Delek US (DK) 6 Aug 242024 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator today. At this time, I would like to welcome everyone to the Delek Second Quarter Earnings Call. [Operator Instructions] I would now like to turn the conference over to Robert Wright, Deputy CFO. Please go ahead.

to US welcome Conference Quarter and Call. morning, the Second Delek Earnings Good on include EVP call and joining EVP, today's Participants me will Officer; Mark Israel, Operations; Corporate Development. Financial CEO; EVP, Avigal Reuven Chief Spiegel, and and Hobbs, Joseph President Soreq, US can Delek presentation of material Investor section found be Today's the on Relations the website. contains our harbor regarding statement safe X Slide forward-looking statements. results comments. made today's uncertainties cause actual and call that today's from risks Any to involve during materially forward-looking statements differ may differ to are here that could results Factors SEC actual as well our included in cause as filings. to The no any assumes company obligation update forward-looking statements. now call turn I Avigal will the for opening remarks. to over Avigal?

Thank Good Robert. joining you for us today. you, and morning, thank

During is a of I'm the $XXX proud was environment, making. our ongoing operations million. EBITDA progress our well. challenging the second team Despite we quarter, adjusted market ran our

Turning our priorities. to strategic

and reliable having outlined key As our shareholder-friendly unlocking Sales trying sheet. value detail. achieve. area focus now core third, system; in priorities of Delek are: operations; key sum and will and each safe to calls, I inherent one is of everything focus previous second, on we these the and the part reliable our of are the I a first, have operation strong in on balance being

provide communicated We and this achieved strong previously and have track OpEx made additional our further guidance. progress ever details Piping throughput will quarter. on Robert meet and more this. to showed highest throughput improvement it's Joseph on and

sum-of-the-part Next, progress we would that have made I to efforts. in our talk like the about

X, price around as efficient a allow our of retail sale a to announced will a refinery. we further of reliable total of the position series for our have safe, million. We announced business and $XXX us On August that improve transactions

the with transaction it pleased shareholders. are and for value DK unlocks the We

FEMSA is with agreement years. XX for supply Our

to return building our We with the sheet to and stakeholders. to exploring a opportunities. improve sale great the balance proceeds intend strategic are the relationship cash and additional company use from We

Now DKL. the amend transaction between cover and agreement. I would DK and execute extend We like to and

interest DKL. water decided of to for From to on value cash of allows enhance perspective, from significant strength are transactions number of prolific also DKL service This is it full into areas both Wink most on we refineries. in exceed a drop DKL FID of Webster the perspective, Today, DK DKL acquire a subscribed We will DKL to new DK And the Permian plant. agreements bring a have the expected announced gas also will and processing highly The position a XX% announced transaction provider DKL. crude, our it high-quality assets a a natural back win-win to for balance companies. plant stakeholders cash as in gas its These Basin. and return. synergetic, sheet. without

We expect come to the half online the first plant during of XXXX.

transaction cash Xx. allow M&A by of an a Midstream DK of the stand-alone $XXX loss of the announced a cash to DKL over transaction our infusion of announced preferred. in DKL $XXX the for million refineries of profile the acquisition Midstream enhance quality DK on should the $XX asset transaction accretive margin of On no HXO EBITDA of puts This around to the DKL convertible of be flow to basis. cash independence us Midstream multiple front, on and to The impact us little EBITDA. our immediately in transaction acquired on free test The the and and and overall basis is million to businesses. and Post-synergies, around is for million

with deconsolidation. third-party DKL coming making us midterm further over path to We This EBITDA third-party steps closer our road transaction of on are Midstream this $XX the sharing DKL, independent move million, taking along service For we market around high-quality it months. the look to as forward largely provider.

