DK - Earnings call transcript Q4 2018 | Delek US Holdings, Inc.

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Operator

Good morning. My name is Ella and I will be your conference operator today. At this time, I would like to welcome everyone to the Delek US Holdings Q4 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator Mr. may conference. you begin Johnson, your Keith

Keith Johnson

financial Thank everyone conference for Good morning. and call to thank I'd like year-end quarter joining fourth webcast discuss you, to Ella. and DK's results. us on today's

can Joining during Greene, President, EVP and found Chairman, of Yemin, The be CEO; our COO and materials today's today's as me be and other Kevin presentation Fred management Investor members call of on the CFO; Uzi Relations our US's is Delek and call EVP Kremke, using well we'll on as team. section website.

reminder, may the Please this see As Harbor statements a laws. defined for X call Safe as is that term slide securities statement. forward-looking federal under contain

Principles Investors In non-GAAP our non-GAAP the report result, addition which can to encouraged financial are financial in of GAAP which reporting reconciliation found relations investor Accounting GAAP, be financial measures or certain results of results. accordance section website. review Accepted to is the in the we comparable posted these on release to Generally press with

call Kevin press are On prepared information will the before over the has review for that, to release closing incorporated few and to cover press in we assuming the Uzi, last reviewed made and offer turn in XQ Our earnings been are call, the market that will Kevin. today's turning covering operations financial performance Fred being remarks quarter segment to over With it strategic I'll release. comments.

Kevin Kremke

great flow from generation Keith. quarter record cash solid our We with Thanks, had results a and operations.

XXXX, per share fourth reported the of or of share Delek or on of $XXX.X share period. for $X.XX per prior to basis adjusted net million US income US an income net income fourth quarter quarter diluted per see fourth compared per X, to million XXXX $XXX.X diluted can $X.XX in compared $X.XX the income $XX.X you diluted XXXX. Delek the net million diluted Slide of share, As or quarter of million of in an On or adjusted $X.XX for $XXX.X net reported the year

$XXX.X quarter Our the XXXX, to to XX% adjusted EBITDA compared increased in million by period. $XXX.X of in the prior million year fourth

Our in the million in year. that Midland fourth drove year-over-year the contribution led fourth also a of by $XXX.X differential a This fourth million quarter margin compared Logistics on XXXX. to quarter quarter $XXX.X $XXX.X crude Cushing to million compared the of consolidated to contribution oil improved improved contribution $XXX.X the million wider benefited a refining of margin it prior margin of was from as to basis. in

quarter fourth of the to During of We continuing great and to our cash a consolidated ended X. incentive XXXX, expenses cash basis, supported due shown of of from quarter combined Taking $XX related shareholders. quarter debt. and cash to operations, expenditures million. our combination cash generated by quarter This the million, the during of XXXX performance financial on overhead with basis X on the free net consideration, $XXX a capitalization. during of flow Slide billion highlights ability $XXX our return of our was million fourth approximately We our into expenses capital fourth Slide $X.X refinery million on $XXX and higher higher had to primarily G&A cash plan approximately and our of were maintenance. $XX the as million our $XXX million

alternative our to $X we XXst. investment generation of should of XX% a net had at Excluding balance by provided approximately with debt million us financial The projects fund debt at net to cash allow on our $XXX million, debt midstream XX% DKL sheet December flexibility and opportunities. depending

to in differentials operations. EBITDA I spread, oil highlight crack potential wanted crude current and the from volatility the With our

of to discount the a Using this used highlighted of on to decks in ability taking the into of $X.XX is IR variations that XXXX. second long-term note at slide in past. our quarter Please account, before operational generate Midland the that this have million current the annual crack our Slide Krotz X, and operations EBITDA. approximately be Springs have $XXX Cushing average should spreads in the LT We of project

December We've included long-term to analysis also benefit curve will an potential lows past. forward at this the March received the in from rents in and barrel. to that Dorado I'd We labors improvement similar to for ULSB potential spreads this note and our is Krotz like $XX.XX consistently crack in used earlier million. year. to spreads average from which the crack seen we the used X-X-X case. EBITDA $XXX our is Springs refineries trading the in approximately per Current a this That El have bring

complete should to As initiatives, benefit. potential approximately billion generate IMO of we $X before we have mid-term EBITDA our the XXXX any

