10-K: Delek Logistics Reports Strong 2025 Growth, Strategic Acquisitions

Delek Logistics Partners, LP achieved significant financial growth in 2025, driven by strategic acquisitions and expansion in the Permian Basin, while increasing its quarterly distribution.

Summary

• Net income increased by $33.8 million in 2025 compared to the prior year, reaching $176.5 million.
• EBITDA increased by $32.9 million in 2025 compared to 2024, totaling $395.7 million.
• Net revenues increased by $72.7 million, or 7.7%, in 2025, reaching $1,013.3 million.
• The Gathering and Processing segment saw a $52.4 million increase in EBITDA, largely due to the H2O Midstream and Gravity acquisitions.
• The Wholesale Marketing and Terminalling segment and the Storage and Transportation segment experienced EBITDA decreases of $28.8 million and $22.5 million, respectively, primarily due to reclassification of certain throughput fees as interest income under sales-type lease accounting.
• The Investments in Pipeline Joint Ventures segment's EBITDA increased by $29.1 million with the acquisition of the W2W Investment.
• Successfully completed a debt issuance of $700 million in 7.375% senior notes due 2033, enhancing liquidity to over $1.0 billion.
• Repurchased 243,075 common units from Delek Holdings for $10.0 million, with $140.0 million of authorization remaining under the Common Unit Repurchase Agreement.
• Declared a quarterly distribution of $1.125 per common unit for Q4 2025, representing a 1.8% increase over the Q4 2024 distribution.
• Acquired Gravity Water Intermediate Holdings LLC for $300.8 million ($209.3 million cash and 2,175,209 common units) on January 2, 2025, expanding water disposal and recycling operations in the Permian Basin and Bakken.
• Delek Permian Gathering purchasing and blending activities were transferred from Delek Holdings to the Partnership on May 1, 2025, which included the cancellation of $58.8 million in existing receivables owed by Delek Holdings.
• Entered into agreements to sell a Tyler refinery tank for $19.0 million and El Dorado tank and terminal assets for $66.0 million to Delek Holdings, with expected closing dates of April 1, 2026, and October 1, 2027, respectively.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong performance, marked by significant growth in net income and EBITDA, strategic acquisitions expanding its Permian Basin presence, and an increased distribution, despite some segment-specific revenue reclassifications and increased interest expenses.

Positives

• Net income increased by $33.8 million to $176.5 million in 2025 compared to 2024.
• EBITDA increased by $32.9 million to $395.7 million in 2025 compared to 2024.
• Net revenues grew by 7.7% to $1,013.3 million in 2025.
• The Gathering and Processing segment's EBITDA increased by $52.4 million, largely driven by the H2O Midstream and Gravity acquisitions.
• Successfully completed a debt offering of $700 million in 2033 Notes, increasing liquidity to over $1.0 billion.
• Increased quarterly distribution to $1.125 per unit for Q4 2025, a 1.8% increase over Q4 2024.
• Strategic acquisitions (Gravity and H2O Midstream) enhanced the Permian Basin footprint and diversified customer and product mix.
• The DPG Dropdown from Delek Holdings included the cancellation of $58.8 million in receivables, improving the balance sheet.
• Maintained strong safety protocols, achieving four years without lost time injuries.
• Reduced the leverage ratio, providing greater financial flexibility for future opportunities.
• Contractual rate adjustments on FERC regulated pipelines and other agreements increased fees by 1.4% to 2.6% effective July 1, 2025.
• Expanding natural gas processing capabilities with a new plant and adding Acid Gas Injection (AGI) and sour gas processing capabilities in the Delaware Basin.

Negatives

• The Wholesale Marketing and Terminalling segment's EBITDA decreased by $28.8 million in 2025.
• The Storage and Transportation segment's EBITDA decreased by $22.5 million in 2025.
• These segment EBITDA decreases were primarily due to the reclassification of certain throughput fees as interest income under sales-type lease accounting.
• Revenue decreased by $12.1 million due to the assignment of the Big Spring Refinery marketing agreement to Delek Holdings in Q3 2024.
• West Texas marketing operations saw a $5.6 million revenue decrease, mainly due to lower average sales prices per gallon for gasoline and diesel, despite increased volumes.
• Interest expense increased by $28.3 million, or 18.8%, in 2025, primarily due to the issuance of the $700 million senior note.
• Income from equity method investments, while increasing overall, was partially offset by a $14.0 million decrease from other joint ventures.
• Net cash used in investing activities increased by $59.6 million in 2025, mainly due to increased purchases of property, plant, and equipment and intangibles.