on to efforts. announce million. are am it. I by the we around exceeding progress regional our cost that our around time had highlight completed reduction and target Robert process details reduce a to to When I would cost ZBB will are we pleased we like this $XXX ahead more estimates. Next, making have efforts, announced we our of our provide

it's are project overall the further company. is looking new In not increase reduction, addition, deals we just leaner The cost and structurally of at but our to about profitability making about our of more providing sheet. profitable more maintaining to to details the The strategy balance shareholder We is commitment return you with and company. our piece look in strong future. final forward ways near

paid we another to July million increase dividends. X.X% regular per quarter, the the in approved share dividend. XX, On During $XX Board

share. Our quarterly is $X.XXX now per dividend

Before closing, under to Circuit want highlight I the that overturned RFS addition week. the D.C. denial of exemption last small EPA also the the refinery

us and to our our their On note, I XXXX special personal sent employees. of the in In a the in to case, dedication. back difference reconsiders pool. give it started the under in appreciation as the Delek has reconsideration. work us my would Our for RFS We team like retail deserve closing, the we been along important believe petition entire our to DKL Chevron direction EPA the back hard Retail grant EPA and thank I have ruling journey for request. especially exemption X,XXX the should EPA with The division employees,

the over our additional Now on I to who provide color call would operation. like will Joseph, to turn

you, Avigal. Thank

improved operators for were per I'm excellence expenses day $X.XX operating per past you in our the and quarter a compliant and of a was margin for way to second In approximately the and XX,XXX structure in quarter, reinforce our throughput discussed second per $X.XX operations refining XXX,XXX Production very per was throughput barrels clearly barrel barrels high data cost have operating total to of We Tyler, record today, barrel in several safe, favorable per day. proud demonstrate Bottom system. reliable power barrel. results, our which the quarter with led share $XX.XX and line And capabilities quarters. operations assets. our as the

For range. total total In was day per in XX,XXX is XX,XXX the Dorado, barrels throughput throughput estimated quarter per the third in in approximately the El barrels day. the quarter, to Tyler XX,XXX

production throughput our barrel. to barrel, $X.XX and environment, quarter, the were product quarter day barrels to is Our well is diversification forward by the range. successfully was approximately oil the logistics XX,XXX market. freight the pushing After execution per on third backlog driven was for side, successful Operating the Estimated increased relatively for expenses low-margin and product is recovery quarter Spring, barrels Total Big plan a demonstrating first margin throughput day. $X.XX X,XXX in per in access weak our including of flexibility per crude market X,XXX team the per new the the support optionality. results. reflected in initiatives In

We was range benzene per production our year. barrels XX,XXX Springs, Our day later We people, related operation total stability. equipment process remain per throughput which this approximately on the XX,XXX benzene barrel, focused per third barrels range. barrel at ensure for consent XX,XXX margin is completed $X.XX order. in and in barrel refinery, striper per and operating In our Estimated supports quarter the $X.XX expenses $X.XX to Spring the project to target were a Krotz waste to we approach throughput as was day. progress in successfully requirements per Big

the were turnaround. XX,XXX fourth per $X.XX barrel The quarter in the the was barrel. margin of stages quarter for is per quarter operating X,XXX in day preparation per team $X.XX expenses and third for throughput range. production is barrels Planned Our in to final our

in the quarter system is throughput third for range. day per XXX,XXX the target implied Our barrels XXX,XXX to

balances the for the on to Moving Midwest our products in growth the supply/demand second front, commercial quarter Asphalt impacted negatively challenged improved netbacks. and differentials

gaps, to supply. of and approximately Robert turn our loss million on focus over the sites. and generated was each will commercial a continue wholesale I was we for our $XX one the a million marketing, loss call successfully loss and For that, the Of logistics addressing by $XX for reliability contributed initiatives reported advance operational negative leaving $XX to In summary, quarter, same $X contribution teams Supply variance. million the after Asphalt financial by time, for process optimization now approximately excellence million for at Marketing.

move Joseph. XX. Thank you, I Slide to will now

net XXXX is share negative per or primarily the $XX delivering to of shows decrease from a the Adjusted quarter, the of $X.XX waterfall quarter $X.XX EBITDA. share. strong lower to second EBITDA second net in was results XXXX of another Delek had For a margin attributable the adjusted and first million adjusted relative the refining. refining lower $XXX environment quarter. driver in $XX for Logistics or to Slide quarter The was loss first per million the quarter XX, was in million. that million EBITDA of second the $XX negative million loss On from had $XXX quarter primary

our Finally, the due are lower corporate efforts. primarily expenses to reduction in cost

Within million XXXX XXXX payments includes accruals. in addition This to largely results of XX Financing $XX operations is amount XXXX Slide Slide of outflow expenditures. year period capital intermediation tack-on also XX, million payments. the show activities and net timing agreement. cash the flow On million Cash capital in reflects related was $XX discuss including to to to for activities we Investing and of million actual distribution million. million dividend full of Moving the this working flow. in program of an addition $XX from to $XX movements, capital the negative $XX inventory the DKL in offering loss our for $XX is forecast.

