Delek US(US:DK)2022-11-07 21:17Financial Data and Key Metrics Changes - Net income for Q3 2022 was $7.4 million or $0.10 per share, with adjusted net income of $1.1 million or $0.02 per share, down from $3.6 million or $0.05 per share in the prior year [11] - Adjusted EBITDA for Q3 2022 was $136 million, impacted by $225 million of inventory headwinds due to FIFO accounting [11][12] - The company ended Q3 2022 with $1.15 billion in cash and $1.58 billion in net debt, with $146 million of net debt at DK after excluding Delek Logistics [13] Business Line Data and Key Metrics Changes - The total refining system crude oil throughput reached a record of approximately 300,000 barrels per day in Q3 2022, with expectations of 280,000 to 290,000 barrels per day in Q4 2022 [18] - Capital expenditures in Q3 2022 were $81 million, with a full-year expectation of approximately $300 million [19] Market Data and Key Metrics Changes - Same-store fuel sales increased by 7% year-on-year, indicating strong demand in the retail footprint [25] - The company noted robust product markets in the New York Harbor and Chicago areas, with demand remaining strong across the U.S. [65] Company Strategy and Development Direction - The company plans to repurchase $75 million to $100 million of outstanding shares in Q4 2022 and has increased the regular quarterly dividend to $0.21 per share [8] - A focus on capital allocation includes retiring $100 million to $150 million of debt in Q4 2022 [9] - The company is exploring strategic options to unlock the sum of the parts value of its assets, having engaged a banker for advice [9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the downstream energy industry's outlook and the company's operational performance [7] - The CEO highlighted the importance of safety and reliability in operations and the potential for delivering additional value to shareholders [10] - Management noted that the refining assets are profitable and expected to demonstrate strong cash flow, which should improve investor confidence over time [32] Other Important Information - The company is conducting an analysis of its cost structure to ensure competitiveness with peers [15] - A sustainability report is expected to be issued later in the month, reflecting ongoing ESG efforts [19] Q&A Session Summary Question: Capital allocation and share repurchase guidance - Management confirmed a commitment to prioritizing shareholder returns, with plans for aggressive buybacks into 2023 [22][23] Question: Operational performance and sales comparisons - Same-store fuel sales are up 7% year-on-year, indicating strong demand [25][26] Question: Addressing the sum-of-the-parts discount - Management acknowledged the perception of over-leverage and the lack of liquidity at DKL as contributing factors to the stock discount [30][31] Question: Capital expenditures for 2023 - Anticipated capital expenditures for 2023 may be marginally higher than $300 million, with a turnaround scheduled for the Tyler plant [36] Question: Cost structure initiatives - The company is evaluating both G&A and OpEx as part of a zero-based budgeting process [38] Question: Biodiesel facilities profitability - The three biodiesel facilities are profitable and expected to remain so, although not materially impacting overall results [60] Question: Hedging strategy - The company plans to minimize hedging exposure going forward [58] Question: Demand outlook and mid-cycle EBITDA - Management remains optimistic about demand and expects mid-cycle EBITDA to be higher than previously thought [68]