of Krotz at On to our LP our As the to midstream is investments, EBITDA to and goal we dependent project and in while to continue less allocation, and investing our Springs Slide returning reliable retail exploring for our add opportunities the overtime due highlight growth. approach develop operations, crack capital shareholders combination prudently of cash differential the we and spread to business. business our disciplined balance operations list X, to safe the support

based factoring and our our the each past on while use this reminder, different conditions program expected in discussed Company, of as aspects cash for We the strategic in how goals of goal market this generation. flexibility matches that and the financial opportunities valuations balance is have it to a our

in an X, XXXX. creating our in to modeling balance value flexibility through couple different a about business the that industry I We range margin wanted structure With guidance we sheet the based this the the turn to barrel market the continue curve to As items some including from count repurchases our call our driving of excluding think $X.XX discount of on of Fred. in share per over a help we long-term in for gross outlook. to for quarter on nature our estimate cycles to operate, provide provide estimated the in to shareholders. focus first forward share this and opportunities and I'll midland added realized diluted XXXX be On our to a QX of the cash quarter that, to maintain should $X.XX in generation which is flow which as effort would investment strong operations. goal our Slide We

Fred Greene

Kevin. Thanks

During quarter, fourth oil the was XXX,XXX crude throughput per refining day. our total system barrels approximately

pumps the slightly on on Dorado will XXst approximately in March The will began Xth. XXX,XXX with It first Dorado is El rate and barrels February XXth. turnaround the of firing the the seal the Slide the refining throughput per in account throughput we As expect a turnaround at refinery oil begins. day. between shown X downtime following the crude El quarter and on in upcoming X remain at takes operating to the system average into This for XXXX, begin refinery on reduced which and associated days until fire February for down lower XXX,XXX

XXXX, crude the spending update we average per expect to give XX,XXX the During Dorado of at an on projects. between you the capital X, to barrels on and of El first couple highlight day. XX,XXX throughput I Slide our quarter want On

in fourth quarter were to the the during $XXX XXXX. million expenditures capital fourth $XX compared quarter of Our million

million. we For $XXX spent approximately XXXX,

retail, million Spending level expenditures $XXX at to $XX at the in level. capital in system million This logistic in $XX gathering XXXX as million big are the includes and segment, amount the be segment, million. approximately our our corporate screen is $XXX million. forecasted corporate million XXXX $XX included on Our for refining $XX

The will XXth cost the on and expected on approximately completed to March mentioned, short turnaround that to $XX be the and El begin million. units. previously work the is by we plan to turnaround expected Dorado I million majority As mid format operational $XX be This the April. to fully allow process of around refineries a is

III complete this During on produce we September-October gasoline. certain to to units maintenance planned timeframe, work preparations year, Tier have

current the is Our end operational prices, $XX a at EBITDA to be Springs in XXXX, million on Based We the market spent to $XX annualized they in of approximately and alkylation $XXX is million the project through total refinery project this second quarter. be of million. the expected total Krotz approximately early for $XXX million. expect in range would cost expected

our approximately total more million. day. $XX system our $XX $XX Currently, million previous previous $XX additional project for changes of due our segment. some continue into guidance consideration, future timing we on crude by in barrels optimization XXXX. to $XXX portfolio's new per spend convert spent million EBITDA the to higher system. million further and low refining us million routing our provide expect $XXX compared reduce in continues generated stated Big grow. year. The this butylenes The Spring project, butane As crack The products. unit production expected line the still on factors including previously of has is acres by XXXX, annualized million during is into benefit a the the $XXX we gasoline to dependence a Progress and the of an dedicated expected XXX,XXX it and expect million value XXXX compares of business Taking to XXX,XXX than to a This ability change to number spreads. This million range as and for value across have and quality capacity the of $XXX to this producers improves have the will flexibility EBITDA to reminder, including cost this gathering will we to on should alkylation approximately estimate

Uzi the call for closing I'll to turn over Next, comments.

Uzi Yemin

Fred, in and Thank good a great We XXXX. had morning everybody. year you,

which business record this flow through invest the returning provide generated in $XXX attractive Our our strategy to over with organic was overtime. diversity projects to should credit to XXXX. business to of more our increase laid midstream business our adjusted utilized years, our for our We shareholders. EBITDA performance EBITDA XXX% the million while grow We project by cash out multiples. These cash

utilize Permian models is the of million to the this initiatives the it believe becomes capital XXXX. should be Our of system efficient our all partners combination other our potential create EBITDA progressing along We operational. grows supply midstream project should when for different in more projects better continue us with projects. by Basin $XXX to will a to Also, combination Permian beneficial and these million and The $XXX achieve Basin. platform help evaluate takeaway and pipeline combined we project a gathering

