Core Insights - Delek is focusing on deconsolidating its midstream segment, Delek Logistics Partners, to unlock shareholder value while maintaining cash flow benefits [2] - The company is implementing a balanced capital allocation strategy that includes dividends, share buybacks, and growth investments, with a planned reduction in capital expenditures by $80-$100 million for 2025 [3] - Delek has transformed into a diversified downstream energy company with a focus on the Permian region, benefiting from lower pricing in this area [4] Factors Favoring DK Stock - The logistics segment achieved record EBITDA of $106.1 million in Q3 2024, driven by strong contributions from Delaware Gathering systems and strategic pipeline developments [5] - Delek returned $16.4 million in dividends and executed $20 million in share buybacks in Q3 2024, with a regular quarterly dividend of 25.5 cents per share announced for Q4 2024 [6] Cautionary Factors - The refining segment experienced a significant decline in adjusted EBITDA to $10.2 million in Q3 2024 from $296.1 million in Q3 2023, due to a 49.1% year-over-year drop in benchmark crack spreads [8] - The company faces earnings volatility due to fluctuations in crude oil prices and refining margins, with the logistics segment providing some stability [9] - As of September 30, 2024, Delek had consolidated long-term debt of $2.79 billion, resulting in a net debt position of $1.75 billion, which could pose risks if refining margins remain weak [10] - Limited growth in the core refining segment is evident, with throughput at key refineries falling below expectations [12]

Core Viewpoint - Delek US Holdings has experienced significant fluctuations in refining margins over the past five years, particularly during the COVID-19 pandemic and the subsequent recovery phase [1]. Group 1: Company Performance - The refining margins for Delek crashed during the COVID-19 pandemic, indicating a challenging operating environment for the company [1]. - Following the pandemic, refining margins surged, suggesting a recovery and potential growth opportunities for Delek [1].

Core Insights - Delek US Holdings, Inc. reported a third-quarter 2024 adjusted net loss of $1.45 per share, which was narrower than the Zacks Consensus Estimate of a loss of $1.71, but a decline from a profit of $2.02 per share in the same quarter last year due to weak contributions from the Refining segment [1][4] - Net revenues decreased by 35.9% year over year to $3 billion, missing the Zacks Consensus Estimate by $48 million [1] - Adjusted EBITDA for the quarter was $70.6 million, down from $345.1 million in the year-ago period [2] Financial Performance - Total operating expenses decreased by approximately 29.6% year over year to $3.1 billion, with capital expenditures of $128.5 million during the same period [7] - The company had cash and cash equivalents of $1 billion and long-term debt of $2.8 billion as of September 30, 2024, resulting in a debt to total capital ratio of about 76.1% [7] Segment Performance - Refining segment's adjusted EBITDA was $10.2 million, a significant decline from $296.1 million in the prior-year quarter, attributed to lower refining crack spreads which fell by an average of 49.1% [4] - Logistics segment reported an adjusted EBITDA of $106.1 million, an increase from $96.5 million in the year-ago quarter, driven by contributions from Delaware Gathering systems and the Wink to Webster pipeline dropdown [6] Dividends and Guidance - The board approved a regular quarterly dividend of 25.5 cents per share, payable on November 18, 2024, to shareholders of record as of November 12 [2] - For 2024, the company expects capital expenditures of $330 million, with specific allocations for Refining, Logistics, Discontinued Operations, and Corporate & Other [15] Key Transactions - Delek Logistics completed the acquisition of H2O Midstream for $229.5 million, which includes water disposal and recycling operations in the Midland Basin of Texas [8][9] - The company finalized the sale of its retail operations for approximately $390.2 million in net cash proceeds before taxes, recognizing a pretax gain of $98.4 million from the transaction [10][11]

