May 8, 2017 - 4:15 PM EDT
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Delek Logistics Partners, LP Reports First Quarter 2017 Results
  • Increased drilling activity in the Permian Basin benefiting operations 
  • Declared quarterly distribution of $0.69 per limited partner unit; increased by 13.1 percent year-over-year
  • Reported first quarter 2017 net cash from operating activities of $23.5 million and distributable cash flow of $20.6 million

BRENTWOOD, Tenn., May 08, 2017 (GLOBE NEWSWIRE) -- Delek Logistics Partners, LP (NYSE:DKL) ("Delek Logistics") today announced its financial results for the first quarter 2017. For the three months ended March 31, 2017, Delek Logistics reported net income attributable to all partners of $14.6 million, or $0.43 per diluted common limited partner unit. This compares to net income attributable to all partners of $15.4 million, or $0.54 per diluted common limited partner unit, in the first quarter 2016. Distributable cash flow was $20.6 million in the first quarter 2017, compared to $20.4 million in the prior-year period. 

For the first quarter 2017, earnings before interest, taxes, depreciation and amortization ("EBITDA") was $23.9 million compared to $23.7 million in the prior-year period. Improved performance in the wholesale marketing and terminalling segment, led by a higher gross margin per barrel in west Texas, were the primary factors offsetting the effect of lower performance on a year-over-year basis from the SALA Gathering System and the Paline Pipeline, as well as the effect of sixteen days of planned downtime at Delek US' Tyler, Texas refinery during the first quarter 2017.

Uzi Yemin, Chairman and Chief Executive Officer of Delek Logistics' general partner, remarked: "During the first quarter, our position in the Permian Basin benefited from increased drilling activity, which has translated into better margins in our west Texas wholesale operation and increased volumes on our RIO joint venture crude oil pipeline.  Also, late in the first quarter, volume on the Paline Pipeline benefited from crude oil price differentials widening, as the price environment supported third party crude oil shipments to the Gulf Coast. The Caddo joint venture crude oil pipeline, which began operations in January, quickly increased throughput during the first quarter.  We maintained financial flexibility, ending the quarter with approximately $301 million of capacity on our credit facility and a leverage ratio of 3.8 times. Our financial position supported the 13.1 percent year-over-year increase in our declared first quarter distribution."

Yemin concluded, "We have continued to experience the benefits from our Permian Basin position into the second quarter, as drilling activity and crude oil production have continued to increase. Once Delek US has successfully completed the acquisition of the remaining outstanding common stock of Alon USA Energy, Inc. that it does not already own, it should create additional growth opportunities through future potential drop downs and the ability to provide logistics support to a refining system with significant access to the Permian Basin. We remain focused on creating long term value for our unit holders, as we evaluate potential third party growth opportunities and partnering with Delek US.  We anticipate that the financial flexibility provided by our balance sheet and focus on growth initiatives should support a distribution per limited partner unit increase of at least 10% annually through 2019."

Distribution and Liquidity
On April 24, 2017, Delek Logistics declared a quarterly cash distribution for the first quarter of $0.69 per limited partner unit, which equates to $2.76 per limited partner unit on an annualized basis. This distribution is expected to be paid on May 12, 2017 to unitholders of record on May 5, 2017. This represents a 1.5 percent increase from the fourth quarter 2016 distribution of $0.68 per limited partner unit, or $2.72 per limited partner unit on an annualized basis, and a 13.1 percent increase over Delek Logistics’ first quarter 2016 distribution of $0.61 per limited partner unit, or $2.44 per limited partner unit annualized. For the first quarter 2017, the total cash distribution declared to all partners, including IDRs, was approximately $21.0 million. Based on the declared distribution for the first quarter 2017, the distributable cash flow coverage ratio for the first quarter was 0.98x.

As of March 31, 2017, Delek Logistics had total debt of approximately $392.0 million. Additional borrowing capacity, subject to certain covenants, under the $700.0 million credit facility was approximately $300.5 million.

Financial Results
Revenue for the first quarter 2017 was $129.5 million compared to $104.1 million in the prior year period. The increase in revenue is primarily due to higher prices in the west Texas wholesale business. On a year-over-year basis the performance from the operations was stable. Total operating expenses were $10.4 million, which was in line with $10.5 million in the first quarter 2016. Total segment contribution margin was $26.5 million in the first quarter of 2017 compared to $26.8 million in the first quarter 2016. General and administrative expenses were $2.8 million for the first quarter 2017, in line with $2.9 million in the prior-year period.

