Delek Logistics(US:DKL)2025-05-07 20:27Acquisitions and Investments - The Partnership acquired 100% of Gravity Water Intermediate Holdings LLC for water disposal and recycling operations in the Permian Basin and Bakken on January 2, 2025[111]. - Gravity Acquisition completed on January 2, 2025, for a total consideration of $300.8 million, consisting of $209.3 million in cash and 2,175,209 common units, enhancing the company's position in the Permian Basin[130]. - The Delek Permian Gathering Dropdown on May 1, 2025, involved the transfer of the purchasing and blending business, with total consideration including the cancellation of $58.8 million in existing receivables owed by Delek Holdings[130]. - The El Dorado Purchase Agreement, executed on May 1, 2025, involves Delek Holdings purchasing assets for cash consideration of $25.0 million, set to close on January 1, 2026[132]. - The partnership is focused on pursuing attractive expansion opportunities in the Permian Basin, particularly in crude, natural gas, and water services[141]. Financial Performance - The Partnership reported a $6.4 million increase in net income for the three months ended March 31, 2025, compared to the prior year period[124]. - EBITDA decreased by $16.0 million in 2025 compared to 2024, primarily due to a change in classification of certain commercial agreements[124]. - EBITDA for the three months ended March 31, 2025, was reported at $85.5 million, compared to $101.5 million for the same period in 2024[153]. - Net revenues for Q1 2025 decreased by $2.1 million, or 0.9%, compared to Q1 2024, totaling $249.93 million[160]. - EBITDA for Q1 2025 was $85.49 million, a decrease of $16.01 million, or 15.8%, from $101.50 million in Q1 2024[158]. - Distributable cash flow increased to $71.71 million in Q1 2025, up from $67.99 million in Q1 2024, representing a growth of 5.0%[155]. Segment Performance - The gathering and processing segment saw a $10.2 million increase in segment EBITDA, largely due to the H2O Midstream and Gravity acquisitions[124]. - The wholesale marketing and terminalling segment experienced a $12.0 million decrease in segment EBITDA[124]. - The storage and transportation segment reported a $13.7 million decrease in segment EBITDA[124]. - The gathering and processing segment saw net revenues rise by $22.7 million, or 23.7%, in Q1 2025, largely due to contributions from H2O Midstream and Gravity operations[170]. - Net revenues for the wholesale marketing and terminalling segment decreased by $12.6 million, or 10.5%, to $106.7 million in Q1 2025 compared to $119.3 million in Q1 2024[176]. - Net revenues for the storage and transportation segment decreased by $12.3 million, or 33.3%, to $24.6 million in Q1 2025 compared to $36.9 million in Q1 2024[185]. Expenses and Cash Flow - Operating expenses increased by $9.1 million, or 28.4%, in Q1 2025 compared to Q1 2024, driven by higher general and administrative expenses[161]. - General and administrative expenses surged by $4.0 million, or 82.3%, in Q1 2025, primarily due to transaction costs related to the Gravity Acquisition[161]. - Net cash provided by operating activities decreased by $12.3 million to $31.6 million in Q1 2025 compared to $43.9 million in Q1 2024[198]. - Net cash used in investing activities increased by $224.9 million to $234.8 million in Q1 2025, primarily due to the Gravity Acquisition for $181.2 million[199]. Debt and Liquidity - Total liquidity as of March 31, 2025, amounted to $447.0 million, consisting of $444.9 million in unused credit commitments and $2.1 million in cash[192]. - Total indebtedness as of March 31, 2025, was $2,155.1 million, reflecting an increase of $269.7 million compared to December 31, 2024[203]. - The outstanding floating rate borrowings totaled approximately $705.1 million as of March 31, 2025, exposing the company to interest rate risk[211]. - A hypothetical one percent change in interest rates would change interest expense by approximately $7.1 million annually[211]. Strategic Outlook - The economic outlook remains uncertain due to geopolitical instability and commodity market volatility, but the Partnership is positioned to manage through potential downturns[125]. - The company aims to achieve strong cash flow growth in 2025, driven by the expansion of the Libby gas processing plant and the integration of H2O Midstream and Gravity acquisitions[144]. - The partnership is prioritizing reducing its leverage ratio to enhance financial flexibility for pursuing growth opportunities[143]. - The partnership's long-term strategic objectives include increasing economic separation from Delek Holdings and enhancing third-party cash flow contributions[140]. Market and Regulatory Factors - Market trends indicate that fluctuations in crude oil and natural gas prices significantly impact operations, with long-term fee-based contracts mitigating short-term financial risks[147]. - Changes in commodity prices can significantly affect revenues and cash flows, impacting operating margins[210]. - Inflationary factors may adversely affect operating results, impacting gross margin and operating expenses[212]. - Regulatory maintenance projects are financed through cash generated from operations, ensuring compliance with environmental regulations[206]. Safety and Compliance - The company has successfully avoided lost time injuries for four years, demonstrating strong safety protocols and adherence to regulations[142].