Delek Logistics Partners, LP (DKL) on Q1 2021 Results - Earnings Call Transcript
Operator: Good day, and welcome to the Delek Logistics' First Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Blake Fernandez. Please, go ahead. Blake Fernandez: Good morning. I would like to thank everyone for joining us on this webcast to discuss Delek Logistics Partners' First Quarter 2021 Financial Results. Joining me on today's call will be Uzi Yemin, our General Partners Chairman and CEO; and Rueven Spiegel, CFO; as well as other members of our Management team. Reuven Spiegel: Thank you, Blake. Our first quarter performance on a year-over-year basis benefited from the contribution of asset drop downs that occurred in 2020. That said, winter storm Uri has a negative impact on results in the first quarter, in addition to maintenance at the Paline pipeline. We expect these factors to normalize into the second quarter. Our distributable cash flow was approximately $53 million in the first quarter of 2021, compared to $36 million in the first quarter of 2020. Net income attributable to all partners increased approximately 30% over the prior year period. Our DCF coverage ratio was 1.31 in the first quarter of 2021, compared to 1.15 in the prior period. EBITDA was $59 million, which represents a 21% increase over the prior year period. We increased our quarterly distribution to $0.92 per limited partner unit for the quarter ended March 31, 2021. This distribution is to be paid on May 14, 2021 and represents a 1.1% increase from the fourth quarter 2020. This is our 32nd consecutive quarterly increase and is still 3.4% higher than our first quarter 2020 distribution. On March 31, DKL had approximately $113 million of available capacity on our 850 credit facility. Our total debt was approximately $1 billion and the total leverage ratio is 3.7x, which is within the 5.25x currently allowable under our credit facility. Now I will turn the call over to the Blake to discuss the results. Blake Fernandez: Thanks, Reuven. In our Pipelines and Transportation segment, the first quarter 2021 contribution margin was $42 million, compared to $30 million in the first quarter of 2020. This increase was primarily attributable to the asset drop downs, including the big spring gathering system dropped on March 31, 2020 and trucking asset dropped on May 1, 2020. Uzi Yemin: Thank you, Blake, and good morning, everybody. First quarter results were resilient considering the winter storm impact along the Gulf Coast in pipeline maintenance. We're expecting the improvement into the second quarter and throughout the year as energy demand improves with the vaccination uptake and . Our long history of distribution growth continues and we remain committed to delivering another 5% increase in 2021. Our distribution coverage and leverage ratios remain healthy and create flexibility. Finally, we are pleased to announce an exclusive agreement with Baker Hughes, utilizing technology to meet IMO product spec toward blending capabilities. This offers a low capital high return opportunity that could be scalable if successful. With that, Operator, can you please open the call for questions? Operator: Thank you. We will now begin the question-and-answer session. And the first question comes from Spiro Dounis with Credit Suisse. Please, go ahead. Spiro Dounis: Hey. Good morning, everybody. Uzi, I wanted to ask you about the outlook for the rest of the year. It sounds like things are getting back to normal, which is good to hear. So far our first part of this year, fairly quiet for detail, especially when you look back at last year and all the activity dropped downs you all were doing. So, obviously some of this is market and storm-related and turnaround-related. But forward to the rest of the year, should we expect in uptick in activity from you all? And what form does that take? I know drop downs are on the table at one point. Where do those stand? How do you see yourself hitting those growth goals? I think you're still committed to that 5% distribution growth level. Uzi Yemin: Hey, Spiro, good morning. Well, there are several initiatives that are coming to fruition over the next few months -- actually Q2. First of all, the expansion of the Red River pipeline to where with the planes will come into effect over the next or during a little bit next quarter. Second, the Paline pipeline, we have an agreement that is coming to an effect early May to start shipping more on Paline. And third, with the Baker Hughes agreement on the blending side together with DK, which is just the start of something that can be very meaningful and not capital-intense. So these are the three organic growth projects that give us the confidence to continue to say our coverage and leverage ratios will stay very healthy. On the M&A side, obviously, we need to be very nimble. We are waiting on the sideline to see if something comes to fruition. But leverage comes down toward the 3.5 mark. It's now 3.7 and the coverage will get healthier during the year because of these organic growth projects. Odely, I don't know if you want to add anything? Odely Sakazi: No, I think you hit all those marks. Uzi Yemin: Yes. Spiro Dounis: Okay, great. And then on Baker Hughes and then once again just focusing on the detail part of it. I guess you helped frame out in terms of timing and when we start to see cash flows