Pipelines and Transportation Segment
The contribution margin in the first quarter 2017 was $16.1 million compared to $20.3 million in the first quarter 2016. This change was primarily due to reduced performance in the Paline Pipeline.  During the first quarter 2017, the Paline Pipeline was a FERC regulated pipeline with a tariff established for potential shippers, compared to the prior year period when the pipeline capacity was under contract with two third-parties for a monthly fee.  Also, lower volume on the SALA Gathering System on a year-over-year basis was a factor in the change in contribution margin. Operating expenses were $8.2 million in the first quarter 2016 compared to $7.7 million in the prior year period.

Wholesale Marketing and Terminalling Segment
During the first quarter 2017, contribution margin was $10.4 million, compared to $6.6 million in the first quarter 2016. This increase was primarily due to improved performance in the west Texas wholesale operations and lower operating expenses on a year-over-year basis. Operating expenses decreased to $2.2 million in the first quarter 2017, compared to $2.7 million in the prior year period.

In the west Texas wholesale business, average throughput in the first quarter 2017 was 14,467 barrels per day compared to 14,370 barrels per day in the first quarter 2016. The wholesale gross margin in west Texas increased year-over-year to $2.72 per barrel and included approximately $1.1 million, or $0.86 per barrel, from renewable identification numbers (RINs) generated in the quarter.  During the first quarter 2016, the wholesale gross margin was $0.53 per barrel and included $1.5 million from RINs, or $1.18 per barrel.  On a year-over-year basis, the gross margin per barrel benefited from higher drilling activity in the Permian Basin that increased fuel demand and improved the supply/demand balance.

Average terminalling throughput volume of 114,900 barrels per day during the quarter decreased on a year-over-year basis from 118,218 barrels per day in the first quarter 2016 primarily due to lower throughput at the Tyler, Texas terminal. During the first quarter 2017, average volume under the east Texas marketing agreement with Delek US was 63,396 barrels per day compared to 66,414 barrels per day during the first quarter 2016. Both fees from the east Texas marketing agreement and Tyler terminal volumes were lower due to sixteen days of planned downtime at Delek US' Tyler, Texas refinery during the first quarter 2017.

First Quarter 2017 Results | Conference Call Information
Delek Logistics will hold a conference call to discuss its first quarter 2017 results on Monday, May 8, 2017 at 4:00 p.m. Central Time. Investors will have the opportunity to listen to the conference call live by going to www.DelekLogistics.com. Participants are encouraged to register at least 15 minutes early to download and install any necessary software. For those who cannot listen to the live broadcast, a telephonic replay will be available through August 8, 2017 by dialing (855) 859-2056, passcode 8261987. An archived version of the replay will also be available at www.DelekLogistics.com for 90 days.  

Investors may also wish to listen to Delek US’ (NYSE:DK) first quarter 2017 earnings conference call on Monday, May 8, 2017 at 4:30 p.m. Central Time and review Delek US’ earnings press release. Market trends and information disclosed by Delek US may be relevant to Delek Logistics, as it is a consolidated subsidiary of Delek US. Investors can find information related to Delek US and the timing of its earnings release online by going to www.DelekUS.com.

About Delek Logistics Partners, LP
Delek Logistics Partners, LP, headquartered in Brentwood, Tennessee, was formed by Delek US Holdings, Inc. (NYSE: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 Delek US Holdings, thereby subjecting us to Delek US Holdings' business risks; risks relating to the securities markets generally; risks and costs relating to the age and operational hazards of our assets including, without limitation, costs, penalties, regulatory or legal actions and other effects related to releases, spills and other hazards inherent in transporting and storing crude oil and intermediate and finished petroleum products; the impact of adverse market conditions affecting the utilization of Delek Logistics' assets and business performance, including margins generated by its wholesale fuel business; uncertainty regarding the outcome of Delek US Holdings' agreement to acquire the remaining outstanding common stock of Alon USA Energy, Inc.; the results of our investments in joint ventures; adverse changes in laws including with respect to tax and regulatory matters and other risks as disclosed in our annual report on Form 10-K, quarterly reports on Form 10-Q and other reports and filings with the United States Securities and Exchange Commission. 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. Delek Logistics undertakes no obligation to update or revise such forward-looking statements to reflect events or circumstances that occur, or which Delek Logistics becomes aware of, after the date hereof.

