Delek US (DK) 5 Nov 212021 Q3 Earnings call transcript

Company Profile

Participants

Blake Fernandez	Senior Vice President of Investor Relations & Market Intelligence
Reuven Spiegel	Executive Vice President & Chief Financial Officer
Uzi Yemin	Chairman, President & Chief Executive Officer
Todd O'Malley	Executive Vice President/Chief Commercial Officer
Ryan Todd	Piper Sandler
Manav Gupta	Credit Suisse Securities
Carly Davenport	Goldman Sachs
Roger Read	Wells Fargo
Prashant Rao	Citigroup
John Royall	JP Morgan
Matthew Blair	Tudor, Pickering, Holt
Paul Sankey	Sankey Research
Clay Augumini	Bank of America
Jason Gabelman	Cowen & Company
Paul Chang	Scotiabank

Call transcript

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Operator

Good morning, and welcome to the Delek US 2021 Third Quarter Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Blake Fernandez. ahead. go Please

Blake Fernandez

would on I Delek thank for everyone Holdings' Good conference like call us results. financial today's quarter discuss and joining third morning. XXXX to webcast US to

the used Spiegel, be Uzi on me Chairman, Relations CEO; website. The and Investor Commercial and today's team. O'Malley, is Officer, found as materials EVP Joining of Yemin, as our CFO, and the management during well call of President, can Delek our and EVP on today's Chief call Todd Reuven section other presentation members US

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

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

turn Our that release and third assuming reviewed, release. the been less and call incorporated financial call, close and I'll cover the are then comments. over review today's with will strategic guidance; Uzi to is are Reuven prepared On a covering that has and cover I we being segment quarter earnings into market the remarks information performance; made operations will that, capitalization With will will Reuven. Todd and CapEx; few closing

Reuven Spiegel

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

prior million $XXX period. compared the year million was the in to a EBITDA quarter, loss of $XX adjusted third Our in

inventory breakdown of provide of the per of highlights waterfall. we results. provides inventory of in $XX capital other On operations, a over turn XX after-tax second that, XX had Page $X.XX of Page The impacts, cash includes the release or quarter X, flow and in hedging share million. $XX flow provides included press of continuing release million impacts of tailwind, to quarter. cash million items which $XX adjusted Blake. a will of the from With the working In a third approximately it I detriment the we slide XXXX, positive paragraph

Blake Fernandez

Slide We ended Reuven. the quarter our Thanks, $X.XX basis on cash consolidated of debt. billion highlights capitalization. million $XXX with a third net X of and

of September of Excluding net Delek XX, debt $XXX million we net at debt XXXX. at Logistics had approximately $XXX.X million,

guidance to X, Moving provide costs million. impact fourth ongoing range natural to gas of the forecasted Slide be $XXX $XXX quarter proceeds. insurance we are assumes impact the million of from elevated reflects for to prices and This modeling. no Operating in

including combine X helpful we enterprise over would while of gauge Due just against employees to it value, cost two expenses, different pose feedback, to peers. on Before Based metrics methodologies, Slide turning high, it capacity peers. to investor assets refer to against screen permissible of be different we Todd, partially to overall to thought number structure refining and illustrate you structure where our our cost tends I low. to to G&A screens our classification relative would our the competitiveness

to As the discuss turn competitively. can over and will very call you we now see, I that, CapEx. With screened operations Todd to

Todd O'Malley

Thanks, Blake.

X, at $XXX of but in was contemplated approximately which per for total the was the back the expected The one XXX,XXX potential minimal to Springs utilization year next to On capital which levels. to scheduled XXXX. our third approximately I oil $XXX will quarter, refining range we of for shutdown now million, facilities in expect day half due expenditures the to day. to capital The is significant currently fourth during gross first XXX,XXX crude at the or turn crude Hurricane oil a during call impact the XX% planned from net impact first average online Uzi system between fairly base of decline turnaround XXX,XXX of is Ida, million previous per with Tyler quarter third the comments. XXXX a closing guidance consistent is throughput on the spending million proceeds. be to Krotz midpoint. is the program XXXX, resulting quarter throughput throughput our full incurred During In that barrels facility, over Slide basis, barrels representing were major the quarter. a a planned $XX of insurance

Uzi Yemin

DKL performance lowers Ongoing Thank to capture which high, and environment. the reached half and macro the of within units operational improving you, Todd, their portfolio. quarter. well for no refinery all-time insurance first exemptions the potential their to major value significant into planned year, an proceeds compared is until and reflects EBITDA the The our fourth more offer reinforces next positioned capital improvement the recently of turnarounds year. tailwinds Delek’s reliability embedded and the system cost good With morning.

into year. Webster we throughout move Wink contribution XXXX, should to provide the As positive a

report. encourage ESG questions? to call on please you Finally, progress we that, to later XXXX our for will plan We review sustainability publish our today With operator, the investors open report. our

Operator

from [Operator Sandler. from Ryan Instructions] go Piper question first Todd And comes ahead. our Please

