Delek Logistics Partners, LP Reports Third Quarter 2017 Results
Source: Nasdaq GlobeNewswire / 08 Nov 2017 17:15:14 America/New_York
- Declared quarterly distribution of $0.715 per limited partner unit; increased by 9.2 percent year-over-year
- Reported third quarter 2017 net cash from operating activities of $30.5 million and distributable cash flow of $21.6 million
BRENTWOOD, Tenn., Nov. 08, 2017 (GLOBE NEWSWIRE) -- Delek Logistics Partners, LP (NYSE:DKL) ("Delek Logistics") today announced its financial results for the third quarter 2017. For the three months ended September 30, 2017, Delek Logistics reported net income attributable to all partners of $16.9 million, or $0.50 per diluted common limited partner unit. This compares to net income attributable to all partners of $13.2 million, or $0.41 per diluted common limited partner unit, in the third quarter 2016. Distributable cash flow was $21.6 million in the third quarter 2017, compared to $19.1 million in the prior-year period.
For the third quarter 2017, earnings before interest, taxes, depreciation and amortization ("EBITDA") was $29.7 million compared to $22.0 million in the prior-year period. The combination of a higher gross margin per barrel in west Texas, improved performance from the Paline Pipeline and East Texas marketing agreement were the primary factors in the year over year increase.
Uzi Yemin, Chairman and Chief Executive Officer of Delek Logistics' general partner, remarked: "During the third quarter, we added a truck crude unloading facility to support the Big Spring refinery and are on track to increase the Paline Pipeline capacity to 42,000 barrels per day in the first quarter 2018. In addition to these initiatives, to provide logistics support to a larger refining system at Delek US, we will continue to explore other opportunities. Also, we believe that following our sponsor's, Delek US, acquisition of Alon USA Energy on July 1, there will be an opportunity to grow through future potential dropdowns. We anticipate that the financial flexibility provided by our balance sheet and focus on growth initiatives should support a distribution per limited partner unit increase of at least 10% annually through 2019."
Yemin concluded, "Our operations performed well in the third quarter, and our EBITDA was approximately $30.0 million for the second quarter in a row. Our west Texas margins remained strong, and the Paline Pipeline operated near capacity as crude oil differentials remained favorable to support third-party crude oil shipments to the Gulf Coast. We ended the quarter with approximately $533 million of capacity on our credit facility and a total leverage ratio of approximately 3.7 times. This financial position supported the 9.2 percent year-over-year increase in our declared third quarter distribution."
Distribution and Liquidity
On October 25, 2017, Delek Logistics declared a quarterly cash distribution for the third quarter of $0.715 per limited partner unit, which equates to $2.86 per limited partner unit on an annualized basis. This distribution is expected to be paid on November 14, 2017 to unitholders of record on November 7, 2017. This represents a 1.4 percent increase from the second quarter 2017 distribution of $0.705 per limited partner unit, or $2.82 per limited partner unit on an annualized basis, and a 9.2 percent increase over Delek Logistics’ third quarter 2016 distribution of $0.655 per limited partner unit, or $2.62 per limited partner unit annualized. For the third quarter 2017, the total cash distribution declared to all partners, including IDRs, was approximately $22.3 million. Based on the declared distribution for the third quarter 2017, the distributable cash flow coverage ratio for the third quarter was 0.97x.
As of September 30, 2017, Delek Logistics had total debt of approximately $401.3 million and cash of $5.3 million. Additional borrowing capacity, subject to certain covenants, under the $700.0 million credit facility was $532.7 million.
Revenue for the third quarter 2017 was $130.6 million compared to $107.5 million in the prior year period. The increase in revenue is primarily due to higher sales prices in the west Texas wholesale business. Total operating expenses were $10.7 million in the third quarter 2017, compared to $9.3 million in the third quarter 2016. This increase was primarily due to outside services and employee related expenses. Total segment contribution margin was $30.8 million in the third quarter 2017 compared to $24.7 million in the third quarter 2016. General and administrative expenses were $2.8 million for the third quarter 2017, compared to $2.3 million in the prior year period.
