DK - Earnings call transcript Q1 2020 | Delek US Holdings, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Delek US First Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] And please be advised that today’s conference is being recorded. [Operator Instructions]

like Mr. the would your over I today, speaker now to conference hand to And Fernandez. Blake you. Thank Please go ahead, sir.

Blake Fernandez

conference to and like quarter for today's to you, XXXX thank and Thank good everyone joining morning. financial results. us Holdings' Delek US discuss I would call first webcast on

other Joining today's EVP as and EVP CFO; Investor Uzi Louis LaBella, call of Delek Yemin, and the Refining; Chairman, President, members incoming me Assi Reuven US Ginzburg, team. section Relations can as used Spiegel, President management on and well of today's CEO; website. of during the EVP be is Presentation our and our CFO; and on found materials call

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

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

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

offer then will will and guidance, capitalization Uzi cover few Louis comments. Assi I operations On performance, call, cover and financial today's CapEx, review will closing will a strategic

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

Assi Ginzburg

compared of prior share or million or the reported year per for to Thanks, share Blake. $XXX net quarter a in period. an loss the XXXX, first per income $X.XX of $XXX.X net a US basis, adjusted million On $X.XX Delek

per prior $XX.X other was of $XX.X $X.XX period. quarter in of year This gain loss Our Adjusted the in XXXX of is million. compared inventory adjusted headwind a first include or results pre-tax to share. million comprised $XXX.X million $XXX.X EBITDA the loss million

point out that to from like results. LCM would inventory is already separate the that I adjusted this is from charge excluded

headwind estimated $XX.X applying a rate is annual from resulting to million the there tax Additionally, tax the quarterly results. effective

flow negative which X, first XXXX, approximately of from a In waterfall. continuing $XXX of we Page we a of million cash $XXX generated On working capital flow operations, provided quarter includes million. benefit cash the

Finally, cash the million, quarter Spring in expenditures capital the were including $XXX Big turnaround.

that, I Blake. it turn to over With will

Blake Fernandez

Slide We ended Assi. the quarter our Thanks, $X.X basis on cash consolidated of long-term billion highlights capitalization. million $XXX with a first debt. net X of and

a long-term net $XXX Delek net Excluding at debt $XXX approximately XXXX. debt million at of Logistics March we had XX, million, of

X, Slide freeze, Moving through for guidance cost operating on to reduction operating or we expect and overhead $XX in cost a costs hiring is actions versus in basis XXXX levels. full-year a million provide second XXXX decrease improvement to optimize of This modeling. in overhead. we structure XX% limiting quarter reduction $XXX comprised million on million Based in taken a and $XX

operations will now CapEx. call turn to that, and discuss I to Louis With over the

Louis LaBella

Thanks, Blake.

reflects which refining barrels expect quarter, XX% XXX,XXX midpoint. oil at for day, Spring crude the day, throughput downtime average Tyler our of and system total In at was crude work. throughput barrels major to second the During XXX,XXX approximately utilization the approximately oil per to we XXXX, the turnaround XXX,XXX between quarter first Big reformer per

$XXX spending. On expenditures the Capital quarter to the reflecting Spring. Slide major turnaround want X, capital million, in were during I first Big highlight our

as Webster like $XXX provided will capital $XX Wink reduction of as a lowering represents JV joint venture. be financing a Red well or million. connector excludes to Recall, CapEx the from full-year million a As This our approximately are to XX% program we result by prior volatility, investments market River XXXX where guidance.

canceling or are that roughly coming reductions and out the the full-year the slide. down differing minimum XXXX capital point outlay projects. completed by would discretionary segment first program year. in XX% balance the bulk The the of the outlined is spending for I as retail quarter, leaving gathering in The of of broken program from capital Permian was

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

Ezra Yemin

Thank Good X. facing between to oil morning, is and The impact dual energy you, industry Louis. move supply. headwinds everybody. Please demand global COVID-XX from Slide excess

through a our We ability steps are $XXX leading spending to million aggressive lower cost taking reduction to a profile improve to and structure collectively. compete

steep somewhat moved niche regional our in product our and up every allowing macro are near-term. have contango Feedstocks is our advantages through conditions our rates industry the mainly utilization system favor, While average run remained on our have system. with we economy the insulated curve markets the been in barrel volatile, us have to factors footprint, run benefit where opening Texas. especially These above