to Slide total return market As February In cash capitalization $XXX of XX% shown or on million was approximately about 'XX. XX. our on shareholders XXXX,

we program of cash Currently, with attractive quarter capital to intend we potential million to XXXX. is balances for opportunities stock first $XX Delek shareholders allocation in the growth. believe our of repurchase stock Our and investment

our our the first investing since With on a increase XXXX. our the creating business exploring Board X% addition, shareholders remain as opportunities that, our value we In fourth Directors regularly develop our returning quarter Ella, and we please. increase of balance of quarterly focused stage next in questions, approved which for of growth. marked long-term to dividend our cash to the open call We

Operator

first question [Operator comes Instructions] from of the The Neil line Mehta.

open. Your line is

Neil Mehta

PGC that asset. terms developing I commitment you the want continue from the to off but diversify you the business and the that stake potential some It to the message out presentation sounds to pipeline grow want midstream latest absolutely in start is an to time, from business alternative? today that merge of release as your on -- EBITDA or then the pipeline to the the with farm is what over in of that and like logistics

Uzi Yemin

it the -- not different time. be -- pipelines situation Well said the don't first, the good past will all we that in built. Neil. and times, this past we've that think all all We know enough much We many morning, is in

it few partners, the light the also makes Gathering PGC that in with what and of We and We see in and the Gathering we strategy, especially of our than pipelines. sense growing that combine absolutely of our if opportunities believe expected, other of return to on long-term our are working the these to growing is producers the faster because fact Gathering. our our trust

don't we times want and to the say EBITDA away. as are turn to more us them barrels it four five grows we on more probably Gathering You that expecting heard

asset you if business So grow we continuing are this to or midstream committed to will.

as same we the clear demand very at While they and differential situation we balance the Permian as Basin get want in wide. time be enjoy to supply the

Neil Mehta

And online of it normalized potential guess forward, differential pipeline Brent I what counter appreciate it's see The where that maybe just that the in and then, out be. comments about Slide coming Midland. Plains inverts? actually looks just I and could Midland terms thoughts to that. or Midland Midland, combine be with with WTI a base so helpful would well. like X not $X.XX And So your argument it's -- on, realistic your about your then their case, EBITDA Uzi, Exxon there? could want WTI if much capacity as pipe was a scenario with we framing moving you

Uzi Yemin

Exactly. question, based And we you the of answer is, some on if know, as your peers any no. $XX. cutting people. will company we're Midland other than less have of little absolutely Midland based that our sure heard number, it's is I'm not as And Because, Cushing, And today, production. is Brent. on that

So that tailwind that process we barrel $XX company money. every a is our to huge and we make

January remaining ourselves chance situation don't not that are what It premium in the is was before and $X.XX XXXX. more the that think than the though. for We say that numbers in stay the to coming February production a expected are of the they big $X.XX, that what expected. barrels that just do from preparing there's we saw may XXX,XXX here than barrels will they the XXX,XXX yesterday, more certainly We EIA that the

in So again. Permian balance the the will shift

we given However, other be data I just $X.XX want this differential initiatives moment. would an a for clear, to for any we the and long a $X.XX. reason in and work at of a are XXXX illustration think period see The time we over point that don't $X.XX not that's compensate to

Operator

Our question comes of the Manav line from Credit next Suisse. from Gupta

open. is line Your

Manav Gupta

bad Neil's your A a I've and in quick you done never you've long known follow time up on Obviously, question. life. a deal

on Is XX% announced And for Permian. are you just lowered. which they And not filled another and here before I little bit coming thinking an if know, guidance out option? not consider pipes with if PGC So, you're way you ahead right overcapacity big we reason option of you work the E&P a would the a see to wanted the these seeing an don't basically Permian are today that things on because now? are producers going in CapEx of even some

Uzi Yemin

we a and targeting times long-long to know should that each other EBITDA. not think we we is Manav, do I do X for project any don't think time. don't X that

Manav Gupta

Okay.

