DK - Earnings call transcript Q1 2019 | Delek US Holdings, Inc.

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Operator

Good day, ladies and gentlemen, this is your conference operator. At this time, I would like to welcome everyone to the Q1 Earnings Call for Delek US Holdings Inc. [Operator Instructions] Thank you. I would now like to turn the call over to Keith Johnson, you may begin your conference.

Keith Johnson

Thank you, Laurie. morning. Good thank to us XXXX discuss to call today's financial for webcast and DK's everyone like on joining conference results. I'd first quarter

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

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

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

prepared review less financial call, that been release. are the over today's to cover are press we earnings Uzi. information give as reviewed an overview press Uzi I'll the call and closing that, release covering turn results, Danny for has strategic then Fred few XQ Our made in will is will the incorporated being On the offer that in market Assi performance segment will assuming operations will then quarter, comments. With remarks

Uzi Yemin

in our a we investing our to great performance as financial back while Thanks continue Keith. a Great to cash this to great businesses. quarter. had that’s We be return quarter shareholders

LT in few Krotz minutes, Fred turnaround and at As project April. at Springs El discuss we completed the in the Dorado will

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

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

Now discuss Danny to I performance quarter. will turn it for over the to financial

Danny Norris

reported Thank $XXX.X or share share per quarter net $XX.X income net loss million Delek in you, $X.XX Uzi. $X.XX or of of per a to the basic US million compared XXXX. first diluted of

favorable Our quarter more consolidated contribution lower quarter from period, period to the of was income $XXX.X of from million in crude a sustainable compared a this of approximately first refining $XXX.X improved refining This and in related included expense, Midland margin which management benefit waivers of margin contribution was million an rising million the $XXX.X year. $XX.X tax generated quarter million by brand at million inventory the of prior first biodiesel commercial strategy last price compared $XXX.X first increase during in active contribution differential, to million results the to performance, of $XX.X In led and XXXX. credit. RINs the year year a oil, This by margin prices. rents of driven

or did rents tax results from any not this XXXX include regulatory first the During year decisions the quarter on labors of benefit credit. biodiesel

first net in We the There cost I matters. million basis and these quarter $XX on related of benefit was on the disposal note the continue with results. and of partially the reported that a pretax refining approximately and inventory adjusted emissions to of $X cost market adjustment primarily inventory segment. basis by our costs approximately a both to XXXX or work was to government and allowance asset an million on offset in want offset benefit pretax the do of reported of adjusted results lower

cash to This as of the quarter shown from cash million operations our through flow investing of continuing business approximately Our with $XXX cash financial performance Slide XXXX capital generated during first on combined the $X in X supported X. net basis of performance $XXX million solid the on approximately million $XX of shareholders. debt. our a quarter returning Slide approximately billion with of of highlights and and cash ended million our expenditures consolidated $XXX cash the capitalization. first We

Excluding Slide on million net balance of X, us fund debt March at financial of of million cash of to XX Delek XX% we should with had debt investment opportunities. this depending Midstream current alternate to flexibility from XX% net debt Logistics allow our operations. provided approximately The an EBITDA our highlight our $XXX potential I our to projects want $XX our generation at year. On sheet

refining slide variations includes on have improved long-term highlighted the refineries this our the the average discount operations annual that current at across at It and in a a a initiatives to the crude and have $X.XX we benefit our alkylation RINs is Midland of as from project Please slide note which includes in Krotz backs operational the generate Springs and commercial $XXX received presentations waivers net that Dorado past. our El Springs potential spreads Krotz the slide, crack such We now have this consistently of benefit this to also approximately system. ability of sourcing, EBITDA. million used our past. Using from and in Cushing

the we benefit. $X any to As billion should in initiatives, complete of IMO potential generate we before of our EBITDA Midstream excess have

of forward based to business. turnaround we hedging the realized headwind less rebuilding to from continue We would I unit provide On on generation $X.XX our El gross Krotz do our of in Springs alkylation a goal some to As a the of retail midstream our guidance want range I the timing our realized which investments, in Slide for inventory million help Midland per that spread flow $X.XX operations. modeling combination margin EBITDA XXXX. combination the second and of discount be our quarter XXXX to add and curves the X, our and from of due differential we note in estimate following expect second want develop cash our the to to quarter is at to $XX barrel operations, the should and dependent of continue driving overtime losses. levels crack Dorado crude