Pipelines and Transportation Segment
The contribution margin in the third quarter 2017 was $17.5 million compared to $16.1 million in the third quarter 2016. This change was primarily due to improved performance on the Paline Pipeline, higher volume on the Lion Pipeline System, partially offset by lower volume on the SALA system. During the third quarter 2017, the Paline Pipeline was a FERC regulated pipeline with a tariff established for potential shippers, compared to the prior year period when 10,000 barrels per day of the pipeline capacity was under contract with a third-party for a monthly fee. The Paline Pipeline was shut down for approximately nine days due to disruption caused by Hurricane Harvey in the Beaumont area in the third quarter 2017. Operating expenses were $8.6 million in the third quarter 2017 compared to $7.7 million in the prior year period.
Wholesale Marketing and Terminalling Segment
During the third quarter 2017, contribution margin was $13.3 million, compared to $8.6 million in the third quarter 2016. This increase was primarily due to improved performance in the west Texas wholesale operations and east Texas marketing agreement on a year-over-year basis. Operating expenses increased to $2.1 million in the third quarter 2017, compared to $1.6 million in the prior year period.
In the west Texas wholesale business, average throughput in the third quarter 2017 was 12,929 barrels per day compared to 12,162 barrels per day in the third quarter 2016. The wholesale gross margin in west Texas increased year-over-year to $4.00 per barrel and included approximately $1.6 million, or $1.32 per barrel, from renewable identification numbers (RINs) generated in the quarter. During the third quarter 2016, the wholesale gross margin was $1.16 per barrel and included $1.8 million from RINs, or $1.57 per barrel. On a year-over-year basis, continued growth in drilling activity in the Permian Basin increased fuel demand and improved the supply/demand balance, which combined with higher margins during a period of product supply disruptions associated with Hurricane Harvey, led to improved performance in the west Texas wholesale business.
Average terminalling throughput volume of 127,229 barrels per day during the quarter increased on a year-over-year basis from 120,099 barrels per day in the third quarter 2016 primarily due to higher throughput at the Tyler, Texas terminal, partially offset by a decline at other locations. During the third quarter 2017, average volume under the east Texas marketing agreement with Delek US was 74,357 barrels per day compared to 67,812 barrels per day during the third quarter 2016.
Alan Moret has been appointed President of the general partner of Delek Logistics. He joined Delek US through the Alon USA transaction and has served as an EVP of Delek Logistics since July 1, 2017. At Alon, Mr. Moret served as Interim CEO of Alon USA Energy, Inc. and Alon USA Energy Partners, LP from January 2017 until July 1, 2017. Prior to these appointments, Mr. Moret served as Senior Vice President of Supply, Trading and Logistics at Alon since 2008 and, prior to that, as Senior Vice President of Alon’s Asphalt Division where he directed the company’s asphalt operations and marketing. Mr. Moret joined Alon USA in August 2006 in connection with Alon USA’s acquisition of Paramount Petroleum Corporation, where he served as President from November 2001 to August 2006. Mr. Moret has more than 40 years of experience with refining, crude oil and refined product trading and marketing, petroleum logistics, and asphalt business.
Third Quarter 2017 Results | Conference Call Information
Delek Logistics will hold a conference call to discuss its third quarter 2017 results on Thursday, November 9, 2017 at 8:30 a.m. Central Time. Investors will have the opportunity to listen to the conference call live by going to www.DelekLogistics.com. Participants are encouraged to register at least 15 minutes early to download and install any necessary software. For those who cannot listen to the live broadcast, a telephonic replay will be available through February 9, 2018 by dialing (855) 859-2056, passcode 99812645. An archived version of the replay will also be available at www.DelekLogistics.com for 90 days.
Investors may also wish to listen to Delek US’ (NYSE:DK) third quarter 2017 earnings conference call on Thursday, November 9, 2017 at 9:30 a.m. Central Time and review Delek US’ earnings press release. Market trends and information disclosed by Delek US may be relevant to Delek Logistics, as it is a consolidated subsidiary of Delek US. Investors can find information related to Delek US and the timing of its earnings release online by going to www.DelekUS.com.
About Delek Logistics Partners, LP
Delek Logistics Partners, LP, headquartered in Brentwood, Tennessee, was formed by Delek US Holdings, Inc. (NYSE:DK) to own, operate, acquire and construct crude oil and refined products logistics and marketing assets.
