Delek Logistics Partners, LP Q3 FY2025 earnings call

• Delek Logistics Partners had another record quarter with approximately $136 million in quarterly adjusted EBITDA.
• Raised full year EBITDA midpoint guidance to the upper end of the range between $500 million and $520 million.
• Successfully completed commissioning of the new Libby 2 plant in the third quarter and advanced acid gas injection and sour gas handling capabilities.
• Solid operations in crude and water gathering segments with record volume for DTG crude gathering in the third quarter.
• Well-timed and cost-effective acquisitions of 3 Bear, H2O Midstream and Gravity Water Midstream have supplemented organic growth and enabled transition to a full suite service provider.

For the Gathering and Processing segment, adjusted EBITDA for the quarter was $83 million compared to $55 million in the third quarter of 2024. Wholesale Marketing and Terminalling adjusted EBITDA was $21 million compared to $25 million in the prior year. Storage and Transportation adjusted EBITDA in the quarter was $19 million compared with $19 million in the third quarter of 2024. Investments in pipeline joint venture segment contributed $22 million this quarter compared with $16 million in the third quarter of 2024. Adjusted EBITDA for the quarter was approximately $136 million, up from $107 million in the same period last year.

• DKL has increased its full year EBITDA midpoint guidance of $500 million to the upper end of the range between $500 million and $520 million.
• Expect DCF coverage ratio to continue to strengthen through the remainder of the year as recent growth projects like the Libby 2 gas plant contribute more meaningfully to financial performance.

Q: I was wondering if you could maybe expand on the comments in the press release around producers increasing activity on your acreage ahead of Libby 2 coming online. Just curious how you're thinking about the treating capacity ramp at the year-end as well as maybe some of the benefits you might be seeing across your broader gathering system just as you bring that sour gas offering to your customers?

A: Yes, absolutely. So why don't I take a minute or two to give you a bit broader overview. As you saw on our numbers, crude and water are extremely strong, and we are very happy about that. And I think we also can be proud of the strategy we set to be a premier crude gas and water provider in the heart of the Permian basin. I think that we were pretty much the first one to put that strategy together, and it's starting to give us a very nice yield. That's part of the reasoning that we are increasing our forecast, our guidance for the year, and we are very proud of the timely manner acquisition and build we did. We saw a record crude. We do not see any material change in the drilling activity in our acreage. And with the discussion we have with our producer and we are seeing more and more synergies between the different streams that we are actively managing. And with that, I will let Reuven comment more about the sour progress we are seeing. Reuven Spiegel: The actual construction and start-up of Libby 2 has been above our expectation on time and on budget. Originally and based on producers' forecast that we anticipated to fill up the plant with sweet gas. But as they were drilling, the landscape has changed and the producer needs solutions for sour gas as soon as possible. As a result, we accelerated some sour programs to provide solution in a more rapid time line. We have very high confidence in not only filling up Libby 2, but because of the full suite, sour gas, crude and water solution that we provide, we will need to expand processing capacity earlier than our previous expectations.

Q: I just want to ask on the equity income line. I think Robert mentioned some, I mean, better performance or improving performance. Clearly, that was equity investment line. That was clearly a very strong point in the quarter. Can you just talk about that a little bit? And is this current run rate something that's maybe sustainable going forward?

A: Yes. Thanks for the question. Yes, as I mentioned in the prepared remarks, most of that line item was impacted by strong performance in the quarter by Wink to Webster. I think when you look at our JV results on an annualized basis, like year-to-date, I think that's a good run rate of what to expect going forward. I think we're pretty happy with our JV results overall.

Q: Can you maybe also talk a little bit about the water landscape overall? I think Reuven and Avigal, you both mentioned others trying to emulate your 3-stream strategy here. As far as you see with the landscape, are you seeing new competitors, new opportunities? Just curious kind of with some mergers happening and IPO happening, whether anything has shifted in your view?

A: Yes. So that's a very good question. And we should see very important trends that you can see is the gas and oil ratio and the water and crude ratio. Both of them are working extremely well from our position standpoint. And if you go one year back, Gabriel, and you think about the timing that we did the both H2O and Gravity acquisition, we brought that pretty much at half price versus what we've seen the market trending today. So we are very happy about the timing and the trend in the market. Obviously, as you can see in the Delaware Basin, it's almost impossible to get SWDs permitted in a timely manner. So we were very fortunate to have the position we are at, and it's going very well to our expectations.