Uzi Yemin

Kevin here. on on slides threshold obviously, it one midstream of down the So side, the laid the and

threshold that's that think certainly to not I to these to we project remember So these returns, mind threshold expect now are any they other and to are our our short our but project. term. regard that projects, do EBITDA, times projects that's change But our X going X in don't long-term we're

Manav Gupta

in And the like actually the Okay. refining. looks Alon are assets outperforming legacy Delek assets here

that throw So work Krotz can a at you allowing doing as beat you Big all little the as to there? drive are over on well you that's light the Springs,

Uzi Yemin

do take question want Assi, about to Krotz? you the

Assaf Ginzburg

Sure.

we markets. with on we when products low, throughout of see that we very more as So market. of because was past impacted sell continue as Also wholesale off you run And prices, -- its to paid inability today, about positively a and results initiative money are And the there can you continuing progress Krotz the go we this making lot its Krotz where And you us. to a which know lower RINs year. crude. you the in Krotz. in remember Midland-type of to initiative helpful losing And RIN supportive of are stay to the very think is to are

Operator

Morgan. JP from comes Gresh the question line Phil from next of Our

open. is line Your

Phil Gresh

handicap you And looking I around has PGC, have you to this these pieces if hoped guess, probably had entail I be kind of with at JV one forward to moving some or you a guess were to with more some any move if here. follow-up try move bit alternatives, to were would of anything you if just difficult qualification approach? that would order may there's I magnitude save forward on as But you're other capital type changed PGC. to point? little know what of do maybe

Uzi Yemin

That's a understand from going great I question. we're there-where here.

Let me clear. be

magnitude the I Delek. months It for depends of as And understand the down able the we few what's as -- -- We well believe numbers cost up. be it project. next shakes as to we how that will on together cost are putting the more the in just every the pin

that clear to check I see a sudden don't other shareholders. Kevin We However, well. I about us us prevents doing all of think especially as want the be big writing things, and was from a clear that returning to cash continuing

We are very committed to that.

as or as sure shareholders So that take we consideration think we cash projects, to want into the we also are giving returning we money different very make we attractive. our that stock is to are

analysts to and somebody if I So didn't respond we and that talk some that. -- thinks

million of a now the $XXX on put $XXX of is they we're years. two there and that putting analysts over all check table a no to or sudden million the next Some going buyback

Let assure me not just and will that others happen. you

Phil Gresh

Okay. Thank you.

$XXX next lead my obviously, question, is or down it's and fourth were the into the it's it'd the of in your which cap. buyback you just I still continue, to quarter the of on You amount guess, be basis, million quarter, from small a rate year if million $XX a not But is from full market a first which a step run still first quarter.

here run So thinking has idea is about the how with be this or new rate diffs that? is you could should the that we Midland comfortable be contracted something as

Uzi Yemin

that one. I'll -- He Phil, Assi that. tell I closer is to let answer much

Assaf Ginzburg

year, this XX% return as it's we that between to can, the CapEx When is to which generate over of shareholders. look this the from Phil, taxes EBITDA. of you we're right million and some with million showing Alky If the more $XXX of achieve waivers can $XXX flow million million X RIN cash our year here reduce to of -- $XXX you're somewhere and you presentation, at page we $XXX can and that you free than close interest cash actually --

are spread dividends $XXX quarter lower think crack We million return in buyback current $XX has days. and we million in last can rate at buyback, makes new come that in environment. up roughly $XX know based we up But environment, roughly around us million $XXX targeting the current share roughly million. on this year count, the the in which few of the you for gives which as dividend And

Phil Gresh

this be come then there not a that DKL But on call. Very is TBD? to that any additional from helpful. drop there Some some the downs or competitor was cash I as flow might could And that call is still there was thought because whether year?

Assaf Ginzburg

As call third the drop we on EBITDA communicated on track -- end is the of probably for during the acted between to the the roughly quarter. the And by drop DKL $XX the and second million. complete that -- we quarter the sometime third down down

said So you're if multiples, also to One thing our willing lot times a and to will say, balance order we it million continue fund add planning using buyback the can to it will of cash We're projects do a to we to over which $XXX we're seven and and to not buybacks. cash we flow, free stocks. even Company it have in leverage use buybacks.

Phil Gresh

OK. higher particularly it's trend trending one but a guys the Last I've not well quarter. for bit as Sure, been XXXX fourth but the the would progressed as just others you noticed be just in on OpEx, here for

the unique anything step Or for refining in we So that how think down about should Delek again there might OpEx? XXXX?

