Delek Logistics Partners, LP Q3 FY2024 earnings call

• Closed several important transactions in Q3 2024: extended contracts with DK for 7 years, acquired Delek portion in Wink to Webster Pipeline, and closed acquisition of H2 Midstream.
• Made good progress on Delaware Basin processing plant expansion, expecting completion on time and on budget in first half of 2025.
• Board of Directors approved increase in quarterly distribution to $1.10 per unit.
• Managed liquidity by accessing debt and equity markets, with approximately $780 million of liquidity post recent equity offering.
• Capital program for Q3 was $65.2 million, with $53.4 million allocated to new gas processing plant, and expect to spend $90 million to $100 million in H2 2024 on gas processing plant.

For the Gathering and Processing segment, adjusted EBITDA for the quarter was $55 million compared to $52.9 million in the third quarter of 2023, with the increase primarily due to higher throughput from Delek Logistics Permian Basin assets and small contribution from H2O post-transaction. The Wholesale Marketing and Terminalling adjusted EBITDA was $24.7 million compared with $28.1 million in the prior year, primarily due to lower wholesale margins. Storage and Transportation adjusted EBITDA in the quarter was $19.4 million compared with $17.9 million in the third quarter of 2023, mainly driven by higher storage and transportation rates. The investment in pipeline joint venture segment contributed $15.6 million this quarter compared with $9.3 million in the third quarter of 2023, primarily from the Wink to Webster drop-down contributions.

• Expect DCF coverage ratio to steadily move back above long-term objective of 1.3x in second half of 2025.
• Target to spend $90 million to $100 million in second half of 2024 on new gas processing plant.
• Long-term leverage ratio target is 3.5x.
• Goal to continue growing distribution.

Q: Talk about the progress and updated expectations on the processing plant timing and potential sour gas opportunities.

A: Progress on the plant is going very well, on schedule and cost-wise, expecting completion in first half of 2025. Excited about sour gas opportunities, part of 3Bear acquisition with AGI wells permits and more to come.

Q: Talk about Midland's volumes trend and acreage dedication.

A: DKL sees great value in the area, acreage dedication deal is accretive, expecting to be around $190 million in DPG by end of year and above $200 million in 2025, with incremental volumes expected in 2026.

Q: How does ACO midstream integrate with 3Bear assets?

A: Integration is done on G&A, accounting, IT systems, business development, and operations sides, with bundling sale opportunities.

Q: Thoughts on capital allocation between distribution growth, debt payment, leverage, and coverage?

A: Proud of 47x consecutive distribution increase, goal to continue increasing distribution, balance growth opportunities, liquidity, leverage ratio (target 3.5x), and coverage ratio.