Financial Performance - Consolidated net loss for Q3 2024 was $67.5 million compared to net income of $136.1 million for Q3 2023, representing a significant decline [170]. - Net loss attributable to Delek for Q3 2024 was $76.8 million, or $(1.20) per basic share, compared to net income of $128.7 million, or $1.98 per basic share in Q3 2023 [170]. - Net revenues for Q3 2024 were $3,042.4 million, a decrease of $1,586.4 million, or 34.3%, from $4,628.8 million in Q3 2023 [172]. - Total revenues for the refining segment in Q3 2024 were $3,027.8 million, down from $4,624.5 million in Q3 2023 [165]. - Refining margin for Q3 2024 was $165.5 million, a decrease from $456.7 million in Q3 2023 [165]. - Consolidated net loss for the nine months ended September 30, 2024, was $118.8 million compared to net income of $206.8 million for the same period in 2023 [171]. - Net revenues decreased by $3,046.6 million, or 24.3%, to $9,478.5 million for the nine months ended September 30, 2024, compared to $12,525.1 million in the same period of 2023 [173]. - Operating income for Q3 2024 was $(121.9) million, a decline from $212.1 million in Q3 2023 [167]. - EBITDA decreased by $282.9 million, or 95.7%, in Q3 2024 compared to Q3 2023, primarily due to decreased refining margin and sales volume [213]. - YTD 2024 EBITDA decreased by $477.8 million compared to YTD 2023, mainly due to decreased refining margin and crack spreads [215]. Revenue and Sales - The average price of Gulf Coast Gasoline (CBOB) was $2.97 in Q1 2023 and decreased to $2.03 in Q3 2024 [150]. - The average Gulf Coast 5-3-2 ULSD crack spread was $32.55 in Q3 2023, dropping to $15.27 in Q2 2024 [153]. - Refining segment revenues decreased by $1,596.7 million, or 34.5%, in Q3 2024 compared to Q3 2023, primarily due to a decrease in average gasoline prices by 18.2% and ULSD by 24.6% [206]. - For the nine months ended September 30, 2024, revenues decreased by $3,028.2 million, or 24.3%, driven by a 9.4% decrease in average gasoline prices and a decrease in wholesale activity [206]. - Total sales volume of refined products averaged 309,175 bpd in the three months ended September 2024, up from 307,626 bpd in the same period of 2023 [198]. Operational Highlights - The company completed the sale of its Retail Stores for proceeds of $390.2 million, which is a significant step in its value creation journey [121]. - The acquisition of H2O Midstream is expected to be immediately accretive, delivering incremental contribution margin and cash flows, although its impact on the third quarter is not significant due to the closing date [121]. - The logistics segment continues to perform strongly, driven by increased volumes from the Delaware Basin and rate increases [121]. - The company has implemented additional cost reduction measures, including reducing contract services and non-critical travel, as part of its enterprise optimization plan [121]. - The company is focused on operational excellence, financial strength, and strategic initiatives to enhance scale and diversify revenue streams [123]. - The company has realigned its reportable segments to reflect changes in financial reporting, particularly following the sale of its retail operations [120]. Capital and Investments - The company has returned $68.1 million of capital to shareholders through dividends and share buybacks in 2024 to date [123]. - The company aims to reward shareholders with a disciplined capital allocation framework, including reducing debt and opportunistic share repurchases [138]. - The company raised $132.2 million from a public offering of 3,584,416 common units at $38.50 per unit, and $165.3 million from another offering of 4,423,075 common units at $39.00 per unit [142]. - The company plans to execute a major turnaround at the Krotz Springs refinery, focusing on outage spend and optimizing downtime [137]. - Total capital spending for the nine months ended September 30, 2024, was $315 million, compared to $181.2 million in the same period of 2023 [241]. Market Conditions and Outlook - The near-term economic outlook remains uncertain due to geopolitical instability and commodity market volatility, prompting the company to progress its business transformation efforts [121]. - The company expects refining capacity to shut down and crude oil demand to rise, which may balance the market over the next 6 to 12 months [143]. - RIN prices have shown significant volatility, impacting refining margins due to regulatory and political influences [156]. Environmental Initiatives - The company is investing in carbon capture technology, with a project at the Big Spring refinery expected to capture 145,000 metric tons of carbon dioxide per year, supported by a 70% cost-share agreement with the Department of Energy [123]. - Delek Logistics was selected for a carbon capture pilot project with a 70% cost-share from the DOE, potentially receiving up to $95 million in federal funding [142]. - The company has decided to idle its biodiesel facilities while exploring sustainable alternatives [132]. Debt and Cash Flow - Total cash and cash equivalents as of September 30, 2024, were $1,037.6 million, with total long-term indebtedness of approximately $2,789.4 million [232]. - Net cash provided by operating activities from continuing operations was $78.9 million for the nine months ended September 30, 2024, a significant decrease from $891.7 million in the same period of 2023 [236]. - Net cash used in investing activities from continuing operations was $387.4 million for the nine months ended September 30, 2024, compared to $320.6 million in the comparable period of 2023, primarily due to the acquisition of H2O Midstream [238]. - The increase in total long-term principal indebtedness as of September 30, 2024, was $186.0 million compared to December 31, 2023, primarily due to the issuance of the Delek Logistics 2029 Notes [232].