Non-GAAP Disclosures:
EBITDA, distributable cash flow and distributable cash flow coverage ratio are non-U.S. GAAP supplemental financial measures that management and external users of our combined financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:

  • Delek Logistics' operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or, in the case of EBITDA, financing methods;

  • the ability of our assets to generate sufficient cash flow to make distributions to Delek Logistics' 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 believes that the presentation of EBITDA, distributable cash flow and distributable cash flow coverage ratio provide useful information to investors in assessing its financial condition, its results of operations and cash flow its business is generating. EBITDA, distributable cash flow and distributable cash flow coverage ratio should not be considered in isolation or as alternatives to net income, operating income, cash from operations or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP.  EBITDA, distributable cash flow and distributable cash flow coverage ratio have important limitations as analytical tools because they exclude some, but not all items that affect net income and net cash provided by operating activities. Additionally, because EBITDA and distributable cash flow may be defined differently by other partnerships in its industry, Delek Logistics' definitions of EBITDA and distributable cash flow may not be comparable to similarly titled measures of other partnerships. Please see the tables below for a reconciliation of EBITDA and distributable cash flow to their most directly comparable financial measures calculated and presented in accordance with U.S. GAAP.  Also, please see the accompanying table providing the calculation of distributable cash flow coverage ratio.

 
Delek Logistics Partners, LP
Condensed Consolidated Balance Sheets (Unaudited)
 
  March 31, December 31,
  2017 2016
     
  (In thousands)
ASSETS    
Current assets:    
Cash and cash equivalents $33  $59 
Accounts receivable 23,812  19,202 
Accounts receivable from related parties   2,834 
Inventory 6,328  8,875 
Other current assets 804  1,071 
Total current assets 30,977  32,041 
Property, plant and equipment:    
Property, plant and equipment 345,172  342,407 
Less: accumulated depreciation (96,263) (91,378)
Property, plant and equipment, net 248,909  251,029 
Equity method investments 102,975  101,080 
Goodwill 12,203  12,203 
Intangible assets, net 14,154  14,420 
Other non-current assets 4,385  4,774 
Total assets $413,603  $415,547 
LIABILITIES AND DEFICIT    
Current liabilities:    
Accounts payable $13,117  $10,853 
Accounts payable to related parties 343   
Excise and other taxes payable 4,535  4,841 
Tank inspection liabilities 1,013  1,013 
Pipeline release liabilities 1,072  1,097 
Accrued expenses and other current liabilities 2,315  2,925 
Total current liabilities 22,395  20,729 
Non-current liabilities:    
Revolving credit facility 392,000  392,600 
Asset retirement obligations 3,845  3,772 
Other non-current liabilities 14,348  11,730 
Total non-current liabilities 410,193  408,102 
Total liabilities 432,588  428,831 
Deficit:    
Common unitholders - public; 9,131,036 units issued and outstanding at March 31, 2017 (9,263,415 at December 31, 2016) 181,775  188,013 
Common unitholders - Delek; 15,197,571 units issued and outstanding at March 31, 2017 (15,065,192 at December 31, 2016) (194,419) (195,076)
General partner -  496,502 units issued and outstanding at March 31, 2017 (496,502 at December 31, 2016) (6,341) (6,221)
Total deficit (18,985) (13,284)
Total liabilities and deficit $413,603  $415,547 
         


Delek Logistics Partners, LP 
Condensed Consolidated Statements of Income (Unaudited) 
  
  Three Months Ended March 31,
 
  2017 2016 
      
  (In thousands, except unit
and per unit data)
Net sales:     
Affiliate $36,619  $38,760  
Third-Party 92,854  65,296  
Net sales 129,473  104,056  
Operating costs and expenses:     
Cost of goods sold 92,590  66,753  
Operating expenses 10,358  10,464  
General and administrative expenses 2,848  2,913  
Depreciation and amortization 5,193  4,996  
Loss (gain) on asset disposals 12  (44) 
Total operating costs and expenses 111,001  85,082  
Operating income 18,472  18,974  
Interest expense, net 4,071  3,199  
(Income) loss from equity method investments (245) 229  
Income before income tax expense 14,646  15,546  
Income tax expense 51  98  
Net income attributable to partners 14,595  15,448  
Comprehensive income attributable to partners $14,595  $15,448  
      
Less: General partner's interest in net income, including incentive distribution rights 4,109  2,253  
Limited partners' interest in net income $10,486  $13,195  
      
Net income per limited partner unit:     
Common units - (basic) $0.43  $0.54  
Common units - (diluted) $0.43  $0.54  
Subordinated units - Delek (basic and diluted) $  $0.54  
      
Weighted average limited partner units outstanding: (1)     
Common units - basic 24,328,607  17,024,490  
Common units - diluted 24,380,770  17,115,198  
Subordinated units - Delek (basic and diluted)   7,252,299  
      
Cash distribution per limited partner unit $0.690  $0.610  


Delek Logistics Partners, LP
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
          
      Three Months Ended
March 31,
 
      2017 2016 
          
Cash Flow Data     
Net cash provided by operating activities $23,474  $26,374  
Net cash used in investing activities (5,414) (16,555) 
Net cash used in financing activities (18,086) (9,615) 
 Net (decrease) increase in cash and cash equivalents $(26) $204  
           


