Delek US Holdings, Inc.
Investor Presentation
January 2020
Disclaimers
Forward Looking Statements:
Delek US Holdings, Inc. ("Delek US") and Delek Logistics Partners, LP ("Delek Logistics"; and collectively with Delek US, "we" or "our") are traded on the New York Stock Exchange in the United States under the symbols "DK" and "DKL", respectively. These slides and any accompanying oral and written presentations contain forward-looking statements within the meaning of federal securities laws that are based upon current expectations and involve a number of risks and uncertainties. Statements concerning current estimates, expectations and projections about future results, performance, prospects, opportunities, plans, actions and events and other statements, concerns, or matters that are not historical facts are "forward-looking statements," as that term is defined under the federal securities laws.
These forward-looking statements include, but are not limited to, the statements regarding the following: financial and operating guidance for future and uncompleted financial periods; future crude slates; financial strength and flexibility; potential for and projections of growth; return of cash to shareholders, stock repurchases and the payment of distributions and dividends, including the amount and timing thereof; crude oil throughput and optionality; crude oil market trends, including production, quality, pricing, demand, imports, exports and transportation costs; light production from shale plays and Permian growth; differentials including increases, trends and the impact thereof on crack spreads and refineries; takeaway capacity, and projects related thereto; refinery complexity, configurations, utilization, crude oil slate flexibility, capacities, equipment limits and margins; the potential benefits from IMO 2020; improved product netbacks; the performance of our joint venture investments, including Red River and Wink to Webster, and the benefits, flexibility, returns and EBITDA or adjusted EBITDA therefrom; our ability to execute on the Big Spring Gathering System and the benefits, flexibility, returns and EBITDA or adjusted EBITDA therefrom; the performance and expected EBITDA from the Krotz Springs Alkylation unit; midstream growth and the benefits, returns and EBITDA or adjusted EBITDA therefrom; the potential for, and estimates of cost savings and other benefits from, acquisitions, divestitures, dropdowns and financing activities; divestiture of underperforming stores and other non-core assets and matters pertaining thereto; the attainment of certain regulatory benefits; retail growth and the opportunities and value derived therefrom; long-term value creation from capital allocation; execution of strategic initiatives and the benefits therefrom; and access to crude oil and the benefits therefrom. Words such as "may," "will," "should," "could," "would," "predicts," "potential," "continue," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "appears," "projects" and similar expressions, as well as statements in future tense, identify forward-looking statements.
Investors are cautioned that the following important factors, among others, may affect these forward-looking statements: uncertainty related to timing and amount of value returned to shareholders; risks and uncertainties with respect to the quantities and costs of crude oil we are able to obtain and the price of the refined petroleum products we ultimately sell; risks related to Delek US' exposure to Permian Basin crude oil, such as supply, pricing, production and transportation capacity; gains and losses from derivative instruments; management's ability to execute its strategy of growth, including through acquisitions and the transactional risks associated with acquisitions and dispositions; acquired assets may suffer a diminishment in fair value as a result of which we may need to record a write-down or impairment in carrying value of the asset; changes in the scope, costs, and/or timing of capital and maintenance projects; the ability of Wink to Webster joint venture to construct the long-haul pipeline; the ability of the Red River joint venture to expand the Red River pipeline; the ability to grow the Big Spring Gathering System; operating hazards inherent in transporting, storing and processing crude oil and intermediate and finished petroleum products; our competitive position and the effects of competition; the projected growth of the industries in which we operate; general economic and business conditions affecting the geographic areas in which we operate; and other risks contained in Delek US' and Delek Logistics' filings with the United States Securities and Exchange Commission.
Forward-looking statements should not be read as a guarantee of future performance or results, and will not be accurate indications of the times at, or by which such performance or results will be achieved. Forward-looking information is based on information available at the time and/or management's good faith belief with respect to future events, and is subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements. Neither Delek US nor Delek Logistics undertakes any obligation to update or revise any such forward-looking statements.
Non-GAAP Disclosures:
Delek US and Delek Logistics believe that the presentation of earnings before interest, taxes, depreciation and amortization ("EBITDA"), adjusted EBITDA, free cash flow, distributable cash flow and distribution coverage ratio provide useful information to investors in assessing their financial condition, results of operations and cash flow their business is generating. Distributable cash flow is calculated as net cash flow from operating activities plus or minus changes in assets and liabilities, less maintenance capital expenditures net of reimbursements and other adjustments not expected to settle in cash. EBITDA, adjusted EBITDA, free cash flow, distributable cash flow and distribution coverage ratio should not be considered 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, adjusted EBITDA, free cash flow, distributable cash flow and distribution coverage ratio have important limitations as analytical tools because they exclude some, but not all, items that affect net income. Additionally, because EBITDA, adjusted EBITDA, free cash flow, distributable cash flow and distribution coverage ratio may be defined differently by other companies in its industry, Delek US' and Delek Logistics' definitions may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. Please see reconciliations of EBITDA, adjusted EBITDA, distributable cash flow and distribution coverage ratio to their most directly comparable financial measures calculated and presented in accordance with U.S. GAAP in the appendix.
2
Investment Overview (NYSE: DK)
Flexible Financial Position to Support Midstream Growth
Big Spring Gathering
Wink to Webster Long Haul
Pipeline Joint Venture
Red River Pipeline Joint
Venture
Cash Returns to Shareholders
- September 2019 balance sheet:
- Delek US: approx. $1.0 billion of cash; $2.0 billion of debt
- Includes $6.4 million cash and $841 million debt of DKL
- Net debt (excl. DKL) of $159 million
- Over 275,000 dedicated acres; Ability to control crude oil quality, growing midstream services to support producers in Permian Basin
- Expected annualized EBITDA of $20-$25 million in 2020 (1)
- Expected annualized EBITDA of $40-$50 million in 2022 (3)
- Links value chain from Permian Basin wellhead to Gulf Coast markets
- Expected net investment of $340 to $380 million with expected return that is well above internal hurdle rate of 15%
- Supports DKL growth and increases crude oil optionality for DK with improved access to Cushing crude oil
- ~$128.0 million initial investment + additional $16.5 million for expansion; Expected annualized adjusted EBITDA of $13.5 to $15.5 million pre-expansion growing to $20.0 to $25.0 million post-expansion (first half 2020)(1)
- Repurchased $43.0 million of DK shares in 3Q19, $305 million over last 12 months
- Target $30 million repurchase of DK shares in 4Q19
- Increased regular quarterly dividend(2):
- 4Q19 increased by 3.5% to $0.30/share
- Sixth increase from $0.15/share, since dividend paid during first quarter of 2018
- Please see page 40 and page 41 for a reconciliation of forecasted incremental annualized net income to forecasted incremental annualized adjusted EBITDA for the Red River joint venture and the Big Spring Gathering System in 2020.
- Quarterly dividends mentioned are quarterly dividends per share declared in referenced periods.
- Includes benefit from quality uplift for refineries. We are unable to provide a reconciliation of this forward-looking estimate of EBITDA because certain information needed to make a reasonable forward-looking estimate is difficult to estimate and dependent on future events, which are uncertain or outside of our control, including with respect to unknown construction timing, unanticipated construction costs and other potential variables. Accordingly, a reconciliation to net income as the most
comparable GAAP measure is not available without unreasonable effort. | 3 |
Integrated Company with Asset Diversity and Scale
Strategically located assets with growing crude oil optionality
Source 207,000 bpd from Permian Basin
- Growing gathering system
- Wink to Webster JV Crude oil Pipeline
Access to Cushing; 35,000 bpd increasing to 100,000 bpd first half 2020
CADDO
RIO
Refining (1) | Logistics | Asphalt | Retail | Renewables | ||||||||||
• | 302,000 bpd in total | • | 10 terminals | 6 asphalt terminals located | • | Approximately 263 | Approximately 40m gallons | |||||||
• | El Dorado, AR | • | Approximately 1,320 | in: | stores | Biodiesel production | ||||||||
• | Tyler, TX | miles of pipeline | • | El Dorado, AR | • | Southwest US locations | capacity: | |||||||
• | Big Spring, TX | • | 11.0 million bbls of | • | Muskogee, OK | • | Largest licensee of 7- | • | Crossett, AR | |||||
• | Krotz Springs, LA | storage capacity | • | Memphis, TN | Eleven stores in the US | • | Cleburne, TX | |||||||
• | Crude oil supply: 262,000 | • | West Texas wholesale | • | Big Spring & Henderson, | • | West Texas wholesale | • | New Albany, MS | |||||
bpd WTI linked currently | • JV crude oil pipelines: | TX | marketing business | |||||||||||
• | Increasing crude oil | RIO / Caddo/ Red River | • | Richmond Beach, WA | ||||||||||
supply optionality | • | Own 63.4%, incl. 2% GP, | ||||||||||||
through Red River | of DKL(2) |
- California refinery located in Bakersfield, which is not shown on the map, has not operated since 2012.
