Delek US(DK) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted EBITDA for Q3 2024 was approximately $71 million, with a$32 million decrease in refining due to a lower-margin environment compared to Q2 2024 [6][27] - The company reported a net loss of $77 million or negative$1.20 per share for Q3 2024, with an adjusted net loss of $93 million or negative$1.45 per share [26] Business Line Data and Key Metrics Changes - In Tyler, total throughput was approximately 75,000 barrels per day with a production margin of $7.48 per barrel [17] - El Dorado's total throughput was approximately 78,000 barrels per day, with a production margin of$0.66 per barrel, impacted by outages [18] - Big Spring achieved a total throughput of approximately 73,000 barrels per day with a production margin of $6.82 per barrel [22] - Krotz Springs had a total throughput of approximately 82,000 barrels per day with a production margin of$4.80 per barrel [23] Market Data and Key Metrics Changes - The refining margin environment is currently $5 to$6 below mid-cycle, leading to expectations of more refinery capacity shutdowns [6] - The company anticipates that low refining product inventory and rising oil demand will help balance the market over the next six to twelve months [6] Company Strategy and Development Direction - The company is focused on safe and reliable operations, unlocking sum-of-the-part value, and maintaining a strong balance sheet [8] - A new cost reduction and margin improvement plan aims for at least $100 million in annual cost savings and margin increases by the second half of 2025 [13] - The Market Optionality plan will optimize product production and sales to maximize value [15] Management's Comments on Operating Environment and Future Outlook - Management noted that the El Dorado refinery is well-positioned for operational excellence and profitability improvements [20] - The company is committed to a balanced approach to capital allocation, maintaining dividends while pursuing share buybacks [40] Other Important Information - The company closed the sale of its retail asset to FEMSA on September 30, which supports a strong balance sheet [11] - The deconsolidation of DKL is progressing, with ownership interest reduced from 79% to 66% [12] Q&A Session Summary Question: El Dorado's margin performance - Management acknowledged softer margins and highlighted ongoing operational improvements and flexibility of the El Dorado refinery [34][35] Question: Share repurchase program pace - Management confirmed a balanced approach to capital allocation, emphasizing ongoing buybacks while maintaining dividends [39][40] Question: DKL's future EBITDA - Management refrained from providing specific guidance for DKL's 2025 EBITDA but indicated positive growth potential [43][44] Question: CapEx reduction implications - Management clarified that the CapEx guidance reflects a sustainable approach in a low-margin environment [50] Question: Supply and marketing performance - Management noted improved commercial strategies and seasonal benefits contributing to better performance in supply and marketing [52][53] Question: Path to achieving mid-cycle EBITDA - Management discussed the importance of the Enterprise Optimization Plan (EOP) in achieving mid-cycle EBITDA targets [57][58] Question: Value release from DKL - Management emphasized ongoing deconsolidation efforts and the potential for value maximization in the midstream business [67][72]