Delek US (DK) 7 Nov 222022 Q3 Earnings call transcript

Good morning, and welcome to the Delek US Third Quarter 2022 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to Blake Fernandez. Please go ahead.

Good morning. thank webcast joining Holdings' to 'XX results. to conference on third like financial and call discuss would everyone us for today's quarter I Delek US

CEO; call COO be and well found call Relations presentation as our Investor Soreq, Joining materials O'Malley, of as is section members on U.S. team. on CFO; Todd the today's President me website. of can and management Reuven other used Spiegel, EVP today's Avigal the The during

may for contain defined call statements harbor As as laws. is a conference reminder, term forward-looking under Please that this statement. see our securities federal Slide X safe

reconciliation addition principles these to measures comparable results or Investor In financial release non-GAAP in GAAP accounting report the can of be the on results, we press generally Relations the certain website. the non-GAAP accepted section encouraged financial found our of reporting GAAP, posted are in results. financial accordance to Investors which with review to

release that press release. Our prepared market the is into remarks call, earnings segment incorporated less are information are reviewed assuming that and On being the we covering as begin has with we'll made today's been then to will the comments Then and turn Todd review CapEx to Reuven Avigal. cover over call Q&A. over we'll and guidance financial from capitalization. it With that, and turn performance will Avigal. our I'll

solid operational good Thanks, and another inventory to excluding due performance strong quarters movement. We consecutive Blake, record of morning. utilization results, and quarter -- of refinery had

out about the and Additionally, gears talk reliability. focus we and positive. proud laid on Switching outlook I'm of the the downstream the last team execution energy for is industry to quarter. priorities safety

shareholders. First, returning to cash

repurchase $X.XX shares increased dividend our $XXX regular $XX million to share the we guidance expect million to repurchase In QX. with a We of We million buyback. share. quarter, total our outstanding of third during exceeded quarterly of $XX per to

debt level allocation. debt on balance flexible QX. and retire our sheet. We between of maintain million plan during million This to focus $XXX reduces a to capital Second, $XXX

our our options. hired banker sum head to corporate started of of assets. We unlock strategic parts value us engaged we the a on and Third, initiative to advise of the development

will key market be of my in of value front opportunities with once full CEO, the strength as in I X you to to focused the impressed and to quarter role by plan to remain I'm the updating forward I our operation. a the will many look communicate quarters. We have additional complete. it continue that, of team the Reuven. our to and After excited over we over our depth to our With deliver priorities. us on turn execution shareholders I on our upcoming

fourth million put quarter, and flow analyze order Avigal. a buybacks inventory Thank X, comparative or adjusted should for provided the income On of an to $X.XX of basis This we results. $X.XX and $X.XX of a to flow us the we for in $X.X compared income had or Beginning our had impact Net you, net in third million We headwinds to U.S. allows easier $X.X purposes. or reduce $XXX million increase third adjusted $X.X income results with our Strong adjusted associated EBITDA Slide help per perspective share. of cash us $XXX Delek This flow. make includes cash will with debt. net share share On in footing quarter, quarter. per FIFO accounting. period. prior the accounting from equal remove peers inventory on million year per was from an million

a December billion record capitalization. that X highlights XX. consolidated the billion the $X.XX We of And quarter had will to shareholders basis, be Avigal debt. $X.XX of Board we our third share ended on Slide per net with dividend As approved November mentioned, on $X.XX paid regular of X cash.

debt as October, September net DK debt at had at credit we million billion, transactions. of In of Logistics we XX. $X.XX had of $XXX Delek Excluding X noteworthy

