DKL - Earnings call transcript Q1 2020 | Delek Logistics Partners, LP

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Delek Logistics First Quarter Earnings Call. At this time, all participants' lines are in a listen-only mode. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] As reminder, this conference is being recorded today May 6, 2020.

I would now like to hand the conference over to your speaker today, Blake Fernandez. begin. may you Blake,

Blake Fernandez

good us would discuss on quarter Partners’ and everyone Delek to for first results. financial joining this XXXX morning. you, like I thank Logistics Thank webcast to

and will on me Yemin, partners Ginzburg, as incoming the Reuven today well members CEO; Joining management be as team. Assi and other call our Uzi general Spiegel, CFO, CFO; Chairman of our

laws. forward-looking is statements this As call being under recorded federal will defined a securities the as make term is reminder, and

reporting in certain results Generally Accounting to with addition report In we Principles financial non-GAAP Accepted accordance or GAAP, results. financial

to the press of can encouraged be are the which these Investors which the our website. the in on review section release, non-GAAP to financial Relations measures found results, is of GAAP comparable posted reconciliation Investor

assuming first are information the press been less remarks release has are made the and market segment and prepared in press quarter being reviewed incorporated earnings we covering release. as that than Our

results, I Assi call, will today’s review remarks. strategic few On will financial begin overview, offer closing a will and with Uzi

I’ll With Assi. call to over the turn that,

Assi Ginzburg

Blake. Thanks

from first benefited a Assets. Dorado and Gathering performance results from East on marketing, year-over-year assets, our basis Paline El quarter Texas the Our Pipeline, improved

approximately to interest first $XX.X the Our DCF prior period. increased the in year net XXXX, quarter compared approximately in was income quarter $XX.X XXXX. first in The million Partners’ the million Limited XX% over

approximately in which for first XXXX, the was coverage, X.XX year prior the X.X Our period. to DCF approximately quarter of compared

our quarter represent consecutive quarter per XX unit XXXX over the than our paid prior and our on XX, performance March X.X% the increase XXXX. and distribution. quarterly our to EBITDA XXth increased quarterly This distribution was is which XX.X% limited for periods. This from year outlook $XX million, foreign May on higher a Based ended a is and first $X.XX the XXXX. quarter X.X% represent increase be we increase will fourth distribution

approximately had dropdown, on available completion $XXX XXXX, credit capacity of and DKL At the our after March $XXX million XX, facility. DPG million of

ratio was times under of debt decrease total leverage X.X is prior and our times in total from and the allowable leverage X.X Our credit facility quarter. a within approximately the $XXX times X.X a million currently

turn discuss call Blake to Now, to I results. the the over will

Blake Fernandez

Thanks Assi.

quarter or Partners’ Logistics in reported the in or net income million, prior interest XX.X year, first million as representing net XXXX, partners XX% fourth to to prior million of $X.XX increase of the compared approximate in unit, all For year quarter unit attributable per to Delek compared Limited period. income in XX.X an per XX.X the million was the $X.XX XX.X year-over-year.

In our XX.X XX.X our increase was pipelines in strong compared the and gathering segment, and to was primarily first strong million XXXX the of performance quarter of million, XXXX. margin first at Paline assets to margins transportation the Pipeline. from This quarter attributable contribution

year. expenses increased in an our year, our XX.X and in the wholesale first million marketing first this to XX segment, million from increase the prior million terminalling in which XX.X margin Operating was million XX.X of contribution from is quarter and quarter the XXXX

were million year lower X.X than of prior expenses Operating the period.

barrel prior the was quarter first year. Our Texas in barrel in $X.XX wholesale gross per quarter, the a margin $X.XX to of first West compared the

period. day, compared was barrels in in barrels year throughput However, to West up XX,XXX the day Texas per prior per to XX,XXX

maintenance. first joint in quarter XXXX was million venture included million, were approximately first crude of compared in approximately of the X and quarter X the oil Capital our X.X X.X to pipelines million equity of million of expenditures spending prior X.X million period. year discretionary the During and XXXX, from income sustaining

XX.X forecast million and total million maintenance million, million of of has reduced been X.X our expenditure XX.X XXXX, discretionary full-year XX.X to For capital. which from gross capital includes

for Uzi to over call the turn I’ll closing that, With his comments.