2) | As of September 30, 2019, 5.4% of the ownership interest in the general partner is owned by three members of senior management of Delek US (who are also directors of the general partner). The remaining ownership interest is held by a subsidiary of | 4 |
Delek US.
Long History of Opportunistic Acquisitions & Value Creation
Being Nimble and Capturing Market Dislocations / Opportunities
Increased Gathering | DKL Joint Ventures | ||||||||||||
RIO Pipeline | |||||||||||||
East and West Texas | |||||||||||||
2011 | Caddo Pipeline | ||||||||||||
Exp. Inv.: ~$104 mm | |||||||||||||
SALA Gathering | |||||||||||||
Lion Oil acquisition | |||||||||||||
2005 | 2011 | 2012 | 2013 | 2014 | 2015 | 2017 | 2018 | 2019 | |||||
Nettleton | Biodiesel | Biodiesel | 47% | Acquired rest | Biodiesel | ||||||||
Tyler refinery & | Paline Pipeline | Acquired rest | |||||||||||
Pipeline | Facility | Facility | ownership | of Alon USA | Facility | ||||||||
related assets | $50 mm | of Alon USA | |||||||||||
$12.3 mm | $5.3 mm | $11.1 mm | in Alon USA | Partners | $8.0 mm | ||||||||
$68.1 mm(1) | |||||||||||||
2005 | Current | ||||||||||||
2006 | Acquisition Completed | 2011 | 2014 | 2019 DKL | |||||||||
171 retail fuel & | |||||||||||||
Abilene & San Angelo | 2016 | ||||||||||||
Lion refinery & | Mt. Pleasant | Red River | |||||||||||
convenience stores | |||||||||||||
terminals | Sold MAPCO | ||||||||||||
related pipeline & terminals | System | Pipeline JV | |||||||||||
& related assets | |||||||||||||
$55.1 mm | 2013 | for $535mm | |||||||||||
$228.7 mm(1) | $11.1 mm (2) | $128 mm | |||||||||||
$157.3 mm | |||||||||||||
North Little Rock | |||||||||||||
Product Terminal | |||||||||||||
$5.0 mm | 2014 | 2019 | |||||||||||
2017 | |||||||||||||
Frank | |||||||||||||
Wink to Webster | |||||||||||||
Thompson | Acquired rest | ||||||||||||
Long Haul JV | |||||||||||||
2012 | 2013 | Transport | of Alon USA | ||||||||||
$340 - $380 mm | |||||||||||||
Big Sandy | Tyler-Big Sandy | $11.9 mm | |||||||||||
terminal & pipeline | Pipeline | ||||||||||||
$11.0 mm | $5.7 mm | ||||||||||||
2015 | 2018 Formed | ||||||||||||
47% | Big Spring |
Gathering | |
ownership | |
in Alon USA |
- Includes logistic assets in purchase price. Purchase price includes working capital for refineries.
- Mt. Pleasant includes $1.1 million of inventory.
Refining | Logistics/Midstream | Retail | 5 |
Midstream: Big Spring Gathering System
Delek US' Gathering Helps Control Crude Oil Quality and Cost into Refineries
- Approximately 200-mile gathering system, 350Kbpd throughput capacity
- >275,000 dedicated acres; Points of origin: Howard, Borden, Martin and Midland counties
-
Total terminal storage of 650K bbls; Connection to Delek
US' Big Spring, TX terminal - Expected capital cost:
- $79 million spent in 2018
- Estimated $132 million spent in 2019
- Will continue to develop as acreage grows
- Current annualized EBITDA benefit forecast
- $20 to $25 million in 2020 (1)
- $40 to $50 million in 2022 (3)
- Getting closer to wellhead allows us to control crude quality and cost
- Provides improvement in refining performance and cost structure
- Potential future dropdown to DKL once ramped
- Gathering increases access to barrels
- Creates optionality to place barrels:
- Big Spring (local refinery)
- Midland
- Colorado City (access other refineries)
- Wink (to Gulf Coast)
- Control quality and blending opportunities
- Please see page 41 for a reconciliation of forecasted EBITDA to forecasted net income for Big Spring Gathering System in 2020.
- Based on internal company projections; actual results will vary based on market conditions, operations and company performance. Please refer to the forward looking statement disclaimer on page 2 for additional considerations.
3) | Includes benefit from quality uplift for refineries. We are unable to provide a reconciliation of this forward-looking estimate of EBITDA because certain information needed to make a reasonable forward-looking estimate is difficult to estimate and | 6 |
dependent on future events, which are uncertain or outside of our control, including with respect to unknown construction timing, unanticipated construction costs and other potential variables. Accordingly, a reconciliation to net income as the most comparable GAAP measure is not available without unreasonable effort.
Midstream: Wink to Webster Crude Oil Long Haul Pipeline Joint Venture
Complements Gathering - Provides Access to Gulf Coast Markets
- Wink to Webster Pipeline
- 650-mile36-inch diameter crude oil pipeline
- Wink to Webster Pipeline LLC - Exxon, Plains, MPLX, Delek US, Rattler Midstream, Lotus Midstream
- Expected completion early 2021
- Supported by significant volume of long term commitments
- Delek US' Investment
- Delek US has 15% ownership interest in Wink to Webster Pipeline LLC
- Expected $340 million to $380 million net investment
- ~$75 million invested through the end of 3Q19
- Integrated with Big Spring gathering system to provide source of barrels and services to producers
Big Spring
Midland
Wink
Beaumont
Junction
Webster/
Baytown
- Well above Delek US' targeted minimum required midstream IRR of 15%
- Evaluating multiple options to finance at least 75% of the investment which includes project financing or utilizing and/or expanding our existing credit facilities
7
Midstream: Red River Pipeline Joint Venture
- DKL purchased 33% interest in May 2019; closed effective May 1
- Approx. $128.0 million initial investment; Financed with revolver
- Planned expansion from 150 kbpd to 235 kbpd
- Expected completion in first half of 2020
- DKL will contribute $20.0 million to the expansion, of which $3.5 million was included in initial investment in May 2019
- Expected annualized adjusted EBITDA
- Expected $13.5 to $15.5 million annualized adjusted EBITDA(1) pre- expansion
- Increases to $20.0 to $25.0 million annualized adjusted EBITDA(1) post- expansion first half 2020
- Delek US is a major shipper on pipeline; increased crude oil optionality
- Increasing by 65,000 bpd to 100,000 bpd following expansion; Incremental 24 million bbls/yr of Cushing crude oil into Longview, TX
• From Longview, TX DKL access to: | Longview |
- Delek US refining system; Ability to reduce dependence on Midland crude oil at Tyler, El Dorado and Krotz Springs
- Gulf Coast markets through Paline and other third party pipelines
- Increases potential WTI-Brent exposure with limited cost to the company
1) Please see page 40 for a reconciliation of forecast incremental annualized net income to forecast incremental annualized adjusted EBITDA.
8
Midstream: Utilizing Free Cash Flow & Strong Balance Sheet to Fund Growth
Supports goal to generate approximately $370 million to $395 million of annualized midstream adjusted EBITDA by '23
- Delek US announced goal to achieve midstream target by 2023
- Delek Logistics provides platform to unlock logistics value
- Paline Pipeline tariff increase
- Incentive tariff of $0.75/bbl expired on Feb. 28, 2019; FERC tariff of $1.57/bbl in place
- $900,000 monthly EBITDA increase(2)
- Red River Joint Venture (2)
- Pre Expansion: Expected $13.5 to $15.5 million annualized adjusted EBITDA
- Post Expansion: Increases to $20.0 to $25.0 million annualized adjusted EBITDA (first half 2020 completion)
- Krotz Springs Midstream Assets
- $30 to $34 million EBITDA / year (2)
- Midstream Growth Projects by 2023:
- Other organic midstream growth projects being invested in by strong sponsor DK
- Big Spring Gathering System
- Wink to Webster Long Haul
- Other organic growth
Strong Adjusted EBITDA Growth Profile from Midstream Initiatives (1)
($ in millions)
$140-$165$370-$395
$32
$5 | $8 |
$9 |
$176
Paline & Red River excludes EBITDA generated in LTM
9/30/19 | (3) | (2) TariffPaline Increase | ($8)Exp($9)/Post | (2) | AssetsMidstream | (2) | projectsgrowth | (4) | (4) AnnualizedTotal EBITDA.Adj Potential |
EBITDALTM | PreRiverRedJV | SpringsKrotz | MidstreamOther |
- Information for illustrative purposes only to show potential based on estimated dropdown assets listed. Actual amounts will vary based on market conditions, which assets are dropped, timing of dropdowns, actual performance of the assets and Delek Logistics in the future. Expected amounts adjusted for what is captured in the LTM period.
