8-K: Delek Logistics Partners Completes $285 Million Acquisition of Gravity Water Midstream

Delek Logistics Partners, LP finalized its acquisition of Gravity Water Intermediate Holdings LLC for $285 million, expanding its water disposal and recycling operations in the Permian and Bakken basins.

Summary

• Delek Logistics Partners, LP (DKL) has completed the acquisition of Gravity Water Intermediate Holdings LLC on January 2, 2025.
• The purchase price was $285 million, consisting of approximately $209.3 million in cash and 2,175,209 common units of DKL.
• The acquisition expands DKL's water disposal and recycling operations in the Permian Basin and the Bakken.
• This acquisition is expected to be synergistic with DKL's previous acquisition of H2O Midstream.
• DKL anticipates that over 70% of its EBITDA will come from third-party sources following this acquisition.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to the completion of a strategic acquisition, expected synergies, and management's optimistic outlook. The focus on growth and value creation contributes to the high score.

Positives

• The acquisition expands DKL's service offerings to include integrated full-cycle water systems.
• The deal is expected to create cost and commodity sale optimization synergies.
• The acquisition is a strategic move to become a full-suite midstream services provider.
• The company believes it offers the best combination of yield and growth in the midstream sector.

Risks

• The press release contains forward-looking statements that are subject to risks and uncertainties.
• Actual results could differ materially from those expressed in the forward-looking statements.

Future Outlook

The company anticipates continued growth and value creation for stakeholders, with a focus on integrated midstream services and third-party revenue.

Management Comments

• Avigal Soreq, President at Delek Logistics, stated that the Gravity acquisition represents another significant step in DKL's commitment to being a full suite crude, gas and water midstream services provider.
• Avigal Soreq also believes Delek Logistics continues to provide the best combination of yield and growth in the midstream sector.
• Management is excited about the prospects for DKL and the value it continues to bring to all of its stakeholders.

Industry Context

This acquisition aligns with the trend of midstream companies expanding their service offerings to include water management, particularly in active basins like the Permian and Bakken. It also reflects a move towards integrated service models.

Comparison to Industry Standards

• The acquisition of Gravity Water Midstream by Delek Logistics is comparable to other midstream companies expanding their water infrastructure assets in the Permian Basin, such as the acquisition of produced water assets by companies like WaterBridge Resources and Solaris Water.
• The focus on integrated water solutions is a common strategy among midstream players, similar to how companies like Plains All American and Energy Transfer have expanded their water infrastructure to complement their crude and natural gas operations.
• The transaction value of $285 million is within the range of recent midstream asset acquisitions, although specific multiples are not provided in the document for a direct comparison.

Stakeholder Impact

• Shareholders are expected to benefit from the increased scale and potential synergies.
• Customers will have access to a broader range of integrated midstream services.
• Employees may see new opportunities as the company expands its operations.

Next Steps

• Delek Logistics will integrate Gravity's operations into its existing midstream network.
• The company will focus on realizing cost and commodity sale optimization synergies.
• DKL will file a registration statement within ten business days to register the resale of the equity interests issued to the Seller.

Key Dates

Keywords

Delek Logistics Partners, Gravity Water Midstream, Acquisition, Permian Basin, Bakken, Water Disposal, Midstream, EBITDA, Synergies, Common Units