First, secured with commitments October with maturity loan $X.X date secured credit million XX $XXX credit maturity October with senior XX. U.S. of billion, a a Separately, in term and October revolving facility extended the to date $XXX maturity a including $X.X of date its DKL a new Delek in facility million XX. asset-based to of expanded billion

have our Todd, we remain would cost to like structure I company's to near-term with launched it mention we competitive peers. handing evaluate key to a Before initiative ensure to

we plan call We will have over our once work. Todd. additional engaged to With advisers and information conducting that, this We to concluded share analysis. I the have are currently turn

costs Thanks, million are result $XX of in range and of lower On natural $XX This Operating in the expenses Slide be elevated guidance quarters for the second $XXX expected is typically slightly purposes. range $XXX bonuses to the million. lower be is to XQ from which are a modeling fourth quarter in in and X, for each reduction and XQ is Reuven. a relative of rates. we of This accrues to prices million quarter the forecasted levels, utilization fourth electricity to the million. provide to fourth as G&A company year. gas

the to DKL million for Finally, of million guidance $XX the impact debt. reflects interest consolidated expense of $XX quarter

utilization the capital XX% sustainability expected between report. expect of Later Slide refining a new approximately month, consolidated our at the will average we record on approximately basis. the day achieved day. year barrels per be system to of approximately X, or third annual oil quarter third our expenditures during capital million XXX,XXX crude crude In and XXX,XXX total $XXX third million. this is per quarter issue $XX oil throughput barrels On 'XX, a fourth the During to quarter, XXX,XXX 'XX were full midpoint. program throughput The we

for investors on focused our monitor the continuous journey. encourage are improvements that, you we questions? efforts ESG our will and open We operator, making please With in to call

Instructions]. [Operator

with from Read is Roger question Wells Our Fargo. first

thinking guidance, just the share to are I'd allocation, elevated basis guidance a Are be Are #X, that so come about guess stay repurchase my we you thinking like share short of share repos? to and you going partly on QX guess? in repurchase question. because for guidance the was a I magnitude? for along we I going will of what long-term the get back longer-term are like and I'll well more I kind waiting walk above to that to model. Or be margins guess, slide is before as strategic more understand the capital term this? overview we here, How in, we putting I essentially And tie

Roger, it's Avigal.

the to company the going top in we walk, put shareholder priority. previous are And talking So the of we just that the we're said for talk. not the in our call walking

gave investors a we $XXX with guidance are we quarter, the we perception so. guideline back million the million to you what quarter $XX had total and planning increased dividend. our to gave obviously And last buyback to dividend. debt. to this expecting If We quarter, exceed Obviously, the do remember, program the versus the to guidance $XXX us million study to $XX investors We and are are million We that's had to we of reduce we planning buyback a special $XX million. of million. brought this do. we the And $XX also

we to well. a Going -- very with forward, looking With is we at going robust the very forward, said, that we look performing well the aggressively that are buyback Roger, very and see into continue company XXXX. market

that. Appreciate Okay.

of compared in The across you terms other any period? thoughts, look operationally, Just look can compared on and numbers share here. demand just selling pre-COVID question, you to gasoline and you're quarter as how like to, sales what comparing the prior specific system you're your any say, side diesel, the

I have I'll Todd. year-on-year. total clearly of representative kind happens X% are envelope our kind certain it's we distillate refinery sales And seeing retail retail think pretty same-store what inside footprint, of of Roger, use locations heavy. footprint up of operations. And of a is that obviously, fuel our we're which of

We have subset that's heavy. also another gasoline

we're feeling lower here. year-on-year again, And a the is And representation recently across on The up pretty demand sticky Basin. So Permian that good prices view. buttressed I and certainly, good. the a have basis, we're think

what the demand on feel we are the about looks we for So of now the and 'XX outlook good barrel. side where like

with The Ryan Todd is Piper next Sandler. from question

that, there it's addressed are fundamental of -- in are on a could is perception that know that if we ways of the stock. the leverage of any -- timing higher I terms forward, mean to making you thoughts I from you've know not the which best hard to DKL bankers, that's you discount really drive of thoughts? the and -- helping answer point about you sum-of-the-parts is but the you're high-level that address to Is And a in something levels high that the is than -- of And have? up. think the -- on level, there at is debt in Maybe hear it if it think high as we that discount? question Any it's the months engaged -- as effort I high-level view? Great. couple talk the a at balance follow are may X this I there's we effort about to that next consolidated what maybe months? and try sheet of you Can view look maybe

take it's I'll Ryan, Blake. a stab.