Second refining, was addressing quarter primarily sustaining Half capital and of in regulatory expenditures this were $XX spend million. projects.

recent announcement. the broken Slide Net at is Delek full and As year original between the capital XXXX, debt of track on on plant the Logistics Delek outlook for gas was plan XX. $XXX outside out million for

the of million, net of the quarter, items. quarter XX a we $XXX a drew $XXX million cash including covers debt, balance During ending down all $XX of $XX of paid and million with cash million. position debt Slide the

million, Joseph the expenses be XXXX, the In million $XXX and we expect $XX million of addition $XX guidance to between to $XXX third to operating provided and between and be quarter million. G&A for

and around $XXX outlook million. quarter Our expenses for G&A third is operating

through million original reduction As efforts exceeds rate Avigal this our on mentioned, our in of cost basis. target run a $XXX savings

million. D&A is guidance, interest other expected $XX $XX and to million $XX be and be net and to between million to $XX between million As expense

questions. We open will for line the now

comes first Gupta [Operator line of UBS. with question Your the Instructions] Manav from

I'm a I'm trying Guys, obviously, understand debt since slide itself. to difference here, XX with there's to about big between spoke debt. and it, consolidated you Delek just start going

numbers so you basically And to not situation more this be can in this what eventually, X you're on debt. so a to where done year additional and those start converging get holding

what understand be done here? more that trying So to can debt to deconsolidate

trying mentioned. just the you I I highlights get will what point will of to do, to and are giving overview start we with exactly

of sum the in both see and very driving the an you target quarter, DKL, have we value this were As parts investor this we show aggressively. to DK, of to commitment the unwavering

more We a quarter specific, of we I've with From and to that exactly be we all same and cash same to stakeholders the on with a over of testimony to between our the conflicted quarter. availability what do this said created earlier last remember, you That's strong other That's and to DKL, deal time. Manav, of value will this that step. standpoint, To improved ability to along that do April huge million time. did the bring sell that and balance. are the commitment create all it a the we go same able at during in quarter $XXX year build, DK March execution of next to DK over to buy, the transaction

on increased making ourselves grow have DKL in of while future, extend, and will asset, did to huge company basically deconsolidation the X-year steps. moved income towards that, all huge. deconsolidation. of contract see to did basically bucket From minimal EBITDA, and a we're put That's And we have EBITDA. you steps the right from what one third-party standpoint, company and everything us point doing taking In vice swap able economical a the ready. on asset one impact the DKL, additional versa and economically third of another we We the on

more and us for come. quarter huge a to was that So

putting the where out things right is barrel And the less you like your of versus is peers. the bucket. per competitive one So assets some about mentioned right in the delegated of EBITDA

refining. understand, transactions you to with done are on the trying going sit have DKL, of now some within assets So those to based

right the the So we crack better matter, on per in same should environment or the assets a now EBITDA expect like a barrel for that capture are buckets.

Yes, that's We capture back exactly at Manav, value improve time while growing right. refining. the the it you over going DKL, rate got in bringing were the to and DK

to exactly do, right. got like what we'd and exactly it that's So you

going to DKL and be deconsolidation So ready. DK

You got it exactly right.

really, SREs? gallon. The matter what should be understand those last you is SREs, does it if And feel On very honest, is, quick help like to price given be you position one. $X.XX a us your the why crude really

the days very with was Friday. So ago, we were pleased court XX it ruling on

court will you get. something give the right we decision, that? to But color we I and think need hope the why get I made more don't some that's and around [indiscernible],