Uzi Yemin

prepared that in remarks. the we highlight did Phil,

bonuses want fourth add also great Assi, guidance maintenance expecting Delek we're more the for you have We do be first year that have to of a for back which in quarter. you we color that the the quarter. to -- quarter, than that look U.S. in fourth at line gave, higher Other the was that? to any And combination big if in we

Assaf Ginzburg

Sure.

will quarter half the So Company, our that difference our you for quarter is When the mean given run year number rate. million. incentive plan oil number when at to maintenance that $XX of And is million forecast you million. of number million the had, we biggest below we insurance. OpEx the related actual -- of look QX say total we the -- QX, for the was unplanned our million the reimbursement by combination lower and our $XXX to that OpEx of $XX settlement which including have with I there the at the during adjusting $XXX some look $X accruals the ended Including

saw we the we you to QX if in that expect million overall, in range be what QX mid saw QX. is we So the do and of abnormal use think million $XX what the -- to of we $XXX below

Operator

the comes question next Heffern RBC. from of from Brad Our line

open. is line Your

Brad Heffern

do four kind stepping was looks trajectory You just think five maybe increases I that. of Congratulations of and that mentioned I going it with buyback you of sustainability terms comfort quarters. comments the so in curious or have dividend term the in mean, dividend think gaining but performance growth time was longer the like versus just over in and the prepared forward? about the been up Alon, how what I on you the on?

Kevin Kremke

you aim targeted with business right, said much that also at we're it yield, we pretty we'll X.X% dividend peers. through look to and we -- in at continue to in And line with quarter-over-quarter. And line We of the stay peers cycles sustainable to now. be the

XXXX, look we're at the as feel So, continue to of where generation mentioned, we'll comfortable we cash given with at the and the -- every quarter. business Assi profile for it

Brad Heffern

this question other the slate, crude I the and El was is that dynamics the WTI pretty just a what were Dorado, that I then crude there? then on wondering other what quarter crude crudes dropped significantly the And and noticed increased. line

Uzi Yemin

I'm to if will that. get with back slate. crude sure El We the anything to Dorado in abnormal not need you with

Going…

Keith Johnson

you. follow-up definitely with We'll

what were And and quarter well. the in the they think may swung right -- it operating have you seeing. a bit here course in you And I of of little they run have WTS there. as around

a in that playing slate. seeing breakdown must the the on be crude that role you're percentage So, probably

Uzi Yemin

We do you didn't to want see but opinion at par add now. here WTI/WTS much -- I'll I ask, volunteer Brad. pretty my

the asphalt, Dorado gasoline El especially of to sound. debris as crazy is of price actually the market, in volume of -- as it However, close the the

slate a bit heavy we So, our little after the turnaround. may

Operator

Prashant Our next question Citigroup. comes from from Rao

open. is line Your

Prashant Rao

terms a work circle I to are to of but guys on of the I wanted sense or that in a I would be or you of First, allocation balance historic PGC which evaluating project. up? now in is -- wanted free right -- get just for all qualitative back, cap it, at had freed up the good capital you you be just sense like But portion first if is up would if a the stock some pipeline there's more color, where free-up terms How that buyback the incremental pick versus would discount. a the about the of trading that were Is how enough to back of now variability sort giving versus some of think some re-devoting in investments could recycled that of of pulling you're on or maybe out that deep is it that sort -- capital at the those projects project one -- into dollars other hand, just that terms buyback? of the alternative looking right some to project

Assaf Ginzburg

I'll take question. that

very the quarter to pipeline. huge the comfortable financing we maybe And As the stepped the the cash to the gathering site $XXX Kevin returning flow any have almost was the went PGC at businesses as XXXX project as and/or saw up we know the on that QX, during saw buyback good of actually free in we refinery don't you And to -- million, end you in shareholders. level. already very

trading. So, extra is of especially I the is not really money project, front of with for it's to share would us, idea trading when -- Delek but just the say the look price investors do when is

Prashant Rao

me second the I question just initiatives. my Okay. is bit a that's I leads more to wanted forecasted long-term from the little on which midstream million have And appreciate the the then EBITDA. guys the the it color $XXX here. million provided kind you step-up $XXX on into of walk

How Big where much of in the be is pipe? could that that Spring up the that long-haul how much is of variability bucket how of how a show of -- are of and could sense the Sort during or -- that that Gathering? what's that much of in year? What sort sense

Uzi Yemin

Okay, Assi. so take that let me one

producers partners As want we we have I that partners. do Fred the -- are us did think of people to his with Gathering as our when together. our optimize to were -- putting new and commercial job come to We remarks, job are coming with able little be it in a that system. see And mentioned team our excellent point clear more a I to production. bit system. they prepared with The obviously of more And interest we