In DKL support for GP Delek increases Spring midstream, Big the This sold our the and to ownership business DKL. transaction recently Gathering to XX%, the demonstrates including interest. our

well a liquidity are macro to maintaining to we with ample sheet balance We volatility. strong and positioned withstand are committed

maintaining our dividend of payment $X.XX are per We share. quarterly

Spiegel, as friendship. Reuven company with welcome everything I'd do for am I thank of XX him again At company love long and incoming love, smartness With to dedication, the a were for Assi I'd Ginzburg company. did again, great full this who that, and point, for years us like to to emphasize with and His for us I'd company. his our personal thank our term will CFO, he sure our as like a

open like for to taking questions, as acknowledge stock I Before we our is would position in CVR that shareholder. them a call Energy welcome and we the a

keeping quarter we and first would this the outlook. in results We your have no further appreciate you so comments to questions regard,

the for Lee, that call questions. open please you would With

Operator

line your Todd. from And question Instructions] of first Ryan [Operator the comes

Your now is open. line

Ryan Todd

to you Maybe the and a crude Can enough whether much think could if view talk maybe it about, volatility I talk you you follow-up with – then you I think the destined, how mean, coming bit can market? And a but something relates Good differentials have the morning, on everybody. I the focuses so. feel too in seen probably structure export we've month Thanks. out playing of – those market dynamics on both question. of contango, or over a past months? not one, the about contango I little but Midland Midland I start How lot in

Ezra Yemin

Ryan. morning, good Well,

believe As that to market. we discussed need before, export to at chain look we the value Midland for along the all

As between we see anywhere export in today is to the marketplace, $X $X.

to given at but moment. on of as is chain which focus to that everybody which Midland, one picture, the part part, the the see contango order So can want well at – probably as you value depends on Brent-TI, of full size look any in favor in

very all but Brent-TI we to $X.XX not is and than moment, know – around brings to as Midland, more $X That $X is contango only if at these strength United look any this very, States, $X. immediately around grades happened grades At little are in States. you sour, including the blended in the what United is All including, Maya, the in strong. medium that

I think Mars, So check $X, yesterday didn't morning. was to $X.X I this a

And so every get part matter the it if the it. capture doesn't chain, of value actually chain, you value where you

in on premium $X.XX. barrels. Midland need Now the as portion to that is a have when we remember we of This now is just our case,

barrel. little less We which CMA, which every $X, than $X contango, on get the the has around maybe –

that but grade US. actually the very and Midland. how the environment between contango overall of $X than know the strengths don't more $X Delek positive will current Brent-TI long in for So offset is last, including I it

Ryan Todd

utilization is And appreciate a going the I – industry it I targeting as appreciate a roughly rate XX%, you're be the which color the looks mean, above you the norm. you're second highlighted for quarter. maybe probably around then to there. guidance as I question, second like that's

– of or demand. you of about pricing from what view how Can parts those as gasoline maybe and being distillate locally a the you're country? a from other relative strength resilient, And access – what talk your in of terms the markets, seeing logistical you've you're to whether niche that seeing in you're ways what and viewed point seeing markets in

Louis LaBella

morning, Good Absolutely. Ryan.

niche less which all are the working seen across impact are at. We've refineries finally market, U.S. So serving they a on obviously area, our basically

calculated we are point is on come impact charge was decline the which the the this the gasoline leading significant side, see this gasoline, less the beginning, seen working and obviously and the At mostly we demand most market, obviously we what weeks with at starting of diesel, have but beginning, niche to with gasoline is we gasoline up. kind for the but some the starting serving on ago, the than back decline or two favor. numbers. saw we And EPA in there three saw of our side over In the

Ryan Todd

you. Thank Okay.