XXXX $XXX how were under us has denied And million Fridays at Yes, it Manav, I Circuit XXXX, some standpoint, XXXX think to to company it spent I'm that petitions from meet D.C. if ruling RFS, from for very facts a from Court, the the was about you our positive give look going to just in requirements you during time. from out order played for to XXXX, move X us. we approximately the us. for

going don't appeal we from EPA how know more, but XXXX are under we ruling XXXX is RFS we and think court But We to meet have XXXX, that's so requirement. spent million but We are what's after here. $XXX far. happen to extremely eligible positive, more apply done not it obligations doing our for and this that. still SREs, can we to between the

on [indiscernible] role. new his to Congratulations

Morgan Our line Stanley. comes next of with from question the Laetsch Joe

Congrats the on parts progressing efforts the sum here. of

know balance go just a bit towards know but there front? hoping of remarks, to much a the I on I is in more how mentioned prepared it that on So the to I'm the into from you transaction. on proceeds little dive the touched putting sheet, use bit you

We in strategy. past have our communicated about allocation cash the

dividend to growing Just again the dividend cycle. throughout maintained last increased our X% this dividend remind We days. few strong everyone, just by

sustain So and we are very our proud grow of dividend. maintain our to ability

are we'll approach balanced value the that a of have and in late the details on and once give share improving balance QX price, our a more We early closed transactions between buyback. lot see sheet QX. We

tax Just the a should follow-up. quick implications transactions? How from about we the recent think

front, some leakage, structure are retail tax material, not the but we to On there it's that. the will working on be minimize

related the transaction, are as party taxes far As the residual.

Next Neil Goldman question of Sachs. comes from line with Mehta the

the I step this simplify to in structure to M&A does easier think larger get on the you Congrats a on level. just DKL really scale could I way today. I'd announcement to the at be things do deconsolidation? that new help corporate does closer one it guess be curious

this Yes, absolutely. deal. That's the all point of

the rights the putting are structure. right and We right asset under ownership economically

income. to chose the think by of DKL I to first second be was quarter time going the the XXXX, largely X/X third-party

So all that's full for in making huge step real a assets. value those a

our So absolutely. the is answer That's intention.

a and have asset of and providing very the that gas water we the time. We and for Basin, we around an reflect all have products will and proud and crude, DKL strategy in are premier value M&A in Permian that itself location over clear

little And very is had quarter performed And and a Big well. of bit the there's Slide Tyler by it El asset. helpful Dorado margins follow-up tougher seems and is a it Spring on see X, of to dispersion here. lot like the a

look forward? out you? spread, does think that way So how stands to that when about should at the we what the And affect go you

focus in There of of around improvement performing operationally. Joseph terms is will asset Dorado give commercial well because extreme is the more But very it. color El

it. with One refining Similar acquisition consistent oversupplied happy to our the the crude including our core as in very with level, product to we with elevator to lower peers, -- mainly capture clear. back the which [indiscernible], was downstream. for a that job want faced it's I our configuration. The believe and we plants increased peers is Two second trends team Middle and make the headwinds. a increased On group upstream healthy following low three, very similar market is East a weakness, comes seasonal which optimizing doing margin, under Midwest for We're We an is strategic it our quarter, faced price; is the list. operating great basis. on

opportunity low. market the Our access around alternative clearly are when [indiscernible] is

far, overly This destinations progress rocket be the have balances we are improved. the X forward. the execution. and that and executing obvious have about impact Midwest offering the past I'll one logistics the expecting see both on strategic we the into actually last say and demonstrate we to those not product so And and of wholesale talk is identified third next are done definitely thing, the and what margins. call, I'm earnings we And science, now and market in aspect will So we weeks we positive on the quarter refinery able

TPH. of comes question Matthew line the Blair with Next from

the talk second to you jump it think out the I is little do I the from quarter. in wholesale prices then you supply what QX? bit. a outlook marketing and crude Joseph, about improving for lower And you It on you Could on sounds into improvement about side, helped there? What touched want like side. Asphalt some expect tailwinds QX the the in

see do bit improvement. But more, please, an on a Joseph that Joseph. touch will We

Midwest wholesale market moving you we options with is and our improving. when marketing, have the On better the not see flooded results again, will pricing and product the on markets,