Ryan Todd

still Maybe and I the of Yes, couple and great first DK. over to the stabilizing thanks. do past on. things DKL question, you’ve doesn’t you the a was job reflect one which initially Congrats appear valuation on years, strengthening the of done were of know But really Uzi, a market results. focused

with you as your see numerous discount. consolidation your reckon to the still their the purpose, on give us try whether down peers valuation on part minimum of at of DKL you We see to the stake latest MLP serving and continue force useful an affiliates. consolidate on a thoughts to DKL entity, Can market selling in thoughts to least

Uzi Yemin

these morning. questions ask for Good Hi. taking morning, time Thanks Ryan. this the to us

and DKL a strategy is also take the is that of DPG the situation tool unfold one-by-one. them organic years very the is three that drop with DKL high. the you Webster remember strategy, The all and as the in that is in saying, starting MLP our the all up strong future coming from well that well, capital dropdown activities the an and take cost fact all if it’s is of feel to that Permian. DKL along toolbox. couple of because coming I end to of notes will on from standpoint is time coming hitting ago it our to Wink time The the We us fruition. you guys low maybe Let of in down, as – will

any options are you of not mentioned. limit going to We to the ourselves

We it $XX anxious like actions, has or actions the of in got We any that best carefully. know DK DKL. actions value no the sometimes are at means some fair know We are a value for anything that. is time but looking sometimes same DKL, cash the – clarify. is that is for thought in until I market at the things

of that between continue turning flow a the to with just we fact an SREs to both value arbitrage, not We dumb. to positive to are not companies deserve that turning hurry the I we our And as to you are that anything in We - for believe difference in we because while but just continue DKL DK, don’t we are not corner. want protect them. the is rush the cash anything. of do and there to we We valuation and to the see anything do know do are which saw strongly options. outlook a or also

Ryan Todd

Okay. maybe, free in inflection mentioned I flow Thanks. mean, and the And in just you cash. cash

thoughts what the Should like into and would about priorities the CapEx about year, for next to year think meaningful think excess flow? we priorities use you look to budget of net on free the you for – any As continue generate looking the cash? cash how could

Uzi Yemin

Blake this question. and Absolutely. this morning answer let I’ll nickel his earn for

Blake Fernandez

piece. the Yes, Ryan. take I’ll CapEx

the million with help in I and for it formalized So, turnaround we’ll through $XXX deferral terms Obviously, go we’ve COVID, go a to if next way capital like need approval model, out million. you just you during the would roughly obviously, maintenance think you periods and plus we look you come said process more historically, placeholder the frame $XXX having Board budget. a to I of But the that. in low quarter is up of end

to million help in to we on that is and course, quick systems I think toward examples call fair low we the that out of build probably I So, probably of it’s additional are think And cash standpoint. and to CapEx. maintenance are the now out. that have are $XXX some is efficiency some are but that projects it we EBITDA are from minor I some look have upgrades generating think going There returns be end, to and retail this free we quick think will upper going trending capital, There an projects small hit terms coming very so of of growth. us

entity. I and its a formalized growth. without mind point final think I on bit growing DKL is, then That’s just you entity again, in end at as sure own. upper much the of number, becoming little thing on and on into is to self-sustaining out a and So, giving you larger The a CapEx a maybe are want make keep maintenance coming

CapEx whatever going the impacting DK. for cash the is that not So, to really it’s forward, flow

next guidance terms up So, numbers something. the spending on like helps again, hopefully year. more we’ll look give of what in framing that formalized But

Ryan Todd

great. it’s And lot. a Thanks

Operator

next go The from Please Suisse. ahead. from Gupta question comes Manav Credit

Manav Gupta

nice was extend entire twice. Louis wanted only of and the the demise to condolences Hey, very He family him I sad or I a met once Uzi. untimely on my to as gentleman. Delek

So, for am sorry I loss, Uzi. your

Uzi Yemin

was great Manav. you, say but end the him call, really sorry great feel ahead, family words. thoughts and entire Manav. the Thank away I keep Delek about him say it. going now. Thank was our early. a – something kind Go I’ll friend you about of in family prayers. feels Louis we his to planning very for We leader, And you. too by Thank sad and and the feel your it

Manav Gupta

Uzi, whether margin, it’s it’s OpEx, whether El quarter-over-quarter, excellent Dorado, gross improvement fronts. both

Because us quarter-over-quarter So, at help things strong you this is came a what improvement did How together? that refinery. very understand if you look different?