- Please see pages 33, 39, and 40 for a reconciliation of forecasted EBITDA or adjusted EBITDA to forecasted net income for the Krotz Springs midstream assets, Paline pipeline tariff increase, and Red River joint venture, respectively.
- Please see page 38 for reconciliation of Delek Logistics net income to EBITDA.
- We are unable to provide a reconciliation of this forward-looking estimate of adjusted EBITDA because certain information needed to make a reasonable forward-looking estimate of net income is difficult to estimate and dependent on future events, which are uncertain or outside of our control, including with respect to unknown construction timing, unanticipated construction costs and other potential variables. Accordingly, a reconciliation to net income as the most comparable GAAP measure is not available without unreasonable effort. These amounts that would require unreasonable effort to quantify could be significant, such that the amount of projected GAAP net income would vary substantially from the amount of EBITDA
adjusted projected. | 9 |
Transforming Adjusted EBITDA Toward Midstream
- Midstream to comprise increasing % of future adjusted EBITDA
- More stable revenue stream
- Higher multiple business
- Refining free cash flow funds midstream build-out
- E&P and MLP capital constraints creates opportunity in Midstream
YTD 3Q19
Adjusted EBITDA (1)
-10%
22%
5%
83%
Refining Retail Midstream Corporate, Other and Eliminations
2022-2023 Potential | ||||||||||
• | Base adjusted EBITDA performance | Adjusted EBITDA (2) | ||||||||
progressively moving higher based on high | -8% | |||||||||
grading the portfolio and stable growth | ||||||||||
projects | 35% | |||||||||
70% | ||||||||||
• | Offers integration and synergies; | 3% | ||||||||
participation in broader value chain | ||||||||||
Refining | Retail | Midstream | Corporate, Other and Eliminations | |||||||
- YTD as of September 30, 2019.
2) | Delek US 2022 - 2023 target: Actual results will vary based on market conditions, operations and company performance. Please refer to the forward looking statement disclaimer on page 2 for additional considerations. | 10 |
Improving the Base: Progressing Toward Sustainable Adjusted EBITDA of ~$800mm to >$1B
- Divesting Underperforming Assets
- Throughout '18 divested Paramount, CA/AltAir Renewables, West Coast Asphalt terminals, Long Beach, CA (collectively removed ~$35mm of annual carrying costs - based on 2017 run rate)
- Evaluating Bakersfield
- Optimizing Assets
- Simplified corporate structure with ALDW transaction
- Interest expense savings from simplified debt structure
- Delivered $100mm synergies from Alon Merger (ex-interest expense)
- Unlocked Big Spring Logistics value with $315mm drop down to
DKL
- Diversifying Portfolio / Incremental Contributions
- Commercial initiatives adding value
- Free cash flow funding more stable midstream and gathering build-out
- Krotz alkylation unit ~$50mm/yr expected EBITDA (1)
-
Gathering progressively ramping to $40-$50mm/yr adjusted
EBITDA in '22(3) - $20 to $25 million in 2020 (1)
- Red River expansion complete early '20 ($20-$25mm/yr adjusted EBITDA) (1)
- Wink to Webster expected completion early '21, expected greater than 15% unlevered IRR on $340-$380mm capital investment
- Regulatory: Rins/BTC ~$80mm/yr(3)
- DK positioned to benefit from IMO
- Range Reflects
- $0 - $2.50/Bbl Midland/WTI differential
- $5-$6/BblWTI/Brent spread
- $15-$16/BblGC ULSD 5-3-2
- 97% utilization rate
Adjusted EBITDA ($mm)
1,000
800
In motion
Future growth
600
Initiatives should create sustainable adj. EBITDA and midstream growth
400
200
0
(2) | (2) | (3) | (1) | (1) | (3) | (3) | (3) (4) |
- Please see pages 32, 40, and 41 for a reconciliation of forecasted EBITDA or adjusted EBITDA to forecasted net income for Krotz Springs Alkylation Project, Red River joint venture and Big Spring Gathering System, respectively.
- Please see page 34 and page 35, respectively, for a reconciliation of actual Adjusted EBITDA to Net Income for YTD as of 9/30/19 and 2018.
- We are unable to provide a reconciliation of these forward-looking estimate of EBITDA because certain information needed to make a reasonable forward-looking estimate is difficult to estimate and dependent on future events, which are uncertain or outside of our control, including with respect to unknown construction timing, unanticipated construction costs and other potential variables. Accordingly, a reconciliation to net income as the most comparable GAAP measure is not available without
unreasonable effort. Gathering adjusted EBITDA Includes benefit from quality uplift for refineries. | 11 | |
4) | Based on internal company projections; actual results will vary based on market conditions, operations and company performance. Please refer to the forward looking statement disclaimer on page 2 for additional considerations. | |
Retail: Diversifies Delek
DK Advantage and Footprint
~80% integration with existing downstream operations offering synergies and competitive advantage
Operate approximately 263 C-stores in Central
and West Texas and New Mexico
Ongoing Strategy
Divesting underperforming stores
Rebrand 7-Eleven stores to DK by '21
Implement interior re-branding/re-imaging
Longer-term build out new to industry (NTI) stores
12
Renewables: Biodiesel Facilities
3 Biodiesel Facilities: | Estimated Carbon Saved by producing Lower Carbon Intensity Fuel (2) |
~40mm gallons of Annual Biodiesel | |
Production Capacity | ~1 Billion |
Crossett, AR
Cleburne, TX
New Albany, MS
• Congress Approved $1/gallon Biodiesel Tax Credit |
(BTC) for 2018 - 2022 |
• $1/gallon Credit Equates to ~$40 million of |
Annual Income (~$0.50/share EPS) to DK (1) |
• Integrated with refining system: Ability to Sell |
Volumes "In-House" and Retain Most of the |
Credit |
~86,500
Passenger vehicles driven for one year
Miles driven by an average passenger vehicle
:
~52 billion
Number of
smartphones
charged
~940,000
Barrels of oil
consumed
• Renewables Business Enhances ESG Position |
40mm gallons of biodiesel
=
407,200 metric tons of carbon reduction
1. | Estimate based on operating at capacity and share count as of 3Q 2019. Actual will vary based on utilization, market conditions and regulatory environment. | 13 |
2. | Source: EPA; https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator.Please note that these estimates are approximate and should not be used for emission inventory or formal carbon footprinting exercises. |
PADD 3 Refining System with Crude Slate Optionality
Tyler, Texas
- 75,000 bpd crude oil throughput
- 8.7 complexity
- Light crude oil refinery
- Permian Basin, Cushing and East Texas sourced crude oil
El Dorado, Arkansas
- 80,000 bpd crude oil throughput
- 10.2 complexity
- Flexibility to process medium and light crude oil
- Permian Basin, local Arkansas, East Texas, Cushing and Gulf Coast crude oils
Big Spring, Texas
- 73,000 bpd crude oil throughput
- 10.5 complexity
- Process WTI and WTS crude oil
- Located in the Permian Basin
Krotz Springs, Louisiana
- 74,000 bpd crude oil throughput
- 8.8 complexity
- Permian Basin, Cushing, local and Gulf Coast crude oil sources
Increasing Access to Cushing Crude Oil Grades, bpd
Crude | Current | 1st Half 2020 |
Throughput | Crude Oil | |
Crude Oil Access | ||
Capacity | Access | |
35,000 | 35,000 to |
42,000 | |
25,000 | 25,000 |
35,000 | |
35,000 to | |
302,000 | 100,000 |
135,000 to | |
207,000 | |
207,000 | |
Permian | Cushing | ETX/ AR | Other/GC |
Crude Oil Optionality- Red River pipeline joint venture to increase access to Cushing crude oil from 35,000 bpd to 100,000 bpd following expansion in first half 2020
- Brings total barrels priced on a Cushing basis, excluding Midland, to 125,000 bpd
YTD 3Q19 | |||||
8% | Tyler(1) | 1% | |||
WTI | 100% | ||||
ETX | WTI | ||||
91% | linked | ||||
Other | |||||
El Dorado(1) | |||||
21% | |||||
WTI | 100% | ||||
Local AK | 25% | 54% | WTI | ||
linked | |||||
Other | |||||
Big Spring(1) | |||||
WTI | 24% | 100% | |||
WTI | |||||
WTS | 76% | linked |
Krotz Springs(1)
75%
WTI | 26% | WTI | |
GC Sweet | 74% | linked | |
- Crude oil slate based on amount received year-to-date as of September 30, 2019 and will vary each period based on operations and purchases.
14
Note: WTI-Brent differential realized through crack spread and capture rates and Midland-WTI differential realized in crude slate.