dislocations. number of there's drive As of you can any kind know, that market things

to not always it's pinpoint so And easy specifics.

them which anywhere for perception of more has gap deconsolidated sure, trended consolidated on about Bear. of of basis. acquisition to to have historical over is debt, substantial primarily the the much due the think now a investors the talked hit DKL I XX%, on you extensively quite consolidated to And versus one X% leverage which from we X between

we manager debt, whereas leverages And over-levered, look at are deconsolidate so the a not we very generalist on Bloomberg, to pulls our and levered goes debt very who all. if you portfolio

So drivers. that's one of the

progressively I to at the other of that's one we've lack improve. and liquidity the And something is been DKL. issues think trying of float

we've weightings man Alerian. And think within various being of kind "last standing" benefited away. we've the from our MLP going increased rest group terms of indexes I the in MLP of the a like

we should downturn trading as something had So that going evaluate then COVID, opportunities. we volumes in is final be the I And to we of highlight our during improving with some our forward is dividend. parts work cut the would can the thing and

refining had EBITDA. Our system negative

profitable very assets actually demonstrate and now I think delivering. starting we're refining the that are to

be more have can And to we these so just facilities. get strong going as that I and that's something that from cash with over more flow time comfortable think demonstrate, we investors

help. to going that's think I

of So are at anything And least really haven't some from are think to data specific. as committed we X perspective, contributing disconnect. to timing, the far I as probably my those points that

corporate board. banks. -- ours formally of bank said demonstrate a -- on to trying are engaged We came we now bank hired we a We've

months. coming so And the demonstrate to probably we're something that's looking over

be an to could to time. going it's to But fair that think means have do we some on which want the progress necessarily plan take say we're keep plan. think a go, of depending I I don't market route Obviously, of the the abreast we announcement that effectuated. making. we

million Great. budget $XXX one forward in this That's moving very to XXXX, any we in in that other? as or Are of spending just be CapEx capital you're there of large -- Maybe thinking year's way pieces we the ballpark look direction helpful. should terms XXXX. next year

Yes. it's Ryan, Todd.

we in think see of system. long-term that this we've as that on seen Again, the to year, lot and obviously, million across gathering growth was a $XXX I strength. that dependent continue

that planning. in and back I go as that the good exactly that higher we was come 'XX probably we set first we didn't than surgical closer at point 'XX. we the Tyler that would one our would strikes end turnaround of to year marginally now get have little half, a line have continuing at million initially more of update did but think is. a is least right 'XX. We'll a next market that defining The into the any target some some as to time during We and through we small anticipate outlier, So bit 'XX of yourself do on what at scheduled for But say $XXX in plants. turnaround I year

Carly Davenport Sachs. from is question with Next Goldman

about size about you're you're kind targeting that program you the efforts Can Or of of drive any efficiencies? talk color bit provide a Are any structure? little point? around numbers you that potential can kind areas cost can this to the there you put at key of the a just what making around

as have Carly, at part it's we we're the the started. budget process G&A Reuven. OpEx zero the looking both Well, and that of

We have thoughts findings. initial some and

have the programs I the whole will then once we give an which complete think set I exact work, have we but all in to few on done be will that our structure will are want the the it. the number mini be don't we will around weeks. X budget. we next communicate goal And to under

around a to And the those was areas logistics that potential under to X you expectations? it. with the Got the couple your or flag learnings the as have surprise initial then Bear Great. upside would integrate of quarters kind Kind of of belt. side follow-up to that relative just into here any portfolio assets you've had any as you key

large. That's great us, thanks line of a we right? just we and a it's product not obviously from strategic debt acquisition Carly, from us geographic And again. that also but discussed spoke, standpoint question. believe when a how It's by for we opened in, a