there, you mentioned it being kind of a small CapEx number. Any sense you can give us around that front? Is this for DKL going to be a very much fee-based enterprise? Or how should we think about this structure? Uzi Yemin: Yes, it's a fee-base for details. The money is coming in as we speak. More and more bells -- we're not ready to discuss the amount of bells, but I will do it over the next couple of quarters. But as we have more and more bells coming in, the fees will continue to grow. It already started the beginning of the year and now it's getting stronger for the second quarter and third quarter will be even stronger. We're very optimistic that the 5% will be met easily like in the past without any drop down. Probably we'll do over the next quarter or two, will give projected cash flow from that project as we get more and more of that blending and treatment capabilities placed. Spiro Dounis: Okay. We'll wait and see on that one. Last one for me just on West Texas marketing margins. Very strong again. It looks similar to Q3 last year. And so, I'm sure RINs and RINs' prices had a lot to do with that, but just curious if there's anything else you would call out there on that number? Really just trying to get a sense that if RINs stay up at these levels, or does West Texas margin sustainable around these levels for the rest of the year? Odely Sakazi: Hey, Spiro. It's Odely. As you mentioned, as we also mentioned before, the Q4 was more from the hedging loss but really what we're seeing right now in Q1 is really from a RINs contribution and also flat on hedging, along with a good production and throughput around 10,000 in just margin becoming better than what we've seen in Q4. So, it's primarily coming from the RINs, better utilization now with the West Texas also. Spiro Dounis: All right. It's all I had. Thank you, gentlemen. Be well. Operator: The next question comes from Ned Baramov with Wells Fargo. Please, go ahead. Ned Baramov: Hey, good morning. Thanks for taking the question. With the Krotz refinery back online, could you maybe review what's the approximate EBITDA generated by the midstream assets being in around this facility? And also has there been a change in how you think about the potential drop down of these assets ? Uzi Yemin: Good morning, Ned. This is Uzi. Thanks for taking the time to ask the question. The courts facility is now free cash flow from a DK standpoint. What we're doing over there as I mentioned, and we mentioned, Baker Hughes agreement, that Baker Hughes agreement will enhance the profitability of Krotz and other places. We are waiting to see how much this is going to contribute, but it's in the millions. So, it's not a small amount. And then we see how the market shakes up to see if we're doing the drop downs or stay away from the drop down for the time being. The total EBITDA from that drop down is $30 million. As I mentioned earlier we still have three organic projects that are coming to fruition that will add money and will make the EBITDA even stronger in the near future. But then we need to think about the next steps of detail growth. As we said, our goal was to be 73.95 . I think we are getting very close to achieving that during . And the crossing, now we need to think about the next leg. Ned Baramov: Okay. And then maybe one more on Paline. What is the what is the latest on this? In the past you had talked about further capacity increases. Are there any discussions on this front? Uzi Yemin: We have an agreement with a shipper that is starting May 1. We'll see how this goes. That ship is a new shipper. They didn't ship before, so we'll see how this goes. And if there's more demand, then there's no reason to believe that we won't expand that with a minimum capital CapEx. Ned Baramov: Okay, got it. And maybe one more, if I may. Uzi Yemin: Please. Ned Baramov: Uzi Yemin: Can you repeat the question? Ned Baramov: Could you review some of the expansion projects included in your CapEx budget for 2021? Odely Sakazi: Sure. This is Odely, Ned. Specifically around the discretionary as we gave the forecast is from really on the project that what we mentioned both on the Jefferson completion of the Jefferson Connection and on Paline, along with our project around Baker Hughes opportunity and also in DPG. So, all those are primarily the items associated with the business development forecast. Ned Baramov: That's perfect. Thank you. That's all I had. Uzi Yemin: Thank you, Ned. Operator: Looks like we have no further questions. So, this concludes our question-and-answer session. I would now like to turn the conference back over to Management for any closing remarks. Uzi Yemin: Yes, I'd like to thank everybody that listened to the call this morning. I'd like to thank the management on the table end in general for another good quarter despite the winter storm Uri. I'd like to thank the unit holders, investors for their trust in us. But mainly, I'd like to thank each one of the employees of this great company that make it what it is. Have a great day. We'll talk to you next time. Operator: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Delek Logistics Partners, LP (NYSE:DKL) Financial Performance Review
- Missed Earnings Estimates: DKL reported earnings per share of $0.68, missing the estimated $0.74, with revenue of approximately $209.9 million against the expected $242.1 million.