Financial Data and Key Metrics Changes - Adjusted EBITDA for Q3 2024 was approximately $71 million, with a $32 million decrease in refining due to a lower-margin environment compared to Q2 2024 [6][27] - The company reported a net loss of $77 million or negative $1.20 per share for Q3 2024, with an adjusted net loss of $93 million or negative $1.45 per share [26] Business Line Data and Key Metrics Changes - In Tyler, total throughput was approximately 75,000 barrels per day with a production margin of $7.48 per barrel [17] - El Dorado's total throughput was approximately 78,000 barrels per day, with a production margin of $0.66 per barrel, impacted by outages [18] - Big Spring achieved a total throughput of approximately 73,000 barrels per day with a production margin of $6.82 per barrel [22] - Krotz Springs had a total throughput of approximately 82,000 barrels per day with a production margin of $4.80 per barrel [23] Market Data and Key Metrics Changes - The refining margin environment is currently $5 to $6 below mid-cycle, leading to expectations of more refinery capacity shutdowns [6] - The company anticipates that low refining product inventory and rising oil demand will help balance the market over the next six to twelve months [6] Company Strategy and Development Direction - The company is focused on safe and reliable operations, unlocking sum-of-the-part value, and maintaining a strong balance sheet [8] - A new cost reduction and margin improvement plan aims for at least $100 million in annual cost savings and margin increases by the second half of 2025 [13] - The Market Optionality plan will optimize product production and sales to maximize value [15] Management's Comments on Operating Environment and Future Outlook - Management noted that the El Dorado refinery is well-positioned for operational excellence and profitability improvements [20] - The company is committed to a balanced approach to capital allocation, maintaining dividends while pursuing share buybacks [40] Other Important Information - The company closed the sale of its retail asset to FEMSA on September 30, which supports a strong balance sheet [11] - The deconsolidation of DKL is progressing, with ownership interest reduced from 79% to 66% [12] Q&A Session Summary Question: El Dorado's margin performance - Management acknowledged softer margins and highlighted ongoing operational improvements and flexibility of the El Dorado refinery [34][35] Question: Share repurchase program pace - Management confirmed a balanced approach to capital allocation, emphasizing ongoing buybacks while maintaining dividends [39][40] Question: DKL's future EBITDA - Management refrained from providing specific guidance for DKL's 2025 EBITDA but indicated positive growth potential [43][44] Question: CapEx reduction implications - Management clarified that the CapEx guidance reflects a sustainable approach in a low-margin environment [50] Question: Supply and marketing performance - Management noted improved commercial strategies and seasonal benefits contributing to better performance in supply and marketing [52][53] Question: Path to achieving mid-cycle EBITDA - Management discussed the importance of the Enterprise Optimization Plan (EOP) in achieving mid-cycle EBITDA targets [57][58] Question: Value release from DKL - Management emphasized ongoing deconsolidation efforts and the potential for value maximization in the midstream business [67][72]