in we pleased. our line on I call, the with numbers we mentioned are very are integration, the pleased coming and expectations, with very As the

to managed we Going get want have and diversification of forward, a have to operation out those manage business keep. we And we the to got. we those assets a and safe always have we most --

question with JPMorgan. John from next Your is Royall

So just a on follow-up allocation. question capital

major today Looking cash in your than doing paydown and cash. more time free talked that down buyback. debt expecting your the think I the a XQ, Is balance about flow? know over on in And to you're buyback buyback cash you macro there down the so, maybe you both have on aggressive unless from over working sitting to a see guidance improvement being billion I would post-dividend some at cash. if thought for $X I'm draw in you're and the assuming we that the

continue So a you may that some that is draw assumption cash? to safe

This the question. for is Reuven. Thank you

it rate, free we're generating. you that, flow the it on think buybacks if X%, think deposits at hand, since have I is a getting it's we banks to but and way on combination on because today cash for are look dividend, loans. at to generating, flow done of reduction the two When one look our And floating paying the hand, these that we're are I are comes cash increased on of rates other X.X%. around the we

So we to some balance on that have the combination of use flow the down cash a of the cash pay we free sheet and debt. will

Permian into XXXX? looking differential just versus Cushing. view the Midland Midland Great. Okay. updated above continues your your production trade growth That's takeaway Midland helpful. in on then And for differentials. What's to the on and view going

So that's a great question.

Midland close production. to we We very -- we have are there. producer are obviously looking at have the the over And we

about We the in have seen coming area the But rigs area. XX our more or going DPG between up on specific more very from today, full to less. being is months to Midland differentials, get nicely XX

nice last around barrels We year. X.X of We've seen more increase a are barrels a day. than XXX,XXX million today

we news that XX front So going optimistic forward. on think line the are And more next XX that months. I in see around we'll differential that to

Blair Matthew question with is Tudor, from next Holt. The Pickering,

that XXXX? than your reasonable buybacks cash dividend after And think to in flow Do have your be target it free would minimum you balance? cash a for is more

want don't per to target think give a specific we Matthew, se. cash I

I need comfortably M&A. Obviously, $XXX or million, think we $XXX to dry and have above potential nice to recession we've It the so million and/or is historically to that maintain probably additional business. that. run powder we're potential scenarios a said

So pretty now I be right seems trending to comfortable. think where we're

some down makes and debt, a expense given As to arbitrage little benefits. sense between the interest cash which use the Reuven pay may said, of we probably cash

going cash of basically terms do In to you were use think are asking, I 'XX, buybacks. we to

use that think free we specific. pinpoint we're to anything cash think don't the looking I opinion Avigal I of flow. to want is

looking like the stock robust the discounted. finalize look entities really scenario sum-of-the-parts we now scenario, buybacks of parts where at before Once right feel the are that like. I the understand is we the we we're sum think the what various

more think a specific at point, formulaic terms that I we're get to going of in approach.

the in good. And and up on flow to R&D update there then it's through might to of start is terms any expected when when Sounds Delek? in your investment contribution

I deferred to to XX-day had we they The the thing seen believe believe, Global the best start-up have do that the last option look Yes. think with, Clean extend. I to Energy March is I a is Matthew, filings. at

start-up. looking option that. be year we you're just XX-day kind conservative, a So course, at after of to maybe And next midyear have of a

late half enter probably feeling we should it's scenario, the of So the type like second of a year project.

