Core Viewpoint - Delek US Holdings, Inc. is a significant player in the downstream energy sector, focusing on refining and logistics, transforming crude oil into essential fuels and managing the infrastructure for their transportation and storage [1] Group 1: Performance and Strategic Initiatives - The company is making strong progress on its Enterprise Optimization Plan, targeting at least $120 million in annual cash flow improvements by the second half of 2025, with operational gains already realized [4][10] - Delek is actively deconsolidating Delek Logistics, aiming to increase third-party EBITDA to 80%, which has improved liquidity by $250 million and could unlock hidden value in DKL [5][10] - Despite a challenging refining margin environment, Delek repurchased $32 million in shares and paid $16 million in dividends in Q1 2025, indicating confidence in its long-term value [6][10] - The company’s refineries are positioned for stronger performance heading into the summer driving season, with improved throughput guidance suggesting better earnings [7] - Potential retroactive small refinery exemption approvals from the EPA could provide a financial benefit exceeding $300 million, significantly improving liquidity and earnings [8] Group 2: Challenges and Risks - First-quarter 2025 refining margins were down nearly 30% year over year, contributing to a net loss of $173 million, with ongoing macroeconomic headwinds posing risks to profitability [11] - Execution risks in the midstream deconsolidation process could hinder value realization, as full deconsolidation is not yet complete [12] - Competitive pressures in the Southwest refining market, with gasoline and diesel cracks below five-year averages, may impact refining margins [13] - Reliance on Permian crude output presents risks; any decrease in production could increase feedstock costs and disadvantage Delek compared to larger refiners [14] - The company's share price has declined 20.5% over the past year, underperforming its sub-industry, indicating investor concerns about margin pressures and operational efficiency [15]

Group 1 - The core investment thesis for Delek US Holdings (NYSE: DK) revolves around its significant stake in Delek Logistics Partners (DKL), which is a midstream play [1] - The investment strategy has been focused on deep value and the sum of parts analysis, indicating that the market may undervalue the company's assets [1] Group 2 - The author has been contributing to investment analysis since 2011, emphasizing a value-oriented approach rather than growth [1]

Group 1 - The oil market continues its strong performance, with WTI crude oil futures rising 2.8% to $63.67 per barrel and Brent crude oil futures increasing 2.6% to $66.63 per barrel, marking the largest four-day gain since October of the previous year [1] - The positive market sentiment is driven by a breakthrough in US-China trade negotiations, where both parties agreed to suspend new tariffs for 90 days, alleviating concerns over weak energy demand [1] - The US Labor Department reported a narrowing year-on-year increase in the Consumer Price Index (CPI) to 2.3%, the lowest in four years, which has led institutions like JPMorgan and Barclays to lower recession forecasts for the US economy [1] Group 2 - Geopolitical factors are also providing support, with the Trump administration adopting a hardline stance towards Iran, raising concerns about the stability of Middle Eastern supply [2] - Demand signals are turning positive, as a JPMorgan report indicates that despite uncertainties in crude oil demand, the refined oil market remains strong, with gasoline and diesel prices stable [2] - The refining sector is experiencing a bullish response in the secondary market, with companies like PBF Energy rising 10.1% and Delek US increasing by 6.1% [2]

Delek US Holdings, Inc. (DK) reported a first-quarter 2025 adjusted net loss of $2.32 per share, wider than the Zacks Consensus Estimate of a loss of $2.27 and the year-ago quarter’s loss of 41 cents. This decline was mainly due to weaker year-over-year performance in the Refining segment. (See the Zacks Earnings Calendar to stay ahead of market-making news.)Net revenues decreased 18.2% year over year to $2.6 billion.  The figure also missed the Zacks Consensus Estimate by $208 million.The diversified downs ...