Operator

comes your of And Heffern. Brad line the next question from

open. Your now line is

Brad Heffern

question Hey. inventories. on Good morning, A everyone.

about and capital all during out quarter sales there you of guys sort odds So first quarter sort in other with related, a can it of in guess have first profitability benefit are those of looked quarter, is talk, the were like working a of which of inventory, reporting. what did contributed to people I the lot the you then how

you reverse? can to Thanks. should dynamics and if explain that So we expect of that's something the that

Louis LaBella

inventory. so In of off quarter the was Brad. the things Big Hey big the to and obviously component terms we had in that turnaround, Spring a tends throw

had utilization, Tyler and there a at bid some so work also off. reformer We was

typical of question if are in And things a skewed had those maybe on was working I out So something that your would you second rates. I'm in specifically terms but not I sure things point mind, two bit think then versus utilization capital. sales

Assi Ginzburg

impacted tax reversal Yes. one one Hi, was quarter was million a capital biodiesel Working the excess by credit. provision fourth not two fourth and of Brad. credits. $XX million other $XX was credit, was quarter, One tax on

that these see number the you tax is is X reflecting on credits. So million Slide of $XXX

Brad Heffern

Thanks makes just And question That a on sense. then Okay. for detail. that.

how there you still more this buyback lot, think the and recovered Webster you maybe to with that point? continues the on chance that entity linked ultimately trading obviously Thanks. could XX% in see a or So yield, but scale that problem at I you solve assume? will this do it's Is a into of value that that it's do if

Ezra Yemin

continue as at we that. reason need look to we Well, carefully. midstream look at something into strategically very that the That’s look the we to

cost hefty. XX% expensive. of is extremely However, It's very capital

So structure just think it a company, of happened look we sense. period as the do time, at then thing need it probably to the we capital to longer makes want if this we recover if doesn't of think over about

we that sure However, make understand. I all to want

will. We you have unfolding, if the situation DKL

Our target million that We annual value. million. dropdown basis to create will $XXX to $XX now results. a continue with ideas to have we to is at look an the tool how million dropdown and and We're of things talking the still on about DKL as to around latest $XX EBITDA to

Brad Heffern

Thank Okay. you.

Operator

question from next And Manav the Gupta. comes your line of

open. line now is Your

Manav Gupta

Hey, guys.

will missed. you be Assi, all, of First

out, went were we pillar of to can I think choosy and always the second us way you out whenever a the company helped us. be you help of

So be missed. you clearly will

We you. will miss really

with the question, that, contango we the So first understand benefit.

like tried remember I think I you some provide $XX the that it have for help for $X like $XXX number, past in you million. benefit? the quantify if year, exact don't entire to Can million stretches and a it's but to us the sensitivity,

Assi Ginzburg

more It's million. for than every Absolutely. call a little $XXX $XXX dollar, it million

Manav Gupta

Okay, perfect.

million from reduction, Second and of run assumed should provide be question, rate came CapEx that you where a $XX can going as forward. that

we assume CapEx at Delek lower of $XXX running should million would ahead? going So the kind be

Frederec Green

It's Green. Fred Hey, Manav.

growth So the build the going where new retail Permian XX Delek initiatives came our stores. also of out some not including and year, to for mostly just the we're Gathering, cuts of

million ongoing sustaining capital then to a at levels have changing our year. think base capital turnaround at where not I we're look $XX going on we $XX that million later per forward. roughly And year, per one typically our but your we refinery still

Manav Gupta

Big this there. is Okay. And of this the last asset, assets capture some best quarter out Uzi, did reflect good margin the of very asset. me, in Spring not a the one for quality That

was shown I'm or a certainly So it because that in kind I much against expect something results? better trying rate ahead. and a you turnaround going what XQ understand, to just don't of was That's capture asset, just

Ezra Yemin

first it maybe it's and With up running marketplace. I no it's much full. performing years, assets in a pretty for well situation. just best this of and fact we be put of for major, that quarter the turnaround, first have that the then the to in including wanted actually want year reflection is for because clear, in a already most still one six of CapEx down was a the to best the touch of capital at it our since quarter, shape the the the in refinery capital you five challenges even or to capital Even it the if our refinery turnaround, you next over is intent spent of when the the good look projects. from of we very came upcoming major days XX company is Well, a

Manav Gupta

capture historical good you. Basically all And much refinery was which haywire. the better turnaround go should Perfect. runs it the to as the XQ, to in it capture caused the rate. Thank back go

Ezra Yemin

Absolutely.

Manav Gupta

you. Thank

Ezra Yemin

Absolutely.

Operator

your next comes And Sankey. the of line question from Paul

line is Your now open.