Niche Market = Margin Strength
Permian Centric Assets Offer Advantaged Access
• Transportation economics should set the |
differential; barrels need incentive to clear market |
• Incremental barrel must be exported |
• Permian should remain discounted to Brent |
• IMO 2020 expected to increase shipping costs |
• Pipeline tariff renegotiations have reduced costs |
• Midland |
• Permian key driver of domestic production growth |
• New Permian pipes divert crude from Cushing |
• Gulf Coast export constraints remain a variable |
• Refining downtime to cause ebb/flow of diffs |
• DK top tier per barrel metrics 1H19 despite |
compressing differentials |
• Red River creates optionality to access Cushing bbls |
• 65mbbl/d expansion in 1H20 |
• Currently access ~75mmbbl Midland crude annually; |
$1/bbl move in Midland to Cushing equates to $75mm |
Indication of Permian/Brent Export Economics (1)
$10.00
~$7-9/bbl
$8.00
$6.00 ~$5-6/bbl$4.00 $2.00 $0.00
Europe | Asia |
Pipeline Tariff | Transport from terminal to water |
Shipping Freight | Time Value of Money |
2019 Net Income / Bbl of Refined Products Sold ($/Bbl) (2)
$7.00
$6.00 $5.74
$5.00 $4.26 $4.00
$3.00$2.53
$2.06
annually |
• Red River creates optionality to reduce down to |
50mmbbl Midland annually; $1/bbl change would |
equate to $50mm annually |
$2.00
$1.00
$0.00
$1.10 $1.10 $0.87
HFC DK VLO PSX PARR MPC PBF
1) | Illustrative of market dynamics November 2019. | 15 |
2) | Source: Simmons Energy; YTD through September 30, 2019. |
Capital Allocation Framework
Four pillars underpinned by a rigorous and disciplined capital allocation program to create long-term value:
Priorities:
- Invest: Capital allocation program focuses on safety, maintenance, and reliability as top priority
- Dividends: Maintain a competitive and growing dividend, commensurate with underlying earnings power
- Grow: Maintain financial strength and flexibility to support strategic growth objectives
- Return excess cash / Enhance Balance Sheet: Opportunistically repurchase shares and/or reduce net debt
Non-Discretionary | Discretionary |
Sustaining & Regulatory Capex
- Approximately $130 million sustaining capex/yr
- Between $50-$70 million per turnaround
- Upcoming turnarounds over next 3 yrs.
- Critical for safe and reliable operations
- Various amounts for regulatory capex
Dividend
- Grow dividend commensurate with underlying earnings growth of the company
- Level that can be maintained through the cycle
Growth Capex
- 25% IRR for >$5mm projects at Refining; <$5mm is 50% IRR
- >15% IRR minimum hurdle rate for Retail projects, dependent on size
- >15% IRR hurdle rate for stable cash flow Logistics projects
Cash Returns to Shareholders
- Target competitive overall cash return; Share repurchases may be opportunistic based on alternative investment opportunities and relative valuations
Acquisitions
- Evaluate accretive opportunities as they arise vs. alternative uses of cash
Opportunistically De-lever
- Continue to optimize the balance sheet
- Opportunistically repay DK debt when FCF supports it
- $150mm convertible debt paid in Sept of 2018
16
Capital Allocation - Balanced & Flexible
- Targeting >$1B Adjusted EBITDA in Coming Years
Capital Allocation Philosophy | Historical Adjusted EBITDA |
Income Tax Expense
• | $606mm adjusted EBITDA YTD 3Q19(1) | Interest Expense, Net |
• | Underpinned by midstream growth | Flexible |
- Growth Capital and Buybacks to Flex with Free Cash Generation
Non-discretionary
- More Stable Midstream Earnings Underpins Better Visibility to Return Cash to Shareholders
Adj EBITDA '18 (1) | EBITDA YTD 3Q19 (1) |
Adj |
1) | Please see page 34 and page 35, respectively, for a reconciliation of actual Adjusted EBITDA to Net Income for YTD as of 9/30/19 and 2018. | 17 |
Capital Allocation Discipline
Cash Balance & Net Debt (DK Ex. DKL)(1)
- Maintaining strong balance sheet
- Should support ability to invest in the business and return cash to shareholders
- Provides ability to act quickly to take advantage of opportunities
- DK excluding DKL, had $1 billion of cash and $159 million net debt at 9/30/19
$1,013 | $1,128 | $1,090 | $1,079 | ||
$1,000 | |||||
$984 | $946 | ||||
$209 | $178 | $130 | $159 | |||||||||||
$72 | ||||||||||||||
$(5) | $8 | |||||||||||||
1Q18 | 2Q18 | 3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | ||||||||
Cash Balance | Net Debt |
Capital Allocation Discipline in Practice - Investing in the Business
- Investing in the business
- El Dorado turnaround completed in April
- El Dorado vacuum tower work end of September
- Big Spring turnaround scheduled 1Q20
- Growing the business
- Focus on Midstream
- Big Spring Gathering System capital spending
- Joint Venture Contributions
- Wink to Webster long haul pipeline joint venture
- Red River Joint Venture
- Improving Refining operations
- Krotz alkylation project (Completed April '19)
Capital Expenditures(1)
$74.1 | $44.7 | |||||||||||||
$52.0 | ||||||||||||||
$53.4 | $38.2 | |||||||||||||
$30.6 | ||||||||||||||
$38.4 | $54.8 | $54.3 | $65.8 | |||||||||||
$47.8 | ||||||||||||||
$39.5 | ||||||||||||||
$32.7 | ||||||||||||||
$16.3 | ||||||||||||||
1Q18 | 2Q18 | 3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | ||||||||
Sustaining Capex | Discretionary Capex |
1) | Based on company filings from Q1 2018 through Q3 2019. Sustaining capex defined as regulatory & maintenance capital expenditures. Capital expenditures does not include joint venture contributions. | 18 |
Capital Allocation Discipline in Practice - Cash Returned to Shareholders
Delek US Cash Returned(1)
LTM 3Q19 Cash Returned to Shareholders as % of Market Cap(2)(3)
Expect to repurchase $30 million in 4Q19
LTM 3Q19 returned $391.0 million to shareholders through buybacks and dividends
16.0%
14.0%
12.0%
14%
$157.9 | |||||||||||
$95.3 | $92.1 | $58.6 | |||||||||
$46.2 | $43.0 | ||||||||||
$20.0 | |||||||||||
$17.0 | $20.8 | $21.0 | $20.9 | $21.0 | $21.5 | $21.8 | |||||
1Q18 | 2Q18 | 3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | |||||
Dividend | Share Repurchases | ||||||||||
Dividends Declared ($/share) | |||||||||||
Raised quarterly dividend six times since 1Q18 to $0.30/share from | |||||||||||
$0.15/share | $1.00 | $0.00 | $1.14 | ||||||||
$0.95 | $0.00 | ||||||||||
$0.40 | $0.96 | ||||||||||
$0.40 | $0.00 | $0.00 | |||||||||
$0.00 | |||||||||||
$0.39 | $0.55 | $0.60 | $0.60 | $0.60 | $0.60 |
10.0% | 9% | 10% | 10% | |
8.0% | 7% | 7% | ||
6.0% 5%
4.0%
2.0%
0.0%
PBF CVI PSX VLO MPC HFC DK
Dividend+Share Repurchases as % of LTM 3Q19 Net Income(1)(3)
140% | 127% | |
120% | 107% | |
100% | 96% | |
84% | 86% | |
80%69%
59%
60%
$0.00 $0.18
$0.15 $0.15
$0.21
40%
20%
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 E |
Regular Special
- Based on company filings from Q1 2018 through 3Q 2019.
- Based on market capitalization as of last quarter ending 9/30/2019
- Based on company filings, NASDAQ IR Insight, Factset
0%
PSX | CVI | DK | HFC | PBF | VLO | MPC |
19
Market Opportunities & Valuation
DK Operations Positioned to Benefit from IMO 2020
Delek US positioned to benefit with high value product yields and crude oil slate flexibility
• Refining system product yields |
• Middle distillate: average approx. 115,000 bpd of distillate or |
42 million barrels annually(4) |
• Gasoline: average approx. 150,000 bpd of gasoline or 55 |
million barrels annually (4) |
• Low residual products: approximately 2.9% yield (4) |
• Crude oil slate has flexibility |
• Ability to increase sour crude oil processing to approximately |
50% based on market economics |
• Big Spring refinery currently processes 26% WTS and |
can increase to 100% |
3Q19 Refiners' Middle Distillates Yield % (1) (2) (3)
43%
40%
39% 39% 39%
35%
33%
CVI | DK | HFC | PSX | VLO | MPC | PBF |
3Q19 Refiners' Gasoline Yield % (1) (3)
• El Dorado refinery flexibility to process light to |
medium sour crude oil (up to 100%) based on |
economics |
• El Dorado enhanced post vacuum tower design change |
• Positioned to run at higher utilization rates, with potential to |
improve distillate yield over 4% |
51%
50% 50% 50%
49%
48%
43%
DK | CVI | HFC | PBF | MPC | VLO | PSX |
- Krotz Springs refinery exploring ability to produce low sulfur marine fuel
- Industry average based on peer group.