Acquisition and Investments - Delek Logistics acquired Gravity Water Intermediate Holdings LLC for a total consideration of $300.8 million, consisting of $209.3 million in cash and 2,175,209 common units[176]. - The company expects the Gravity Acquisition to be immediately accretive, delivering incremental contribution margin and cash flows[169]. - Delek Logistics' recent acquisitions are expected to diversify the customer base and enhance integrated crude and water services in the Permian Basin[169]. - Delek completed the sale of 100% equity interests in four subsidiaries operating 249 retail fuel and convenience stores for a total consideration of $300.8 million, closing the transaction on September 30, 2024[181]. - The company is exploring investment opportunities in renewables and carbon capture technologies to align with sustainability goals[193]. Financial Performance - Consolidated net loss for Q1 2025 was $158.5 million, compared to a net loss of $25.2 million in Q1 2024, with net loss attributable to Delek at $172.7 million or $(2.78) per basic share[232]. - Total revenues for Q1 2025 were $2,641.9 million, down from $3,128.0 million in Q1 2024[229]. - Cost of sales for Q1 2025 was $2,705.6 million, compared to $3,033.1 million in Q1 2024[229]. - Refining segment EBITDA for Q1 2025 was $(16.2) million, a significant decrease from $105.1 million in Q1 2024[228]. - Net revenues decreased by $486.1 million, or 15.5%, to $2,641.9 million for the three months ended March 31, 2025, compared to $3,128.0 million in 2024[233]. Refining Segment Insights - The Refining segment experienced a decline in crack spreads compared to Q1 2024, but demand for refined products remained strong, supporting EBITDA growth[170]. - The refining segment has a combined nameplate capacity of 302,000 barrels per day (bpd) as of March 31, 2025, with individual refineries having capacities of 75,000 bpd, 80,000 bpd, 73,000 bpd, and 74,000 bpd[184]. - The refining margin for Q1 2025 was $137.4 million, down from $268.4 million in Q1 2024[228]. - Refining segment revenues decreased to $2,608.3 million for the three months ended March 31, 2025, from $3,108.3 million in 2024[244]. - The average price of WTI Cushing crude oil decreased from $77.01 per barrel to $71.47, a decline of 7.2%[265]. Operational Efficiency and Cost Management - The enterprise optimization plan (EOP) aims to improve financial health by reducing general and administrative expenses and enhancing margins through minimal capital projects[171]. - The company aims to enhance operational excellence by implementing digital systems to improve decision-making and automate processes[193]. - Operating expenses decreased by $2.5 million, or 1.2%, to $212.4 million for the three months ended March 31, 2025, driven by lower employee costs[234]. - Operating expenses rose by $9.0 million, or 28.2%, to $40.9 million for the three months ended March 31, 2025, driven by costs associated with recent acquisitions[277]. - The average operating expenses per barrel of throughput for the El Dorado refinery increased to $5.16 from $4.72 in 2024[254]. Market Conditions and Economic Outlook - The near-term economic outlook is uncertain due to geopolitical instability and commodity market volatility, impacting trade negotiations and potential tariffs[171]. - Environmental regulations continue to affect refining margins due to volatility in RIN prices, which are sensitive to regulatory and political influences[217]. - The company anticipates further consolidation in the industry due to increased cost pressures and regulatory changes aimed at reducing carbon emissions[188]. - Natural gas prices, a significant component of refining segment earnings, are influenced by supply-side and demand-side factors, with the company managing risk through fixed-price supply contracts[220]. Liquidity and Capital Structure - Total liquidity as of March 31, 2025, amounted to $1,810.7 million, including $1,186.9 million in unused credit commitments and $623.8 million in cash[279]. - As of March 31, 2025, total cash and cash equivalents were $623.8 million, with total long-term indebtedness of approximately $3,035.3 million, reflecting an increase of $267.3 million compared to December 31, 2024[289]. - The company had an inventory intermediation obligation of $433.6 million and product financing liabilities totaling $237.2 million, all due within the next 12 months[290]. - The company’s total unused credit commitments under revolving credit facilities were approximately $1,186.9 million as of March 31, 2025[289]. Capital Expenditures - Capital expenditures for the three months ended March 31, 2025, totaled $132.6 million, with a forecast of $405 million for the full year[293]. - The refining segment's capital spending was $56.2 million, while the logistics segment accounted for $71.9 million during the same period[293].