Core Viewpoint - Delek US Holdings reported a quarterly loss of $1.45 per share, which was better than the Zacks Consensus Estimate of a loss of $1.71, indicating a 15.20% earnings surprise [1]. Financial Performance - The company posted revenues of $3.04 billion for the quarter ended September 2024, missing the Zacks Consensus Estimate by 1.56%, and down from $4.75 billion a year ago [2]. - Over the last four quarters, Delek US Holdings has surpassed consensus EPS estimates three times and topped consensus revenue estimates two times [2]. Stock Performance - Delek US Holdings shares have declined approximately 38.3% since the beginning of the year, contrasting with the S&P 500's gain of 21.2% [3]. - The stock currently holds a Zacks Rank 5 (Strong Sell), indicating expectations of underperformance in the near future [6]. Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is -$1.94 on revenues of $2.47 billion, and for the current fiscal year, it is -$4.66 on revenues of $12.12 billion [7]. - The trend for estimate revisions ahead of the earnings release has been unfavorable, which may impact future stock performance [6]. Industry Context - The Oil and Gas - Refining and Marketing industry is currently ranked in the bottom 2% of over 250 Zacks industries, suggesting a challenging environment for companies within this sector [8].

Financial Performance - Delek US reported a net loss of $76.8 million or $(1.20) per share for Q3 2024, compared to a net income of $128.7 million or $1.97 per share in Q3 2023[1][2]. - Adjusted EBITDA for Q3 2024 was $70.6 million, significantly down from $345.1 million in the same quarter last year[2]. - Adjusted net loss for Q3 2024 was $93.0 million, compared to an adjusted net income of $131.9 million in Q3 2023[2]. - The company experienced a net loss of $136.1 million for the three months ended September 30, 2024, compared to a net income of $206.8 million in the same period of 2023[16]. - Cash provided by operating activities from continuing operations was $(22.1) million for the three months ended September 30, 2024, down from $420.2 million in the same period of 2023[19]. - Nine months ended September 2024 showed a net loss of $146.6 million, compared to a net income of $184.7 million for the same period in 2023[31]. - The company reported total non-current liabilities of $3,617.9 million as of September 30, 2024, an increase from $3,527.0 million at December 31, 2023[15]. - The company recorded restructuring costs of $33.7 million ($26.1 million after-tax) for the third quarter of 2024, as part of its business transformation efforts[24]. Segment Performance - The refining segment's Adjusted EBITDA was $10.2 million, a decrease from $296.1 million in Q3 2023, primarily due to a 49.1% drop in benchmark crack spreads[3]. - The logistics segment achieved a record Adjusted EBITDA of $106.1 million, up from $96.5 million in the prior year quarter, driven by strong contributions from Delaware Gathering systems[4]. - Segment EBITDA attributable to Delek US for Q3 2024 was $1.8 million, a significant drop from $324.8 million in Q3 2023[33]. - Adjusted Segment EBITDA for Q3 2024 was $62.4 million, down from $328.7 million in Q3 2023, indicating a decline of approximately 81%[35]. - Refining segment net revenues for the three months ended September 30, 2024, were $2,852.6 million, while total revenues reached $3,027.8 million[44]. - The refining segment reported net revenues of $8,872.1 million for the three months ended September 30, 2024, compared to $4,392.4 million for the same period in 2023, indicating significant growth[46]. Cash and Debt Management - As of September 30, 2024, Delek US had a cash balance of $1,037.6 million and total consolidated long-term debt of $2,789.4 million, resulting in net debt of $1,751.8 million[7]. - Net (cash) debt, excluding DKL, as of September 30, 2024, was $(135.2) million, compared to $78.0 million as of December 31, 2023, indicating a shift to a net cash position[51]. - Total current assets decreased to $2,564.8 million as of September 30, 2024, from $2,666.0 million at December 31, 2023[15]. - Total liabilities increased to $6,084.9 million as of September 30, 2024, compared to $5,982.1 million at December 31, 2023[15]. Operational Metrics - Total refining production margin per barrel for the three months ended September 30, 2024, was $4.88, significantly lower than $16.01 for the same period in 2023, representing a decrease of approximately 69.6%[40]. - Average total throughput for the three months ended September 30, 2024, was 74,998 bpd, compared to 75,995 bpd in the same period of 2023, showing a slight decline of about 1.3%[40]. - The company reported total sales volume of refined products averaging 309,175 bpd for the three months ended September 30, 2024, compared to 307,626 bpd in the same period of 2023, indicating a slight increase of about 0.5%[40]. - The average crude oil utilization rate based on nameplate capacity for the three months ended September 30, 2024, was 97.8%, compared to 97.6% in the same period of 2023, showing a marginal improvement[40]. Strategic Initiatives - Delek US announced an Enterprise Optimization Plan (EOP) expected to increase overall profitability by at least $100 million[1]. - The company closed the sale of retail assets for proceeds of $390 million and completed the acquisition of H2O Midstream, enhancing third-party cash flows[1]. - Delek US completed the acquisition of H2O Midstream for $229.5 million, enhancing its water disposal and recycling operations in the Midland Basin, Texas[20]. - The company sold 100% of the equity interests in four retail subsidiaries for approximately $390.2 million, resulting in a gain on sale of $98.4 million[21]. Market Conditions - The average WTI Cushing crude oil price per barrel for the three months ended September 30, 2024, was $75.28, down from $82.51 in the same period of 2023[47]. - The U.S. Gulf Coast 5-3-2 crack spread averaged $15.64 per barrel for the three months ended September 30, 2024, compared to $32.39 in the same period of 2023, reflecting a significant decrease[47].

