Delek Logistics Partners LP (DKL) Q2 2024 Earnings Call Highlights: Record EBITDA and Strategic ...

GuruFocus News
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In This Article:

  • Quarterly Adjusted EBITDA: $102.4 million, up from $92.8 million in Q2 2023.

  • Distributable Cash Flow: $68 million.

  • DCF Coverage Ratio: 1.32 times.

  • Gathering and Processing Segment EBITDA: $54.7 million, up from $52.6 million in Q2 2023.

  • Wholesale Marketing and Terminalling EBITDA: $30.2 million, up from $28 million in Q2 2023.

  • Storage and Transportation EBITDA: $16.8 million, up from $15 million in Q2 2023.

  • Pipeline Joint Venture Segment Contribution: $7.9 million, up from $7.3 million in Q2 2023.

  • Leverage Ratio: Improved to 3.81 times from 4.34 at the end of 2023.

  • Capital Expenditures: $10.2 million for Q2 2024, with $90 million to $100 million expected in the second half of 2024.

  • Quarterly Distribution: Increased to $1.09 per unit.

Release Date: August 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Delek Logistics Partners LP (NYSE:DKL) reported a record quarterly adjusted EBITDA of $102.4 million, showcasing strong financial performance.

  • The company announced an extension of the contract with DK and Wink to Webster pipeline, securing long-term agreements of up to seven years.

  • DKL's acquisition of H2O Midstream is immediately accretive on an EBITDA and free cash flow basis, enhancing its midstream service capabilities.

  • The investment in a new gas processing plant is expected to generate cash on cash returns of more than 20%, with completion anticipated in the first half of 2025.

  • The Board of Directors approved an increase in the quarterly distribution to $1.09 per unit, reflecting a strong track record of delivering value to unitholders.

Negative Points

  • The company faces risks and uncertainties that may cause actual results to differ from forecasts, as highlighted in their forward-looking statements.

  • Despite improvements, DKL's leverage remains a concern, although it has decreased to 3.81 times from a high of 4.84 at the end of 2022.

  • The capital expenditure for the second quarter was $10.2 million, with expectations to spend $90 million to $100 million in the second half of 2024, indicating significant ongoing investment requirements.

  • The EBITDA range for the recent transaction is broad ($55 million to $85 million), suggesting potential variability in expected financial outcomes.

  • There are complexities involved in the exchange of units between companies as part of the Wink to Webster recontracting, which may impact financial reporting and tax efficiency.

Q & A Highlights

Q: Can you discuss the impact of the H2O Midstream acquisition on future customer opportunities and potential synergies? A: Avigal Soreq, President, explained that the acquisition allows for a more comprehensive view of customer deals, operational efficiencies, and infrastructure relevance for both services. This makes the deal highly accretive and synergistic for Delek Logistics Partners.

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