quarter During XXXX, continued to based first compared spreads crack per XXXX the Xnd improve WTI barrel Gulf in per quarter the $XX.XX May of X-X-X through have crack on the $XX.XX of barrel to averaging spread. Coast second

timing third Cushing In May addition and has and widened the should This crude taking consideration for purchases. Midland operations discount benefit in in quarter refining inventory oil our effect. June the

turn our the I’ll to Fred call to operations. Now over discuss

Fred Greene

Danny. Thanks

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

The turnaround Dorado. was refiner at on oil completed the refining April operations. for is on XXX,XXX and Slide now normal capital on system XXX,XXX in quarter XXth the to second takes back X, of this average turnaround $XX expect barrels costs between account shown to began Turnaround the XXth. Total for As El crude was day. and This XXXX million. per we March approximately throughput into

of XXXX. $XX units. Capital our quarter per During the on turn allowed average This format we want to $XXX second day. XX,XXX was On compared first of million X, to work the during in between El the and spending. the quarter expenditures a the I Slide expect crude quarter shortened were first XXXX, majority completed the barrels be capital to oil XX,XXX at throughput Dorado million highlight around to that of process

operational $XXX $XX expenditures Our to I'm that forecasted is million number the expected million. prices forecasted This for to the XXXX pleased be the logistics, early $XX in is million. at refining, in on corporate currently the in announce million refinery million The Based retail, $XXX contribution includes in alkylation be $XXX million was Spring gathering current and corporate spending in at are annualized system unit XXXX level. Springs on capital $XXX Big EBITDA million. April. included $XX level our new that approximately market Krotz

ability and into across improves to alky provide a As low butane production it products. flexibility higher additional reminder, the should as convert gasoline butylene value value unit the

future future an of the refining segment to on number $XXX compares million. increased our more spend and factors which of million benefit the the $XXX to in capability support million XXXX. generated Taking number in the previous and line previous growth or during $XX Progress million including by in along on achieved the system. spreads. accrued million million also Our is areas our include our total this producers into should XXXX. This $XX a the consideration, to $XX portfolios of expected of has reduce range $XX $XXX Big EBITDA we be an business compared approximately unit our due fully connections crack estimate guidance with of on spent spending is This by that gathering to XXXX. change production and alky The addition Spring approximately we of XXXX, additional quality continues annualized new dependence project, expect million storage to approximately EBITDA of to will cost further expected

capital project our the reminder, a expenditures this develop adjusted as system support plans. producers our As growth to we maybe for further

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

Uzi Yemin

the and refinery Fred, that EBITDA was benefited to Krotz Also, XXXX, our have widening to that and in performance factors refining in WTI-linked greet were forward. operational benefit as system continue This first start rate. to us as a improvements morning commercial differential. great crude been including built Midland-Brent well These to a initiatives our have initiatives the Thanks, good going improvement continue and everybody. business. improve that Springs quarter implemented of capture our should system we from These

Alky in from In would benefit place, Springs. new the Krotz unit addition the to which initiative at

market The currently remains continued of at oil add gathering crude Permian crack increase our environment activity to year the As system beginning progressing should differential The quarter, Midland-Brent we Basin. the support the increased and for have entered acreage dedications. The is business our producers barrel. with drilling improve. walk conditions to the $XX in and continued to in price since the is an we second attractive per have model. spreads This

to quarter, pipeline During more in explore PGC proposed one us haul options the long announced allows Partnership. the participate favorable to we the project. of exited This

combination us with million Slide EBITDA by in of these on XXXX. $XXX projects achieve midstream million help $XXX X, initiatives, shown along to other As the should

Slide total on first return shown $XX to million As approximately XXXX. the in cash was XX, of shareholders quarter

Over the or our to capitalization. market XX% return of would last million XX, months about twelve $XXX March

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

our dividend, quarter consecutive approved marks which fifth in quarterly increase X% our Board our third In regular Directors increase the XXXX. since addition, of of

will term cash questions. can Laurie, that, balance next you focused to in business on our returning stage for call develop remain and growth. open to value please exploring we shareholders With our as the opportunities investing creating our We long of the

