricing disputes between OPEC members and Russia; an inability of Delek US to grow as expected as it relates to our potential future growth opportunities, including dropdowns, and other potential benefits; scheduled turnaround activity; the results of our investments in joint ventures; adverse changes in laws including with respect to tax and regulatory matters; and other risks as disclosed in our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other reports and filings with the United States Securities and Exchange Commission. Forward-looking statements include, but are not limited to, statements regarding future growth at Delek Logistics; distributions and the amounts and timing thereof; potential dropdown inventory; projected benefits of the 3 Bear acquisition; expected earnings or returns from joint ventures or other acquisitions; expansion projects; ability to create long-term value for our unit holders; financial flexibility and borrowing capacity; and distribution growth of 5% or at all. Forward-looking statements should not be read as a guarantee of future performance or results and will not be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking information is based on information available at the time and/or management's good faith belief with respect to future events, and is subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements. Delek Logistics undertakes no obligation to update or revise any such forward-looking statements to reflect events or circumstances that occur, or which Delek Logistics becomes aware of, after the date hereof, except as required by applicable law or regulation.

Non-GAAP Disclosures:

Our management uses certain "non-GAAP" operational measures to evaluate our operating segment performance and non-GAAP financial measures to evaluate past performance and prospects for the future to supplement our GAAP financial information presented in accordance with U.S. GAAP. These financial and operational non-GAAP measures are important factors in assessing our operating results and profitability and include:

• Earnings before interest, taxes, depreciation and amortization ("EBITDA") - calculated as net income before net interest expense, income tax expense, depreciation and amortization expense, including amortization of customer contract intangible assets, which is included as a component of net revenues in our accompanying condensed consolidated statements of income.
• Distributable cash flow - calculated as net cash flow from operating activities plus or minus changes in assets and liabilities, less maintenance capital expenditures net of reimbursements and other adjustments not expected to settle in cash. Delek Logistics believes this is an appropriate reflection of a liquidity measure by which users of its financial statements can assess its ability to generate cash.
• Distributable cash flow, as adjusted for transaction costs, or Distributable cash flow, as adjusted - distributable cash flow adjusted to exclude significant, infrequently occurring transaction costs.

Our EBITDA and distributable cash flow measures are non GAAP supplemental financial measures that management and external users of our condensed consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:

• Delek Logistics' operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or, in the case of EBITDA, financing methods;
• the ability of our assets to generate sufficient cash flow to make distributions to our unitholders on a current and on-going basis;
• Delek Logistics' ability to incur and service debt and fund capital expenditures; and
• the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

We believe that the presentation of EBITDA and distributable cash flow measures provide information useful to investors in assessing our financial condition and results of operations and assists in evaluating our ongoing operating performance for current and comparative periods. EBITDA and distributable cash flow should not be considered alternatives to net income, operating income, cash flow from operating activities or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP. EBITDA and distributable cash flow have important limitations as analytical tools because they exclude some, but not all, items that affect net income and net cash provided by operating activities. Additionally, because EBITDA and distributable cash flow may be defined differently by other partnerships in our industry, our definitions of EBITDA and distributable cash flow may not be comparable to similarly titled measures of other partnerships, thereby diminishing their utility. For a reconciliation of EBITDA and distributable cash flow to their most directly comparable financial measures calculated and presented in accordance with U.S. GAAP, please refer to "Results of Operations" below. See the accompanying tables in this earnings release for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures.