Delek Logistics Partners Completes Purchase of Rail Offloading Racks and Crude Oil Storage Tank
Delek Logistics Partners, LP (DKL) (“Delek Logistics”) announced that subsidiaries of Delek Logistics have acquired, from subsidiaries of Delek US Holdings, Inc. (DK) (“Delek US”), a crude oil storage tank constructed in 2014 adjacent to Delek US’ Tyler, Texas refinery and rail offloading racks constructed in 2012 adjacent to Delek US’ El Dorado, Arkansas refinery for a combined $61.9 million in cash. Delek Logistics financed the purchase price for these assets through available cash and borrowings on its revolving credit facility.
Uzi Yemin, Chairman and Chief Executive Officer of Delek Logistics’ general partner, remarked: “This purchase of these logistics assets from Delek US is expected to add approximately $6.7 million of EBITDA to our operations on an annual basis. This should provide additional growth in 2015 and move us toward our target of a $150.0 million EBITDA run rate as we exit 2015. We continue to evaluate opportunities for future growth including both organic projects and acquisitions.”
Assets acquired by Delek Logistics as part of this transaction include the following:
El Dorado Rail Offloading Facility – These assets consist of two crude oil unloading racks that allow Delek US’ El Dorado refinery to receive up to 25,000 barrels per day of light crude or up to 12,000 barrels per day of heavy crude or some combination of the two.
Tyler Crude Oil Storage Tank – This tank has approximately 350,000 barrels of shell capacity that supports Delek US’ Tyler refinery.
In connection with the closing of the transaction, Delek US, Delek Logistics and various of their subsidiaries entered into, among other long-term agreements, a throughput agreement for the rail offloading facility and a tankage agreement for the crude oil storage tank. The transaction and related agreements were approved by the Conflicts Committee of Delek Logistics’ general partner, which is comprised solely of independent directors.
Delek Logistics Partners, LP Reconciliation of Forecasted Annual
EBITDA to Amounts under US GAAP
(unaudited, in millions)
Reconciliation of Forecasted Annual EBITDA (a) to Forecasted Net Income:
Rail Offloading and
Crude Oil Storage
|Add: Depreciation and amortization expenses||1.1|
|Add: Interest and financing costs, net||1.3|
|Forecasted Annual EBITDA (a)||$6.7|
(a) Delek Logistics defines EBITDA as net income (loss) before net interest expense, income tax expense, depreciation and amortization expense.
EBITDA is a non-U.S. GAAP supplemental financial measure that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess, among other things:
- Delek Logistics’ operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or financing methods;
- the ability of Delek Logistics’ assets to generate sufficient cash flow to make distributions to our unitholders;
- Delek Logistics’ ability to incur and service debt and fund capital expenditures; and
- the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
Delek Logistics’ management believes that the presentation of EBITDA provides useful information to investors in assessing Delek Logistics’ financial condition, Delek Logistics’ results of operations and the cash flow Delek Logistics’ business is generating. EBITDA should not be considered as an alternative to net income, operating income, or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP. EBITDA has important limitations as an analytical tool because it excludes some, but not all items that affect net income. Additionally, because EBITDA may be defined differently by other companies in our industry, Delek Logistics’ definitions of EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.
About Delek Logistics Partners, LP
Delek Logistics Partners, LP, headquartered in Brentwood, Tennessee, is a growth-oriented master limited partnership formed by Delek US Holdings, Inc. (DK) to own, operate, acquire and construct crude oil and refined products logistics and marketing assets.
Safe Harbor Provisions Regarding Forward-Looking Statements
This press release contains “forward-looking” statements within the meaning of the federal securities laws. These statements contain words such as “possible,” “believe,” “should,” “could,” “would,” “predict,” “plan,” “estimate,” “intend,” “may,” “anticipate,” “will,” “if,” “expect” or similar expressions, as well as statements in the future tense, and can be impacted by numerous factors, including the fact that a substantial majority of Delek Logistics’ contribution margin is derived from commercial arrangements with Delek US, thereby subjecting Delek Logistics to Delek US’s business risks, in addition to risks relating to the securities markets generally, the impact of adverse market conditions affecting the business of Delek Logistics, adverse changes in laws including with respect to tax and regulatory matters and other risks as disclosed in the annual reports on Form 10-K, quarterly reports on Form 10-Q and other reports and filings with the United States Securities and Exchange Commission for both Delek US and Delek Logistics. There can be no assurance that actual results will not differ from those expected by management or described in forward-looking statements of Delek Logistics or Delek US. Neither Delek Logistics nor Delek US undertake any obligation to update or revise such forward-looking statements to reflect events or circumstances that occur, or of which Delek Logistics or Delek US become aware, after the date hereof.