Operator

Credit from Gupta [Operator Please questions. Instructions] Manav Suisse. Your first line comes from the ask question your of

Manav Gupta

Good you morning, it see like and I this El that guys beat it. were Tyler was am and congrats big or deliver very Big glad and mediocre this to would good guys hoping last in beat Dorado. the Springs a was big delivering and beat the we What fact hidden be XQ, also all Krotz somewhere PSX on the there beat had quarter you the really firm about and time was beat

you project that's I'm My doing is is So as project, we not midstream PGC do we how side, looks eye the investors understand forced at it. are proceed, PGC Big but effort very Spring and more trying Springs management working. really that… we to like on extra were project Delek on the love everybody in on versus to question which management investors the It's with and the project, look being fell replaces bring the when stock ensure all an a little The both What in could a Uzi, strong big see management investors made midstream outperformed. the investors Any entire or Big which loves were board. right. it that comments next to is to did more project why never make views it when for case on divergent. it, gathering offer like way portfolio it, actually right

Uzi Yemin

the of last months the over really first happen. work kind here Manav The words. hard you thank all make these team Well, for really initiatives to few

last long haul haul. So, I the am something do good question, is long job very the of time PGC and what to with that we probably achieved didn’t about need proud we and strategy we clarify vis-à-vis your

move is these along that we to to don’t access all midland other use own places. destroy to utilize gathering intent the Obviously, want our form both we Our to some to market. and get to barrels our and

want will fund seven our we the we the commitment past, So pretty should or Also, on producers that’s haul times be the EBITDA seven at well, which and with times and to are the least new in Obviously, a looking as our do at in the to mentioned supporting project. for we commitment projects. that make EBITDA five sure all be to financing take not it was XX% you as projects return we long if fully we’re and at we all enable XX%, the healthy. our which if return will that five

about Lastly, I will emphasize the said that we announced at want give them the of when will make and just to time we them we are several there a what looking market. we decision are projects, and few notify

Manav Gupta

to any am follow an it? HEP Uzi up. and agreement a expires if renew in with you if and correct, plan somewhere I those leases has for quick that Thanks HEP DK from comments spike XXXX

Uzi Yemin

got Well, this did once and the year. believe prospects, we to the end do expires we to option It grow a several I close will something market from we work HEP very very, We the how buyers make and with one so. loan. we that of are agreement decision notify go by any to with was

Operator

of Your ask Please from the Sachs. Neil Goldman from your question. comes next question line Mehta

Carly Davenport

This questions. for taking is Neil. the Carly on Thanks for

The first one is just on spreads.

the so expectation Midland think for I spreads. is

we so see pipes now expectation those move think is as but the more XXXX recently. for more to as is come widen Midland I online we’ve to

trend and in in can how are has about expect think to just what the talk XXXX? you going So diff the XXXX, driven recent you you moves then

Uzi Yemin

in diff and Midland. we quarter narrow why, the and now are second probably third early balanced we expect to get because quarter, more the The pipeline, we diff in

on barrels. if Corpus off-take Corpus clear in as in capacity and to that are [indiscernible] one situation take am and some want terminalling dependent to I thing, And However, big emphasize and Corpus. the I not Corpus these here. at all something the That's ready the sure the is of

Corpus to see and the point was very the pipeline at beat wider another The quarter with sold to going is much, Corpus the pretty terminals situation depth may the trying few that’s situation believe we several before to So with connect fourth themselves one can’t active out first this situation. quarter thing.

end closer we need Spring in Big Spring Big been allow the saw these change system that’s the the barrel to long would fact the this the of Asia. or system be day it’s the our to and to barrels in gathering term Now mind quarter, it barrels Gulf good enjoy doesn’t that somewhere term the the Europe of us strategy. our as gather exported in quality of In long how and know in to the not the by we situation all the in being but and

WTI. much that by we're the the So the of the diff is by end at versus looking more Midland-Brent Midland day, impacted

Carly Davenport

this And quite then the strong follow quarter. looked cash up is flow, just around

also for can another both just talk the about of here. and dividend one, and then on in any returns out number wondering the if impact Just buyback following year wondering rest capital on call there views if strong the quarter to working was that the capital you

Assi Ginzburg

headwind First XXX,XXX was in flow, I'll start Tyler refinery. cash flow there the rebuild to the barrels of roughly with the inventory cash some

