8-K: Delek Logistics Reports Record Q2 2025 Results

Delek Logistics Partners, LP announced record second quarter 2025 financial results, driven by strong Adjusted EBITDA growth and its 50th consecutive quarterly distribution increase.

Summary

• Reported record second quarter 2025 net income of $44.6 million, or $0.83 per diluted common limited partner unit.
• Adjusted EBITDA reached $120.9 million, an 18% increase year-over-year.
• Net cash provided by operating activities was $107.4 million, up from $87.6 million in Q2 2024.
• Distributable cash flow, as adjusted, was $72.5 million.
• Declared a quarterly cash distribution of $1.115 per common limited partner unit for Q2 2025, marking the 50th consecutive quarterly increase.
• Successfully completed the new Libby 2 gas processing plant, expanding processing capacity in Lea County, New Mexico.
• Executed a $700.0 million debt offering maturing in June 2033, increasing total liquidity to over $1 billion.
• Reaffirmed full-year Adjusted EBITDA guidance of $480 million to $520 million.

Sentiment

Score: 8

Explanation: The filing reports record Adjusted EBITDA, consistent distribution growth, successful project completion, and enhanced liquidity, all of which are strong positive indicators. While net income per unit slightly decreased due to more units outstanding and total revenue saw a dip, the overall tone and key financial metrics point to robust operational performance and strategic execution.

Positives

• Achieved record second quarter 2025 results with Adjusted EBITDA of $120.9 million, an 18% increase compared to $102.4 million in Q2 2024.
• Marked the 50th consecutive quarterly distribution increase, raising it to $1.115 per unit for Q2 2025, a 2.3% increase over Q2 2024.
• Successfully completed the new Libby 2 gas processing plant, providing needed processing capacity expansion for producer customers in Lea County, New Mexico.
• Successfully executed a $700.0 million debt offering maturing in June 2033, enhancing total liquidity to over $1 billion.
• Increased net cash provided by operating activities to $107.4 million in Q2 2025 from $87.6 million in Q2 2024.
• Distributable cash flow, as adjusted, increased to $72.5 million in Q2 2025 from $67.8 million in Q2 2024.
• Reaffirmed confidence in full-year Adjusted EBITDA guidance of $480 million to $520 million due to strong execution.
• Gathering and Processing Segment Adjusted EBITDA increased to $78.0 million in Q2 2025 from $54.7 million in Q2 2024, primarily due to incremental EBITDA from the Gravity and H2O Midstream acquisitions.
• Income from equity method investments increased to $10.5 million in Q2 2025 from $7.9 million in Q2 2024, due to the W2W dropdown.

Negatives

• Net income for Q2 2025 was $44.6 million ($0.83 per diluted common limited partner unit), a decrease in per unit earnings from $41.1 million ($0.87 per diluted common limited partner unit) in Q2 2024, primarily due to an increase in diluted common limited partner units outstanding (53,473,271 in Q2 2025 vs. 47,232,507 in Q2 2024).
• Total net revenues decreased to $246.35 million in Q2 2025 from $264.63 million in Q2 2024.
• Wholesale Marketing and Terminalling Segment Adjusted EBITDA decreased to $23.3 million in Q2 2025 from $30.2 million in Q2 2024, primarily due to the assignment of the Big Spring refinery marketing agreement to Delek Holdings.
• Corporate Adjusted EBITDA was a loss of $7.9 million in Q2 2025, compared to a loss of $7.1 million in Q2 2024.
• Cash and cash equivalents at June 30, 2025, were $1.4 million, a decrease from $5.38 million at December 31, 2024.
• Leverage ratio was approximately 4.32x as of June 30, 2025.

Risks

• A significant portion of revenue is derived from Delek US, thereby subjecting the Partnership to Delek US's business risks.
• Exposure to political or regulatory developments, including tariffs, taxes, and changes in governmental policies relating to crude oil, natural gas, refined products, or renewables.
• Risks and costs relating to the age and operational hazards of assets including, without limitation, costs, penalties, regulatory or legal actions and other effects related to releases, spills and other hazards inherent in transporting and storing crude oil and intermediate and finished petroleum products.
• Ability to realize cost reductions.
• The impact of adverse market conditions affecting the utilization of assets and business performance, including margins generated by its wholesale fuel business.
• Risks and uncertainties with respect to the possible benefits of the Delaware Gathering, Permian Gathering, H2O Midstream and Gravity transactions, as well as from integration post-closing.
• Risks related to exposure to Permian Basin crude oil, such as supply, pricing, gathering, production and transportation capacity.
• Uncertainties regarding actions by OPEC and non-OPEC oil producing countries impacting crude oil production and pricing.
• An inability of Delek US to grow as expected as it relates to potential future growth opportunities, including dropdowns, and other potential benefits.
• Projected capital expenditures.
• Scheduled turnaround activity.
• The results of investments in joint ventures.