- Middle distillates yield includes distillate fuel oil, kerosene and kerosene-type jet fuel.
- Sourced from respective company press releases, SEC filings, and earnings calls.
4) | Average calculated based on 2018 results. Residual yield includes asphalt, road oil and residual fuel oil. | 21 |
Valuation Opportunity
- Energy sector severely discounted versus broader market
- DK earnings stream to become more stable with midstream growth
- Consistently growing dividend results in yield well above S&P 500 average
- Midstream & Retail EBITDA potential "alone" support current equity value
Partial Segment Sum of Parts
Midstream | ||||
'23E EBITDA ($mm)* | (1) (2) | EBITDA Multiple | ||
$383 | 8.0 x | 10.0 x | ||
$3,060 | $3,825 | |||
Retail Marketing | ||||
'23E EBITDA ($mm) | (1) | EBITDA Multiple | ||
$35 | 8.0 x | 10.0 x | ||
$280 | $350 | |||
Enterprise Value ($MM) | ||||
Enterprise Value ($MM) | $3,340 | $4,175 | ||
DK Consolidated Net Debt 3Q19* | $994 | $994 | ||
Less DKL minority interest | $293 | $293 | ||
Equity Value ($MM) | $2,054 | $2,889 | ||
3Q19 est. share count (mm) | 75 | 75 | ||
Equity Value ($/share) | $27 | $38 | ||
Mid-Pt | $33 | |||
Refining Value $0** |
- Midstream growth funded w/ combination of project financing and free cash flow
- Net of corporate expenses
Metrics vs. S&P 500 (3)
'20E P/E Multiple | 10-yr avg P/E | |
DK | 10.7 x | 10.6 x |
S&P 500 | 18.61 | 15.3 x |
Current Dividend Yield | ||
DK | 3.4% | |
S&P 500 | 1.8% | |
Return on Equity (LTM 3Q19) | ||
DK | 23.1% | |
S&P 500 | 15.1% | |
'20E Price to Book | ||
DK | 1.5 | |
S&P 500 | 3.3 |
- We are unable to provide a reconciliation of this forward-looking estimate of EBITDA because certain information needed to make a reasonable forward-looking estimate of net income is difficult to estimate and dependent on future events, which are uncertain or outside of our control, including with respect to unknown construction timing, unanticipated construction costs and other potential variables. Accordingly, a reconciliation to net income as the most comparable GAAP measure is not available without unreasonable effort. These amounts that would require unreasonable effort to quantify could be significant, such that the amount of projected GAAP net income would vary substantially from the amount of EBITDA projected.
- Please refer to page 6 for additional midstream information.
3) | Bloomberg as of 1/2/2020 | 21 |
An Integrated and
Diversified Refining,
Logistics and Marketing
Company
Permian Focused
Refining System
Focus on Long-Term Shareholder Returns
Growing Midstream Platform to Diversify EBITDA Stream
Financial Flexibility to
Support Strategic
Objectives
Invest in the Business to
Operate Reliably and
Safely
Appendix
3Q19 Highlights
- Strong financial position with over $1 billion of cash on the balance sheet
- Cash flow was robust at approx. $213 million from operating activities
- Working capital increased cash flow by approx. $80 million
- Total investing activities of approx. $180 million:
- Cash capital expenditures of approx. $106 million
- JV investment of approx. $78 million (including approx. $75 million Wink to Webster)
- Total cash returned to shareholders of approx. $65 million
- Includes approx. $43 million through repurchases
Total Consolidated Cash Flows
1,400
$80
1,200
$133
$1,006
$87
1,000 $951
($180) ($65)
800
600
400
200
0
6/30/2019 | Operating | Working | Investing | Return to | Financing | 9/30/2019 |
Cash Balance | Cash Flow | Capital | Activities | Shareholders | Activities | Cash Balance |
(excl working | ||||||
capital) |
25
Guidance
4Q19 Guidance Range | Low | High |
Consolidated Operating Expenses, $ in millions | $165.0 | $175.0 |
Consolidated G&A, $ in millions | $65.0 | $70.0 |
Consolidated Depreciation and Amort., $ in millions | $51.0 | $53.0 |
Net interest expense, $ in millions | $30.5 | $32.5 |
Effective Tax Rate | 23.0% | 25.0% |
Estimate Diluted Share Count (exclusive of repurchases) | 75.0 | 75.3 |
Total Crude Throughput | 275,000 | 280,000 |
Realized Midland-Cushing Premium, $/bbl | $0.15 | $0.35 |
Backwardation/(Contango) | $0.00 | $0.10 |
2019 Capital Expenditures, $ in millions | ||
Refining | $246.8 | |
Logistics | $9.8 | |
Retail | $21.3 | |
Corporate/Other | $137.0 | |
Total | $414.9 |
(1) | Delek US estimates. Actual results will vary based on market conditions, operations and company performance. Please refer to the forward looking statement disclaimer on page 2 for additional considerations. |
26
Current Delek US Corporate Structure
94.6%
ownership interest (1)
Delek US Holdings, Inc.
NYSE: DK
Delek Logistics GP, LLC
(the General Partner)
61.4% interest in
LP units2.0% interest General partner interest
Incentive distribution
Delek Logistics Partners, LP
NYSE: DKL
rights
- As of September 30, 2019, 5.4% of the ownership interest in the general partner is owned by three members of senior management of Delek US (who are also directors of the general partner). The remaining ownership interest is held by a subsidiary of Delek US
27
Market Data
Access to Midland Crude Oil Benefits Margins
WTI Midland vs. WTI Cushing Crude Oil Pricing (1)
($ per barrel)
$2.00
$0.00
($2.00)
($4.00)
($6.00)
($8.00)
($10.00)
($12.00)
($14.00)
($16.00)
($18.00)
Jan-20
Nov-19
Sep-19
Jul-19
May-19
Mar-19
Jan-19
Nov-18
Sep-18
Jul-18
May-18
Mar-18
Jan-18
Nov-17
Sep-17
Jul-17
May-17
Mar-17
Jan-17
Nov-16
Sep-16
Jul-16
May-16
Mar-16
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
Jan-15
Nov-14
Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Sep-13
Jul-13
May-13
Mar-13
Jan-13
Nov-12
Sep-12
Jul-12
May-12
Mar-12
Jan-12
Nov-11
Sep-11
Jul-11
May-11
Mar-11
Jan-11
1) Source: Argus - as of December 2019
29
U.S Refining Environment Trends
Refined Product Margins and WTI-Linked Feedstock Favor Delek US
$50
$40
$30
$20
$10
$0
-$10
-$20
-$30
Brent-WTI Cushing Spread Per Barrel (1) | WTI 5-3-2 Gulf Coast Crack Spread Per Barrel(2) | LLS 5-3-2 Gulf Coast Crack Spread Per Barrel(2) | |
Nov-19
Sep-19
Jul-19
May-19
Mar-19
Jan-19
Nov-18
Sep-18
Jul-18
May-18
Mar-18
Jan-18
Nov-17
Sep-17
Jul-17
May-17
Mar-17
Jan-17
Nov-16
Sep-16
Jul-16
May-16
Mar-16
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
Jan-15
Nov-14
Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Sep-13
Jul-13
May-13
Mar-13
Jan-13
Nov-12
Sep-12
Jul-12
May-12
Mar-12
Jan-12
Nov-11
Sep-11
Jul-11
May-11
Mar-11
Jan-11
Nov-10
Sep-10
Jul-10
May-10
Mar-10
Jan-10
- Source: Platts and NYMEX as of December 31, 2019; 5-3-2 crack spread based on HSD
- Crack Spreads: (+/-) Contango/Backwardation
30
Reconciliations
Non-GAAP Reconciliation of Alkylation Project EBITDA(1)
Reconciliation of Forecast Incremental U.S. GAAP Net Income (Loss) to Forecast Incremental EBITDA for Alkylation Project
($ in millions) | Annual Amount | |
Forecasted Incremental Net Income | $ | 33.2 |
Add Forecasted Incremental Amounts for: | ||
Interest Expense, net | $ | - |
Income tax expense | $ | 9.9 |
Depreciation and amortization | $ | 6.9 |
Forecasted Incremental EBITDA | $ | 50.0 |
- Based on projected potential future performance from the alkylation unit project at Krotz Springs. Amounts of EBITDA, net income and timing will vary. Actual amounts will be based on performance of the project and market conditions.