Uzi Yemin

turnaround the El Reed and refinery if doing I Remember, there. you out the in Well, job at will. just think manager two is of over turnaround Manav. the that refinery We X.X, came think excellent actually tranches, Dorado. Mike We

refinery XX,XXX running to more XX,XXX are close the now. We Actually, than this month.

we will to that. optimize continue obviously, Now,

fair commercial Now, do initiatives. there over second to to a is job part improve the the

want we refining. and in side that’s on commercial to see or as something things that Dorado big refining will or Krotz the El the These because to do are initiatives of a that them organization happen You number in continue be competitive. we

Now, are Dorado, others We one thing both remember. specifically believe need and SREs. do that as to do well, believe Krotz we we these El specifically, but

work we As past. with and to the these two we administration the like deserve them believe strongly in that we we got continue

if commercial you change Reed, speak Mike SREs, So, about by we led the turnaround the as is strong think that add believe should and changing after get we and operation that which you that the we the part them.

assets very for You competitive also are looking Krotz. at

thank So, for question. that you

Manav Gupta

you for taking Thank Uzi. question, my

Operator

The next go Carly Sachs. ahead. Davenport from from question Please comes Goldman

Carly Davenport

from we if in the very taking around of to bucket Hi, about able in reflected you probably the is the guess, our what other the I think see four forecast one other earnings is the in and core great with It’s Are good Thanks were talk the profitability about for there. questions. more refining positive refineries. a first morning. inflection was refining to sort contributor. line My the quarter. just Results bucket,

would helpful, any So, that be on colors

Uzi Yemin

we system. and whole a well, is let the talk First, that, we not I’ll as just our I for lately a you. I him. vote can we few thank Carly, This disappoint will about Todd is to refining integrated do we want as to can words Vis-à-vis, of before organization run say said, confidence a – everything organization the you and and refining

other. the sometimes And in one themselves versus somewhere, place find

We parties. at obligations vis-à-vis third our are looking

looking and around. specific move difficult very It’s to things are at that we We that activity always. allocate our refineries or sometimes to wins

and hit that. Now, numbers more a they bigger or sometimes than they are taking are these small, sometimes actually are sometimes

let that taking of Todd So, to of in it anything steps with a there add as and are this leave that activities areas ahead – different that. in market us world, result that. contributing I’ll to the to are several wants that

Todd O'Malley

making obviously sure different pieces watching in No, I every and all that up number it it market. are Uzi actively Carly. very It’s day that think, covered well, a in things of we that managing and small we add little are the

Carly Davenport

I about the improved Great. back is Brent a guess, where That’s higher certainly are as a the Refining would got think how on margins frame earnings. bit level. positive curious helpful. the we company have on you’ve you the macro, TI we the bit. inflecting towards just here. other follow-up But And path compressed then, side has to

if impacts refining that talk a your about back moving So, ultimately kind pieces of earnings profile? of little it you more get some how to and could bit normalized ability to those

Uzi Yemin

optimum three breakeven quality weeks now are we look around thing. Todd? normal to don’t what, at TI Midland a Only look Yes, was at we Brent at and We and ago, at Brent breakeven. as Midland. positive, – $X.XX

actually do what on we you can us between daily Midland look pretty to And and and we do. that’s expect basis easily. TI move if that’s what a So, that, you at

know are about ability back to too don’t concerned go TIs TI because we our So, Midland. Brent I of Midland to that versus

know Now, see you producers to very saying they please every disciplined. day. know it it remember we are be and that are that I going

Our DPG the growing day. system by gathering is

thought ago, be will Midland if or we growth here XXX a for few that So, the XXX. months

little speak, our answer at being about thing. because Otherwise that price was question, We we make oil Blink, because of we for lower concerned as TI, arbitrage Midland compresses, into point one around $XX, not should or negative that if know That’s Brent won’t come it are sense then to the are mind territory. export. think changing just I your yesterday. we But of it

change that the Second, spreads. saw thought a We for this actually things price And that medicine will I they an a pandemic. idea today will be have year XXXX always and came that changing. vis-à-vis Pfizer with that

and I will the of start of to are be world home think are tired people people also coming sitting here. the office. at clear, employers toward let’s tired the working not solution Also,

on that So, to idea there as energy the strong the demand there year. is that over prices or compared the a also chance don’t very, refineries lead led our or very Europe, mind that make to. will in That energy prices in XXXX be a of top crisis energy the

are was short we out a I So, a That downturn of answer I think that covered we But the speak. long hope as question. everything. pulling I to

Carly Davenport

That’s Thanks Uzi. much, great. so

Operator

Please go next Our ahead. Wells comes from from Instructions] [Operator question Roger Read Fargo.

Roger Read

Yes. morning everybody. Hey. Good

been we ways say, some question, a last like but to in Just, as don’t where follow-up soon. didn’t little a we’ve a any seeing really and the change time inland production long I have time guess, we obviously, market been in would I growth think on desk Uzi. to are It’s that an I’d obviously, I

we Midland other – side? where sell the and between opportunities to terms are or crude product started in. of TI would So, of in unit, you changes any feedstock help besides switching on you make company, you Tyler kind you trying as look if first was at acquired that the any today, you it the when market are the a what to so, sourcing

Uzi Yemin

That’s want one. you to Todd? Do one great that take a

Todd O'Malley

Sure. Yes.