Paul Sankey

morning, everyone. Assi, about miss missing I badly good joke sure whether all will, is as Good can a but the Hi. as best. I'm this Manav and

I think it's lot detailed about a you as typically the we've the SPR, about that XXth mate. feel a anyway, just question can bit a just little A time about specific little a talk thanks question? bit very

Assi Ginzburg

little in SPR. from When it than also I you are maintain that the that we you he play contango. asked can and Well, barrels the million. I it’s other when don't if $XXX comfortable it mind put the the about the in reason the with question why Manav dividend million we we and increase And that so And can that's we some reasons actually bought $XXX here. you we DKL. changed put said is do of a more the we that, dividend have with This earlier. telling – That's and was while the the fact one places inventory. press

contango aspects. We in the enjoyed several

we tapped Red operates, of That that you that will, payline, One of and our some support, not business as as some well toe SPR them the also of operate. own and pipelines it the is it into if River we business.

way us it's and the toolbox. for money business in So our make great another to a tool

Paul Sankey

results a long especially with And can which and try us about the and asking difficult follow-up Thanks. which Great. changed drove-off going into the to obviously – and then you a the has world question, normalize? QX Can Can – make which firstly, Manav's a and to forward. two months Big QX, is and to that? Spring. further Manav we questions, sense is difficult of about do you try talk to you we how big cliff But extent

up. XXX that something, about you be will interesting get anything secondly, where to your parts, say can you but end And normalized where that Thank earnings a know if very your post-COVID And would moving I feel there's you. perspective.

Blake Fernandez

COVID Midland in a take move stab in actually at we've the we I'll impact We've saw group, I spreads Since order contango. Blake. seen in crack to it's seen it. and out. the market moved packing course the just relative say. began, Paul, And would in of then all Hey periods favor, terms moving the of Obviously, our an expansion around. of

very a just we XX% The I realize a number. when far that. are loss remind at look I it thing see too historically that's forward, would of XX% $X.XX and normally just going of leave of say we at looking on probably share, at as I that, a and kind say achievable is Without about a just guidance, very XQ I crack would Coast only would we estimates confident Gulf a a that to would that. benchmark tell you I you And X-X-X

Paul Sankey

it. Got

Blake Fernandez

The difference have that you a XXX% is Midland, that. or when actually feedstock contango you component, of capture

we market much rates going going in spread So contango help lower that's to rather forward. – would an a crack our capture actually expanded

color. that gives So you some I hope

Paul Sankey

clear of FIFO. whatever? earnings? thanks last in things do without you can Thank world wider the think and you for we're specific in obviously a will Do demand try handled And this Please think you. more made Blake. rid a Thanks night and where bit. to up Uzi, you obviously you Yes. the spreads, gasoline to of Blake LIFO and efforts talk about of a going get results. settle combination bit

Ezra Yemin

already Well, without state make an in here, while the in or Texas, decline, that being XX% in at sure least in was of from area too And serve. to Texas XX% while today it need we than demand optimistic less first gasoline the we one we of that which open, we're data do to decline in environment just some of the the have Texas. coming is

think serve I Texas. areas we all in the don't

start So to that thing factors winning. gasoline note more other that will API too as And fact want another people pretty the will winning optimistic, gasoline. think that your have will as they be offices some several data. probably The want showed draw of not offset costs general, as we pull day to. fact much that saw that to be Paul, the already the will will open as you want to we up, don't quickly. used in I mass fly, mentioned driven transportation, states to don't but yourself. I people be to by here people you One by I the saying want be back people that – don't least use at saw yesterday be gasoline to can That going fact But

It as minus Texas of use XX% two as weekly days I is ago. a XX%. to be minus basis on And said,

we So days started or a already only and few opened to cut, open ago. Texas

maybe So too optimistic but we Texas. here, that coming do we have from data

Paul Sankey

Uzi. Thanks, guys. Thanks,

Operator

the comes your question next Theresa of And from line Chen.

is line now open. Your

Theresa Chen

specifically guess industry Does you for just population pace decline. of factors to that behaviors that consumer in are should there? color about with there better have just or why maybe share? Any do your and you qualifiers or or average? than it density markets, you the we questions. my of discussion XX% terms consider, any the can decline. on national in at Can the deceleration you Thank mentioned and a Uzi, and relative XX% the the around trough to follow-up your Hi. market talk the taking I

