DKL — Delek Logistics Partners, LP

Summary of DKL Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Adjusted EBITDA: $132 million, up from $123 million year-over-year.
• Distributable Cash Flow (DCF): $72 million, with a coverage ratio of approximately 1.2x.
• Quarterly Distribution: Increased to $1.13 per unit, marking the 53rd consecutive increase.
• Capital Expenditures: Total spending of approximately $50 million, with $42 million allocated to growth projects.
• Adjusted Leverage Ratio: 4.05x, indicating financial flexibility.

2. Strategic Updates and Business Highlights

• Operational Strength: Strong performance across all segments, particularly in gas, crude, and water services in the Permian Basin.
• Gas Business Development: Successfully drilled the first AGI well, progressing towards a comprehensive sour gas solution.
• Crude Gathering Operations: Continued strength despite challenges from winter storm impacts; volumes are expected to recover.
• Water Business Expansion: Increased footprint following acquisitions, with a focus on innovative solutions for produced water gathering and disposal.
• Third-Party Business Growth: Approximately 80% of run-rate EBITDA expected to come from third parties in 2026.

3. Forward Guidance and Outlook

• Full-Year EBITDA Guidance: Reaffirmed at $520 million to $560 million, reflecting confidence in operational execution and macroeconomic conditions.
• Growth Capital Spending: Planned expenditures of $180 million to $190 million expected to yield an incremental $75 million in EBITDA on a run-rate basis.

4. Bad News, Challenges, or Points of Concern

• Impact of Winter Storm Fern: Approximately $10 million headwind on results due to well shut-ins and colder temperatures, particularly affecting crude and gas operations.
• Slower Ramp-Up: The build-out of the sour gas infrastructure has progressed slower than initially expected, but utilization is anticipated to increase in the coming months.
• Market Pressures: Potential risks associated with commodity pricing and market dynamics, particularly related to Waha gas pricing and its impact on producer activity.

5. Notable Q&A Insights

• Market Environment: Management expressed optimism regarding the macro environment, noting a favorable shift in crude pricing dynamics and increased demand for shale crude due to geopolitical factors.
• Gas Utilization Timeline: Expected to reach capacity in 3 to 6 months, with ongoing efforts to enhance processing capacity.
• Water Business Demand: Anticipated continued growth in the need for water services, with a focus on comprehensive treatment and disposal solutions due to regulatory complexities.
• Waha Pricing Impact: Management acknowledged the importance of Waha pricing and upcoming pipeline capacity expansions, which should alleviate pressure on producers and benefit DKL's operations.

Overall, DKL demonstrated strong financial performance in Q1 2026, with positive growth prospects despite facing some operational challenges. The company remains focused on executing its strategic initiatives while navigating the evolving market landscape.