The with next question from is Leggate Doug America. Bank of

This is Doug. My the a on oil for first is basis. Kalei question follow-up on

has here WTI So Brent modestly. widened

this spreads gas sell on you on give releases the you U.S. view that updated SPR see the EU to can post Just and compression economics also how that hoping us noting recruits. the helps trending in an

Thanks Todd. for question. Yes. Kalei, the it's

markets So prompt TI settle there. I We've of as X-ish in that anybody the the think kind out seen watch Brent the the curve. range closely as around you out dead

high work wide like that's think wider and due truly up when And utilization we capacity, We that given was maybe are we roll to as and dynamic to takeaway in hold commenting to Xs that on rate Xs to going being between to Midland levels. the to in no of of go-forward to capacity those terms built is we we'll firmly XX% of Avigal see in see We Permian day. spread basis. existing incremental well remain X-ish on as kind the kind any to that Brent-TI growth start of that a the low that XX% reach Brent-TI of mid- kind probably believe as do level the continue on earlier takeaway what at

in looking seconds. that's what at, So XX I think we're

My on is second -- gas. that, basis Todd. appreciate on I question

fixed for get dropped tight prices another it there several because X recently takeaway to very quarters. won't and So is

at OpEx can So this how talk benefits wondering Big and Spring. you costs the about hydrotreating if

Yes.

that obviously level down don't into individual from break it we plant perspective. So

are that we side our attuned we in going commercial to to keenly what continue, say day, on we obviously increase exposure your the the is We think the can think that's of And Waha are working area. point. to what's every gas. happening ledger to Waha to I

safe Spring exposed it's that Big that is to think to XXX% I market. say

facilities. at in on some natural We of and and capitalizing potentially and come of now gathering some projects, of kind different acquisition other the to are, for actively the X using Bear processing that through again, portfolio gas looking which of into inclusion have Waha fruition the of leverage accessing our to

that necessary. think I on and more market So update when come to as there's the to we'll and continue

with Bank. is next from Cheng Paul Scotia The question

please. questions, Two

The one, talk about you the that And to of hedging now you stays is hedging. secondly, or what future, want are And first with what us the going that I to the nature to the same? the doing? you're or that can And the going is in share that are you reducing the -- increase would guys the next be bill, third on branding making thinking? in, have get the you that plant second what biodiesel quarter? What you that is intention on latest current half facility. money the the -- if saying look? curious, those or in is just it activity also current -- your And your You're the do Are of year. the

it's Blake. Paul,

handle Let two on Todd me number to three. defer the and first

So on know, say will as specifics don't I this. the disclose you we but hedging piece,

we're out historically, those us the the then begin that But our allows out two as each we offsetting think able the it exposure. really going to sense I that hedging other. the the to that forward inventory we're be And opportunity makes being to then adjust reduce said script inventory, I with because, hedging should minimize if think adjusting said, to impacts. other in planning

of the plan or that historically. probably forward reduce we've our minimize going is done So to amount hedging

$XX from that really that. us participate On say disclosure. level to GCE, hope in interest. for So all it's million we I of XX% that a That's answers can

get I going renewable I to door capital But the overcommit amount in to in that would in So think participate anything want small and most to we're our to view foot a that diesel do fairly don't dabble. future. the to as of

an So tells I that us market. allows story. participate. of likely It would think kind it's understand to we -- the It

to have just then leave And there. think I'll probably so And Todd plant. for give it biodiesel it to the I I'll

Paul, that extent, biodiesel of will are, well just RIN actually indeed facilities various our I are remind profitable of to to feedstocks. mix Blake. clarify, you, upside the inside a different does to Thanks, X exposed have certain Those as Yes. and DX LCFS on we and facilities exist the as obviously a footprint. what X

So material those they believe continue impact that a would but profitable to total corporation. way the are profitable and on will that basis results for go-forward a we be in not

accounting Can still have what's -- sneak I under Since are the accounting, just simple FIFO in why you very Great. question? the that a will LCM?

let to that. back Paul, us come off-line on you

take small more if LIFO a amount it's be it's offline a question think But peers. think that's the just I that compared accounting to I it'd detailed better all right. to

is question Stanley. with next from Morgan Dan The Kutz

you I different of question out just across guess, parsing a to forward, terms broad of ask, kind perspective in is market. it from seeing what by and wanted maybe the your high-level are guys what outlook your I system product of a kind demand moving