Financial Data and Key Metrics Changes - Delek reported a net loss of $173 million or negative $2.78 per share for Q1 2025, with an adjusted net loss of $144 million or negative $2.32 per share and adjusted EBITDA of $26.5 million [21][22] - The refining segment saw a $42.2 million increase in EBITDA due to a higher margin environment and increased throughput compared to Q4 2024 [21] - Logistics segment delivered $117 million in adjusted EBITDA, a $9 million increase over the previous record [22] Business Line Data and Key Metrics Changes - Total throughput in Tyler was approximately 69,000 barrels per day in Q1, with a production margin of $7.82 per barrel [14] - El Dorado's throughput was approximately 76,000 barrels per day with a production margin of $3.83 per barrel [15] - Big Spring's throughput was approximately 59,000 barrels per day, with a production margin of $4.86 per barrel [16] - Cross Springs achieved a record throughput of approximately 85,000 barrels per day, with a production margin of $6.40 per barrel [18] Market Data and Key Metrics Changes - The refining margin environment was reported to be around $4 below mid-cycle levels [5] - Supply and marketing contributed a loss of $23.7 million in Q1, driven by seasonal low demand trends [19] - Crack spreads improved to $3 to $4 in recent weeks, indicating positive market conditions [42] Company Strategy and Development Direction - The company is focused on its Enterprise Optimization Plan (EOP) aiming for cash flow improvement of $120 million annually starting in the second half of 2025 [10] - Delek is advancing its midstream deconsolidation goal, with third-party cash flow at DKL increasing to around 80% [8] - The company is committed to a disciplined capital allocation strategy, including share buybacks and dividends [10][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the operational improvements and the potential for a strong year ahead, particularly in the context of the Permian Basin activity [32] - The company remains optimistic about the support from the EPA for small refinery exemptions, which could provide significant financial relief [51][55] - Management highlighted the importance of free cash flow and the positive trajectory of operational metrics [34][68] Other Important Information - The company paid $16 million in dividends and repurchased $32 million of its shares during the quarter [10] - Capital expenditures for Q1 were $133 million, with a significant portion allocated to logistics and refining segments [23] Q&A Session Summary Question: Discussion on DKL and full year EBITDA guidance - Management reiterated confidence in DKL's performance and the positive outlook for Permian activity [30][32] Question: Capital returns strategy and sustainability of dividend yield - Management emphasized a balanced approach between share buybacks and dividends, focusing on free cash flow generation [33][38] Question: Improvement in supply and marketing for Q2 - Management noted strong demand and improving market conditions, expecting further improvements in wholesale marketing and asphalt categories [40][42] Question: Dynamics in the Southwest market - Management reported strong crack spreads in the Southwest, particularly in Arizona markets, countering concerns about sluggishness [46] Question: Small refinery exemptions (SREs) and potential retroactive claims - Management confirmed that they are pursuing both retroactive and forward-looking SREs, with significant potential value [51][55] Question: Opportunities for upside beyond EOP targets - Management acknowledged potential for exceeding the $120 million target due to ongoing operational improvements [60] Question: Intercompany transactions and their impact - Management clarified that recent intercompany transactions are aimed at optimizing asset allocation and enhancing deconsolidation efforts [72][76] Question: OpEx guidance and trends - Management explained that increased OpEx guidance is primarily due to the addition of a new natural gas plant, with expectations for further improvements [99][100]