X.X So to that holder much this more many than market. and system different XXXX ago, I to think number started producers that we that. change be no we've that more is is as growing years that going know we reason system. we may while, get of plate and that of million our are competitive $XXX into expect people And what were expecting

However refinery lot. being area, only in a the helps the

Fred projects the that's sense? and then it us that this we prepared together, reason times as And the we say, to holder with returns and as down, being X makes are EBITDA, look said, give return? other if what the returns remarks, mentioned So versus to in we -- breaking his X need put everything that the said plate

Operator

Energy. from of Simmons Our next comes Fernandez line the Blake question from

line open. Your is

Blake Fernandez

didn't you. if very RIN And not just had going you any but on typically March biodiesel in far there tax credits. I kind this, know get or your waivers I'm of there's and probably Thank you any to I update believe get thinking there?

Uzi Yemin

the help didn't shutdown the government Well here. of

are credit refinery the chance a over around year. BTC, actually BTC have in --- include The of usually two Tax which and we're waivers. these that. the next you remarks did government. I still just with the last Assi tax working magnitude that we we that we mentioned the waivers. Biodiesel Credit couple made update two of will months. We waivers that -- partners to think we as some progress we But with good waiver two mentioned the there's and for working prepared BTC his However, the our retroactive it And think showed get not page their get X, we on

Blake Fernandez

Okay. helpful. Fair enough. That's

know piece, waterfall I cash slide basically but your I'm decent a is $XXX on about you bit to guess -- on at is this in sounds a have is is sheet wondering line million that a your but deck comments your buybacks. which unconventional fund second uses you it Assi's and like basis just amount net-debt your levered, interest and I with under of looking into little expense And carrying of CapEx. The not your interest balance you're order in growth of and a I are expense in dip to guess looking And overall very kind based general cash.

guess the you're an I opportunity expense bit? of wondering that is the balance down a to and if cash here future? delever so So throughout interest billion caring Get maybe I'm there into of XXXX $X or

Uzi Yemin

the million saying Why We away $X $X.X Blake for way you billion. By don't billion? very take this $XXX from hard worked are us.

Blake Fernandez

there. short a change Sorry

Kevin Kremke

comfortable with for times last our year, at today plus we yes. potentially X.XX%. I sheet. you profile. philosophy than the the of balance at allocation mean, mean, DK term And current to as here Okay, I the we're LIBOR loan And overtime. is refinanced delever today, capital part look more leverage X.X entire would sitting example know

but of than in would in share using is and the I but even reasonably general, the business, ADL cash cost to leverage a efficient bares than balance say rate today. of comfortable interest lower invest our buybacks, So with where it's debt capital more delver that, we're do

Operator

of of line Merrill next Bank comes Our question Doug the Lynch. from from America Leggate

open. line Your is

Clay McCoy

a comments Clay It adding to don't cash far look you flow have have And your your seems under-valued of to portfolio. like goal you Doug. stable midstream is This for during on assets. for

think own at I some you DKL.

question my would feel So out LP to you similar how Valero? is buying the about

Assaf Ginzburg

ignoring least DK the available said, the for looked with fact MLP is as in the holding down, market and -- We've the in and actually Delek very that value public -- think the a good drop no last equity potential that opportunity is the said extremely not being we there trading XXXX. at is almost it at being growth still company. now the a performance that With the and I'm With limited. there with specifically and of ours wasn't DKL

to If to and can do DKL. consider doing will operate strategy continue sure to as value it, DKL will execute get developing long-term So we make want the it Valero did. what that Otherwise, we for for is we have a we'll we are public what company. a to

Clay McCoy

for another one know just prior I answer. the pipeline Midland, is follow starts? that's so your year-end to easy near-term if not WTI you're I your for dislocation My view wondering just appreciate optimistic on an up

Uzi Yemin

the down $XX I'll now from coming And one. much do even what take saw we follow went that CapEx, and slowdown as big -- similar $XX, probably saw we We carefully. watch prices what when we very to that year. of is you idea producers. And to The that a we last more. see we as cutting

see be a if back of However, surprised couple we coming Basins we see -- tighten the as next we $X will capacity the differentials activity Permian $X, $X, picking months and of the over up. won't in up

when the that we pipelines know these are once Corpus to clear thing seeing want come be one that carefully. three I very export pipelines the about don't we be the start move this third for quarter, and will expect the supposed to online. ready we're to that I checking terminals back. However, then at come

that these question exported around all -- So the constraints export, it the I'm constraints all may because sure and that terminals even if that that we will barrels in which terminal area. comes the the Corpus of pipeline capacity in day we have expect the the the one -- not online will