Uzi Yemin

Logistics Delek XX% strong last everybody. quarter and delivered XX%, net and Thank increasing EBITDA in year. performance respectively, Limited morning in financial income interest with approximately Partners’ first the you, versus and Blake, good

from distribution next the integral in and on DK growth business of quarter is of sponsor was part footprint. First over X.X% DKL our step expanding The recent growth a for basis. the midstream is Gathering Permian year-over-year an our acquisition

our increase. We in LP cash expectation the on year, compared distribution year distribution to reiterated even an coverage generation year, Red this We distribution flow ratio X% outlook factoring recently from expansion. increase River XXXX. of decision half improving based the This expect the the increased was second our the the path throughout in after on for to

and the significantly industry our toward year coverage use time flexibility. over to and expect maintain excess to reduce financial the average to leverage toward ratio plan We improve strong flow cash

drop opportunities down demonstrated attractive We who also support through for our potential to sales. strong sponsor has assets DK from explore continue DKL

the call I'd I Before our questions, thank and last Ginzburg, years. open Assi few CFO the to moments for take a few for minutes for his like service XX within exiting or company our

and also, like will who of DKL few smartness, us ability demonstrated his great for our its tremendous CFO, I'd new last contributed And has dedication, leading success. welcome I'm has do help the us. to Assi amount sure significantly to over years, to Spiegel, Reuven

that With call for operator, open questions. the please

Operator

Dounis. [Operator Thank the first you. of question Your comes Instructions] line from Spiro

Spiro Dounis

everyone Assi morning, good to congrats Reuven. and Hi, and

the when you pull away? you the comment for the timing how that ratio? volumes. just the coverage West the Uzi drilling looking to as rest talk some on well it demand coverage improving just understanding get just current of maybe to to thinking impact the of headwinds distribution and starts the COVID DKL Texas and comes activity a of as can impacts, So, year, with the when to really to wanted marry for about of Just impact you're better lower about

Uzi Yemin

Well, morning. good

would to we several question this morning. Your components like has that answer

over even comfortable the fruition is into more the First quarters. of that several that though fact that have will we few in especially macro than next the light environment, all, environment the actually industry, DKL thriving for not projects still come in it's of

done have well industry said on next that as leverage both the that you will, in get assets well quarters, Our couple we coverage, to is we it if as a average, and significantly that quarters. together as hope and we we have goal of will very leverage, towards come investments drop-down, to strongly over ideas will next that the few few and as improve around coverage both over the the fruition our with

have how I be of coverage that to the didn’t internally the the we would the say toward we we and not just want would can – end dividend see raised leverage had year. the good not

Spiro Dounis

I'd Okay, like]. [so

Assi Ginzburg

I know, by to lock that going about EBITDA. XX% obviously to strong would to you're have you sponsor, who's of so helps with drop, a the lot our Yes, MVC’s basically, underpinned in obviously just add Delek you, that XX%

Spiro Dounis

guess, run And that's good you guys have on hearing volumes that started no, West Yes, some point. in far about a the just some shut-ins Permian Texas significant pretty see hitting in curious so volumes, to on I off the there? the May, if then just yet

Reuven Spiegel

Good morning Spiro. Hi, it’s Spiegel.

