Release Date: May 07, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Delek US Holdings Inc (DK, Financial) made significant progress in improving operational performance, including successful planned outages at Tyler and Big Spring refineries.
- The company advanced its midstream deconsolidation goal, increasing third-party cash flow at DKL to around 80% and improving financial liquidity by approximately $250 million.
- DKL's water acquisitions and new gas processing plant are performing well, supporting cash flow and distribution growth.
- The enterprise optimization plan (EOP) is on track to achieve at least $120 million in annual cash flow improvement.
- Delek US Holdings Inc (DK) maintained a strong balance sheet, allowing for countercyclical share buybacks and dividend payments.
Negative Points
- Delek US Holdings Inc (DK) reported a net loss of $173 million for the first quarter, with an adjusted net loss of $144 million.
- The refining margin environment remained challenging, approximately $4 below mid-cycle levels.
- Supply and marketing operations contributed a loss of $23.7 million in the first quarter, driven by seasonal low demand trends.
- Operating expenses were relatively high, with Big Spring's operating expenses at $8.36 per barrel due to maintenance activities.
- The company faces uncertainties regarding small refinery exemptions (SREs) and their potential impact on financial performance.
Q & A Highlights
Q: Can you discuss the full-year EBITDA guidance for DKL and how changes in Permian activity might impact the outlook?
A: Avigal Soreq, President and CEO, explained that the Permian activity is divided into three buckets: Midland, Delaware, and another area. Midland is mature with strong activity, and Delaware has the lowest break-even, providing a solid position. The company is confident in its guidance and expects a strong year for DKL.
Q: What is your strategy for capital returns, and how sustainable is the current dividend yield?
A: Avigal Soreq emphasized the focus on free cash flow through the Enterprise Optimization Plan (EOP). The company aims for a balanced approach between buybacks and improving the balance sheet, with a commitment to returning value to shareholders.
Q: How are marketing and supply trends expected to perform in the second quarter?
A: Avigal Soreq noted strong demand in asphalt and positive supply and demand reactions. Mohit Bhardwaj added that despite seasonal weaknesses, structural improvements are expected to drive better performance in the second quarter.
Q: Are there opportunities for upside beyond the $120 million EOP target?
A: Avigal Soreq confirmed potential upside beyond the $120 million target, with the entire organization focused on achieving more than initially guided.
Q: Can you elaborate on the intercompany transactions and their impact on the deconsolidation efforts?
A: Avigal Soreq and Mark Hobbs explained that the transactions aim to place assets in the right entities, increasing DKL's third-party EBITDA contribution to approximately 80% and unlocking $250 million in credit facility availability, advancing deconsolidation efforts.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