Future Outlook

The Partnership expects to continue increasing its distribution in the future and is increasingly confident in its full-year Adjusted EBITDA guidance of $480 million to $520 million. Plans are underway to add AGI (Acid Gas Injection) and sour gas treating capabilities at the Libby Complex and further expand overall processing capacity. The company aims to strengthen and grow through prudent management of liquidity and leverage.

Management Comments

• "Continued our consistent distribution growth with our 50th consecutive quarterly increase to $1.115/unit."
• "Successfully completed new Libby 2 gas processing plant, providing a much needed processing capacity expansion to our producer customers in Lea County, New Mexico."
• "Successfully executed $700.0 million debt offering maturing in June 2033. This offering improves DKL's total liquidity to over $1 billion. Enhanced liquidity reinforces DKL's growth efforts as an independent company."
• "During the second quarter Delek Logistics continued its strong execution by completing the construction of new Libby 2 plant and several crude & water gathering projects."
• "Along with providing the highest yield compared to its peers in the AMZI, DKL also continues to provide a long runway of growth driven by its advantageous position in the Midland and the Delaware basins."
• "We are proud of the 50th consecutive increase in our distribution and we expect to continue to increase our distribution in the future."
• "Due to our strong execution we are increasingly confident in our full year Adjusted EBITDA guidance of $480mm to $520mm." Avigal Soreq, President of Delek Logistics' general partner.
• "We are also making progress on adding AGI & sour gas treating capabilities at the Libby Complex and look to further expand the overall processing capacity." Avigal Soreq.
• "As I have mentioned in the past, we will continue to strengthen and grow Delek Logistics through a prudent management of liquidity and leverage." Avigal Soreq.

Industry Context

Delek Logistics operates as a midstream energy master limited partnership, primarily in the Permian and Delaware Basins and other Gulf Coast regions. The company provides essential gathering, pipeline, storage, wholesale marketing, terminalling, and water disposal/recycling services for crude oil, natural gas, and refined products. Its strategic position in key basins and its focus on expanding processing capacity align with the ongoing demand for midstream infrastructure in active production areas. The company highlights its 'highest yield compared to its peers in the AMZI,' suggesting a competitive advantage in investor returns within the midstream sector.

Comparison to Industry Standards

• The company states it provides the 'highest yield compared to its peers in the AMZI' (Alerian MLP Infrastructure Index), indicating strong investor returns relative to other publicly traded partnerships in the midstream energy industry. However, specific comparable companies or projects are not detailed in the filing.

Related Party Transactions

• A significant portion of the Partnership's revenue is derived from Delek US Holdings, Inc. ('Delek US'), which owns the general partner interest and a majority limited partner interest.
• On May 1, 2025, Delek Holdings transferred the Delek Permian Gathering (DPG) purchasing and blending business to the Partnership (the 'DPG Dropdown'). This involved the Partnership assuming rights and obligations to purchase crude oil under certain contracts and receiving line fill inventory of $6.9 million. Total consideration included the cancellation of $58.8 million in existing receivables owed to the Partnership by Delek Holdings.
• The assignment of the Big Spring refinery marketing agreement to Delek Holdings contributed to a decrease in Wholesale Marketing and Terminalling Segment Adjusted EBITDA.
• During Q3 2024, Delek Logistics and Delek US renewed and amended certain commercial agreements, leading to some embedded leases being accounted for as sales-type leases.

Stakeholder Impact

• Shareholders/Unitholders: Benefited from the 50th consecutive quarterly distribution increase to $1.115 per unit, indicating consistent returns. The enhanced liquidity and growth efforts aim to create long-term value.
• Producer Customers: The completion of the new Libby 2 gas processing plant provides much-needed processing capacity expansion, supporting their operations in Lea County, New Mexico.
• Creditors: The successful $700.0 million debt offering and improved liquidity position reinforce the company's financial stability and ability to service debt.
• Employees: Strong operational execution and growth projects suggest a stable and expanding business environment.

Next Steps

• Hold a conference call to discuss Q2 2025 results on August 6, 2025, at 11:30 a.m. Central Time.
• Continue to increase quarterly distributions in the future.
• Make progress on adding AGI (Acid Gas Injection) and sour gas treating capabilities at the Libby Complex.
• Further expand overall processing capacity at the Libby Complex.
• Strengthen and grow the Partnership through prudent management of liquidity and leverage.

Key Dates

Recommendation

The company delivered record Adjusted EBITDA, demonstrating robust operational performance and effective integration of recent acquisitions. The 50th consecutive distribution increase highlights a strong commitment to unitholder returns and financial stability. Strategic expansions like the Libby 2 plant and enhanced liquidity from the recent debt offering position the company for continued growth in key basins. While net income per unit saw a slight dip due to increased unit count and some revenue segments declined, the overall financial health, reaffirmed guidance, and strategic initiatives present a compelling investment case for long-term growth and income.

Keywords

Midstream Energy, Logistics, Oil and Gas, Permian Basin, Delaware Basin, Crude Oil Gathering, Natural Gas Processing, Water Disposal, Wholesale Marketing, Terminalling, Pipelines, EBITDA, Distributions, SEC Filing, DKL