we’ve think, of assets DKL of of having of talked couple that But that is one optionality incredible sweet I netted just we our the the about this to on barrels. just again, beauties Roger, have previous means a and surrounding systems So, optionality calls. run not simply all

ground sour. have capability across We grades, us the on the that to across optimize sweet the and gives steel

we happening of a around. looking shifting we in are side, lot crude So, and slate the as dislocations our speak that the crude are on actively market at the

terms overvalued, wait more looking rent system from optimize selling into the in On out can market we of in slate Pad of the the and in arms of how obviously, at product region are supply X the that it, pushing with pads. and the refining circumstances rack the to product bulk unfortunate the in also the side being we availability surrounds other

are we day. single perspective, that that from at every So, looking

We look and are different exchanges actively with partners. at We working slates. obviously crude

So, answers that hope question. your

Roger Read

looks you on unrelated are just at facility least Yes, renewable look I imagine the out Bakersfield closing it. way closing things at in you’d it’s do follow-up, of helpful you that the how or and I kind little was some in of that that on and to put it already, of be completion curious in as fuels, I definitely other they what bit it are considering, be would there other some at yes, but to opportunities know other you it a that opportunities a are renewable the this point. good diesel

Todd O'Malley

from operational we no quick look. is what pivot said So, needs and I’ll update give become XX-day just to the a we in frankly free the have is there you past, Roger, that a which facility really

of I that our Obviously, think potentially three biodiesel XQ we that exercise so, stay have option. plants. where we tuned. And could

We other past the around look a renewable opportunities saying think, country. different pretty I to the And our diesel is to that, has but front But of to and would at spending think a mindful us necessarily what are been I anything in where be want bridge, transition. consistent capital-intensive exploring money. options Uzi of in feedstock we not be I think have we outside solution the global extremely of we are

So, evaluate. light kind with time of we will think what which the continue to are to stick we the capital for going is sees. our already market being, approach, I But

question. that hope answers So, your

Roger Read

Thank you.

Operator

comes Prashant Please from question Rao Citigroup. go from next The ahead.

Prashant Rao

Thanks morning. for Good taking Hi. question. the

just into sight resolution application that cases of hear things give this against could the line curious litigation the SREs expectations or some some First start there going that one help stand? could to that something week EPA. to in of coming those might that us think, broader where weeks. and I of to some we us news or is some various picture, one clarity those litigations was big of guys just was landscape. I is sort understand on the There on you were

that. closer are to lot you So, guys

So I wondering us that there in be walk just what of front out terms help the you looking the timeline prospective be could market? and through of we could us if was on see kind should what sort you for what in of

Uzi Yemin

Well, Great everybody. say you, morning question, to good should morning, morning. didn’t But, I good say maybe didn’t good to good Prashant. I say I morning

administration almost So, We that we if work have with soon. should due, come believe, believe to continue behind days is deadline. SREs, long It are that SREs past anyway, way, by the due, the questions been continue the one. the they we do XXX do around past to answering we

that of give prices. understand the low. help order I SREs that they prices that to think – the heard are to crude to lower many all in asking that I President or something come We inspection inputs OPEC lower people should believe in increase the them do gasoline Biden the soon.

don’t is hands the soon? how this in Now, administration. I the know of

of We continue – them. of El of you we times, that we and out eight of Tyler, of year, in to going out Dorado submitted last again believe several times, out we seven times the five I guided five six that deserve times to – times course, of out eight. we eight am over remind that that

we certainly month of more or we by wins for the one we market from than on on more away do the we end November. believe deadline November refineries are that XX, and others that. are for are impacted is SRE believe So, compliance the the that our

several So, them we discussed are with they like said, again, very the that to believe think I should we we of administration. soon. that as entitled we come And

Prashant Rao

Okay. Thanks, Uzi.

weeks. helpful. next of few the sometime in the month, That’s end So,

or there of a maybe us capacity is this in coming over biodiesel fact understand was different and that that have couple question, existing you asked maybe next help years. earlier. BBD RD Second you The of lot called on-stream is the could production

score on-stream get sits with an year you competitively for us production think production, two levels Your supply? netbacks what the one, biodiesel? been some things, it this the two, year? you of Do expect help you coming with new you and biodiesel give sot And the on us of facilities and next there do feel existing of like the that production get where out what are comfortable CI could update have you incremental you

Uzi Yemin

if a comparative. plant what rent is question one all goes rents for And the of rents down That’s every stay – enjoy. will thing, refining then will course high, great then do. If refining

the between it’s a So, play two.

these very low these very low are low They in demand very or cap have Now, been assets. capital demand. capital

I the close efficiently is as running think to Mark excellent that as full them that runs doing person capacity. job them

see will Blake, will if will we price will don’t rents to want how and come believe to assets know next just need – then and We how to I you look down, react these competitive do year should – rent that? to if the how anything to at that down add need We that. are. come rents

Blake Fernandez

of on have. guess, mid-cycle what I asking are you like term of a should profitability kind Prashant, basis, longer if kind this

general We a basis have $X.XX before gallon a said a on to times gallons full investors in year year. XX that

are basically $XX at million to year $X million EBITDA. a of You

you from standpoint. modeling So, I mean, a Obviously hopefully helps per quarter. general that flows and that ebbs

Prashant Rao

Okay. I’ll Thanks over. turn it the time a guys. Appreciate lot.