Financial Data and Key Metrics Changes - Delek reported a net loss of $173 million or negative $2.78 per share for Q1 2025, with an adjusted net loss of $144 million or negative $2.32 per share and adjusted EBITDA of $26.5 million [19][20] - The increase in adjusted EBITDA was driven by a $42.2 million increase in refining due to a higher margin environment and sequentially higher throughputs [19] - Logistics segment delivered $117 million in adjusted EBITDA, a $9 million increase over the previous record [20] Business Line Data and Key Metrics Changes - Total throughput in Tyler was approximately 69,000 barrels per day with a production margin of $7.82 per barrel [13] - El Dorado's total throughput was approximately 76,000 barrels per day with a production margin of $3.83 per barrel [14] - Big Spring's throughput was approximately 59,000 barrels per day with a production margin of $4.86 per barrel [15] - Cross Springs achieved a record throughput of approximately 85,000 barrels per day with a production margin of $6.4 per barrel [16] Market Data and Key Metrics Changes - The refining margin environment was around $4 below mid-cycle, impacting overall performance [4] - Supply and marketing contributed a loss of $23.7 million, driven by seasonal low demand trends in wholesale marketing and asphalt [17] Company Strategy and Development Direction - The company is focused on a sum of the parts strategy and midstream deconsolidation, aiming to increase third-party cash flow at DKL to around 80% [7][8] - The Enterprise Optimization Plan (EOP) aims to improve cash flow by $120 million annually starting in the second half of 2025 [9] - The company is committed to a disciplined approach to capital allocation, including share buybacks and dividends [10] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the operational improvements and the potential for a cleaner runway into the summer driving season [6] - The company remains optimistic about the prospects for 2025 and beyond, particularly in light of the support for domestic energy production [11] Other Important Information - The company paid $16 million in dividends and repurchased $32 million of its shares during the quarter [9] - The company expects operating expenses for Q2 2025 to be between $215 million and $225 million, reflecting higher throughput [22] Q&A Session Summary Question: Discussion on DKL and full year EBITDA guidance - Management reiterated guidance for DKL, highlighting strong positions in both Midland and Delaware areas, with expectations for high volumes [28] Question: Capital returns strategy and sustainability of dividend yield - Management emphasized a focus on free cash flow and a balanced approach between buybacks and dividends, indicating confidence in share price value [31][35] Question: Supply and marketing improvements in Q2 - Management noted strong demand and positive trends in RAC, with expectations for further improvements in wholesale marketing and asphalt categories [40][41] Question: Dynamics in the Southwest market - Management reported strong cracks in the Southwest, particularly in Arizona markets, countering concerns about sluggish starts [44] Question: Small refinery exemptions (SREs) - Management confirmed that SREs would be pursued retroactively from 2019, with optimism about receiving support from the EPA [49][52] Question: Opportunities for upside beyond EOP targets - Management acknowledged potential for upside beyond the $120 million target, with ongoing focus on operational improvements [57] Question: Intercompany transactions and their impact - Management clarified that recent intercompany transactions are aimed at optimizing asset allocation and enhancing deconsolidation efforts [71][72] Question: Operational expenditure guidance - Management explained that increased OpEx guidance is primarily due to the addition of a new natural gas plant, with expectations for further improvements in the second half of the year [92][93]

Here is how Delek US Holdings performed in the just reported quarter in terms of the metrics most widely monitored and projected by Wall Street analysts: View all Key Company Metrics for Delek US Holdings here>>> Delek US Holdings (DK) reported $2.64 billion in revenue for the quarter ended March 2025, representing a year-over-year decline of 18.2%. EPS of -$2.32 for the same period compares to -$0.41 a year ago. The reported revenue represents a surprise of +8.54% over the Zacks Consensus Estimate of $2.43 ...

Financial Performance & Liquidity - Delek Logistics reported another record quarter[10] - Delek US increased consolidated financial liquidity by approximately $250 million[11, 26] - Delek US spent $32 million in buybacks and $16 million in dividends, representing approximately a 20% yield[11] - Delek US reiterates 2025 Adjusted EBITDA guidance of $480 - $520 million[11] - Delek US's net loss was $(172.7) million, or $(2.78) per share, but adjusted net loss was $(144.4) million, or $(2.32) per share[49] - Delek US's Adjusted EBITDA was $26.5 million[49] Strategic Objectives & Initiatives - Delek is on track to achieve at least $120 million cash flow improvement through the enterprise optimization plan (EOP)[11, 13, 16] - Delek Logistics' third-party contribution is expected to increase to approximately 80% on a pro-forma basis due to new intercompany transactions[11, 13, 26, 34] - El Dorado's EOP initiatives are focused on generating free cash flow through cycle, with a $50 million margin improvement plan[19] Operational Throughput - Total refining throughput for 1Q25 was 2892 MBPD[47] - Tyler throughput was 348 MBPD in 4Q24 and 2665 MBPD in 1Q25[47]

"Looking ahead, we will continue to execute on our priorities of running safe and reliable operations, making further progress on midstream deconsolidation, improving cash flow generation by at least $120 million, and delivering shareholder value while maintaining our financial strength and flexibility," Soreq concluded. Delek US Results | | | | Three Months Ended March 31, | | | --- | --- | --- | --- | --- | | ($ in millions, except per share data) | 2025 | | | 2024 | | Net loss attributable to Delek US | ...