10-Q: Delek Logistics Partners LP Reports Strong Q2 2026 Revenue Growth

Delek Logistics Partners, LP announced a significant increase in net revenues for the second quarter and first half of 2026, driven by robust performance in its West Texas marketing operations and gathering and processing segment.

Summary

• Delek Logistics Partners, LP reported a substantial increase in net revenues for the second quarter of 2026, up 56.2% to $384.8 million compared to the prior year period.
• For the first six months of 2026, net revenues grew by 37.5% to $682.2 million.
• The gathering and processing segment saw significant revenue growth, largely due to the DPG Dropdown and increased sales in Delaware Gathering operations.
• The wholesale marketing and terminalling segment also experienced strong revenue growth, driven by higher average sales prices and increased RINs revenue, despite the termination of the East Texas Marketing Agreement.
• EBITDA for the second quarter of 2026 increased by 24.3% to $120.0 million, and for the first six months of 2026, it increased by 13.9% to $214.9 million.
• The company completed a $800 million issuance of 6.875% senior notes due 2034 and refinanced its credit facility, enhancing liquidity and extending debt maturities.
• Distributable cash flow for the first six months of 2026 was $158.6 million, an increase from $141.7 million in the prior year period.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this filing as moderately positive, reflecting strong revenue growth driven by increased marketing operations and segment performance, alongside strategic debt management and refinancing.

Positives

• Net revenues increased by 56.2% to $384.8 million in Q2 2026 compared to Q2 2025.
• Net revenues increased by 37.5% to $682.2 million for the six months ended June 30, 2026, compared to the same period in 2025.
• EBITDA increased by 24.3% to $120.0 million in Q2 2026 and by 13.9% to $214.9 million for the six months ended June 30, 2026.
• The gathering and processing segment's EBITDA increased by 46.0% in Q2 2026 and 24.4% year-to-date.
• Successful issuance of $800 million in 6.875% senior notes due 2034, which were used to redeem other debt and extend maturity profiles.
• Refinancing of the credit facility (DKL Revolving Facility) providing $1.3 billion in commitments and enhancing liquidity.
• The company maintained compliance with all debt covenants as of June 30, 2026.
• Declared a quarterly cash distribution of $1.135 per unit, a 1.8% increase over the prior year's second quarter distribution.

Negatives

• EBITDA for the wholesale marketing and terminalling segment decreased by 54.5% in Q2 2026 and 42.9% year-to-date, primarily due to the termination of the East Texas Marketing Agreement and a decrease in wholesale margins.
• Cost of materials and other increased significantly, particularly in the wholesale marketing and gathering and processing segments, driven by higher average costs and volumes.
• Interest expense increased by 68.0% in Q2 2026 and 46.9% year-to-date, largely due to losses on debt extinguishment and new debt issuances.
• The company's total partners' deficit equity was $(69.3) million as of June 30, 2026, compared to $6.1 million at December 31, 2025.

Risks

• The Russia-Ukraine War, Israel-Hamas War, U.S.-Iran War, and events occurring in response thereto, may have an adverse impact on the business, future results of operations, and overall financial performance.
• Sustained commodity price volatility and broader macroeconomic uncertainty could indirectly affect the business, including demand for services.
• Elevated energy prices and supply uncertainty may affect refinery utilization rates, potentially reducing demand for transportation, storage, and terminalling services.
• The financial impacts of U.S. tariffs and any corresponding retaliatory tariffs remain uncertain.
• The company's substantial dependence on Delek Holdings and its ability to pay under commercial agreements.
• Changes in commodity prices and demand for refined products, and the impact of geopolitical events on such demand.
• The possibility of inefficiencies, curtailments, or shutdowns in refinery operations or pipelines.
• Cybersecurity incidents could disrupt operations or impact financial reporting systems.

Future Outlook

The company is well-positioned to manage through economic downturns due to built-in recessionary protections in its fee-based arrangements. It anticipates continued cash flow growth in 2026 driven by the Libby gas processing plant ramp-up and ongoing sour gas gathering capabilities. Strategic initiatives aim to enhance customer and geographic diversification, reduce concentration risk, and support future distribution growth.