Blake Fernandez

Thank you, Prashant.

Operator

from comes Please JP question ahead. Gresh next go The Phil from Morgan.

John Royall

in for I given Hey, on the next updated any capital update is actually good there about going profitability views Royall share looking macro thoughts just piece improvement CapEx allocation? into any in John sitting shareholders? He but the better to can morning. you spoke your is environment on today. returns in traveling know year, the Is Phil. you your This on

Uzi Yemin

like improving first, something the cash the more is million $XX I going I a quarters. insurance thanks our And amounts quarter to an several do just expect mix more in of events them taking our cash we to capital earnings use you the give of got that about to would background adjusting significantly upcoming while allocation you the that are cash are for that am down, have this time. we coming helping and ask. that as position we to We just opportunity add Yes, position one-time because here the position. our

$XX that In this of position impact be cash not is of the the Also, SREs we Now, will fourth connector, will will be building with course, had the we quarter way. the WTW of quarter, dramatically. the cash. adjust course, coming $XX door. cash that there coming settlement with to our million Also million the but - course that, may

want So, about of and if think start a we’ll now then to top right capital that, and will And when energy events, we the that want many all our in also mind. reinstate honestly, that at if and movement have debt reinstate companies the free and we dividend at soon allocation. about you too to we change look have something it to the company look want how We look see business, how the the how you flow transformation. underlying to we is are we the Generating dividend, cash to will market don’t these of on prudently. don’t we we pay use we with think

John Royall

differentials And for situation Thank is in you crude the going the you then, but I And TI, important on out couple I the will of more cushing know cushing think in do guess, Midland how But thoughts play think do to as you Brent specifically, helpful. how well. times. impact, you. months? your a couple be you inventories, U.S. just really guys, the there inland low next of to going flow That’s then, different touched thinking about levels that’s

Uzi Yemin

that Yes, Todd let I’ll one. to take

Todd O'Malley

in to prices point in back ultimately market. to and the to differential to cushing. according week, coming we is are are prefer Yes. this builds, to look is if the of and barrels exposed John, in Midland falling fill of the earlier look again. into differential going so, cushing performing happened This at the the cause in cushing cure that to back has not Uzi’s high really differentials terms guy up what market kind to We super Brent favor at this high that market. we attracting flat. that prices banks To you But today, obviously, saw been our market

In weeks fairly thought or significantly fact, for couple ago, trade negative a of two. even a day we

with reinforcing feel that DPG in pretty make see we good that addition to where we and think they into market is again gives and coming environment Midland are are, things relatively year about around lot weak headed as than next the comment faster much margin believe move on obviously, we we So, volumes where I tailwinds a potential the anticipating strong of us a differentials.

John Royall

much. very you Thank Helpful.

Operator

from The Matthew Tudor, Holt. next question from Blair go comes Pickering, Please ahead.

Matthew Blair

morning, Hey, Uzi. good

Uzi Yemin

Hey, Matt.

Matthew Blair

been like the volumes increasing have both I quarter-over-quarter was looks retail and a down store sales as little your would merchandize year-over-year. per bit well the quarter-over-quarter in activity stronger. then given Just as also retail It fuel that were Permian, you I down and thought your segment guess, year-over-year were

So, you in talk segment? about retail could the dynamics I guess,

Uzi Yemin

Absolutely.

But to we First, still elected see, look close we pandemic. you you same-stores, as stores. the some if from at are recovering

that and manage We business a the carefully want because numbers. recovery very year. to to terms the you the and course, profit merchandize. in if and that profitability September We the see you are year of always starting of bring look have recovery We – the this will see at don’t October, coming on we be gallon We side.

do certainly that’s for like pick happened Permian up our XXXX, activity new But MTIs margins wait very Now, bring online the high to the in please to keep It you continue improve. up. in remember, elected quarter for expecting the stores market and we the correct are strong to the absolutely retail. will year then, as XXXX that and we to will pick are we this very, that

Matthew Blair

Got back then, on to it. conversation circling And valuation. the

numbers, So, refining free. Uzi, the only for is Delek company trading our where on

on stake sitting in DKL. the are big You

has the the lagged in the retail stock year-to-date. and higher interest multiple have also You

looking not these to you about I guess, are what at improve am sensing monetize just an talk what, the actions just much I parts urgency of So, to valuation here? you and could

Uzi Yemin

a do over and here, CEO up for that you markets you as great a that texted – times a friend dramatically. and And week. of public years? been my change XX finished know, for public a ago Matt. me with did saying, So, and company I question, many company a valuation How I’ve market hey, a have that’s and he down a career Look, the CEO I became week is have

what With underlying the mentioned with said, think assets and to obviously free with SREs to the that that. vis-à-vis expecting We improve which are – in start the happen. valuation being on I will prove is that producing cash as doesn’t improvement to we I believe other us flow do that the continued business. the insurance, that all market table options especially was the

for end to So, it will if by we the of the we act. day, will doesn’t but wait the improve, market

Matthew Blair

Got it. Thank you.