Risks

• Substantial dependence on Delek Holdings as a primary customer, exposing the Partnership to risks of nonpayment, nonperformance, or underperformance under commercial agreements, and the impact of Delek Holdings' operational or financial difficulties.
• Exposure to global oil market volatility, including geopolitical events (e.g., Russia-Ukraine war, Israel-Hamas conflict) and OPEC+ decisions, which can impact demand, prices, and financial performance.
• Potential adverse effects from regional or global disease outbreaks, leading to financial and operational impacts, business practice modifications, and asset impairments.
• Operational hazards inherent in gathering, transporting, and storing crude oil and products, including business interruptions, mechanical failures, natural disasters, and cyber-attacks, which could result in substantial losses.
• Risks associated with integrating acquired assets and businesses, such as difficulties in assimilation, unforeseen costs, diversion of management attention, and failure to realize anticipated benefits.
• Inadequate insurance coverage or potential default by Delek Holdings on indemnification obligations could lead to significant uninsured losses.
• Physical effects of climate change and severe weather events (e.g., extreme heat, floods, wildfires) pose risks to operations, potentially causing disruptions and increased costs.
• Ability to pay quarterly distributions is dependent on cash flow, which can be affected by economic, financial, competitive, and regulatory factors beyond control.
• Increasingly stringent federal, state, and local environmental and safety laws and regulations could require substantial expenditures for compliance, remediation, and potentially lead to fines or penalties.
• Volatility in wholesale fuel margins and quantity of barrels sold to wholesale customers in West Texas could adversely affect financial condition and results of operations.
• Contract counterparties, including Delek Holdings, may suspend, reduce, or terminate obligations under commercial agreements in certain circumstances, such as force majeure events, impacting minimum volume commitments.
• Limited ability to expand if Delek Holdings' business does not grow as expected, as part of the Partnership's growth strategy relies on its sponsor's expansion.
• Inability to significantly increase or retain third-party revenue due to competition and other factors, potentially increasing dependence on Delek Holdings.
• Construction projects may deviate significantly from original plans and estimates regarding costs, scope, and timelines, adversely affecting financial condition and distributions.
• Shortage of skilled labor or disruptions in the labor force could make it difficult to maintain labor productivity and execute business strategy.
• Inability to obtain needed capital or financing on satisfactory terms to fund asset base expansions could diminish the ability to make quarterly cash distributions or increase financial leverage.
• Interruption or reduction of supply and delivery of refined products to the wholesale marketing business could result in a decline in sales and profitability.
• Exposure to credit risks and nonpayment/nonperformance by key customers and contractual counterparties, including Delek Holdings.
• Restrictions in the revolving credit facility and indentures governing the 2028, 2029, and 2033 Notes could limit financing, business activities, and cash distributions.
• High debt levels ($2,361.9 million as of December 31, 2025) may limit flexibility to obtain financing and pursue other business opportunities.
• Federal or state regulation of pipeline transportation rates could adversely affect operations and cash flows, potentially limiting rate increases or requiring reductions.
• Delek Holdings' level of indebtedness and credit ratings could adversely affect the Partnership's ability to grow, make cash distributions, and impact its credit profile.
• Limited control over joint ventures, which may lead to delayed decisions, disagreements among partners, or negative impacts from disputes or legal proceedings.
• Direct commodity price risk in the wholesale marketing business and interest rate risk on floating-rate debt, with derivative transactions potentially not performing as intended.
• Not owning all land for pipelines and facilities, leading to potential disruptions or increased costs if rights-of-way or leases lapse.
• Inability to obtain or maintain necessary permits and authorizations, or failure to comply with health, safety, environmental, and other laws, could result in substantial costs or business disruptions.
• Reliance on subjective estimates of reserves connected to gathering systems, which if incorrect, could lead to lower-than-anticipated customer volumes.
• Provisions in gathering agreements, such as minimum volume commitments (MVCs) allowing Delek Holdings to credit excess volumes or shortfall payments, could reduce cash flow stability.
• Climate change legislation or regulations restricting greenhouse gas emissions could result in increased operating and capital costs and reduced demand for products and services.
• Changes in product quality specifications or blending requirements could reduce throughput, increase handling costs, or require capital expenditures.
• Increased regulation of hydraulic fracturing could result in reductions or delays in customer production, adversely impacting revenues.
• Increasing attention to environmental, social, and governance (ESG) matters may impact business, financial results, stock price, and access to capital markets.
• Acts of terror or sabotage, threats of war, armed conflict, or war may hinder or prevent business operations, potentially increasing costs and affecting insurance availability.
• Seasonal fluctuations in customer operating results, typically lower in the first and fourth quarters, can affect volumes and throughput.
• Legislative and regulatory measures could adversely affect the ability to use derivative instruments for risk reduction.
• Reliance on information technology, with any material failure, inadequacy, interruption, cyber-attack, or security failure potentially harming the business.
• Adverse effects of inflation on liquidity, business, financial condition, and results of operations by increasing overall cost structure.
• Delek Holdings' and the general partner's failure to retain or attract key talent could interfere with business strategy and operational effectiveness.
• Complex and evolving laws, regulations, and security standards regarding privacy, cybersecurity, and data protection could result in claims, penalties, and increased operating costs.
• An impairment of long-lived assets or goodwill could reduce earnings or negatively impact financial condition and results of operations.
• The Partnership's ongoing study of strategic options could materially impact its strategic direction, business, and results of operations due to uncertainty and potential costs.
• Failure of cost efficiency measures could lead to reduced competitiveness.