Ezra Yemin

I'm City or LA, for that again, data don't. York have sure New And the we we absolutely. not Well, for

these you in areas. as mainly something areas, We into our So know, need cars. we're they in just about well do And get talking rural their order to rural serve areas. people to

we And was Arkansas, are we in minus the quarter. which and never improving. Arkansas see in And in minus are also saying And now rate it's as we comfortable area it XX XX% Texas for all It's XX%, utilization that reason we're actually we the with that the XX%, mentioned. that's XX%. the – in

but lift. remind that us case was lift. well, as I XXXX, here big were didn't big everybody, say, strong, during or little our and decline as severe. I want heard the data to one that still many shouldn't at very time much the get areas XXXX that rural of We the that's strategies. is cities had more it's see in We cities. on some But again of

Also to significantly I stand most know store want a our but impact same-store go The to lot in in last the virus, don't six weeks. interested one and to big emphasize sells People lines people. people the I four of the inside are want don't thing. and stores, convenience not more the in to of really want and be boxes exposed to people over jumped

and in come to these they out stores. So

weeks Now But cautious. the weeks. this take shouldn't it need We change people inside or is bank. see in data to very be we a for the do We six to store. four only behavior in

Theresa Chen

leads follow-up. it. to Got my That

this your better strategy, of same-store to consumer behavior in sales retail related seeing pentatonic. terms In changing you're so

were there down Texas I DKL XX% comments think on about so. call, West demanding or the some

And you strategy being flights of balanced that? forward also perhaps people norm And of the more, stop are mass social earlier stop driving light to are maybe retail going of and post-COVID going do about going all much. using then comments kicking a How in transit, with yes, this about to as your driving people distancing but your to world, consideration forward. work think going social

Ezra Yemin

shortly is because area. every stop West different areas, But social Texas. I'm the area in of need it going distancing Well, check to of just take country. this it to in some of see hours. customers Arkansas. don't retailers because combination I We box it's it XX We their decision. – very The accepting in other we We know. didn’t a these in retailers And in big and here. remember see factors

or as is. a much sudden or be next the mind weeks, the behavior, to two retailers in I more in know long their we traffic But XX:XX a than as years two it hours, after used change behavior if PM, don't their months Now or see really X:XX clue. two whatever it PM, is all we don't XX:XX beneficiary. box their I have the past. of are big PM will

going to bold little because I'm be So surprised. here I'm

if not we're In there little terms see to traffic, enjoying outside of reason industry and run afraid that's better to we a say going refineries neck, the our we you better the the we're And will, demand. to going say, are than the average. put

we to be We are a big – will beneficiary. that think retail going

contango, their enjoy And maybe the there I XXX% earlier, mentioned the of companies any don't also as which crude know that contango slate. I are company, in

little surprised not at being naive. but just it's maybe So I'm little looked being is a this how better, me

Theresa Chen

surprised at not you your I'm Well, boldness Uzi. at very Thank all, much.

Ezra Yemin

you. Thank

Operator

And your of Roger Read. line from comes next question the

open. is line Your now

Roger Read

future, Good to level, we've thanks continue Yes. and we'd like to luck Thank morning. all space question. Uzi, the the I'm way were indicative they make at other that, Assi, say, the cuts. of Results kick the dividends. some down some seen happy help you're along endeavors. that I'll your the if in wonder next the QX the good obviously you. few but With all to dividend, companies in And not about a guys, for of like

within So capital overall how and I you fits just that was forward going the wondering dividends how about sustainability allocation? think

Ezra Yemin

everybody day I need first all inventory, thing. with the because pretty you ignoring But much little clean everybody We which we LIFO. And this Roger, that took issues of hard to line that to a to was is else. it's including Well, accounting just maybe and FIFO know horrendous with for it quarter in of one us. explain harder and

get of know call $X.XX. First made a I but it to it's quarter is around it of, minus hard loss this to lot $X.XX. it that And was a that noise and number,

of the the capital of project on behind strong of very And million the about we now. are probably a for grades and the like stores, now second favor. All very ago, say, mentioned, $XX week Fred But of And see combination from well of doing fact is convenience year, capital quarter Midland Midland in until this that to with end the and second also the the quarter. we I that advantage leverage weak quarter, will capital right know as quarter. contango, to was talking the took out expectation – the much favor of out we and for system is of with are I'm performing Now the as coverage afraid not better the DKL terms which the be above – us. everybody in for

not afraid negativity if But Obviously, not burning. – quarter or dividend. There's indication first look not no we would need at second dividend. this the to cash show to to continue would doesn't continues, we're continue I'm of quarter reason of any some afraid and continue the it.