Operator

comes from Please Paul ahead. question Sankey go from next Sankey The Research.

Paul Sankey

and morning, ask everyone. second the to good me And Hi, let condolences you.

things secondly prices for higher, the and obviously the going here. thinking ask you’ve just much natural clearly a the U.S. particularly particularly changing it affected the price. there. So, moments I Brent differentials. we been about between And the Can the in of But pretty about you gas here, thing the and flair am that’s and history Uzi, industry? but a pointed gas has you you had the that’s differentials major bit of being talk Europe. Thanks. by about since change gas are how of and changed crude to a in differential between arbitrage Midland couple was firstly at we covered One lot crude prices and some natural here the natural us change

Uzi Yemin

would would to myself year would telling you the at said for we thank first Louis. ago lost $X. have told told natural that have situation, anybody And gas anybody are we that gas and would have your if kind are And here – vis-à-vis regard be that in a also, to somebody $X, words that me, mind. me your at I you Paul, I natural or

I two. don’t we in is last than year that positioned it of don’t we that think I a know especially are And this will I that our biz, in terms our gas. or that a while it very light of change the situation. is fact think more unique well natural

We are the very of natural source our of getting gas proximity cheap because that gas. to

to want I need very know know if that will associated see the changing look business gas it then So, it the Todd? don’t to in don’t I continues add if are that, Permian, being to that said, to carefully. anything with And to much. With do with our you we what we at it. especially

Todd O'Malley

trading, around the prices Paul, slightly That The and the in only crack with switching bid thing maybe mainly I Asia. fuel puts in is $XX under see it about roughly in today. an focused the Northwest now then a MMBTU, as call elevated would Northwest world you Europe really obviously, let’s higher Europe say,

the are that, from of that. to because as solid of that pretty $X result seeing perspective, U.S. of then, So, persists. through you built robust margin good XXXX being a we and And the see crack a – if Northwest in XXXX here set base barrels very again up could for headwinds cracks in environment into continuing in foundational the that curve probably European out $X – environment that

Paul Sankey

Got it.

am for go to explain just bigger much final a guys. it’s you year. just Midland run just I but you a that? Could to like follow-up. me, discount for next you expect it Just you because you – a Could so through Can important

Uzi Yemin

see the we much accrual needs to never said still export going Midland TI markets. Right. know be to barrels that I bigger. their to – What go to if don’t and leave is Brent Midland is then, that, we is

to it’s if somewhere. otherwise needs should closer the reflected something then, be give producers So, – cost

don’t surprised to right already online coming the of at XX, but now. much I and XX, saw Webster Wink that bigger minus the especially it discount, minus XX. we That’s we – are minus we’ve with So, know that think with especially

lion still So Midland with and is weak. the fill

vice look up and So versa. that That’s a will go at opens will $X Brent how see is if then TI to premium we to there Midland chance it. a

Paul Sankey

hands to thanks. defense. Appreciate stay I But to around thinking the head am my that, Uzi. going the about on My have room.

Operator

question next America. Bank go Clay of from ahead. from The Augumini Please comes

Clay Augumini

standing Doug. I’m in guys. morning, for good Hey,

I taking had question. So, couple a for here. the thanks

on The the value of business. first refining is the one

of on based DKL ex-DKL, for the as course, So, loaded is the perception the what SREs of see flow cash wondering the capital. downs burden refining that applying the without sustainable for refining thoughts additional on your free and in refining drop fully cost free, business. And that are the maintenance but business standalone you what

perhaps So differential. assuming, on know, WTI mid-cycle what $X a look does number I that a don’t basis, like rent

Uzi Yemin

let’s okay, here, Well, one-by-one go Clay.

about First, you CapEx. the ask maintenance

$XXX Blake $XXX think year. to the I it’s on that million million between mentioned depends

will. And can if down. you So, it that’s our write number, you

free cash regardless ability flow to vis-à-vis, Second, the of SREs. maintain

after administration granted and the that year. were, after year year thought First we the them to think SREs, because down we we that are that we were SREs

BTU the that assumption So, assuming I is don’t know that like this assumption right exist. is doesn’t

it back minute go it we the don’t will SREs renewable differentials. the So with I $X.XX continue the of diesel an to be just zero, just numbers But in aside now that. assume is know in again are is and have, being neutral will these away. FMEs Midland say – said being Contango, to assumption that RVO should structure all think. no normalized. rents which or and $X.XX – this that for should $X. it know we at But under or go that of and I the put We $XX this would we regardless of and and know $X.XX normalized and under again and I again or just CEO, and as cracks a one I because let’s are $XX cost zero, no i.e.,

think are million refining only. we generate of – We $XXX can we EBITDA that

So it and takes burden Wink we $XX Webster refining. on the cost today there no that structure is to have with

burden CMA be will don’t there know now, why zero, And a I on So zero, right Midland negative refining dropdown. is of with will which $X. it it’s

to know, anything tell in want $XXX us, I So our if million. you that? you won’t add don’t mind it what Blake, suggest to I