On the the challenging, conditions Asphalt we're had Asphalt start range. the expecting and normal the we the year side, wet-weather this to made of with paving to that back go season roofing rough a

plant I on point, then side, yet? that happened at Has was year. that, there of up would diesel the first the half And in start think that in one renewable Bakersfield hope the

that. to So yet. Maybe to answer happen it let question. didn't that He's I Robert closer will

something think are we it's monitoring. I

requirements up the has some running. And with no decision be publicly meet dialogue of the coming information. made to has decision until made, no have their We and them. today, and ongoing monitoring they of filed plant Obviously, been we're

with the comes JPMorgan. line of question from John Royall next Our

sum-of-the-parts the a been effort parts you of to the and print. It's sum with are announcements a complete think after today. retail several are I'd do with incremental with flurry start close closed. this high-level on like deals of with items transactions just question. to How Congrats the you these

You've to third-party fully of get the side on deconsolidation to mentioned on third and more do also party. DKL to the that entity presumably side

So on can you offer in and talk about you inning else steps. can the next what you're anything

to as and enough, close make right of story on starting to that to right need we deals you sure the make to you those in are assets and know those the get done separation long the So order are all bucket, we speak. you're

While a to make make the DKL for and ready and it doing steps. it third-party grow maintain EBITDA dominant that, to we next

All deconsolidation and to same that. are presents of those deal and on those that to buy, you if all able steps transaction, those want completed the build, ready were opportunity all Mark, we itself. close was He the when right anything to was with add deals and of please, time. intercompany very sell to around

DKL I appreciate that think today, highlighted that. we've do week last you it and the But at progress and announced and on our sum-of-the-parts transactions they DK mark journey. significant I

we've interdependence you been think business they the add DK, DKL we're the reducing substantial Delaware, which the Wink-to-Webster between As DKL the processing Midstream, know, importantly, in third-party the to that But will DKL. of extracting combined, announcements, our already this of and highlighted HXO has cited related I DK. of the retail through expansion And capacity is with dropping, gas call value and on are operations. purchase

the we than for prior these consider a pathway announcements. road better down as the much in think and we're were I that, position deconsolidation we to

side. the just is on And then my cost follow-up

second can on the you've million detail $XXX be million? And phase? the some components the a you costs Phase magnitude relative I $XXX first to after mentioned savings? moving X of Is of in there those any anything taking might that think into early. And us what of give of out order completing

of business. are to It's guidance aspects soon. We but that we we'll the be So more in very, that seriously. very impact going didn't give motion is and around very around specific that, taking more everything

tight. stay So

Fargo. of question the Roger with Next Read from Wells comes line

of here. restructuring on parts my question Joseph. the congratulations have progressing the is sum for Maybe I this

Springs Big get to up. hard working been You've

X bringing You the we into, as of the the right support or in EBITDA earlier us work pieces the had X back about enhancing the think about what's that made Dorado. of around think cash for here some these flow refineries, way about units? comments terms generation El to believe, I of But

all specifically? Are refineries you and asking Spring El Dorado Big or about

Well, exciting, Big was at I more progress the Spring. think, I

as going You assets in, mentioned the El was and Dorado, to bringing that's think DKL curious, we deconsolidating also about I'm but I presuming back be just margin-enhancing.

what's the you've to progress the want changes way other think you DK? margin bringing then support about made, So the assets the to into right back from and enhancement make,

So are can switch amazing throughput it reliability, in the contribution. OpEx to the all one teams fixed is do. are handling we sites aspect the do and what for in this each not far the as is with when the and what our calculation what the we amazing more and we is only optimization opportunities It favorable basically of leadership as doing

from more markets. add? have to aviation We can sell payer can octane octane to including convert more right this drive is have more what And other optimization. Mark do the capability the the driving This you higher is we fuel where of Spring system Big day. we from more We some fuel. make jet diesel both to this products, Tyler, we can

the importantly, of But contracts units the mean it with we've rates. little through effectively that but the also DKL to Tyler for of the call, to exchange DK of the future El of specifically and big a Dorado enhancing you're does up those a the the the your and of point, on not refining question, existed uncertainty assets, and I a Big And the your moves Spring, amendment today. and an I but that that overall earlier Avigal DK announced pretty stressed the extending amending touch guess DKL, exactly the know exchange contracts the forward we're over frankly, on things, time a we I right. profitability that capture going assets, years, to market extension and that in to bit improving means physical it and respect know couple contracts. overhang Roger, contracts economic X accomplished to between removes they're announcements

Next question with comes from Scotiabank. the line of Paul Cheng

sell presentation, the share with I DKL Wink DKL. in a what's with missed DKL is with net didn't receiving? we will year Webster and the it I on And you quantify pipeline per cash, think We the disclose you price the down the us DK much for And us the saw what lower million. that fee that pay first your also saying currently expansion, selling basis? is assume or contract either question. you're That's to to are Can how that the you'll price? $XXX maybe associated Wink transaction, investment you're the Should is the EBITDA that that

value it's you is You WXW number. of between transaction net cannot and assume guys DK provide the we that series and a DKL, one-off basically

just So that you assume cannot number.