Safe Harbor Provisions Regarding Forward-Looking Statements
This press release contains “forward-looking” statements within the meaning of the federal securities laws. These statements contain words such as “possible,” “believe,” “should,” “could,” “would,” “predict,” “plan,” “estimate,” “intend,” “may,” “anticipate,” “will,” “if,” “expect” or similar expressions, as well as statements in the future tense, and can be impacted by numerous factors, including the fact that a substantial majority of Delek Logistics' contribution margin is derived from Delek US Holdings, thereby subjecting us to Delek US Holdings' business risks; risks relating to the securities markets generally; risks and costs relating to the age and operational hazards of our assets including, without limitation, costs, penalties, regulatory or legal actions and other effects related to releases, spills and other hazards inherent in transporting and storing crude oil and intermediate and finished petroleum products; the impact of adverse market conditions affecting the utilization of Delek Logistics' assets and business performance, including margins generated by its wholesale fuel business; an inability of Delek to successfully integrate the businesses of Delek and Alon USA Energy, Inc., to grow as expected and realize the synergies and the other anticipated benefits of its merger with Alon, which became effective as of July 1, 2017, as it relates to our potential future growth opportunities, including dropdowns, and other potential benefits; the results of our investments in joint ventures; adverse changes in laws including with respect to tax and regulatory matters and other risks as disclosed in our annual report on Form 10-K, quarterly reports on Form 10-Q and other reports and filings with the United States Securities and Exchange Commission. There can be no assurance that actual results will not differ from those expected by management or described in forward-looking statements of Delek Logistics. Delek Logistics undertakes no obligation to update or revise such forward-looking statements to reflect events or circumstances that occur, or which Delek Logistics becomes aware of, after the date hereof.
EBITDA, distributable cash flow and distributable cash flow coverage ratio are non-U.S. GAAP supplemental financial measures that management and external users of our combined financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:
- Delek Logistics' operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or, in the case of EBITDA, financing methods;
- the ability of our assets to generate sufficient cash flow to make distributions to Delek Logistics' unitholders;
- Delek Logistics' ability to incur and service debt and fund capital expenditures; and
- the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
Delek Logistics believes that the presentation of EBITDA, distributable cash flow and distributable cash flow coverage ratio provide useful information to investors in assessing its financial condition, its results of operations and cash flow its business is generating. EBITDA, distributable cash flow and distributable cash flow coverage ratio should not be considered in isolation or as alternatives to net income, operating income, cash from operations or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP. EBITDA, distributable cash flow and distributable cash flow coverage ratio have important limitations as analytical tools because they exclude some, but not all items that affect net income and net cash provided by operating activities. Additionally, because EBITDA and distributable cash flow may be defined differently by other partnerships in its industry, Delek Logistics' definitions of EBITDA and distributable cash flow may not be comparable to similarly titled measures of other partnerships. Please see the tables below for a reconciliation of EBITDA and distributable cash flow to their most directly comparable financial measures calculated and presented in accordance with U.S. GAAP. Also, please see the accompanying table providing the calculation of distributable cash flow coverage ratio.
