Delek US Holdings, Inc. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Safe and Reliable Operations: Successfully completed turnarounds at Tyler and maintenance at Big Spring; Big Spring refinery making progress in improving operations.
• EOP Progress: EOP aims to improve DK cash flow by $80-$120 million starting in H2 2025, confident in achieving at least $120 million annually.
• Parts Strategy: Making progress towards mid-spring deconsolidation; inter-company transaction increased DKL's third-party cash flow to ~80%, improved DK's liquidity by ~$250 million; DKL's gas processing business has growth runway.
• Shareholder-Friendly: Paid $16 million dividend and bought back $32 million of shares in the quarter; committed to disciplined capital allocation.
• Small Refinery Exemption: Excited about support for domestic energy production; confident EPA will grant SREs under RFS.

Segment Performance

• Refining: In the first quarter, Tyler had total throughput of approximately 69,000 barrels per day, production margin of $7.82 per barrel (including a $0.70 per barrel impact from a planned outage). El Dorado had total throughput of ~76,000 bpd, production margin $3.83/bbl. Big Spring had total throughput ~59,000 bpd, production margin $4.86/bbl. Cross Springs had total throughput ~85,000 bpd, production margin $6.40/bbl.
• Logistics: The logistics segment delivered adjusted EBITDA of $117 million in the first quarter, a $9 million increase over the previous record of quarterly adjusted EBITDA.

Guidance

• EOP: Confident in achieving at least $120 million in annual cash flow improvement through EOP.
• Second Quarter Outlook: Operating expenses expected to be between $215-$225 million; G&A $52-$57 million; D&A $95-$105 million; net interest expense $80-$90 million.
• Logistics: Delek Logistics on track to meet 2025 EBITDA guidance of $480-$520 million.

Risks

• Factors that could cause actual results to differ from forward-looking statements are included in SEC filings; risks associated with SREs and potential retroactive claims.

Question and Answer

• Q: Talk about DKL and the full year EBITDA guidance, and impact of Permian activity.

A: Avigal Soreq discussed Permian activity in Midland and Delaware basins, stating strong positions with water acquisitions and unique sour offering, reiterating EBITDA guidance.

• Q: Talk about capital returns strategy.

A: Avigal Soreq emphasized EOP for free cash flow improvement, dividend and share repurchase as part of balanced capital allocation.

• Q: Discussion on supply and marketing trends in Q2.

A: Mohit Bhardwaj noted strong rack demand, netbacks, and crack spread improvements, expecting positive trends in Q2.

• Q: Question on SREs, retroactive vs forward-looking.

A: Avigal Soreq stated SREs are both retroactive (back to 2019) and forward-looking, optimistic EPA will grant deserved SREs.

• Q: Opportunities for upside beyond $120 million EOP cash flow improvement.

A: Avigal Soreq and Mark Hobbs discussed ongoing EOP initiatives and strong balance sheet positioning for sustainable free cash flow.

• Q: M&A landscape for logistics, impact of E&P activity pullback.

A: Avigal Soreq mentioned M&A criteria of free cash flow, accretive to leverage/coverage, using full toolkit to provide value to investors.

• Q: OpEx guidance and trends.

A: Avigal Soreq and Mohit Bhardwaj discussed OpEx drivers like natural gas plant addition and progress in G&A, optimistic about further improvement in balance of year.