Company Overview - Delek US Holdings (DK) is expected to report a year-over-year decline in earnings due to lower revenues for the quarter ended September 2024, with a consensus estimate of a loss of $1.71 per share, reflecting a change of -184.7% [3] - Revenues are anticipated to be $3.09 billion, down 34.9% from the same quarter last year [3] Earnings Expectations - The earnings report is scheduled for November 6, 2024, and could lead to stock price movement depending on whether the results exceed or fall short of expectations [2] - The consensus EPS estimate has been revised 26.14% lower in the last 30 days, indicating a reassessment by analysts [4] Earnings Surprise Prediction - The Zacks Earnings ESP for Delek US Holdings is +3.32%, suggesting a more optimistic outlook from analysts compared to the consensus estimate [10] - Despite the positive Earnings ESP, the company holds a Zacks Rank of 5 (Strong Sell), complicating predictions of an earnings beat [10] Historical Performance - In the last reported quarter, Delek US Holdings had a surprise of +35.21%, posting a loss of $0.92 per share against an expected loss of $1.42 [11] - Over the past four quarters, the company has beaten consensus EPS estimates three times [12] Industry Context - Marathon Petroleum (MPC), another player in the Oil and Gas - Refining and Marketing industry, is expected to report earnings of $0.97 per share for the same quarter, indicating a year-over-year change of -88.1% [16] - Marathon Petroleum's revenues are projected to be $31.58 billion, down 24.1% from the previous year [16]

Delek US Holdings, Inc. (DK) , a U.S.-based oil and gas refining and marketing company, recently announced that its subsidiary, Delek Logistics Partners, LP (DKL) , completed the acquisition of H2O Midstream, a portfolio company of EIV Capital, LLC. This acquisition, valued at $230 million, includes $160 million in cash and $70 million in convertible preferred redeemable equity. The transaction was funded through a combination of cash and debt financing, a strategic move aimed at strengthening DK's core mid ...

It has been about a month since the last earnings report for Delek US Holdings (DK) . Shares have added about 1% in that time frame, underperforming the S&P 500. Will the recent positive trend continue leading up to its next earnings release, or is Delek US Holdings due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers. Delek Q2 Loss Narrower Than Expected ...