Future Outlook

The Partnership expects continued cash flow growth in 2026, driven by the ramp-up of the Libby gas processing plant and the ongoing completion of sour gas gathering and acid gas injection capabilities. The combined crude and water strategy in the Midland Basin and the full-suite strategy in the Delaware Basin will be expanded. Delek Logistics aims to be one of the few midstream companies offering a comprehensive sour gas solution in the Delaware Basin. The Partnership will continue to evaluate and pursue organic growth opportunities and accretive bolt-on acquisitions, while enhancing profitability of existing assets and diversifying its customer base. The company also plans to enhance its commitment to sustainability and minimize carbon emissions through innovative technologies and value-driven investments. Liquid transportation fuels are expected to remain in high demand in the near term, and the Partnership is strategically positioned to sustain positive operating results and cash flows, even in tougher market conditions, due to built-in recessionary protections like minimum volume commitments.

Management Comments

• "We are a full-suite provider offering integrated crude, gas and water services to the Partnership's customers in the Permian basin."
• "We operate in the most prolific part of the Permian Basin and we will continue to take advantage of the multiple growth opportunities we continue to see in our operating regions."
• "While the oil and gas macroeconomic environment continues to be dynamic, we believe the worlds reliance on hydrocarbons will not disappear, and oil and gas will continue to remain relevant in meeting global energy demand."
• "At the same time, the emphasis on environmental responsibility and long-term economic and environmental sustainability is accelerating, with increased demand for transparency evolving out of the environmental, social and governance ('ESG') movement."
• "This strengthened financial position empowers us to advance our strategy of organic growth while also exploring attractive opportunities for bolt-on acquisitions."
• "We are well positioned to manage through an economic downturn because of built-in recessionary protections which include minimum volume commitments on throughput and dedicated acreage agreements."
• "Delek Logistics is set to be one of the few midstream companies to have a comprehensive sour gas solution to enable incremental crude and natural gas production in Delaware Basin."
• "The continued separation from our parent, growth in third-party cash flows, and improved asset quality at the Partnership are opening multiple growth opportunities."

Industry Context

StockSavvy.ai notes that Delek Logistics Partners, LP's strategic focus on expanding its Permian Basin footprint through acquisitions and organic growth aligns with the region's status as one of the most prolific oil and gas producing areas in the U.S. The emphasis on integrated crude, gas, and water services, including sour gas solutions, positions the company to capitalize on the diverse needs of producers in this key basin. The company's acknowledgment of the dynamic oil and gas macroeconomic environment, coupled with its commitment to ESG and sustainability, reflects broader industry trends towards responsible energy production and diversification, even as global reliance on hydrocarbons is expected to persist. The company's efforts to increase third-party revenue also indicate a strategic move towards greater independence from its sponsor, Delek Holdings, a trend observed in other midstream MLPs seeking to reduce concentration risk.

Comparison to Industry Standards

• The Permian Basin is described as one of the most prolific oil and gas producing regions in the U.S., indicating the company operates in a high-growth area compared to less active basins.
• The company aims to be "one of the few midstream companies to have a comprehensive sour gas solution to enable incremental crude and natural gas production in Delaware Basin," suggesting a competitive advantage in a specialized service compared to other midstream providers.
• The strategy to increase third-party revenue and economic separation from Delek Holdings is a common objective for MLPs seeking to diversify their customer base and reduce reliance on a single sponsor, a benchmark for improved financial stability and market perception.