So being that was for QX. said quarter. offsetting great even very was it a Without that flow with basically in cash quarter strong the the

capital to has return different. and to you quarter shareholders was this no it As capital return as of know excess cash

increased stronger direction stronger, we so came no the the to this change results it and market million in anticipate top As our the of XX there. than quarter on dividend materially up buyback we're what even also

Operator

Phil the question. JPMorgan. question Gresh ask line from Please next from your Your of comes

Phil Gresh

Spring be one haul questions long XX know just of Big I would implying follow-up you're the of on about. been think of guess clarifications, is your already that it's pipeline. this. gathering. trying to or $XXX improvement In the about EBITDA about Midstream just mathematically asked or I'm million a maybe Couple slides I bit so

XXX in be will think there the So haul pipeline. still it long million for embedded I

getting to multiple, times You five an mentioned talking pipeline. you're also existing build a in about but seven on potentially

you'd be of also should tie this project to to financing thinking something cash still So your trying mentioned that the I’m so just of that be like and be able we achieve you would order altogether? it magnitude that be expectation would about

Uzi Yemin

more $XX to but morning point is slightly, one producers which to system. to dedication. Good we question to one your Phil, more in remember the point million missing grow in coming have and continue is and the and to there quarter more that us more the gathering gathering just EBITDA the need missing growth million system We we and this and have acreage $XX

in assume wouldn’t coming expected. $XX way barrels $XX We of way little I barrels one XXX,XXX million think would the that better see the what system Permian closer growth thing. day more the even that’s this we is That’s more to the gathering thought to and one being thing. barrels from than probably little year Basin now stick million. than acreage maybe XXX,XXX So expected to coming I we to By was EBITDA more our we

long picking obviously we new sure that this of part the here we were how times than to make want And certainly that’s the five project decision fully about And long in because don't to we like. we about want not go go to without to EBITDA. more right clear people that’s haul couple we also the enable need are funded we the very past to still make haul, with. we and said Second financing and seven

Phil Gresh

downtime expectations. our full the amounts And able press look very quarter. you margins question if excess quarter, being barrels well Permian there. we're about at despite to gross the strong of on in El example for talked there Dorado of Obviously release I run And second in the just your

in Permian an I'm make despite just quarter there downtime? of barrels the sense reselling a was element strong result of such trying to the So

Assi Ginzburg

enter different the inventory as quarter quarter in basically the lifted come the into first we into them as throughout So, prices and agreement going turnaround the the we did some our El around up the manage refinery. hedges internally. J-X We of we slightly Dorado hedged

So there press on inventory mentioned the managing the is the cover as release. a profit taking from there of we

Keith products during and selected sell tailwind did prior quarter I produced provided the will a say that and the during script to during the the quarter in Keith we quarter as with suggested Dennis and Second, we this script. that

Some But look at XX the the next of refinery. reversed it in amount and you the of we’ve of million. we overall, in was almost we bought be quarter Midland supplement sometime the majority which basically no WTS crude and if quarter, which roughly of will crude add WTI the local

was fully to that a system. So the across of run barrels XXX,XXX all ability we utilizing the that the have and day

So reason barrel we that refinery. of of have sold on $X.XX the enjoyed prices render you towards can’t RIN barrels, lower $X.XX, inventory why a of came least RINs meant the really the and say I just the almost which the benefited course, to we I RINs very to ethanol down the know, end as quarter, benefits right at

Operator

next Holt. comes Matthew question from Your Pickering, from the Tudor, line of Blair

Your line is now open.

Matthew Blair

for break I and FIFO you the like there moving parts in was versus few and a so, but benefit out tailwind Krotz, it LCM there LIFO be think can there? $XX of the inventory Big here. on million El $XX the Dorado, here million, positive about inventory had impact Spring Thanks. a quarter the picture portion What there Assi, sold margins you at you FIFO if benefit third might is a some sounds from

Assi Ginzburg

Sure.