32
Non-GAAP Reconciliation of Krotz Springs Potential Dropdown EBITDA(1)
Krotz Springs Logistics Drop Down
Reconciliation of Forecast Incremental U.S. GAAP Net Income (Loss) to Forecast Incremental EBITDA
($ in millions) | ||||
Forecasted Range | ||||
Forecasted Incremental Net Income | $ | 2.9 | $ | 3.3 |
Add Forecasted Incremental Amounts for: | ||||
Depreciation and amortization | 15.6 | 17.7 | ||
Interest and financing costs, net | 11.5 | 13.0 | ||
Forecasted Incremental EBITDA | $ | 30.0 | $ | 34.0 |
- Based on projected range of potential future logistics assets associated with the Krotz Springs refinery that could be dropped to Delek Logistics from Delek US in the future. Amounts of EBITDA, net income and timing will vary, which will affect the potential future EBITDA and associated deprecation and interest at DKL. Actual amounts will be based on timing, performance of the assets, DKL's growth plans and valuation multiples for such assets at the time of any transaction.
33
Non-GAAP Reconciliations of Adjusted EBITDA
Delek US Holdings, Inc.
Reconciliation of Amounts Reported Under U.S. GAAP
$ in millions
Three Months Ended | Nine Months Ended | ||||||||
September 30, | September 30, | ||||||||
Reconciliation of Net Income attributable to Delek to Adjusted EBITDA | 2019 | 2018 | 2019 | 2018 | |||||
(Unaudited) | (Unaudited) | ||||||||
Reported net income attributable to Delek | $51.3 | $179.8 | $277.9 | $218.5 | |||||
Add: | |||||||||
Interest expense, net | 30.7 | 29.8 | 86.4 | 92.2 | |||||
Loss on extinguishment of debt | - | 0.1 | - | 9.1 | |||||
Income tax expense - continuing operations | 13.4 | 51.0 | 83.8 | 72.3 | |||||
Depreciation and amortization | 49.8 | 49.2 | 146.7 | 146.4 | |||||
EBITDA | 145.2 | 309.9 | 594.8 | 538.5 | |||||
Adjustments | |||||||||
Net inventory valuation loss (gain) | 21.4 | 0.1 | (30.1) | (1.9) | |||||
Adjusted unrealized hedging loss (gain) | (12.7) | 7.6 | 9.1 | (1.4) | |||||
Transaction related expenses | 0.5 | 1.9 | 4.2 | 15.1 | |||||
Non-operating,pre-acquistion litigation contingent losses and related legal expenses | - | - | 6.7 | ||||||
Impairment loss on assets held for sale | - | - | - | 27.5 | |||||
Gain on sale of the asphalt business | - | - | - | (13.2) | |||||
Discontinued operations loss (gain), net of tax | - | (0.5) | 0.8 | 8.5 | |||||
Net income attributable to non-controlling interest | 8.7 | 6.5 | 20.3 | 29.0 | |||||
Total adjustments | 17.9 | 15.6 | 11.0 | 63.7 | |||||
Adjusted EBITDA | $163.1 | $325.5 | $605.8 | $602.2 | |||||
34
Non-GAAP Reconciliations of Adjusted EBITDA
Delek US Holdings, Inc.
Reconciliation of Amounts Reported Under U.S. GAAP
$ in millions
Year Ended | |
December 31, | |
Reconciliation of Net Income (Loss) attributable to Delek to Adjusted EBITDA | 2018 |
(Unaudited) | |
Reported net income (loss) attributable to Delek | $345.6 |
Add: | |
Interest expense, net | 120.1 |
(Gain) Loss on extinguishment of debt | 9.1 |
Income tax expense (benefit) - continuing operations | 96.4 |
Depreciation and amortization | 199.4 |
EBITDA | 770.6 |
Adjustments | |
Net inventory valuation (gain) loss | 52.5 |
Environmental Indemnification Proceeds | (20.0) |
Contract termination charges | 6.2 |
Asset write offs | - |
Adjusted unrealized hedging loss | (28.6) |
Inventory fair value adjustment | - |
Transaction related expenses | 16.0 |
Impairment loss on assets held for sale | 27.5 |
Gain on sale of the asphalt business | (13.3) |
Discontinued operations loss, net of tax | 8.7 |
Net income attributable to non-controlling interest | 34.8 |
Total adjustments | 83.8 |
Adjusted EBITDA | $854.4 |
35
Increased Distribution with Conservative Coverage and Leverage
Distribution per unit has been increased twenty-seven consecutive times since the IPO
$0.375 | $0.385 | $0.395 | $0.405 | $0.415 | $0.425 | $0.475 | $0.490 | $0.510 | $0.530 | $0.550 | $0.570 | $0.590 | $0.610 | $0.630 | $0.655 | $0.680 | $0.690 | $0.705 | $0.715 | $0.725 | $0.750 | $0.770 | $0.790 | $0.810 | $0.820 | $0.850 | $0.880 |
MQD(1)1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19
Distributable Cash Flow Coverage Ratio (2)(3)(4)
Avg. 1.68x in 2014
Avg. 1.35x in 2015
Avg. 1.35x in 2013 | Avg. 1.11x in 2016 | Avg. 1.19x in 2018 | ||||||||||||||||||||||||
Avg. 0.97x in 2017 | ||||||||||||||||||||||||||
1.39x | 1.32x | 1.35x | 1.30x | 1.61x | 2.02x | 1.42x | 1.67x | 1.25x | 1.49x | 1.47x | 1.18x | 1.20x | 1.29x | 0.98x | 1.00x | 0.88x | 1.06x | 0.97x | 0.96x | 1.14x | 1.34x | 1.25x | 1.03x | 1.06x | 1.08x | 1.11x |
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19
Leverage Ratio (5)
1.70x | 1.58x | 2.28x | 2.40x | 3.21x | 2.69x | 2.55x | 2.56x | 3.00x | 3.14x | 3.11x | 3.49x | 3.48x | 3.47x | 3.70x | 3.85x | 3.83x | 3.88x | 3.72x | 3.77x | 4.60x | 4.44x | 4.53x | 4.08x | 4.17x | 4.60x | 4.60x |
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19
- MQD = minimum quarterly distribution set pursuant to the Partnership Agreement.
- Distribution coverage based on distributable cash flow divided by distribution amount in each period. Please see reconciliations starting on page 37.
- 3Q19 based on total distributions to be paid on November 12, 2019.