So a is it's the a of for the that valuation there that, asset. market pretty WXW, and value about of straightforward

-- to DKL with of assume between order DK is You contract deal over going time, we announced. reduced the we $XX from of of going DK, EBITDA the to in over of order come building to the DKL that's to the need to DKL back it's time while magnitudes million that be

between And capture that $XX the better DKL. DK That's the contract EBITDA the like all because in be a to in rate million deal still XX% all, going valuation have. we to are to look going have down of picture. grow. of the road full DK So DKL and we to The of

price drop-down disclose to extension, that price for selling actual Webster the going contract not and or suppose. what's us the I to you're also So

Unfortunately, I can't.

about on than, saying looking that for order already The the and effort question to this a Big the products done at standpoint, markets. optimization from Joseph. trying manufacturing spring make talking the different second that Other and is say, different all you've essentially you still is restructuring of done may been improved changes point? is that, now be other working improvement you're how than you're to at all there's as or

this have the we $X.XX per Spring. XXX about Big the over And that target. I structure, market think on barrel guided we in the quarter, cost

So for reason have special several the still we programs improvements. on going is long-term

sustainable. by that year-end, away be be and will at XXX believe we the go target, they will As we

you Now a to stop start there the defense, very have look working will side And offers. have feedstock a side we on point I the in octane asset, the of great and lot playing when can Big forward. you lot that Spring. and on we and move of made we closely It's a your great ideas before, room

question And the Cowen. Jason our last line comes from TD of Gabelman with

to going contributions. look in disclosed what you've $XX terms just of EBITDA. the million, call I'm I again HXO DKL this million transactions, Paul the EBITDA. $XX gas $XX plant, try at for on is million if asked of what And it, EBITDA some of The of processing

Or and EBITDA is So there? you that off something right DKL. extend. million of the to that $XX amend contract that implies And Wink-to-Webster math? kind of there gets projected for it that then offsets Is DK the

Jason, day comes million over it's to see I not $XX [indiscernible] is back that we it's a EBITDA It's think I of plant, for said example, back follow-up DKL all more to do X. that gas more around opportunity with value good So and that the a Paul, between DK. time. to there in

the step, what for holistically, companies. in stakeholder on give while important sure each didn't is make quarter and on we DKL. So reason and part, transactions, both most improving one That's deconsolidation we're That's the we clear right we our we I achieved the growing are tried, to specific achieve we that making after. think place, and very at on right That's while objective. mind, to want it that look we separation ready numbers And that's very, the capture sure if have same the others between the the and a for you ownership made unitholder. you rate a the is a that of to strategy clearer

how say value you years $XX when many over And million that to do time, take? expect you of

not details, the more and going get [indiscernible] detailed We're to get into some encourage to get you questions. but I with

of question again my other on just once is use then proceeds. And

and now in place expense attack. is Your great high cash that's the of of parent -- terms interest flow It to like seems a the improving it pretty right company. looks

is of So use there just and proceeds? why of one? now is kind priority that talking And through hesitant the right

postage mid-cycle. So at according always looking that to cash our strategy. a And there we we on is obviously, free flow, when are on look

cash to our expectation. So mid-cycle free looks great flow

to to we We return investors. everything and do to have good need a have ability

we So looking very we forward. are are where in confident and

concludes question-and-answer Mr. our That CEO, over Avigal you. call I back session. turn to the Soreq the

around special you execution retail long today. the here. the you our a Thank Thank being you, team We'll you for team and the time joining today. thank the Thank Directors, around a of management with for welcome you focus in that investor, for next and the Board our HXO joining Thank to quarter. us, and the extreme us the employees again for employees table talk and for you. for family the

This concludes today's conference call.

You may now disconnect.