This Todd. Sure, Yes. Dan. is

and earlier Basin, As about bit the think that's seeing on the Permian diesel happening our footprint kind call is a in we're it, little retail both of gasoline sequential inside of call, demand. I what pretty year-over-year, mentioned growth let's representative We X%. running, on

seen Chicago market. in New York Harbor the quarter robust We the pretty last in in have, obviously, area product the markets land and

of of kind obviously that seen system. now the to advantage kind price take the And the of and are based side in York our there to levels things the term. is on we've we footprint to in as those as occurred be United we limited unfortunate has on demand our Certainly, to back pre-COVID drop Toledo. effectively fuel lower jet where incident imports large, But and maintenance. by make on elsewhere continued would Chicago shorter are consumer that of in based refineries say Obviously, resilient. inside shoe can States. the the last I and that some help flat New continuing robust of well see one of

leave there. I'll it So

a build of reduction important role. also the also And the obviously, that is refinery side the that Todd's -- the as huge big is a we in production. the much just first comments, playing demand -- side history such pretty see to in that supply play the time That's also side as see supply And on we strong.

said, the and So optimistic sector. about about very business the we we as remain,

color. kind That's me kind the And just backdrop guess of supports above EBITDA you really or any mid-cycle on then mid-cycle earnings I for and latest appreciating mid-cycle strategic the there's foreseeable acquisition helpful of hoping is my I future you Bear was that share refresh here. what that projects let know underway But your just of on your outlook a if if wondering with could the X memory could kind of the outlook? updates lot

a mid-cycle and market we mid-cycle. we Yes. a think on I wanted. robust that What thought a can more But tell in guidance see the the that, didn't on follow if coming That's is guys question And We than higher later specific we speak. give of you budget demand can great that see that from strong look I season up as we on you customers. the is everyone regarding our today, a before. top we and basically we when

optimistic we demand forward, optimistic from -- we about and going what supply. see are a very So downstream

next Jason The Gabelman question from Cowen. with is

talking but time though, overall discussed. debt you've cash net for of that high high initiatives debt debt? And low of if parent if wonder, growing DK as ask may explore talk there's first about any is if well on business. business, you're didn't right reductions us you mention historically, the you business? parent a reduce second carried you a is now as debt at the one? exploring. that debt have the And what that front. to the consideration considerations MLP, be And think on in that appropriate excluding some One both my the target enhance the of Thanks the about the I value the want strategic you that size balance through Can to the you just for levels. levels to is question I or size I was you think and why options And is gross kind

Yes.

specific -- X to like I I as can. would So be to as would like I questions.

So between borrowing debt incentive we are there and reduction. the market interest you side doing on the is get the on the disallocation can Obviously, because on deposit the what side.

We on be one, having still meaningful a cash about But presents cash want doing the meaningful to and Our balance to sheet are and change. to opportunities. balance of some us, second, for to day sheet ready itself the maintain we to on if able nimble be not allow quick strategy it did be rainy adjustments.

alluded are cash on some them have from Some from we of as free Reuven the a our flow sheet. and that cash them of balance

June just question, second an Bear the acquisition to Going X with finished obviously, X. we

it's So X months just now.

shareholders. do only if it's We to about inorganic digesting are very to is pleased it and are we accretive that. And commitment our growth

not -- the to the we're to going sake do that M&A not we of an of grow M&A just are sake not growing. for going it's and So for just

good the share to are in -- and investment allow a to We accretive in grow have to investors order going to to there. in have investment our

gives that some we're hope what guidance to I or do going you not do. of that, So

question-and-answer to our Avigal over the for I like Soreq concludes remarks. would conference session. turn back This any to closing

Yes.

So able you, and the the to of a record I a team we're to thank Very quarter to want standpoint proud employees operations. first have thank I and performance. utilization to foremost want our from that of this here in we want team room to and in of management with that -- and can. thank fulfilling investors, staying the the running potential us I to company guiding the -- Delek the believing

in Thanks. next thank the meet we'll you quarter. everyone, and So again for

now has concluded. you for presentation. conference Thank The today's attending

now disconnect. You may