4) | In 4Q17, the reimbursed capital expenditure amounts in the determination of distributable cash flow were revised to reflect the accrual of reimbursed capital expenditures from Delek rather than the cash amounts received for reimbursed capital | 36 |
expenditures during the years ended December 31, 2017, 2016 and 2015. | ||
5) | Leverage ratio based on LTM EBITDA as defined by credit facility covenants for respective periods. |
DKL: Reconciliation of Cash Available for Distribution
(dollars in millions, except coverage) | 4 2013 (2) | 1Q14 (2) | 2Q14(2) | 3Q14(2) | 4Q14(2) | 2014 (2) | 1Q15(2) | 2Q15 | 3Q15 | 4Q15 | 2015 (2)(3) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 (3) |
Reconciliation of Distributable Cash Flow to net cash from operating activities | ||||||||||||||||
Net cash provided by operating activities | $49.4 | $14.4 | $31.2 | $20.1 | $20.8 | $86.6 | $15.8 | $30.8 | $20.2 | $1.3 | $68.0 | $26.4 | $31.2 | $29.2 | $13.9 | $100.7 |
Accretion of asset retirement obligations | (0.2) | (0.1) | (0.1) | (0.1) | 0.0 | (0.2) | (0.1) | (0.1) | (0.1) | (0.1) | (0.3) | (0.1) | (0.1) | (0.1) | (0.1) | (0.3) |
Deferred income taxes | (0.3) | 0.0 | (0.1) | (0.0) | 0.2 | 0.1 | (0.2) | 0.2 | 0.0 | 0.0 | (0.0) | - | - | - | 0.2 | 0.2 |
Gain (Loss) on asset disposals | (0.2) | - | (0.1) | - | (0.0) | (0.1) | (0.0) | 0.0 | - | (0.1) | (0.1) | 0.0 | - | (0.0) | - | 0.0 |
Changes in assets and liabilities | 8.3 | 3.4 | (6.0) | (1.6) | 3.0 | (1.2) | 3.3 | (7.3) | 3.6 | 20.5 | 20.1 | (5.4) | (7.1) | (10.0) | 7.7 | (14.9) |
Distributions from equity method investments | ||||||||||||||||
Maint. & Reg. Capital Expenditures | (5.1) | (0.8) | (1.0) | (0.8) | (3.9) | (6.5) | (3.3) | (3.9) | (3.5) | (2.7) | (13.4) | (0.7) | (0.9) | (0.7) | (3.6) | (5.9) |
Reimbursement for Capital Expenditures | 0.8 | - | - | - | 1.6 | 1.6 | 1.6 | 1.8 | 2.0 | 0.2 | 5.5 | 0.2 | 0.2 | 0.4 | 2.4 | 3.3 |
Distributable Cash Flow | $52.9 | $17.0 | $24.0 | $17.7 | $21.8 | $80.3 | $17.1 | $21.4 | $22.2 | $19.0 | $79.8 | $20.4 | $23.3 | $18.8 | $20.6 | $83.0 |
Distribution Coverage Ratio (1) | 1.35x | 1.61x | 2.02x | 1.42x | 1.67x | 1.68x | 1.25x | 1.49x | 1.47x | 1.18x | 1.35x | 1.20x | 1.29x | 0.98x | 1.00x | 1.11x |
Total Distribution (1) | $39.3 | $10.5 | $11.9 | $12.4 | $13.1 | $47.9 | $13.7 | $14.4 | $15.1 | $16.1 | $59.3 | $17.1 | $18.1 | $19.3 | $20.5 | $75.0 |
(dollars in millions, except coverage) | 4 1Q17 | 2Q17 | 3Q17 | 4Q17 (3) | 2017(3) | 1Q18 | 2Q18 | 3Q18 | 4Q18 | 2018 | 1Q19 | 2Q19 | 3Q19 | |||
Reconciliation of Distributable Cash Flow to net cash from operating activities | ||||||||||||||||
Net cash provided by operating activities | $23.5 | $23.9 | $30.5 | $9.8 | $87.7 | $23.7 | $28.0 | $6.0 | $90.4 | $148.0 | $26.2 | $24.1 | $34.3 | |||
Accretion of asset retirement obligations | (0.1) | (0.1) | (0.1) | (0.1) | (0.3) | (0.1) | (0.1) | (0.1) | (0.1) | (0.4) | (0.1) | (0.1) | (0.1) | |||
Deferred income taxes | - | (0.1) | (0.0) | 0.3 | 0.1 | - | - | - | (0.2) | (0.2) | - | - | (0.1) | |||
Gain (Loss) on asset disposals | (0.0) | 0.0 | 0.0 | 0.0 | 0.0 | (0.1) | 0.1 | (0.7) | (0.2) | (0.9) | (0.0) | 0.0 | 0.1 | |||
Changes in assets and liabilities | (3.6) | 0.9 | (8.5) | 14.6 | 3.4 | 3.7 | 6.2 | 28.1 | (59.9) | (21.9) | 3.2 | 7.8 | 3.2 | |||
Non-cash lease expense | - | - | - | - | - | (1.0) | (0.4) | (1.1) | ||||||||
Distributions from equity method investments | 0.3 | 0.2 | 1.2 | 0.8 | - | - | ||||||||||
Maint. & Reg. Capital Expenditures | (2.2) | (2.1) | (0.7) | (4.4) | (9.4) | (0.3) | (1.0) | (2.4) | (3.5) | (7.2) | (0.8) | (1.0) | (3.7) | |||
Reimbursement for Capital Expenditures | 0.9 | 0.5 | 0.4 | 1.7 | 3.5 | 0.4 | 0.3 | 1.3 | 0.9 | 2.9 | 0.7 | 0.7 | 1.2 | |||
Distributable Cash Flow | ||||||||||||||||
$18.4 | $23.0 | $21.6 | $21.9 | $85.0 | $27.3 | $33.5 | $32.4 | $27.6 | $121.5 | $29.0 | $31.2 | $33.7 | ||||
Distribution Coverage Ratio (1) | 0.88x | 1.06x | 0.97x | 0.96x | 0.97x | 1.14x | 1.34x | 1.25x | 1.02x | 1.19x | 1.06x | 1.08x | 1.11x | |||
Total Distribution (1) | $21.0 | $21.8 | $22.3 | $22.8 | $87.9 | $24.0 | $25.0 | $26.0 | $26.9 | $101.9 | $27.4 | $28.9 | $30.3 |
- Distribution based on actual amounts distributed during the periods; does not include LTIP accrual. Coverage is defined as cash available for distribution divided by total distribution.
- Results in 2013, 2014 and 2015 are as reported excluding predecessor costs related to the dropdown of the tank farms and product terminals at both Tyler and El Dorado during the respective periods.
- In 4Q17, the reimbursed capital expenditure amounts in the determination of distributable cash flow were revised to reflect the accrual of reimbursed capital expenditures from Delek US rather than the cash amounts received for reimbursed capital
expenditures during the years ended December 31, 2017, 2016 and 2015. | 37 |
Note: May not foot due to rounding and annual adjustments that occurred in year-end reporting.
DKL: Income Statement and Non-GAAP EBITDA Reconciliation
Delek Logistics Partners LP Income Statement and EBITDA Reconciliation
4 | ||||||||||||||||
2013(1) | 1Q14(1) | 2Q14 | 3Q14 | 4Q14 | 2014 (1) | 1Q15(2) | 2Q15 | 3Q15 | 4Q15 | 2015(2) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | |
Net Revenue | $907.4 | $203.5 | $236.3 | $228.0 | $173.3 | $841.2 | $143.5 | $172.1 | $165.1 | $108.9 | $589.7 | $104.1 | $111.9 | $107.5 | $124.7 | $448.1 |
Cost of Sales | (811.4) | (172.2) | (196.6) | (194.1) | (134.3) | (697.2) | (108.4) | (132.5) | (124.4) | (71.0) | (436.3) | (66.8) | (73.1) | ($73.5) | ($88.8) | (302.2) |
Operating Expenses (excluding depreciation and | ||||||||||||||||
amortization presented below) | (25.8) | (8.5) | (9.5) | (10.2) | (9.7) | (38.0) | (10.6) | (10.8) | (11.6) | (11.7) | (44.8) | (10.5) | (8.7) | ($9.3) | ($8.8) | (37.2) |
Depreciation and Amortization | ||||||||||||||||
Contribution Margin | $70.3 | $22.8 | $30.2 | $23.7 | $29.3 | $106.0 | $24.5 | $28.8 | $29.1 | $26.2 | $108.6 | $26.8 | $30.0 | $24.7 | $27.2 | $108.7 |
Operating Expenses (excluding depreciation and | ||||||||||||||||
amortization presented below) | ||||||||||||||||
Depreciation and Amortization | (10.7) | (3.4) | (3.5) | (3.7) | (3.9) | (14.6) | (4.0) | (4.7) | (4.5) | (5.9) | (19.2) | (5.0) | (4.8) | ($5.4) | ($5.6) | (20.8) |
General and Administration Expense | (6.3) | (2.6) | (2.2) | (2.5) | (3.3) | (10.6) | (3.4) | (3.0) | (2.7) | (2.3) | (11.4) | (2.9) | (2.7) | ($2.3) | ($2.3) | (10.3) |
Gain (Loss) on Asset Disposal | (0.2) | - | (0.1) | - | - | (0.1) | - | - | - | (0.1) | (0.1) | 0.0 | - | ($0.0) | $0.0 | 0.0 |
Operating Income | $53.2 | $16.8 | $24.4 | $17.5 | $22.1 | $80.8 | $17.1 | $21.1 | $21.8 | $17.9 | $77.9 | $19.0 | $22.5 | $17.0 | $19.2 | $77.7 |
Interest Expense, net | (4.6) | (2.0) | (2.3) | (2.2) | (2.1) | (8.7) | (2.2) | (2.6) | (2.8) | (3.0) | (10.7) | (3.2) | (3.3) | ($3.4) | ($3.7) | (13.6) |
