Delek Logistics(US:DKL)2022-05-03 18:27Financial Data and Key Metrics Changes - Distributable cash flow for Q1 2022 was approximately $52 million, a slight decrease from $53 million in Q1 2021 [6] - The DCF coverage ratio was 1.21 times for Q1 2022, down from 1.31 times in the prior year [6] - EBITDA increased by 12% to $66 million compared to the prior year [6] - The quarterly distribution was increased to $0.98 per limited partner unit, representing a 0.5% increase from Q4 2021 and a 6.5% increase from Q1 2021 [7] Business Line Data and Key Metrics Changes - In the Pipelines and Transportation segment, the contribution margin for Q1 2022 was $43.2 million, compared to $41.7 million in Q1 2021 [9] - The Wholesale Marketing and Terminalling segment saw a contribution margin of $19 million in Q1 2022, up from $15 million in Q1 2021, driven by stronger volumes [9] - Equity income from crude oil joint venture pipelines was approximately $7 million, an increase from $4 million in the prior year [10] Market Data and Key Metrics Changes - As of March 31, the company had $586 million of available capacity on its $850 million credit facility, with total debt at $906 million and a leverage ratio of approximately 3.3 times [8] Company Strategy and Development Direction - The company is focusing on its legacy Permian Gathering business, expecting to at least double volumes from Q4 2021 to Q4 2022 [12] - The planned acquisition of 3Bear is expected to enhance size and scale, increase third-party fixed fee revenue, and diversify into the Delaware portion of the Permian Basin [12] - The acquisition is anticipated to be immediately accretive to the DCF ratio [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to continue rewarding unitholders based on macro indicators and the lack of maintenance at the Delek US refining system [13] - The company plans to finance the 3Bear acquisition primarily through debt but expects to manage leverage effectively due to strong underlying business performance [14][15] Other Important Information - Capital expenditures for Q1 2022 were approximately $9.1 million, with a total gross capital expenditure outlook of $73 million for the year [10][11] - The company has achieved 37 consecutive quarters of distribution growth [13] Q&A Session Summary Question: Financing of 3Bear acquisition and leverage targets - Management acknowledged that leverage will increase due to the acquisition but expressed confidence in managing it down over time due to strong business performance [14][15] Question: Impact of financing on dropdown timing - Management confirmed that the timing of dropdowns remains intact, with expectations for the Wink to Webster dropdown to occur in 2023 [16]