Operator

Tudor, Our from Blair Holt. question Pickering, Matthew from next comes

is open. line Your

Matthew Blair

about $X.XX wanted show the ask discount Hey, MidCush which guidance QX It surprising. realized found just a market this like that's of to little million narrower $X.XX for the than million. to would what I looks we actually

post three think normally a would've of on a you extra of would discount MidCush four diffs. we FIFO so should going there you're I in thought refineries, lag period your wider an narrowing be accounting that through. at And

that? And diffs contribute Are just to impacts that us so through walk could I know there don't rolling hedge this through here? you would narrower

Assaf Ginzburg

What And it I think the the is was we suggested. we'll spoke you to with morning the confident LCM. that due QX. how now right financials. and come that and for probably say was accounting this delay two of We differentials read that note posted to and point not the the inventories, about year-end may we you It up. months the First, impact, as Delek this the $X.X your figured this are and will different. show million on last delay even up impacts But and saw Matt one-month I night enough lucky I here actual

Matthew Blair

were were the And margins good. strong retail retail? sales. margins you side the fuel also headwinds of and sounds looks quarter merchandise it about the in on What really but maybe like in-store Okay, really, some of on you talk just could down merchandise

Uzi Yemin

Well, be or as clear. We down, were let we expecting. weren't high we me weren't

system eventually the as margins side We So, let's optimize our us start into the to introducing up. we pick our mainly talk about and thing. food-service programs margins. to one try expect other initially, we That's which

something of Second sales, we sales -- anything abnormal. in inside see -- terms didn't of

So, I much wouldn't read it. too into

Operator

Our line the Cowen. Jason comes from next of from Gabelman question

line Your open. is

Jason Gabelman

Hey morning I very Krotz on wanted strong. It was the to circle performance obviously just everyone. back XQ. in Springs

of years it a best you I number to at margins I know And mentioned more site. there. of just crude the posted for Permian think was some guys the you was running this of due one through

quarter going impact more as of the things if I due since of benefit transitory break narrowed get how was benefit ended? down it maybe And So, won't is you to maybe how wondering seeing that ground? kind you on And of Krotz Permian was structural the at moving much the could has discount the forward? much

Uzi Yemin

tell you just we online. I'll million to if that's margins, will alky the I'm of we improve going even that surprised because said come are let quarter be that in further And of final million Assi this project. second $XX don't answer the and the the stages come and $XX will to course, past. that just fact of

know comments? take don't to you I more want if Assi -- to make a few

Assaf Ginzburg

Sure.

value. That transportation QX refinery. Midland WTI. there think in for it's alternative one, of Midland the it's of when the about $X is is refinery in even So to to XX% this below running on Springs that slate. with thinking still even diffs It's $X about when crude is the a we the trading almost WTI's less And the lot could you the crude you running over $X.X environment the costs WTI, land Krotz barrels as in roughly it, a

very the for there's I is that running say still beneficial refinery. want So as to Midland

crude we positive the of enjoy actually they're end due way of also the them We more from up have which we provide ability the than the refinery. the refinery product, yield quarter finished during first all what we the prices actually As year, worked. know in us came and in the to we when the to produced guide the

the doing So it's actually crude we are higher prices better. in

So Coast. a in think Gulf together we located with of permanent the are fact the are a the saw I over changes in Krotz that the have that Alky, the we by encouraged lot we year last refinery that and WTI very

Jason Gabelman

higher. I from there's cash for you ops the also outflows were flow provide just then like working else on And capital if a and came anything some Can statement. quickly looked bit don't color, cash just know pretty but impact a financing It in quarter? the strong, cash

Kevin Kremke

Yes.

see working over things So at but capital were and an little improvement a the a also a QX takes, improvement bunch AR for down ended $XXX was Like that so weekend. capital on a quarter. all did Prices puts was working million. is we driver, of a

the a QX the barrels on We so. were quarter-over-quarter of big sitting books. impact. inventory more QX like a up driver $X.XX we was And had then Midland LCM was prices inventory Tyler, or ticked about over example, for then of receivables. then days So the couple down other and less XXX,XXX And

obviously big there movers net was helpful. quarter-over-quarter income and So then favorability

Operator

Benny question from next Morgan comes Our Stanley. from Wong line the

Your is line open.