Delek Logistics Partners, LP 
Reconciliation of  Amounts Reported Under U.S. GAAP 
  
  Three Months Ended
March 31,
 
($ in thousands) 2017 2016 
Reconciliation of net income to EBITDA:     
Net income $14,595  $15,448  
Add:     
Income tax expense 51  98  
Depreciation and amortization 5,193  4,996  
Interest expense, net 4,071  3,199  
EBITDA $23,910  $23,741  
      
Reconciliation of net cash from operating activities to distributable cash flow:     
Net cash provided by operating activities $23,474  $26,374  
Changes in assets and liabilities (3,562) (5,401) 
Maintenance and regulatory capital expenditures (2,243) (736) 
Reimbursement from Delek for capital expenditures 3,051  209  
Accretion of asset retirement obligations (73) (67) 
Deferred income taxes (25)   
(Loss) gain on asset disposals (12) 44  
      
Distributable Cash Flow $20,610  $20,423  
      


Delek Logistics Partners, LP 
Distributable Coverage Ratio Calculation 
(In thousands) 
  Three Months Ended
March 31,
 
Distributions to partners of Delek Logistics, LP 2017 2016 
Limited partners' distribution on common units $16,787  $14,809  
General partner's distributions 342  302  
General partner's incentive distribution rights 3,895  1,984  
Total Distributions to be paid $21,024  $17,095  
      
Distributable Cash Flow $20,610  $20,423  
Distributable cash flow coverage ratio (1) 0.98x  1.19x  
(1) Distributable cash flow coverage ratio is calculated by dividing distributable cash flow by distributions to be paid in each respective period. 


Delek Logistics Partners, LP
Segment Data (unaudited)
 
(In thousands) Three Months Ended
  March 31,
  2017 2016
Pipelines and Transportation    
Net sales:    
Affiliate $26,500  $26,306 
Third party 2,177  6,477 
Total pipelines and transportation 28,677  32,783 
Operating costs and expenses:    
Cost of goods sold 4,405  4,776 
Operating expenses 8,155  7,740 
Segment contribution margin 16,117  20,267 
Total Assets $338,072  $ 298,984 
     
Wholesale Marketing and Terminalling    
Net sales:    
Affiliate $10,119  $12,454 
Third party 90,677  58,819 
Total wholesale marketing and terminalling 100,796  71,273 
Operating costs and expenses:    
Cost of goods sold 88,185  61,977 
Operating expenses 2,203  2,724 
Segment contribution margin $10,408  $6,572 
Total Assets $75,531  $80,216 
     
Consolidated    
Net sales:    
Affiliate $36,619  $38,760 
Third party 92,854  65,296 
Total consolidated 129,473  104,056 
Operating costs and expenses:    
Cost of goods sold 92,590  66,753 
Operating expenses 10,358  10,464 
Contribution margin 26,525  26,839 
General and administrative expenses 2,848  2,913 
Depreciation and amortization 5,193  4,996 
Loss (gain) on asset disposals 12  (44)
Operating income $18,472  $18,974 
Total Assets $413,603  $379,200 


Delek Logistics Partners, LP 
Segment Capital Spending 
(In thousands) 
  Three Months Ended
March 31,
 
Pipelines and Transportation 2017 2016 
Maintenance capital spending $1,688  $511  
Discretionary capital spending 449  195  
Segment capital spending $2,137  $706  
Wholesale Marketing and Terminalling     
Maintenance capital spending $203  $16  
Discretionary capital spending 451  362  
Segment capital spending $654  $378  
Consolidated     
Maintenance capital spending $1,891  $527  
Discretionary capital spending 900  557  
Total capital spending $2,791  $1,084  
      


Delek Logistics Partners, LP 
Segment Data (Unaudited) 
  
  Three Months Ended
March 31,
 
  2017 2016 
Pipelines and Transportation Segment:     
Throughputs (average bpd)     
Lion Pipeline System:     
Crude pipelines (non-gathered) 58,744  56,342  
Refined products pipelines 51,355  53,779  
SALA Gathering System 16,531  19,001  
East Texas Crude Logistics System 16,176  9,346  
El Dorado Rail Offloading Rack     
      
Wholesale Marketing and Terminalling Segment:     
East Texas - Tyler Refinery sales volumes (average bpd) 63,396  66,414  
West Texas marketing throughputs (average bpd) 14,467  14,370  
West Texas marketing margin per barrel $2.72  $0.53  
Terminalling throughputs (average bpd) 114,900  118,218  


U.S. Investor / Media Relations Contact:
Keith Johnson
Vice President of Investor Relations                        
615-435-1366

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Source: GlobeNewswire (May 8, 2017 - 4:15 PM EDT)

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