- Investor Confidence: Despite missing estimates, DKL maintains a P/E ratio of 15.04 and an earnings yield of 6.65%, indicating continued investor confidence.
- Efficient Cash Flow Management: The company's enterprise value to operating cash flow ratio stands at 14.79, showcasing efficient conversion of operations into cash flow.
Delek Logistics Partners, LP (NYSE:DKL) is a prominent player in the midstream sector, particularly in the Permian Basin. The company is known for its strategic positioning in the Midland and Delaware basins, which has contributed to its reputation for offering a balanced mix of yield and growth. DKL has consistently increased its financial performance, marking its 48th consecutive increase.
On February 25, 2025, DKL reported earnings per share of $0.68, missing the estimated $0.74. The company's revenue was approximately $209.9 million, falling short of the expected $242.1 million. Despite this, DKL has a price-to-earnings (P/E) ratio of 15.04, indicating investor confidence in its future earnings potential. The earnings yield stands at 6.65%, showing the percentage of each dollar invested that was earned by the company.
DKL's price-to-sales ratio is 2.25, meaning investors pay $2.25 for every dollar of the company's sales. The enterprise value to sales ratio is 4.18, reflecting the company's total valuation compared to its sales. This suggests that while the company missed its revenue estimates, its overall valuation remains strong in the eyes of investors.
The company's enterprise value to operating cash flow ratio is 14.79, indicating how its valuation compares to its cash flow from operations. This ratio suggests that DKL is efficiently converting its operations into cash flow, which is crucial for sustaining its growth and meeting financial obligations. The current ratio of 1.24 further supports this, showing that DKL has $1.24 in current assets for every dollar of current liabilities, indicating a reasonable level of short-term liquidity.
Despite a negative debt-to-equity ratio of -42.24, which suggests more liabilities than equity, DKL continues to establish itself as a leading midstream provider. The company's strategic position in the Permian Basin and its consistent growth trajectory highlight its potential for future success, even amidst challenges in meeting earnings and revenue estimates.
Delek Logistics Partners, LP (NYSE:DKL) Financial Performance Review
- Missed Earnings Estimates: DKL reported earnings per share of $0.68, missing the estimated $0.74, with revenue of approximately $209.9 million against the expected $242.1 million.
- Investor Confidence: Despite missing estimates, DKL maintains a P/E ratio of 15.04 and an earnings yield of 6.65%, indicating continued investor confidence.
- Efficient Cash Flow Management: The company's enterprise value to operating cash flow ratio stands at 14.79, showcasing efficient conversion of operations into cash flow.
Delek Logistics Partners, LP (NYSE:DKL) is a prominent player in the midstream sector, particularly in the Permian Basin. The company is known for its strategic positioning in the Midland and Delaware basins, which has contributed to its reputation for offering a balanced mix of yield and growth. DKL has consistently increased its financial performance, marking its 48th consecutive increase.
On February 25, 2025, DKL reported earnings per share of $0.68, missing the estimated $0.74. The company's revenue was approximately $209.9 million, falling short of the expected $242.1 million. Despite this, DKL has a price-to-earnings (P/E) ratio of 15.04, indicating investor confidence in its future earnings potential. The earnings yield stands at 6.65%, showing the percentage of each dollar invested that was earned by the company.
DKL's price-to-sales ratio is 2.25, meaning investors pay $2.25 for every dollar of the company's sales. The enterprise value to sales ratio is 4.18, reflecting the company's total valuation compared to its sales. This suggests that while the company missed its revenue estimates, its overall valuation remains strong in the eyes of investors.
The company's enterprise value to operating cash flow ratio is 14.79, indicating how its valuation compares to its cash flow from operations. This ratio suggests that DKL is efficiently converting its operations into cash flow, which is crucial for sustaining its growth and meeting financial obligations. The current ratio of 1.24 further supports this, showing that DKL has $1.24 in current assets for every dollar of current liabilities, indicating a reasonable level of short-term liquidity.
Despite a negative debt-to-equity ratio of -42.24, which suggests more liabilities than equity, DKL continues to establish itself as a leading midstream provider. The company's strategic position in the Permian Basin and its consistent growth trajectory highlight its potential for future success, even amidst challenges in meeting earnings and revenue estimates.