Blake Fernandez

earnings you last Clay, mid-cycle and thing think the for quarter. and add the I were Doug asking would only about I

we holding And headwinds of think If et EBITDA. go be you up. is, $XX cetera, our back from through to million out the seems I there about to isolate messaging natural Midland, the Contango obviously, $XX of million and EBITDA, you $XX gas, this and breakeven generated refining kind quarter

So, exacerbate as Uzi a more going the said, crack, is of earnings dramatically. on mid-cycle of refining I $XX rent a basis, power you quite toward adjusted to escalate think, as kind of

Clay Augumini

that. it. I appreciate Got

EBITDA $XXX So the rent there normalized on day. million that, in depends get there nuance back mid-cycle a one the is environment. we I hope

Uzi Yemin

SREs, but Now, want. don’t can number, anybody we assume are normalized, the didn’t it’s year if that which they in not should we also that them. them – won’t cracks be get not the – go we year But and after If whatever getting let’s that I assume include we will we think do not after we honest. year, up,

Clay Augumini

it. for Got Thanks that clarification.

question The really second question is on Logistics. the a strategic Delek rationale about governments. It’s of

pushback have at DKL. burdened been the that it by added fixed business the cost get So the been is we free cash has refining the that to by flow that capacity

DK influenced So, dividend a and doesn’t bit dividend, a management maybe pay but the to governance, DKL it does trough, a entities, out. about owns the by little where of concern is but rate gets paid in that where both mix of

came market are if the of and challenged sure this hear a up likes meeting guys of you things. number in addressed We think But you a on to lot it. they I the

Uzi Yemin

sponsor This the don’t I with as that compensation know a Well, don’t is DKL anything or vis-à-vis that management like – typical we little anything MLP. very or is compensated DK, small I that have which so know people being there with being is impacts management that our little our is very management group – anything largely sponsor DKL, are is if that. – around very structure and of the

has DK with very a of remember, please well capital. Now, cost the

very with over So DK years dividend at the well downs take and these that buy drop shares allowed all that us is pay the to DK cash level.

is XX Also, management know coming where eliminated DKL. months it’s that don’t the I ideas favors So, ago. DKL our from were

am not surprising concerns the if question. are So and we sure what with any I look there

Clay Augumini

Thank Underneath to it, the appreciate you want ask Uzi. answer, I but you.

Operator

from Gabelman Please ahead. go The next from question comes Jason Cowen.

Jason Gabelman

my being Good lot morning. seems of a very Thanks quick question. the is have taking couple covered. of I It for like ones. material stuff

Thanks. from switching, seems of Can capture of between there switch sweet dip you benefit some of impact your moved to like Midland clarification that sour I had XQ? on full prices through it offset your or one, ability to sour. then, the that is is natural discussed And in Did if cash getting gas discuss flow has or come terms number crude XQ. an higher think second you and the WTS that any ACT a weakening the to if just on of you in yield? and that CARES First a just kind

Todd O'Malley

So, Jason, Obviously, this the I’ll the sweet to now. the part regards question to is is right Todd. first of moving that sour. market take

suffice that are between ground on the commercially executing say, today. streams. not to at again, able and reality into to heavily we going We’ll because where it have go So the we a And factored when not already obviously just into kit be to the simply refining that are exactly around detail But between in of that. we it’s running information. we what is based around of gas very DKL assets on look kind It’s those headwind XXX% to optimize natural are a that uplift. you capture sensitive really

So, incremental would you assume. uplift I think what is

Jason Gabelman

sour I that kind what you can level you the the at run us tell maximum and you’ve mean, of and do? much ranges how maybe

Uzi Yemin

own. it couple Well, on to pipelines we of us that depends reversing

But made just Midland right And not pandemic are picking have the coming obviously the out we activity We is we that. remember, that up. now. decision, now do if persists, in just will of it

market. know So, barrels back come give in is sweet it that But a everybody it run do you some let’s to not to time months to that’s XX months. I how or six the your anxious, the business.

production the the pick is to pandemic Permian a years. that will activity I produce But the that last halt starts will up. some the Our high long-term it continue for of levels. The into the time. outlook for put couple over at give know

Reuven Spiegel

quickly question the tax And refund. Jason, on answer your just to

working was and capital. within that booked received So

the on reflected So, X. in that flow cash waterfall is that’s Page

Jason Gabelman

Thanks.

Operator

Please go comes question Scotiabank. Chang next from Our Paul from ahead. Instructions] [Operator

Paul Chang

Hey guys. Good morning.

Uzi Yemin

Mr. Hey, Chang.

