Delek Logistics(US:DKL)2024-08-06 20:44Financial Data and Key Metrics Changes - Delek Logistics Partners reported a quarterly adjusted EBITDA of $102.4 million, an increase from $92.8 million in the same period of 2023, reflecting a strong performance [3][7] - The distributable cash flow (DCF) was $68 million, with a DCF coverage ratio of 1.32 times [7] - Leverage improved to 3.81 times at the end of Q2 2024, down from 4.84 at the end of 2022 and 4.34 at the end of 2023 [7] Business Line Data and Key Metrics Changes - Gathering and Processing segment EBITDA was $54.7 million, up from $52.6 million in Q2 2023, driven by higher throughput from Permian Basin assets [7] - Wholesale Marketing and Terminalling EBITDA increased to $30.2 million from $28 million in the prior year, primarily due to higher terminal utilization [8] - Storage and Transportation EBITDA rose to $16.8 million from $15 million in Q2 2023, mainly due to higher storage and transportation rates [8] - The investment in pipeline joint venture segment contributed $7.9 million, compared to $7.3 million in the same quarter of 2023 [8] Market Data and Key Metrics Changes - The company is positioned as a premier full-service crude water and natural gas provider in the Permian Basin, enhancing its market presence through strategic transactions [3][4] Company Strategy and Development Direction - The company announced an amendment to the contract with DK, extending terms to up to seven years, which alleviates previous uncertainties [4] - Investment in a new gas processing plant is expected to generate cash on cash returns exceeding 20%, with completion anticipated in the first half of 2025 [4] - The acquisition of H2O Midstream for $160 million in cash and $70 million in preferred equity is expected to be immediately accretive to EBITDA and free cash flow, further expanding the company's midstream capabilities [5] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth trajectory, emphasizing prudent liquidity and leverage management [7] - The company is optimistic about future customer opportunities and operational efficiencies resulting from the H2O Midstream acquisition [12] - The new gas processing plant is already highly subscribed, indicating strong demand and future growth potential [14] Other Important Information - The Board of Directors approved an increase in the quarterly distribution to $1.09 per unit, reflecting a commitment to delivering value to unitholders [5] Q&A Session Summary Question: Insights on H2O Midstream acquisition and future customer opportunities - Management highlighted that the acquisition allows for a more comprehensive view of customer deals, operational efficiencies, and relevant infrastructure for both services, making it a highly synergistic deal [12] Question: Timing and future gas processing opportunities related to the new Delaware gas plant - Management confirmed that the new gas plant is expected to be completed in the first half of 2025 and is already seeing strong demand from producers [14] Question: Clarification on the $55 million to $85 million EBITDA range for the recent transaction - Management explained that the range is based on three main components, with the majority of the EBITDA expected to come from the base business rather than synergies [16] Question: Funding expectations for cash components of transactions - Management clarified that while units are changing hands, the net amount is minimal, and the transactions are structured to be tax efficient [18]