Management Comments

• The Partnership is well positioned to continue to add value through our gathering and processing services.
• Our disciplined approach to cost control, coupled with a focus on margin enhancements, supported EBITDA growth and improved cash flow, while our capital deployment remained aligned with our strategic priorities.
• The Partnership continues to pursue opportunities to enhance environmental stewardship consistent with applicable regulatory requirements and market conditions.
• We believe our asset base and contractual protections position us to continue operating effectively amid evolving market and economic conditions.
• We are a full-suite provider offering integrated crude, gas and water services to the Partnership's customers in the Permian Basin.
• The Partnership prioritizes safe and reliable operation of its assets to maintain financial stability and growth.
• By reducing our leverage and maintaining a strong financial position, we are better equipped to navigate challenges that may arise.

Industry Context

StockSavvy.ai notes that Delek Logistics Partners is navigating a dynamic midstream energy landscape. The company's focus on diversifying its customer base beyond its sponsor, Delek Holdings, and expanding its service offerings in the Permian Basin, particularly with sour gas solutions, aligns with industry trends towards integrated midstream providers. The company's ability to manage through market volatility via fee-based contracts with minimum volume commitments is a key differentiator in the current environment.

Comparison to Industry Standards

• The company's EBITDA margin for Q2 2026 was approximately 31.2% ($120.0M / $384.8M), which is competitive within the midstream sector, though specific peer comparisons would require detailed analysis of similar companies' latest filings.
• The increase in net revenues by 56.2% year-over-year in Q2 2026 is a strong indicator of growth, outpacing many peers who may be experiencing more modest revenue increases or declines.
• The company's debt-to-EBITDA ratio, while not explicitly stated as a single figure, can be inferred from the Total Leverage Ratio covenant (not exceeding 5.25 to 1.00) and the Senior Leverage Ratio (not exceeding 3.75 to 1.00), suggesting a moderate to high leverage profile typical for capital-intensive midstream operators.
• The company's stated focus on expanding gas treating capabilities and sour gas solutions at its Libby complex addresses a specific niche within the midstream sector, potentially offering a competitive advantage against peers focused solely on traditional crude or natural gas gathering.

Legal Proceedings

• In the ordinary conduct of business, the company is subject to lawsuits, investigations, and claims, including environmental claims and employee-related matters. The company does not believe any currently pending legal proceeding will have a material adverse effect on its financial statements.

Related Party Transactions

• The Partnership has long-term, fee-based commercial agreements with Delek Holdings for various services, including crude oil gathering, transportation, and storage.
• An Omnibus Agreement with Delek Holdings governs operational services and reimbursement obligations, including an annual fee for centralized corporate services, which increased to $8.0 million effective July 1, 2026.
• The Partnership sold a Tyler refinery tank for $19.0 million and El Dorado tank and terminal assets for $66.0 million to Delek Holdings.
• Delek Holdings returned 359,372 Partnership common units to the Partnership as consideration for the Tyler Tank Sale.
• The Partnership purchases refined products and bulk biofuels from Delek Holdings.

Stakeholder Impact

• Shareholders: The increase in quarterly cash distribution and strategic debt management are positive indicators for unitholders. However, the overall deficit in partners' equity may be a concern.
• Creditors: The company's compliance with debt covenants and refinancing efforts suggest continued access to capital, though leverage remains a factor.
• Suppliers: Increased costs of materials and other expenses may impact supplier relationships if not managed effectively.
• Customers: The company's focus on expanding services and customer base, particularly in the Permian Basin, aims to strengthen customer relationships.

Next Steps

• Continue to focus on achieving strong cash flow growth.
• Pursue attractive expansion opportunities.
• Engage in mutually beneficial transactions with Delek Holdings.
• Optimize existing assets and expand the third-party customer base.
• Enhance commitment to sustainability and minimize carbon emissions.
• Complete construction of sour gas gathering equipment near the Libby gas processing plant in the second half of 2026.
• Close the El Dorado Terminal Sale to Delek Holdings on October 1, 2027.

Key Dates

Recommendation

The company demonstrates strong revenue and EBITDA growth, coupled with strategic financial maneuvers like debt refinancing and new note issuance, which are positive. However, the decrease in wholesale marketing EBITDA, increased interest expenses, and a growing deficit in partners' equity warrant a cautious approach. The ongoing geopolitical risks and market volatility also add uncertainty. Therefore, a 'hold' recommendation is appropriate, pending further clarity on margin recovery in the wholesale segment and sustained operational performance.

Keywords

midstream energy, gathering and processing, wholesale marketing, storage and transportation, pipeline joint ventures, crude oil, refined products, EBITDA