time. dividends this that touched be at think don't we should So

Roger Read

had right. All referencing. of I was understand I Paul's were clear you. that question. contango storage kind that But play the crude involve some it defense. a is of Very it a split is to them believe Thank going something options? the to do other two? SPR DKL, and storage them of of other Or DK you and only that The there some are question thing opportunities inside with of the was entities both classified modeling or will be between inside follow-up

Ezra Yemin

can SPR that Well, only inventory play we not play. the is

you tankage especially lot don’t the have all have when and enjoy of contango. we know we to run As capability a you XXX%,

combination a XX% DKL DK DKL. we XXX% the of Obviously, own it's So the and between GP. and of

something DKL well. – protect we to is at as look very as we need So that

two So very continue if looked play the carefully itself entities months is. it inventory be should the way over will play the few that contango be next and between to the

Roger Read

Great. Thank you.

Operator

have a from Neil Mehta. question coming We

is open. Your line

Carly Davenport

exposure last in Hi, business Neil. on was evolved views the for U.S. month? production if strategy. your just midstream is for the at have the taking increasing Thanks given growth first question. morning. have how the around This trajectory How expectations one good Carly changed midstream all to growth around the My

Ezra Yemin

That's that Carly. of question, to the believe United longer a over will it look on And States we We period need great oil. need still that at time.

time Our to won't cheap same won't is or OPEC the as barrels inside many like be, States. as United anymore needed countries export export the assumption all that United but because will be outside Russia at allow used States that be to it the

we to more in is the country in that So places other how exports, not of people bit going at that behavior. of are modify look light oil needed other only their will but and

Carly Davenport

forward? on to Can what for two between relative Got gasoline DK products. system those flexibility diesel. you. the you dramatic around is just the views your it. the Thank exists margins some diesel gasoline then going strengths follow-up just remind And us then for the seen in That's helpful. shift the and between and production and and between split two any demand We've on pretty thoughts swings those

Louis LaBella

we Currently, the XX% XX% dictate. is Carly. – Yes. been for Thanks between disciplined and typically to a range This we've mode toward about our economics can max while swing gasoline now Louis. if probably and in XX%

Carly Davenport

you. Thank Great.

Operator

comes the of Please your Leggate. question from next Doug ask question. Your line

Clay McCoy

Clay you Doug. Hey. being bit know this than the tanks June, follow-up on is a strong rather Good also This put for question from us producing reasonable is product can let morning, rates. on of being and you're trending sold? April guys. how got any Wondering color provide utilization the I've you talk cadence into that see any if to about a

Ezra Yemin

The we absolutely down that we that don't inventory, are building month. inventory. if know breaking not. by I Well, are building question We're not

Clay McCoy

Thanks. Okay.

Blake Fernandez

I the similar system. somewhat utilization or refinery given would think details Yes. assumption across just a throughout. regional We're for not But fair be the by board

Clay McCoy

very That's fair. Okay.

Ezra Yemin

is more there our And with mentioned that running Clay best one obviously back, will I'd thing. over Big the that to Big assume fact close I demand asset like be is coming to fair Spring. And Spring it's that say one capacity. very to

Clay McCoy

Got it.

recovery? Okay. these or you yesterday sustainable announced confirm you cuts provide wondering had maybe around post the any OPEC just not will and details Also whether can that be

Blake Fernandez

it's I'll kind Blake. Clay, cover Yes. that. of

it So and that. XXXX. think $XXX way roughly a we're point OPEC coming to $XX reference at the for million, look was looking about off of at best I as million

for we're quarter year, you XQ If zip think full-year. of of where of kind look then right going to the guidance we at code the of actual we're for extrapolate you that providing half the and the first that second gets land in and for kind the the

the And $X this, cost That's I thing about system just probably embedded XX% bit standpoint. variable impact utilization, the running from bit normal. million a downtime. a a in little would that of you're at Obviously say only is a below

So that and back about million the come I a year. the of that say is would $X second little XQ just maybe up half might bit in lower

the I take the overhead a guidance extrapolating and be XQ and those XXX, point similar of sustainable point half there definitely last was gets both if On XQ that in reference again, second landing then think actual year, good year the that and should side, of you again forward. going you that

Clay McCoy

Got it.

run those expect do when So to hit rate on you savings?