(Loss) Income from Equity Method Invesments | (0.1) | (0.3) | (0.1) | (0.6) | (0.2) | (0.2) | ($0.3) | ($0.4) | (1.2) | |||||||
Income Taxes | (0.8) | (0.1) | (0.3) | (0.2) | 0.5 | (0.1) | (0.3) | (0.1) | (0.1) | 0.6 | 0.2 | (0.1) | (0.129) | ($0.1) | $0.3 | (0.1) |
Net Income | $47.8 | $14.7 | $21.8 | $15.1 | $20.5 | $72.0 | $14.6 | $18.3 | $18.6 | $15.3 | $66.8 | $15.4 | $18.9 | $13.2 | $15.3 | $62.8 |
EBITDA: | ||||||||||||||||
Net Income | $47.8 | $14.7 | $21.8 | $15.1 | $20.5 | $72.0 | $14.6 | $18.3 | $18.6 | $15.3 | $66.8 | $15.4 | $18.9 | $13.2 | $15.3 | $62.8 |
Income Taxes | 0.8 | 0.1 | 0.3 | 0.2 | (0.5) | 0.1 | 0.3 | 0.1 | 0.1 | (0.6) | (0.2) | 0.1 | 0.1 | 0.13 | (0.28) | 0.1 |
Depreciation and Amortization | 10.7 | 3.4 | 3.5 | 3.7 | 3.9 | 14.6 | 4.0 | 4.7 | 4.5 | 5.9 | 19.2 | 5.0 | 4.8 | 5.4 | 5.6 | 20.8 |
Amortization of customer contract intangible assets | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - |
Interest Expense, net | 4.6 | 2.0 | 2.3 | 2.2 | 2.1 | 8.7 | 2.2 | 2.6 | 2.8 | 3.0 | 10.7 | 3.2 | 3.3 | 3.4 | 3.7 | 13.6 |
EBITDA | $63.8 | $20.2 | $27.9 | $21.2 | $26.1 | $95.4 | $21.1 | $25.7 | $26.1 | $23.6 | $96.5 | $23.7 | $27.1 | $22.0 | $24.4 | $97.3 |
1 | ||||||||||||||||
2Q17 | 3Q17 | 4Q17 | 2017 | 1Q18 | 2Q18 | 3Q18 | 4Q18 | 2018 | 1Q19 | 2Q19 | 3Q19 | |||||
Net Revenue | $126.8 | $130.6 | $151.2 | $538.1 | $167.9 | $166.3 | $164.1 | $159.3 | $657.6 | $152.5 | $155.3 | $137.6 | ||||
Cost of Sales | (85.0) | ($89.1) | ($106.1) | (372.9) | (119.0) | (106.0) | ($105.6) | ($98.4) | (429.1) | ($96.3) | ($93.9) | ($72.6) | ||||
Operating Expenses (excluding depreciation and | ||||||||||||||||
amortization presented below) | (10.0) | (10.7) | (12.3) | (43.3) | (12.6) | (14.9) | (14.5) | (15.4) | (57.4) | (15.3) | (16.5) | (17.5) | ||||
Depreciation and Amortization | (6.3) | (5.8) | (12.1) | (6.1) | (6.2) | (6.1) | ||||||||||
Contribution Margin | $31.8 | $30.8 | $32.8 | $121.9 | $36.3 | $45.3 | $37.8 | $39.6 | $159.1 | $34.8 | $38.8 | $41.3 | ||||
Operating Expenses (excluding depreciation and | ||||||||||||||||
amortization presented below) | (0.9) | (0.4) | (1.3) | (0.8) | (0.8) | (0.9) | ||||||||||
Depreciation and Amortization | (5.7) | (5.5) | (5.5) | (21.9) | (6.0) | (7.0) | (0.5) | (0.4) | (13.9) | (0.5) | (0.5) | (0.5) | ||||
General and Administration Expense | (2.7) | (2.8) | (3.6) | (11.8) | (3.0) | (3.7) | (3.1) | (7.4) | (17.2) | (4.5) | (5.3) | (5.3) | ||||
Gain (Loss) on Asset Disposal | 0.0 | (0.0) | (0.0) | (0.0) | - | 0.1 | (0.7) | (0.2) | (0.8) | (0.0) | 0.0 | 0.1 | ||||
Operating Income | $23.4 | $22.6 | $23.7 | $88.1 | $27.3 | $34.7 | $32.6 | $31.1 | $125.8 | $29.1 | $32.3 | $34.7 | ||||
Interest Expense, net | (5.5) | (7.1) | (7.3) | (23.9) | (8.1) | (10.9) | (11.1) | (11.2) | (41.3) | (11.3) | (11.4) | (12.5) | ||||
(Loss) Income from Equity Method Invesments | 1.2 | 1.6 | 1.9 | 5.0 | 0.8 | 1.9 | 1.9 | 1.5 | 6.2 | 2.0 | 4.5 | 8.4 | ||||
Other (Expense) Income | - | - | - | - | - | - | - | - | - | - | (0.5) | - | ||||
Income Taxes | (0.1) | (0.2) | 0.6 | 0.2 | (0.1) | (0.1) | (0.1) | (0.2) | (0.5) | (0.1) | (0.1) | (0.1) | ||||
Net Income | $19.0 | $16.9 | $18.9 | $69.4 | $20.0 | $25.6 | $23.3 | $21.3 | $90.2 | $19.7 | $24.9 | $30.5 | ||||
EBITDA: | ||||||||||||||||
Net Income | $19.0 | $16.9 | $18.9 | $69.4 | $20.0 | $25.6 | $23.3 | $21.3 | $90.2 | $19.7 | $24.9 | $30.5 | ||||
Income Taxes | 0.1 | 0.2 | ($0.6) | (0.2) | 0.1 | 0.1 | 0.1 | $0.2 | 0.5 | 0.1 | 0.1 | 0.1 | ||||
Depreciation and Amortization | 5.7 | 5.5 | 5.5 | 21.9 | 6.0 | 7.0 | 6.7 | 6.3 | 26.0 | 6.6 | 6.6 | 6.6 | ||||
Amortization of customer contract intangible assets | - | - | - | - | 0.6 | 1.8 | 1.8 | 1.8 | 6.0 | 1.8 | 1.8 | 1.8 | ||||
Interest Expense, net | 5.5 | 7.1 | 7.3 | 23.9 | 8.1 | 10.9 | 11.1 | 11.2 | 41.3 | 11.3 | 11.4 | 12.5 | ||||
EBITDA | $30.3 | $29.7 | $31.1 | $115.0 | $34.7 | $45.4 | $43.0 | $40.7 | $163.9 | $39.4 | $44.8 | $51.5 |
- Results in 2013 and 2014 are as reported excluding predecessor costs related to the dropdown of the tank farms and product terminals at both Tyler and El Dorado during the respective periods.
- Results for 1Q15 are as reported excluding predecessor costs related to the 1Q15 dropdowns.
Note: May not foot due to rounding.
38
Non-GAAP Reconciliation of Increased Paline Pipeline Tariff EBITDA(1)
Reconciliation of Forecast Incremental U.S. GAAP Net Income (Loss) to Forecast Incremental EBITDA for Paline | ||||
Pipeline Tariff Increase | ||||
($ in millions) | Annual | Monthly | ||
Forecasted Incremental Net Income | $ | 10.8 | $ | 0.9 |
Add Forecasted Incremental Amounts for: | ||||
Interest Expense, net | $ | - | $ | - |
Depreciation and amortization | $ | - | $ | - |
Forecasted Incremental EBITDA | $ | 10.8 | $ | 0.9 |
- Based on projected potential future performance from the Paline Pipeline using 36,000 bpd and the tariff change from an incentive rate of $0.75/bbl to the FERC rate of $1.57/bbl. Amounts of EBITDA and net income will vary. Actual amounts will be
based on market conditions and pipeline operations.
39
Non-GAAP Reconciliation of Red River Joint Venture Adjusted EBITDA(1)
Delek Logistics Partners, LP Reconciliation of Forecasted Incremental Annualized Net Income to Forecasted
Incremental Annualized Adjusted EBITDA for the Red River Pipeline Joint Venture
($ in millions) | Pre-Expansion Range | Post-Expansion Range | |||
Forecasted Incremental Annualized Net Income | $5.6 | $7.6 | $10.1 | $15.1 | |
Add Forecasted Incremental for: | |||||
Interest Expense, Net | $6.6 | $6.6 | $7.6 | $7.6 | |
Depreciation and Amortization | $0.0 | $0.0 | $0.0 | $0.0 | |
Forecasted Incremental EBITDA | $12.2 | $14.2 | $17.7 | $22.7 | |
Adjustments: | |||||
Add Forecasted Incremental Distributions from operations of | $1.3 | $1.3 | $2.3 | $2.3 | |
non- controlled entities in excess of earnings | |||||
Forecasted Incremental AnnualizedAdjusted EBITDA | $13.5 | $15.5 | $20.0 | $25.0 | |
1) Based on projected potential future performance from the Red River joint venture. Amounts of adjusted EBITDA and net income will vary. Actual amounts will be based on market conditions and pipeline operations.
40
Non-GAAP Reconciliations of Big Spring Gathering System Forecasted EBITDA
Reconciliation of Forecasted Incremental Annualized Net Income to Forecasted Incremental Annualized EBITDA | ||||
for the Big Springs Gathering System | ||||
($ in millions) | ||||
Forecasted Range | ||||
Forecasted Incremental Annualized Net Income | $ | 5.0 | $ | 10.0 |
Add Forecasted Incremental Amounts for: | ||||
Depreciation and amortization | 15.0 | 15.0 | ||
Interest Expense, net | - | - | ||
Forecasted Incremental EBITDA | $ | 20.0 | $ | 25.0 |
41
Investor Relations Contacts:
Blake Fernandez, SVP IR/Market Intelligence 615-224-1312
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Delek US Holdings Inc. published this content on 06 January 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 06 January 2020 21:12:03 UTC