Delek Logistics(US:DKL)2024-11-07 17:16Financial Performance - The Partnership's net income increased by $3.3 million for the nine months ended September 30, 2024, compared to the prior year[108]. - EBITDA decreased by $11.1 million in 2024 compared to 2023, primarily due to a change in classification of certain commercial agreements with Delek[108]. - Net revenues for Q3 2024 were $214.07 million, a decrease of 22.4% compared to $275.82 million in Q3 2023[142]. - EBITDA for Q3 2024 was $69.18 million, down 29.6% from $98.24 million in Q3 2023[142]. - Net income attributable to partners for Q3 2024 was $33.67 million, a slight decrease of 0.4% from $34.83 million in Q3 2023[142]. - Distributable cash flow for Q3 2024 was $53.28 million, compared to $61.40 million in Q3 2023, reflecting a decrease of 13.5%[139]. - Operating income for Q3 2024 was $31.81 million, a decline of 49% compared to $62.55 million in Q3 2023[142]. - Interest expense for Q3 2024 was $37.02 million, slightly up from $36.90 million in Q3 2023[142]. - Net revenues decreased by $61.8 million, or 22.4%, in Q3 2024 compared to Q3 2023, primarily due to decreased revenue in West Texas marketing operations and lower RINs revenue[144]. - Year-to-date (YTD) net revenues decreased by $35.5 million, or 4.6%, in the nine months ended September 30, 2024, driven by lower average sales prices and RINs revenue, despite increased volumes sold[144]. Segment Performance - The gathering and processing segment experienced a $6.2 million decrease in segment EBITDA, while the wholesale marketing and terminalling segment saw a $2.3 million increase[108]. - The Gathering and Processing segment reported revenues of $81.53 million in Q3 2024, down 14% from $94.83 million in Q3 2023[142]. - The Wholesale Marketing and Terminalling segment generated $106.94 million in Q3 2024, a decrease of 27.2% from $147.11 million in Q3 2023[142]. - The Storage and Transportation segment's revenues fell to $25.61 million in Q3 2024, down 24.4% from $33.89 million in Q3 2023[142]. - The gathering and processing segment's net revenues decreased by $13.3 million, or 14.0%, in Q3 2024, primarily due to changes in revenue recognition[162]. - Net revenues for the wholesale marketing and terminalling segment decreased by $40.2 million, or 27.3%, in Q3 2024 compared to Q3 2023, driven by decreased revenue in West Texas marketing operations[170]. - Net revenues for the storage and transportation segment decreased by $8.3 million, or 24.4%, in Q3 2024 compared to Q3 2023[181]. Acquisitions and Investments - The H2O Midstream Acquisition was completed on September 11, 2024, for a total consideration of $229.5 million, consisting of $159.5 million in cash and $70.0 million in preferred equity[109]. - The Wink to Webster Pipeline Investment was acquired for $83.9 million in cash and the forgiveness of a $60.0 million receivable from Delek Holdings[110]. - The Partnership's investments in pipeline joint ventures increased segment EBITDA by $9.1 million following the acquisition of the W2W Investment[108]. - The Partnership made a final investment decision to build a new natural gas processing plant with a capacity of approximately 110 MMcf/d, projected to generate an EBITDA of around $40 million[111]. Financial Position and Liquidity - Total liquidity as of September 30, 2024, amounted to $702.4 million, consisting of $695.1 million in unused credit commitments and $7.3 million in cash[190]. - The DKL Revolving Credit Facility was increased by $100 million, resulting in total commitments of $1,150 million, with a maturity date of October 13, 2027[113]. - Total indebtedness as of September 30, 2024, was $1,904.9 million, reflecting an increase of $193.2 million from December 31, 2023, due to the issuance of 2029 Notes[201]. - The company expects future funding sources to be sustainable and profitable, although market conditions and crude oil prices may affect cash flows and liquidity[190]. Strategic Initiatives - The Partnership aims to position itself as a premier midstream provider in the Permian Basin through strategic initiatives and environmental stewardship[108]. - The 2024 strategic focus areas include generating stable cash flow, pursuing acquisitions, and expanding ESG consciousness to lower the carbon footprint[124]. - The Partnership's long-term strategic objectives focus on maintaining stable cash flows and growing quarterly distributions through acquisitions and project development[123]. Market Conditions and Economic Factors - Concerns about inflation and economic downturns have softened forward demand expectations for hydrocarbons, but liquid transportation fuels are expected to remain in high demand[108]. - Tariffs on certain FERC regulated pipelines increased by approximately 1.3% on July 1, 2024, while fees adjusted using the consumer price index rose by 3.3% and those using the producer price index increased by approximately 0.8%[112]. Cash Flow and Expenses - Net cash provided by operating activities increased by $45.8 million to $156.4 million for the nine months ended September 30, 2024, compared to $110.6 million in 2023[195][196]. - Net cash used in investing activities increased by $258.9 million, primarily due to acquisitions totaling $243.4 million and increased capital expenditures[197]. - Total capital spending for the nine months ended September 30, 2024, was $69.8 million, with $37.2 million spent in the current period[205]. - Operating expenses decreased by $5.1 million, or 15.4%, in Q3 2024 compared to Q3 2023, while YTD operating expenses increased by $2.8 million, or 3.2%[147]. - General and administrative expenses increased by $10.2 million, or 183.9%, in Q3 2024, primarily due to transaction costs related to acquisitions[148].