Blake Fernandez

all be level take if do to the I full-year it rest is the for of at guidance. like year that the XQ say, we need really you will guidance, Well, maintain the

Clay McCoy

Blake. Thanks, it. Got

Blake Fernandez

Yes.

Operator

question next your from Please comes ask question. Jason Your Gabelman.

Jason Gabelman

refining wanted the on utilization is I Yes. circle Hey, which morning. bit good peers. a stronger to than guidance back

those give selling insulated are any competitors strength in could you're now. First, other you into individual you from product of markets? barrels then if And what running right from terms into in your markets, insight at

a understand demand seen stronger to into margin strong, your some the is, markets eroding benefits those ship that rural And seeing that have opportunity products from I an potentially pipeline guess follow-up. have question competitors demand? the do have by you in markets Thanks. and I happening you're I but are of more

Avigal Soreq

Hey, morning. This is Jason. Good Avigal.

our we obviously a supplying to have of cost So ourselves refinery. advantage

them coming of But in some has of Some refinery some the that an advantage. having rural isolated, does them area. always, present that supply a into area a

the the earlier call we is see As demand, And people on gasoline the areas, mentioned obviously some in in have decline some the dependent the is back. but on strong very much we in us we that have that demand trend move to shows demand. that very beginning those options coming seen

and West Texas of Texas, East Arkansas, in that see all We them.

very are them – very and and the are in seen have are – serve customer much seeing we our coming on we optimistic happy areas we can. rely as we strong So about that we've as a back to demand we us

Jason Gabelman

that optimism utilization it. to? there Is it you XX% into got Got rate, baked

Avigal Soreq

say would the this at we're are fairly some trying way we conservative. in Obviously be fairly hand have data of you. that's point terms I conservative in Jason, actually and guiding we to

Jason Gabelman

it movements seems Got underlying the follow-up through taken accounting a those whereas out And My flow. because on results through their thanks color. is because of cash inventory for gets noise the movements is There the it. of competitors like capital, earnings. specifically for statement, inventory of some lot the done, maybe kind of flow income of on and the way and that working was it flows

it non-cash typically just So how your and I I discuss And the can you flow? think earnings lower or specifically, wasn't policies those kind cash noticed impacted adjustment is. as accounting of market classified cost different and underlying

was what fact just there that non-cash happened you So elaborate if and item? on if could Thanks. a in

Ezra Yemin

Well, including some when working it long price are you different you accounting from It do capital. the then inventory fact different average, have us some inventory LIFO, some do. FIFO, that it of they comes and do refineries, an at when ways ways, to or all one do moving in whatever down, doesn't have treat change standpoint price

days more receivables. month. the XX five while We four of receivables It's are have versus not days. between for average XX of crude seven we to That's unique many to everybody, the on delicate following payables payables pay to on usually

the down, come entire is coming capital down. is, are long working capital, capital capital we prices or then because when everybody working working working the the So

are already it to recover. That when shrinking; prices Delek. When prices when regardless refineries is methods that XXX% down, of accounting not working we capital prices we coming the and capital see up, of It's the is obviously coming unique expending. changes are It's use. working

call the out we some inventory LCM. that's FIFO as the both LIFO the and Regarding our other well accounting methods, LIFO as reason using the tried are to and and within FIFO we some

capital. doesn't and method can case, has we our do do, to fact accounting much it numbers everybody pretty working I'm of these long combine that is the it that LCM. in better the In line you see sure same But our and inventory. peers, some all change If much you are two you we're compared than we the will

Jason Gabelman

Got it.

color on for the Thanks that. Okay.