Paul Chang

to condolence my send Louis’ and first you family. me Let

really news. hear number a So, questions. quick to I the of sorry was Uzi,

have rate on the First, changed, up maybe, per basis. catch margin what is per to and for also your the price currently barrel OpEx natural a gas sensitivity dollar FE

Blake Fernandez

it’s Paul, Blake. I’ll that. tackle

for million us equates basically, sensitivity every offset or roughly MCF of essentially to of distillate that impact for per And the impact $XX crack dollar natural So, gas. corresponding moves barrel, is $X.XX would per that. annual

that. offset enough we to prices, has been than are more seen So, gas seeing the in distillate this environment, where crack have you escalating what

to any higher we margin operating will we prices on our take So, a get costs see. day like

Paul Chang

the margin gas or natural Hey, hydrogen Blake, how is consume for all in catch-up chipping. million crack OpEx, since in on that hydrogen the you hydro – $XX about

for margin piece So catch-up? what the is the

Blake Fernandez

There minimis. small than less amount is at million. de not, it’s a Dorado. I very guess, it’s $X But Paul frankly El

all it’s the So, basically, OpEx in line.

Paul Chang

Alright.

the end you we that can what the at balance booked? that that also in Secondly, the mark-to-market rent all are third of the with curve sitting third that And that is you is gain the [Indiscernible] us share sheet quarter what the quarter. on

Uzi Yemin

positions Paul, there, are little or we another not our that’s we because part or the we as a to market. business. building not not here that We of never Obviously, bit model, we long business if our but ongoing way that consider short, are one disclose that. or are disclosing

Paul Chang

Okay.

Uzi Yemin

of part business. ongoing our That’s

Paul Chang

tell you of or Can What’s quarter net and win expense net the me the expense? ongoing Sure. that the is what XXXX third mark-to-market number?

Blake Fernandez

we Paul, not given historically have don’t that. just disclose We that.

to give So, you. unfortunately, that to don’t I have data

Paul Chang

final Alright. two questions. And

over past refining that First, Uzi, changing I the somewhat several has knew think years. you about all been

quarters, you think at receiving question Gulf think are I is, that in you Coast. think the scale. fail better the the a the I increase of And to last get going that refining lot is I not capacity were focus one anymore. you on to maybe There couple quite economy a in aiming you point, to up number sale refinery are of, sort of of for

Permian any in gasoline insights can Thank system, for part today? their view question still is, the If no next, you. share. really of Do you XX final your there then you customer that mean you your longer the in capacity expanding inorganic interested refining six And say, are level in your over that the months? from with you that activity are think what of strategy? you the how So, heard or that terms to

Uzi Yemin

every system. take Yes. dedication their going of Absolutely. the one, that to coming the are new hear I’ll they signing Every and producers for that producer to it’s up increase on top because to acreage producer the last activity. second easy. the from are – first, We today

of we get the of picking up think an on XXX see the which – now. by have mentioned MVC is what will right that, that the year activity DKL call the that next to toward part we I we will So increase second we certainly. XX% is – versus of the

easy So, that’s an one.

other great which need you to a a weigh And question. is one, little the we a or little factors longer, ask several in On here. more

and second, First, to think we that is company grow it. is too but, need transformation, fact the small energy too we that the It our small.

improve that going the fact operation if of on long-term the Third, we buy we in are we with the ESG. the that we light of have cash to Fourth, refinery what’s free what flow. now, refinery back can and sustainability is

we tomorrow our – So, into we in take almost all as – look to That’s daily to And these like is that weigh on future. steps the metrics. all basis our need the a we strategic for at next buying at look company. factors we are strategic the And a that being a not T-shirt into buying considered refinery decision marketplace. a

Paul Chang

you DK candidate to? maximum form want to is to be you – willing that go what to Uzi, will you nippage the that acquire, And do allow a would you if

Uzi Yemin

ex Yes. think DKL. normalized That’s a more DK basis, I go don’t times. than X.X should that on

net the X.X be We allow than is – a million. that million $XXX at DK times on basis. debt look roughly, $XXX now for we – we more this should if think to So, won’t don’t I normalized

that a sudden think we two, be year we a is and should there fine. long-term, that’s or above of an I times acquisition if all X.X don’t mid-cycle. Now, then deleverage But that over

Paul Chang

Thank you. Alright.

Operator

closing would There like the This for turn back to Yemin to concludes Uzi I more session. our question questions over conference the are answer any no remarks. in queue.

Uzi Yemin

to I and that this and this them I’d make of family, great you prayers, Board want great I call actually Louis in the to but Jason, investors please first, this the all him employees but thoughts around Have I’d keep I’d Obviously, to for I is. I’d working of a it it Directors, like company on morning. the participated company thanks making like my thanking talk it like thank the is. us like – to thank and - day. mostly, all thank have the We’ll Well, we his your to need or everybody table, mostly to colleagues what company who soon. call. for mentioned

Operator

The conference Thank you for today's has concluded. attending presentation. now

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