of that not had which of of adjusted LCM, actual effects. on the results we So the We let’s start million inventory with cost or results $XX was market lower the million, $XXX roughly left million we the so called gains, and in or LIFO out, across system release gains FIFO the FIFO with of second we on press it paragraph. benefit out actually adjusted $XX the

on Krotz and all some Delek – and $XX inventories – loss of we At So basically, historically, inventory basically adjusted put with from result of Dorado, from year were this as the El we them last inventory. early RINsJ-X XX back, we close lifted and Big the the hedged. million are year Spring benefited those QX and hedge with our then the manage we J-X of Towards year late

the getting still good commercial in we quarter favorable in the very inventory part even million, $XX when and quarter. today, $XXX that much it closely we renegotiated board, And the really call the crack our better job a did out during that on was as you say I that’s that what mentioned across you less allow lower different I midland So we that’s extremely products to bridge intermediate see management. point we diffs, out million and can buying of the barrels results benefitted some a can will across and we’re slide, of a an top take environment netbacks will able of basically our though excellent cheaper benefits inventories. the generate customers saying are by spread, in board

the part think actually I how this So commercial quarter. missing exit is

Matthew Blair

the inventory by I $XX million able refinery? guess, then gain, And that to split you are out

Assi Ginzburg

but refineries them go specific want had separately. it's this don’t this think between I that we’ll detail report it better point. at a quarter the to We into I

Operator

of line Your Bank comes from Leggate from next of America. question Doug the

line now Your open. is

Kalei Akamine

This for is Kalei Doug. on

Wondering about Basin. is their and fuels question extend as Texas? supply/demand is if balance very into any Permian central their talk for I one peers whether demand there strong. have can reach Just that expected on market you Obviously the impact for

Uzi Yemin

the about balance the talking you assume Are or product. I product crude balance?

Kalei Akamine

balance. product the Yes,

Uzi Yemin

middle XXXX. we to that bring Yes, of out to believe XX,XXX or know more to XX,XXX very be I our project couple in then companies something and barrels like as the that it one strong continues actually some will to time in region or happen of is XXXX, barrels explain

of it need up. to bring or look at that are other the portion even the moment, take to as concern from $X.XX it is to – bringing pipe or it Still and $X.XX clear be circumstances at the cost, any T&D signs pay any the Gulf you a I’ll somebody and why. to given so or We some pay people yet not is $X.XX, there

see So system with long have be don’t we very will to the that we if we to need we agreement margin continue netbacks. to we that accountable with peoples, I because change Spring is strong there anything and do Big basically people term over different believe expect have wholesale that branded

Operator

Your from ask question. Capital RBC next question Please Heffern Markets. from your comes the of Brad line

Brad Heffern

Uzi, the just that. just to bit a can beat set for you the opportunities horse what but dead wanted little on more exactly the clarify pipeline, us

You mentioned that’s you flight Are built another you don’t talking that support online? about into pipeline about in and already buying pipeline want talking buying so. you new an are to projects existing one of currently that’s into the or

Uzi Yemin

made several over and I trough had it I in options the next months. We sure are it about middle that would the we thinking clarify since – it be – would am leave will few we to comments the of earlier.

Brad Heffern

are general? about And thinking Springs then MLP just progressing update and more on you with on maybe new broadly a in last you guys you that DKL quarter give talk Krotz drop assets. Can an

Uzi Yemin

Assi, do to take want you that one?

Assi Ginzburg

Sure.

end. assets the look by able weight year able into sometimes to the we market to do accomplish the of we’ll agreements at we’ll least think consideration and it crops continue probably For on the next our we or with dropdown type drop taking into discuss and be to quarter, the decision and the still to net it be

ability the in few the last of still you we of access capital weeks. that our favorable. market, is market As market PL not the to were With encouraged the their as by being know MLP very said,

those say I see strength do from and we will buying appetite investors units. some So to to

Operator

over remarks? [Operator I at management. time. There to further you are call no Instructions] this the the any will Do closing turn questions have

Uzi Yemin

over my and Laurie. the thank the Directors quarter. would would end of US to support we every friend of to thank happen another you your We’ll has had. we by day that us last Board for mainly for a analysts Delek like investors helping thank the like Thanks. supporting here, us it do Holdings just table wonderful to that I Thank along quarter of making US couldn’t but this future. and contributed to employee the to of you, Wanted talk company this without you the soon. bright great I Delek

Operator

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

disconnect. now may You

Delek US (DK) 6 May 192019 Q1 Earnings call transcript