Delek Logistics(US:DKL)2026-02-27 18:30Financial Data and Key Metrics Changes - Delek Logistics achieved a record Adjusted EBITDA of $536 million for 2025, reflecting strong execution across its businesses and the addition of high-quality acquisitions [3][5] - Adjusted EBITDA for Q4 2025 was approximately $142 million, up from $114 million in Q4 2024, and $6 million higher than the previous record set in Q3 2025 [12] - Distributable cash flow (DCF) as adjusted totaled $73 million, with a DCF coverage ratio of approximately 1.22 times [12] Business Line Data and Key Metrics Changes - The Gathering and Processing segment reported Adjusted EBITDA of $71 million for Q4 2025, compared to $66 million in Q4 2024, primarily due to the acquisitions of H2O and Gravity [12][13] - Storage and transportation Adjusted EBITDA increased to $35 million in Q4 2025 from $18 million in Q4 2024, driven by the sale of certain assets to DK [13] - The investments in pipeline joint ventures contributed $26 million in Q4 2025, up from $18 million in Q4 2024, reflecting strong performance from the Wink to Webster joint venture [13] Market Data and Key Metrics Changes - Approximately 80% of the run rate EBITDA in 2026 is expected to come from third parties, indicating increased economic separation from the sponsor, DK [7][23] - The company is focusing on the Delaware Basin, where the need for sour gas solutions is urgent, and anticipates a step change in utilization once the sour gas gathering infrastructure is complete [9][21] Company Strategy and Development Direction - Delek Logistics aims to position itself as a premier full-service provider in the Permian Basin, with a focus on natural gas, crude, and water businesses [3][4] - The company announced a 2026 EBITDA guidance range of $520 million to $560 million, reflecting growth opportunities while managing leverage and coverage [5][14] - The integration of H2O and Gravity has enhanced the company's competitive position and built a strong platform for growth [4][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver sustainable growth and long-term value for unit holders, supported by a strong financial position with approximately $940 million in available liquidity [5][12] - The company is optimistic about the growth potential in the Delaware gas business, which is expected to be a key growth engine for years to come [21] Other Important Information - The board approved a distribution increase to $1.125 per unit, marking the 52nd consecutive quarterly distribution increase and 13 years of distribution growth [5] - Total capital expenditures for Q4 2025 were approximately $32 million, with $26 million allocated to growth capital related to sour gas capabilities at the Libby complex [14] Q&A Session Summary Question: Growth expectations for the GMT segment - Management highlighted a clear strategy in crude, gas, and water in the Permian Basin, with a focus on achieving a return on investment that supports coverage and leverage ratios [17][18] Question: EBITDA impact from transactions with DK - The transactions helped further the economic separation of the two entities, with DKL now having 82% of its EBITDA from third-party businesses [22][23] Question: Next steps on Libby processing expansion - Management indicated ongoing investments for future expansion and is closely monitoring customer activities in the area, which look promising [28][29] Question: Thoughts on sour gas midstream M&A - Management expressed confidence in their valuation compared to peers and emphasized that any future deals must be accretive to free cash flow, leverage, and coverage ratios [34]