Delek US Holdings, Inc. Q4 FY2024 earnings call

• Delek Logistics had a record quarter with approx $107 million in quarterly adjusted EBITDA. 2024 was transformational with increased liquidity, amended contracts, acquisitions like Edge Draw Midstream and Gravity Water Midstream, plant expansion in Delaware set to complete in H1 2025, and FID on acid gas injection at Lindy complex. • Announced $150 million buyback from sponsor and 48th consecutive quarterly distribution increase to $1.10 per unit. • Managed financial liquidity in 2024 by accessing debt and equity markets, post-Gravity Water Midstream acquisition had ~$530 million liquidity. • Fourth quarter capital expenditures were $49.4 million, with $42.1 million for new gas processing plant.

For the fourth quarter, gathering and processing segment had adjusted EBITDA of $66 million compared to $53.3 million in Q4 2023. Wholesale marketing and terminalling adjusted EBITDA was $21.2 million vs $28.4 million in prior year. Storage and transportation adjusted EBITDA was $17.8 million vs $17.5 million. Investments in pipeline joint ventures segment contributed $11.3 million this quarter vs $8.5 million in Q4 2023.

• Delek Logistics initiated 2025 EBITDA guidance of $480 to $520 million, representing ~20% growth over 2024 adjusted EBITDA. • 2025 capital guidance: ~$75 million for Lindy processing plant expansion and ~$160 million for growth and maintenance projects.

Q: Good morning. EBITDA guidance here. Just looking at some of the prior benchmarks you have put around the acquisitions and the process and plan expectations, on a relatively conservative guide at least at the low end of the range. So I was just curious if you could maybe talk a little bit about what might drive the high end for solo and tier, and then maybe kind of where you see yourself exiting the year given some of the moving pieces throughout.

A: Hey, Doug. Thanks for the question, and listen, that's the first time we are giving guidance. Delek Logistics obviously is a growing company as we demonstrate and as you can very well see. Obviously, we are increasing the economic separation between Delek US Holdings, Inc. and Delek Logistics in every step that we are doing, and for sure with the step that we announced today of the $150 million buyback from our sponsor. And we want to help you and others to model better, and that's what we try to do today. We feel confident with the guidance we gave today. And, obviously, we are looking forward to updating you down the road. If there are more modeling questions, obviously, you can follow up with Mohit Bhardwaj for more detailed questions on how to get the exact model, but that's where we are today. Obviously, there are always opportunities in the future.

Q: Understood. Yeah. Appreciate the first-time guidance. Maybe a follow-up on the buyback program. Maybe a two-part question here. Just first, just curious how quickly you expect to be able to execute on that $150 million and then second, just how you are thinking about funding these buybacks or if you are looking to potentially fund it all internally with free cash flow, or you may be willing to use debt here given the discounted yield relative to where the equity is trading? And if so, I was just curious where you see leverage over the near term.

A: Yeah. Absolutely. So if we are looking at it from the free cash flow standpoint, again, I am sure that you can appreciate it, our cost of capital on the debt side is around 7%, and what we see here today at $40 is close to 11%. So that's obviously very beneficial from a free cash flow standpoint for Delek Logistics, and that's something that our partnership likes a lot. Also, you can for sure appreciate that the deconsolidation effort is an initiative for both companies, both Delek Logistics and Delek US Holdings, Inc., and the reason that it will allow Delek US Holdings, Inc. to completely fulfill its potential without a sponsor. So those two initiatives are very well embedded in that. We are not going to give specific guidance. It's going to be subject to market conditions and Delek US Holdings, Inc. offering that to Delek Logistics. But that's something that we definitely look very closely at and are working hard on that, but I will let Mohit Bhardwaj chime in more depth and give some more colors. Well, just two bullet points. One, it's a two-year program. And we have to execute that while complying with the company covenant and leverage ratio target. And obviously, that will be in place as long as the Delek Logistics share price makes sense from a free cash flow accretive for the company.

Q: Hey. Good morning. Love to see the guidance. Obviously, it looks great on EBITDA. I'm just wondering, besides you mentioned the release, which is nice to see the upside that's going to happen around the Lindy plant expansion. You know, could you speak to maybe just maybe other notable drivers you would share with us that's driving this upside potential around the EBITDA that you're showing this year?

A: Yeah. So we have many chips in this guidance, right? We obviously finished the Gravity deal, we finished the H2O deal, announced the Lindy plant, we announced the AGR and the sour effort. And obviously, there are synergies among all of that. And we have Wink to Webster. So there is really a mix of transactions we have done, and we felt, Neil, that it's very much necessary to give you guys a clear guidance and make your life just a little bit easier in terms of where we land. And I think it's very important for investors to see how much our currency is cheap versus the entire AMZI index, and how we look at the position it is. So I think that's the reason we decided to give that. Because of the number of transactions we did, and to reflect more how discounted we think our currency is, so that's the reason we did it, and I'm sure that you can appreciate it.

Q: You know, I definitely appreciate it, and the discount is definitely, obviously, seen out there right now. And then my just my follow-up would be on the key three bear assets here, which continue to be so good. Just wondered how how is you know, when you when you look at those assets, just wondering how is demand and utilization of these assets looking?

A: Yeah. So we would not expand those assets if we did not see a strong demand. Obviously, the gas in the Delaware area looks very good. We have made discussions with our producer that we have expertise education with. But another point I would like to highlight for you, Neil, is our comprehensive offering of crude, gas, and water proves itself very nicely in the Delaware, and that's part of the reasoning that we implemented the same concept also in the Midland Basin. So that's paying dividends, and we are very happy about that. That's the reason we felt confident in all the expansion, and we went also to the tactics and also to the strategy. Very good. Thank you.