Delek Logistics Partners, LP Condensed Consolidated Balance Sheets (Unaudited) September 30, December 31, 2017 2016 (In thousands) ASSETS Current assets: Cash and cash equivalents $ 5,290 $ 59 Accounts receivable 20,317 19,202 Accounts receivable from related parties 714 2,834 Inventory 7,891 8,875 Other current assets 37 1,071 Total current assets 34,249 32,041 Property, plant and equipment: Property, plant and equipment 357,532 342,407 Less: accumulated depreciation (106,880 ) (91,378 ) Property, plant and equipment, net 250,652 251,029 Equity method investments 106,098 101,080 Goodwill 12,203 12,203 Intangible assets, net 16,182 14,420 Other non-current assets 3,474 4,774 Total assets $ 422,858 $ 415,547 LIABILITIES AND DEFICIT Current liabilities: Accounts payable $ 14,547 $ 10,853 Accounts payable to related parties — — Excise and other taxes payable 3,376 4,841 Tank inspection liabilities 919 1,013 Pipeline release liabilities 1,000 1,097 Accrued expenses and other current liabilities 8,897 2,925 Total current liabilities 28,739 20,729 Non-current liabilities: Long-term debt 401,318 392,600 Asset retirement obligations 3,991 3,772 Deferred tax liabilities — — Other non-current liabilities 14,568 11,730 Total non-current liabilities 419,877 408,102 Total liabilities 448,616 428,831 Deficit: Common unitholders - public; 9,067,411 units issued and outstanding at September 30, 2017 (9,263,415 at December 31, 2016) 175,831 188,013 Common unitholders - Delek; 15,294,046 units issued and outstanding at September 30, 2017 (15,065,192 at December 31, 2016) (195,217 ) (195,076 ) General partner - 497,172 units issued and outstanding at September 30, 2017 (496,502 at December 31, 2016) (6,372 ) (6,221 ) Total deficit (25,758 ) (13,284 ) Total liabilities and deficit $ 422,858 $ 415,547 Delek Logistics Partners, LP Condensed Consolidated Statements of Income (Unaudited) Three Months Ended
Nine Months Ended
2017 2016 2017 2016 (In thousands, except unit and per unit data) Net sales: Affiliate $ 40,131 $ 36,360 $ 116,574 $ 111,814 Third-party 90,495 71,110 270,294 211,565 Net sales 130,626 107,470 386,868 323,379 Operating costs and expenses: Cost of goods sold 89,120 73,527 266,749 213,381 Operating expenses 10,662 9,251 30,986 28,445 General and administrative expenses 2,751 2,307 8,255 7,918 Depreciation and amortization 5,462 5,356 16,397 15,164 (Gain) loss on asset disposals (5 ) 28 2 (16 ) Total operating costs and expenses 107,990 90,469 322,389 264,892 Operating income 22,636 17,001 64,479 58,487 Interest expense, net 7,124 3,409 16,657 9,892 (Income) loss from equity method investments (1,584 ) 308 (3,005 ) 743 Other income, net (1 ) — (1 ) — Income before income tax expense 17,097 13,284 50,828 47,852 Income tax expense 174 133 333 360 Net income attributable to partners 16,923 13,151 50,495 47,492 Comprehensive income attributable to partners $ 16,923 $ 13,151 $ 50,495 $ 47,492 Less: General partner's interest in net income, including incentive distribution rights 4,745 3,259 13,406 8,303 Limited partners' interest in net income $ 12,178 $ 9,892 $ 37,089 $ 39,189 Net income per limited partner unit: Common units - (basic) $ 0.50 $ 0.41 $ 1.52 $ 1.61 Common units - (diluted) $ 0.50 $ 0.41 $ 1.52 $ 1.60 Subordinated units - Delek (basic and diluted) $ — $ — $ — $ 1.64 Weighted average limited partner units outstanding: Common units - basic 24,361,457 24,303,740 24,341,921 21,878,935 Common units - diluted 24,389,582 24,380,334 24,382,426 21,962,733 Subordinated units - Delek (basic and diluted) — — — 2,408,610 Cash distribution per limited partner unit $ 0.715 $ 0.655 $ 2.110 $ 1.895 Delek Logistics Partners, LP Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) Nine Months Ended
2017 2016 Cash Flow Data Net cash provided by operating activities $ 77,904 $ 86,761 Net cash used in investing activities (21,721 ) (60,161 ) Net cash used in financing activities (50,952 ) (26,600 ) Net increase in cash and cash equivalents $ 5,231 $ — Delek Logistics Partners, LP Reconciliation of Amounts Reported Under U.S. GAAP Three Months Ended
Nine Months Ended