Management Changes

Corporate Governance

Legal Proceedings

• The Partnership is subject to lawsuits, investigations, and claims in the ordinary course of business, including environmental and employee-related matters, but management does not believe any currently pending legal proceeding will have a material adverse effect on financial statements.
• A litigation with the State of Texas Department of Transportation regarding highway expansion impacting Nettleton Station was settled, resulting in the recovery of $8.3 million in 2024 and an additional $4.3 million in 2025.

Related Party Transactions

• Delek Holdings and its affiliates owned 63.3% of the Partnership's common limited partner units as of February 20, 2026.
• Delek Holdings, directly or indirectly, accounted for 49.3% of total revenues for the year ended December 31, 2025.
• Asset Purchase Agreements with Delek Holdings: The Partnership agreed to sell a Tyler refinery tank for $19.0 million and El Dorado tank and terminal assets for $66.0 million to Delek Holdings. Consideration may be a combination of cash and equity, with up to $20.0 million payable through the return of Partnership common units. Delek Holdings will also waive Omnibus fees for an aggregate of $4.0 million during the first two quarters of 2026.
• Delek Permian Gathering (DPG) Dropdown: On May 1, 2025, Delek Holdings transferred its DPG purchasing and blending activities to the Partnership, including the assumption of crude oil purchase obligations and line fill inventory ($6.9 million). Total consideration included the cancellation of $58.8 million in existing receivables owed by Delek Holdings.
• Cash Distributions: The Partnership made cash distributions totaling $238.1 million in 2025, of which $151.0 million was paid to Delek Holdings and its general partner.
• Unit Buyback Authorization: The Partnership may repurchase common units from Delek Holdings for up to $150.0 million through December 31, 2026. In 2025, 243,075 common units were repurchased for $10.0 million.
• Commercial Agreements: The Partnership has numerous long-term, fee-based commercial agreements with Delek Holdings for crude oil gathering, transportation, storage, marketing, terminalling, and offloading services, which include minimum monthly throughput volumes and annual fee adjustments.
• Omnibus Agreement: Governs operational services, reimbursement obligations, a non-compete clause, the Partnership's right of first offer for certain Delek Holdings' logistics assets, and Delek Holdings' option to purchase critical assets from the Partnership upon a change in control or deconsolidation. The annual administrative fee to Delek Holdings increased, phased in from July 1, 2025.
• Other Related Party Transactions: The Partnership purchased $342.2 million in refined products from Delek Holdings and sold $8.7 million in RINs to Delek Holdings during 2025. Delek Holdings paid $0.5 million in construction management and operating fees to the Partnership in 2025.

Next Steps

• Achieve continued cash flow growth in 2026, driven by the ramp-up at the Libby gas processing plant.
• Complete the sour gas gathering and acid gas injection capabilities.
• Expand the combined crude and water strategy in the Midland Basin and the full-suite strategy in the Delaware Basin.
• Evaluate and pursue attractive organic growth opportunities and bolt-on acquisitions.
• Engage in mutually beneficial negotiations with Delek Holdings to create incremental value and increase economic separation.
• Optimize existing assets and expand the customer base by adding incremental throughput volumes, improving operating efficiencies, and increasing system-wide utilization.
• Enhance commitment to sustainability and minimize carbon emissions by pursuing investments in innovative technologies.
• The Tyler Tank Sale to Delek Holdings is expected to close on April 1, 2026.
• The El Dorado Terminal Sale to Delek Holdings is expected to close on October 1, 2027.
• Delek Holdings will waive Omnibus fees for an aggregate of $4.0 million during the first two quarters of 2026.

Key Dates

Recommendation

The filing demonstrates strong financial performance with increased net income and EBITDA, driven by successful strategic acquisitions that expand the company's footprint and diversify its customer base in the high-growth Permian Basin. The increased quarterly distribution signals confidence in future cash flows. While there are some segment-specific revenue reclassifications and increased interest expenses, the overall strategic direction towards economic separation from Delek Holdings and a robust growth profile, coupled with built-in recessionary protections, makes the stock an attractive investment for long-term growth and yield.

Keywords

Midstream, Oil and Gas, Permian Basin, Delaware Basin, Midland Basin, Pipelines, Terminals, Storage, Wholesale Marketing, Water Disposal, Natural Gas Processing, Crude Oil, Refined Products, SEC Filing, 10-K, Delek Logistics, DKL, Energy Infrastructure, MLP, Master Limited Partnership, Acquisitions, Capital Expenditures, Distributions, ESG, Cybersecurity, Related Party Transactions