Delek Logistics(US:DKL)2020-08-06 00:49Financial Data and Key Metrics Changes - Distributable cash flow was approximately $57 million in Q2 2020, compared to $31 million in Q2 2019, representing an increase of 83% year-over-year [8] - Limited Partners' interest in net income increased approximately 107% year-over-year, with net income attributable to all partners of $44.4 million in Q2 2020 compared to $24.9 million in the prior year [11] - EBITDA was $65 million, a 45% increase over the prior year period [9] - DCF coverage ratio improved to 1.58 times in Q2 2020 from 1.08 times in the prior year [8] Business Line Data and Key Metrics Changes - In the pipelines and transportation segment, contribution margin increased to $43 million in Q2 2020 from $24 million in Q2 2019, driven by recent asset drop-downs [12] - The wholesale marketing and terminalling segment saw a decrease in contribution margin to $19 million in Q2 2020 from $20 million in the prior year, primarily due to lower Texas wholesale margins [13] Market Data and Key Metrics Changes - West Texas wholesale gross margin was $0.64 per barrel in Q2 2020, down from $6.25 per barrel in the prior year [14] - Throughput in West Texas decreased to 9,000 barrels a day compared to 11,000 barrels a day in the prior year period [14] Company Strategy and Development Direction - The company announced its 29th consecutive increase in quarterly distribution and aims for 5% distribution growth this year [16] - Recent agreements, such as with Jefferson Energy, are expected to improve supply outlook and expand reach for shippers [17] - The Red River Pipeline expansion is anticipated to enhance performance in the second half of the year [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the financial performance despite macro volatility due to COVID-19, with expectations for progressive improvement in the second half of the year [16] - The outlook for the second half of the year remains positive, with a focus on asset optimization and business initiatives [17] Other Important Information - Total debt was approximately $995 million, with a leverage ratio below 4.1 times, well within the allowable limit under the credit facility [10] - Capital expenditures were approximately $1 million in Q2 2020, with a forecast of $18 million for the full year [15] Q&A Session Summary Question: Inquiry about results and volume trends in July - Management noted that refineries operated above minimum volume commitments and gathering systems have returned to 96%-97% of pre-pandemic levels [20][21] Question: Trends in West Texas margins and volumes - Management indicated a recovery in demand and volumes in the second half of Q2 and July, following a decline during the peak of the pandemic [22] Question: Future EBITDA targets and IDR removal - Management is optimistic about reaching $400 million EBITDA in the next two to three years and is actively considering the removal of IDRs [23][24] Question: Details on the agreement with Jefferson Energy - The agreement is strategic, providing flexibility and a positive outlook for the Paline system, although specific CapEx details were not disclosed [26][27] Question: Sustainability of reduced operating expenses - Management confirmed that cost control measures have led to lower operating expenses, with expectations of some increase due to integrity work but still improved compared to the previous year [27] Question: Contribution from trucking assets - The contribution from trucking assets was approximately $2 million for the quarter, with no plans to provide volume metrics going forward [28]