($ in thousands) 2017 2016 2017 2016 Reconciliation of net income to EBITDA: Net income $ 16,923 $ 13,151 $ 50,495 $ 47,492 Add: Income tax expense 174 133 333 360 Depreciation and amortization 5,462 5,356 16,397 15,164 Interest expense, net 7,124 3,409 16,657 9,892 EBITDA $ 29,683 $ 22,049 $ 83,882 $ 72,908 Reconciliation of net cash from operating activities to distributable cash flow: Net cash provided by operating activities $ 30,493 $ 29,172 $ 77,904 $ 86,761 Changes in assets and liabilities (8,460 ) (9,979 ) (11,141 ) (22,513 ) Maintenance and regulatory capital expenditures (698 ) (718 ) (5,011 ) (2,351 ) Reimbursement from Delek for capital expenditures 419 726 4,254 1,528 Accretion of asset retirement obligations (73 ) (68 ) (219 ) (199 ) Deferred income taxes (39 ) — (158 ) — Gain (loss) on asset disposals 5 (28 ) (2 ) 16 Distributable Cash Flow $ 21,647 $ 19,105 $ 65,627 $ 63,242 Delek Logistics Partners, LP Distributable Coverage Ratio Calculation (In thousands) Three Months Ended
Nine Months Ended September 30, Distributions to partners of Delek Logistics, LP 2017 2016 2017 2016 Limited partners' distribution on common units $ 17,418 $ 15,920 $ 51,380 $ 46,039 General partner's distributions 355 325 1,047 940 General partner's incentive distribution rights 4,497 3,057 12,650 7,503 Total Distributions to be paid $ 22,270 $ 19,302 $ 65,077 $ 54,482 Distributable Cash Flow $ 21,647 $ 19,105 $ 65,627 $ 63,242 Distributable cash flow coverage ratio (1) 0.97x 0.99x 1.01x 1.16x (1) Distributable cash flow coverage ratio is calculated by dividing distributable cash flow by distributions to be paid in each respective period. Delek Logistics Partners, LP Segment Data (unaudited) (In thousands) Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 Pipelines and Transportation Net sales: Affiliate $ 27,805 $ 25,238 $ 81,972 $ 77,680 Third party 3,177 3,388 7,910 15,739 Total pipelines and transportation 30,982 28,626 89,882 93,419 Operating costs and expenses: Cost of goods sold 4,883 4,811 13,691 14,401 Operating expenses 8,573 7,678 24,661 22,317 Segment contribution margin $ 17,526 $ 16,137 $ 51,530 $ 56,701 Total Assets $ 344,260 $ 327,757 Wholesale Marketing and Terminalling Net sales: Affiliate $ 12,326 $ 11,122 $ 34,602 $ 34,134 Third party 87,318 67,722 262,384 195,826 Total wholesale marketing and terminalling 99,644 78,844 296,986 229,960 Operating costs and expenses: Cost of goods sold 84,237 68,716 253,058 198,980 Operating expenses 2,089 1,573 6,325 6,128 Segment contribution margin $ 13,318 $ 8,555 $ 37,603 $ 24,852 Total Assets $ 78,598 $ 65,413 Consolidated Net sales: Affiliate $ 40,131 $ 36,360 $ 116,574 $ 111,814 Third party 90,495 71,110 270,294 211,565 Total consolidated 130,626 107,470 386,868 323,379 Operating costs and expenses: Cost of goods sold 89,120 73,527 266,749 213,381 Operating expenses 10,662 9,251 30,986 28,445 Contribution margin 30,844 24,692 89,133 81,553 General and administrative expenses 2,751 2,307 8,255 7,918 Depreciation and amortization 5,462 5,356 16,397 15,164 (Gain) loss on asset disposals (5 ) 28 2 (16 ) Operating income $ 22,636 $ 17,001 $ 64,479 $ 58,487 Total Assets $ 422,858 $ 393,170 Delek Logistics Partners, LP Segment Capital Spending (In thousands) Three Months Ended
Nine Months Ended
Pipelines and Transportation 2017 2016 2017 2016 Maintenance capital spending $ 1,521 $ 2,403 $ 4,564 $ 3,628 Discretionary capital spending 1,397 210 2,151 409 Segment capital spending $ 2,918 $ 2,613 $ 6,715 $ 4,037 Wholesale Marketing and Terminalling Maintenance capital spending $ 351 $ 101 $ 768 $ 173 Discretionary capital spending 517 363 1,213 799 Segment capital spending $ 868 $ 464 $ 1,981 $ 972 Consolidated Maintenance capital spending $ 1,872 $ 2,504 $ 5,332 $ 3,801 Discretionary capital spending 1,914 573 3,364 1,208 Total capital spending $ 3,786 $ 3,077 $ 8,696 $ 5,009 Delek Logistics Partners, LP Segment Data (Unaudited) Three Months Ended
Nine Months Ended
2017 2016 2017 2016 Pipelines and Transportation Segment: Throughputs (average bpd) Lion Pipeline System: Crude pipelines (non-gathered) 60,247 55,217 59,653 55,951 Refined products pipelines 51,623 47,974 50,933 51,794 SALA Gathering System 15,997 17,237 16,160 18,172 East Texas Crude Logistics System 15,260 17,026 15,006 13,108 El Dorado Rail Offloading Rack — — — — Wholesale Marketing and Terminalling Segment: East Texas - Tyler Refinery sales volumes (average bpd) 74,357 67,812 71,917 68,137 West Texas marketing throughputs (average bpd) 12,929 12,162 13,647 13,039 West Texas marketing margin per barrel $ 4.00 $ 1.16 $ 3.62 $ 1.24 Terminalling throughputs (average bpd) 127,229 120,099 123,780 121,791
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- Declared quarterly distribution of $0.715 per limited partner unit; increased by 9.2 percent year-over-year