Operator

Your from Matthew next comes of question line Blair. the

line Your is open. now

Matthew Blair

DKL all to everybody. perspective? came DKs had the looks evaluation appropriate on a kind question bit future. about talk then think expect mentioned Gathering And less the in I What do Big the like on to drop would safe you you this call, Thanks. the little the It Glad multiple hear Spring multiple Xx. here. sound or a you another Hey and be near valuation than there? maybe of of drop. Could you from in just

Blake Fernandez

Blake. It's Matthew. Hey,

million took drop doubled that if or at business, would very the remind And is implication we I the X good the on for we you thought shares DKL So And gathering time. was value. was there about a basically so. DKL since look you

million transaction that would averages. So from, kind and to of in industry in went it line the essence multiple million call $XXX brought $XXX with have

it I guess we I component a equity very would taking which big price. a So of terms just was felt that answer in was DKL, in depressed of

and we've And get just kind demonstrated any future there. obviously into probably I drops, of but think of supportive think is we're on I to think very leave that going to multiples DKL I don't we'd it DK alluding

Matthew Blair

improve, then more that your earnings And hit Thanks. future good. bit million that periods? Sounds a reversed $XX does you and in Assi, explain out tax get if could little

Ezra Yemin

some here. vacation him But trying is Assi as we time he are is Well, transitioning give to out.

you, Reuven will Matthew? that's question okay So that with if take

Matthew Blair

Sure.

Reuven Spiegel

was year our the prorated rate change that. based million the on outlook from of that the and tax Well, for remaining derived $XX in the

shows results anticipating that think will quarters. the that I next for the So improved amount. And over reverse are

Matthew Blair

Thank Okay. you.

Operator

of next comes Paul Sankey. line the question from And

Your line is now open.

Unidentified Analyst

Hi, tell you good morning. gain us taking for Paul. was quarter? realized Davis Thanks the hedging the It's what on for question. for the Can

Blake Fernandez

was it's $XX Hey, Yes, it Blake. million.

Unidentified Analyst

cost XQ the been in this Has come And realized highlighted. regarding any of my it quarters through you. of see three kind next the the over that of year? just you reductions Thank follow-up Okay. is or how we will

Blake Fernandez

really beyond. of kind a and of It's more XQ progressively

indicate the a I to downward think is XQ trend. you'll guidance notice starting for

XQ would lower out much pretty than I had. I in XQ believe point Although came

the had XQ. in for trying to in additional order So but think to think need I steps trend to there, say, I you're started, some year, we're maintain conservatives bake at achieve I And so. just guidance the in really that we And looking like XQ level.

Unidentified Analyst

you. Okay. all had. Thank That's I

Operator

And questions Presenters, no time. this may there are continue. further you Instructions] at [Operator

Assi Ginzburg

call. employees the for that to company, each thank colleagues I'd times, to during within But dedication one because for these apologize tough talk interruption us. this mainly make like to are happy the during and is. our our of who small around investors the of These this table, minimum like your the in times I'd a first very I'd of Directors, Have my challenging the had company of Well, very Board we'll you business we confidence and great thank interruption day it is our I'm great soon. employees. that like

Operator

you and participating. Ladies today's gentlemen, for call. Thank this conference concludes

disconnect. now may You

Blake Fernandez	Senior Vice President of Investor Relations and Market Intelligence
Assi Ginzburg	Executive Vice President and Chief Financial Officer
Ezra Yemin	Chairman, President and Chief Executive Officer
Reuven Spiegel	Executive Vice President and Chief Financial Officer-elect
Louis LaBella	Executive Vice President and President of Refining
Frederec Green	Executive Vice President of Corporate Development
Avigal Soreq	Executive Vice President and Chief Commercial Officer
Ryan Todd	Simmons & Company International
Brad Heffern	RBC Capital Markets, LLC
Manav Gupta	Credit Suisse
Paul Sankey	Mizuho Securities USA Inc.
Theresa Chen	Barclays Capital
Roger Read	Wells Fargo Securities, LLC
Carly Davenport	Goldman Sachs Group Inc.
Clay McCoy	Bank of America Merrill Lynch
Jason Gabelman	Cowen & Company
Matthew Blair	Tudor, Pickering, Holt & Co.

Delek US (DK) 6 May 202020 Q1 Earnings call transcript