Benny Wong

your noticed quarter stores number there. took Just of kind the of dip in a

longer-term you view kind if of of guys segment? update of And is sold an that sell your Just some wondering looking you Just that how for if in a did, terms sites? part of it to you down? retail strategy

Uzi Yemin

we opened outstanding we market. excellent Spring them, have convert the stores in We to means and that clear stores, underperforming Waco these -- we to market. results. an to continue build just our We take sell the them of we first and dealer very the them Midland, megastore sell use part and sell sell in and were from refinery question. did strategy fuel new few that and catch. will Actually, take Benny, exited a Big megastores. one that's We Good That's did our

we we transaction. rid macro build like And along and at the stores. So paid take the of remember, the we stores and generation the strategy. as long-term all that's the strategy a get new megastores, with to time off be money macro did But it will obviously stores underperforming when same the did all the

Benny Wong

the Uzi, really color. appreciate

a upon can Just that through level to want guys know you step be at the the questions to a cycle. follow-up I question build dividend. on the is prior that really maintained

look a us at it, or define will how as go leverage kind curious, we for with payout next there that over guys couple ratio sense a about years. of or of you that to Just Is logistic target particularly your forward? significant make growth think

Kevin Kremke

ratio targeted payout necessarily. we a really specific Yes, haven't

earlier. Assi walked through cash the free flow

shares, year million becomes for buybacks. as $XX available in gives us a of burden targeting the million So cash continue $XXX lower. And dividend we to obviously back dividends share buy

with our lower said share So with potentially the increasing further, count, but to peers. dividend I look at we'll our line as the stay is in intent earlier,

Uzi Yemin

of shares sheet now guideline slide million. want number thing back the be below saw And getting you to And add the number $XX Benny, to expected we're with on I action toward that what to our Kevin guideline the sheet, what sure or almost our to shares. that I'm way are of one working that pre-allotment more -- said.

all along. strategy the that's So

Operator

Mizuho. comes question next Paul from line Our Sankey from the

open. is line Your

Paul Sankey

for circling addressed I within thinking you into on you've the the wondering commentary imposed oil sort you for that about markets? but that? are That extend of EBITDA, this, sanctions IMO you're what I could outlook will think was if you be know Iran? And

Uzi Yemin

upside from thing. part benefit That's quarter be we here. a but one any reason think that will or The we numbers there IMO the from that's there do So factor this did previous IMO like showed should first be conservative numbers we we numbers. didn't these quarter. of know into that We think -- in not even continued anything not

Second, the see I think the higher. heavy all Venezuela the cuts in spread drive sanctions Iran, as the we the of sour marketplace OPEC on Iran, combination and

then position off. pay not So come our like continues coming United from mainly should if this barrels entirely the -- mainly, with States as running

Paul Sankey

Okay.

for you what So a do current the could IMO And beneficiary impact you're think you sense have of environment? market have?

Uzi Yemin

for In use our internal modeling, months. sometimes XX $X sometimes we $X,

Paul Sankey

what? Of

Uzi Yemin

spreads, better Of X-X-X spreads? crack better crack

Paul Sankey

On IMO?

Uzi Yemin

Yes.

Operator

of Goldman Sachs. We the line have a question follow-up from Neil Mehta from

open. Your line is

Neil Mehta

the again? out to sorry two here. back call working the you really hey, questions capital quarter? Kevin, in did circle What number quick Yes, was it

Kevin Kremke

capital The benefit of call order it around was total the a working we over million. little somewhere but didn't out it $XXX

Neil Mehta

online? Dorado. And ticket just El the follow talk then up you with it about at what plan to Can asset the happened game is the back just get and

Uzi Yemin

Fred?

Fred Charles

Neil. Hey, Sure.

the unit. of a areas the a in crude had pump on we fire So, seal one of

a Fortunately the allowed critical it and to area days. that be restart seven wasn't about to refineries in us able

repaired haven't that March. repaired it at we during the already damage turnaround fully of will if existed All be

Operator

at no call over There to would Instructions] like the to closing time. further are turn I the now the management questions for remarks. back [Operator this

Uzi Yemin

you for friends for their the wonderful your confidence wonderful, like Thank Directors talk thank like support, this thank of employees I'd a great for it you, Have to colleagues I'd company. soon. our great We'll in and to around a wanted analysts want Ella. my here year. for the to I continued investors Board and day. you thank making interest to my to thank our mainly but company is. I the to table company

Operator

you today's call. participation. your concludes for conference This Thank

may disconnect. now You

Delek US (DK) 20 Feb 192018 Q4 Earnings call transcript