So, demand around we back West the demand two from are month have in the we as weeks we but less average in for and seen to more see, starting during or April, what in Texas last pick decline we demand now of XX% so what or area. up some consider the the we've seen

nice like now in So, seen decline U.S. a the across a we’ve bigger obviously return, there was

Spiro Dounis

to necessarily they've able in of know. you peers sort your Okay. new, mid-stream but the have quarter limited Good here, always firm or opportunities places of not invest to to me, have guys just ever, for talked been from that a little something saying to And some really more last the of about find grow. been two, last one now kind than

curious is organically, you strategy the and of mentioned see and augment to obviously which this energy drop-downs, for opportunities, market that even if state new You the here. maybe mission grow

Uzi Yemin

that all midstream more another the near million million and be three drop of likes over around come to market is of our or where the ideas that years the happened. The we few $XXX the a valuation drop-down system goal next step. said do if the really we businesses be gathering surprised ideas over with between down the drop-down, day in fit we future, the years. long about of We I Don't these have that couple know that two, EBITDA is mid-stream. Well, that the grew $XXX

DKL We the in DK and shows has believe conflict reflected committee. both that

things to three two we're out still work happening, $XXX can that the So, over are the with we next confident EBITDA years. that million the mark of

Spiro Dounis

That's Great. Thanks, everyone. me. it for

Operator

[Operator Instructions] comes now Baramov. from question You're a of line Ned

Ned Baramov

would elaborate the as have you potential The drop-downs seen transaction contractual question, maybe whether or of the drop-down? the protection future provisions in on take of and a the form little in a last such could pay same bit more timing

Uzi Yemin

gathering of future. to a or We it's be looking when going to no great we look happen the there meaningful tax tax which down the I'm at was that. no it or that consequences did drop the leakage the Don't did the We're to over was in going achievement. drop-down, if of need still near timing. with We remind great you into drop-down. a the or next tax – surprised

as these that. to looking any look carefully. approve committee need at conflict still at We to want very as leakage, we don't the So, tax that well we're transactions, need but

million $XXX our EBITDA us be that these on this goals. to we toolbox $XXX average and another get tool close coverage – and to to leverage, want in million with we said, is industry we As believe towards both

Ned Baramov

drop-down thinking deal? of are this on then elimination, And a transaction as Great. the potential of still part IDR you

Uzi Yemin

transaction few that IVR DKL, straightforward sense especially not make today's was in ago. transaction need and both months to It's DK The for a market.

for this We are point, make returns to that it almost need week. makes every sense at transaction That’s companies. but will easy and ends at an sure not both we at to looking look that both

Ned Baramov

then QX one Strong last additional fees of seeing on was details me. the throughput drivers and on margins the Pipeline the behind you pipeline? could on the And you. your Got for you're provide Paline results, maybe question

Reuven Spiegel

Spiegel. Good morning. It’s

board. are and looking that around now So, looking cushion the on you obviously, is Paline, grade lowest the the grade if the U.S., on on you're

to are somewhere We about Red QX. the River around expansion finish on

you plus So, if to see putting together very future one Paline. a bright are you one

our that the you and in use serve will to future. we Paline the together QX finishing partner put So, very on that can plans and expansion two nicely the are with

Ned Baramov

you. Got it? Thank

Operator

have presenters remarks. no We closing time. your for over further it this I'll any at to back turn questions

Uzi Yemin

thank dedication work especially thank table of my to your Directors the to challenging for employees and investors times, we'll Also, and in I'd staying like for Board soon. the around for in Thanks us. and healthy. confidence our the confidence everybody, new their like your I'd you thank the these to us. them like team. like I'd I'd management thank for colleagues in to to and obviously, talk

Operator

conference for in you today's Thank call. participating

You may now disconnect.

Blake Fernandez	Senior Vice President of Investor Relations and Market Intelligence
Uzi Yemin	Chairman and Chief Executive Officer
Assi Ginzburg	Chief Financial Officer
Reuven Spiegel	Executive Vice President, Finance
Spiro Dounis	Credit Suisse
Ned Baramov	Wells Fargo

Delek Logistics Partners (DKL) 6 May 202020 Q1 Earnings call transcript