dkl-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☑

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

March 31, 2024


☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

						For the transition period from to

Commission file number 001-35721

DELEK LOGISTICS PARTNERS, LP

(Exact name of registrant as specified in its charter)


Delaware			45-5379027
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

310 Seven Springs Way, Suite 500	Brentwood	Tennessee	37027
(Address of principal executive offices)			(Zip Code)

(615) 771-6701

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common Units Representing Limited Partnership Interests

DKL

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☑

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

At May 1, 2024, there were 47,216,050 common limited partner units outstanding.

Table of Contents

Delek Logistics Partners, LP

Quarterly Report on Form 10-Q

For the Quarterly Period Ended March 31, 2024


PART I. FINANCIAL INFORMATION				PART II. OTHER INFORMATION

3	Item 1. Financial Statements (unaudited)			38	Item 1. Legal Proceedings
	3	Condensed Consolidated Balance Sheets
	4	Condensed Consolidated Statements of Comprehensive Income		38	Item 1A. Risk Factors
	5	Condensed Consolidated Statements of Partner's Equity (Deficit)
	6	Condensed Consolidated Statements of Cash Flows		38	Item 5. Other Information
	7	Notes to Condensed Consolidated Financial Statements
		7	Note 1 - Organization and Basis of Presentation	39	Item 6. Exhibits
		7	Note 2 - Related Party Transactions
		9	Note 3 - Revenues	40	Signatures
		10	Note 4 - Net Income Per Unit
		10	Note 5 - Long-Term Obligations
		12	Note 6 - Equity
		13	Note 7 - Equity Method Investments
		13	Note 8 - Segments
		14	Note 9 - Commitments and Contingencies
		15	Note 10 - Subsequent Events

16	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	25	Summary of Financial and Other Information
	26	Results of Operations
		26	Consolidated
		28	Gathering and Processing
		30	Wholesale Marketing and Terminalling
		32	Storage and Transportation
		33	Investments in Pipeline Joint Ventures
	33	Liquidity and Capital Resources

36	Item 3. Quantitative and Qualitative Disclosures about Market Risk

37	Item 4. Controls and Procedures


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Financial Statements

Part I - FINANCIAL INFORMATION

Item 1. Financial Statements

Delek Logistics Partners, LP

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except unit and per unit data)


	March 31, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	9,672	$	3,755
Accounts receivable	56,993		41,131
Accounts receivable from related parties	36,588		28,443
Inventory	1,655		2,264
Other current assets	615		676
Total current assets	105,523		76,269
Property, plant and equipment:
Property, plant and equipment	1,336,053		1,320,510
Less: accumulated depreciation	(406,009)		(384,359)
Property, plant and equipment, net	930,044		936,151
Equity method investments	238,185		241,337
Customer relationship intangible, net	176,811		181,336
Marketing contract intangible, net	100,352		102,155
Rights-of-way, net	60,141		59,536
Goodwill	12,203		12,203
Operating lease right-of-use assets	17,641		19,043
Other non-current assets	13,471		14,216
Total assets	$	1,654,371	$	1,642,246
LIABILITIES AND DEFICIT
Current liabilities:
Accounts payable	$	26,313	$	26,290

Current portion of long-term debt	—		30,000
Interest payable	12,710		5,805
Excise and other taxes payable	7,638		10,321
Current portion of operating lease liabilities	6,442		6,697
Accrued expenses and other current liabilities	4,098		11,477
Total current liabilities	57,201		90,590
Non-current liabilities:
Long-term debt, net of current portion	1,601,226		1,673,789
Operating lease liabilities, net of current portion	7,367		8,335
Asset retirement obligations	10,225		10,038
Other non-current liabilities	20,819		21,363
Total non-current liabilities	1,639,637		1,713,525
Equity (Deficit):
Common unitholders - public; 12,898,253 units issued and outstanding at March 31, 2024 (9,299,763 at December 31, 2023)	290,051		160,402
Common unitholders - Delek Holdings; 34,311,278 units issued and outstanding at March 31, 2024 (34,311,278 at December 31, 2023)	(332,518)		(322,271)
Total deficit	(42,467)		(161,869)
Total liabilities and deficit	$	1,654,371	$	1,642,246

See accompanying notes to the condensed consolidated financial statements


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Financial Statements

Delek Logistics Partners, LP

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands, except unit and per unit data)


	Three Months Ended March 31,
	2024		2023
Net revenues
Affiliate (1)	$	139,625	$	124,999
Third Party	112,450		118,526
Net revenues	252,075		243,525
Cost of sales:
Cost of materials and other - affiliate (1)	92,882		91,071
Cost of materials and other - third party	30,810		35,025
Operating expenses (excluding depreciation and amortization presented below)	31,695		24,215
Depreciation and amortization	25,167		19,764
Total cost of sales	180,554		170,075
Operating expenses related to wholesale business (excluding depreciation and amortization presented below)	221		525
General and administrative expenses	4,863		7,510
Depreciation and amortization	1,328		1,341
Loss on disposal of assets	567		142
Total operating costs and expenses	187,533		179,593
Operating income	64,542		63,932
Interest expense, net	40,229		32,581
Income from equity method investments	(8,490)		(6,316)
Other income, net	(171)		(2)
Total non-operating expenses, net	31,568		26,263
Income before income tax expense	32,974		37,669
Income tax expense	326		302
Net income attributable to partners	$	32,648	$	37,367
Comprehensive income attributable to partners	$	32,648	$	37,367

Net income per limited partner unit:
Basic	$	0.74	$	0.86
Diluted	$	0.73	$	0.86

Weighted average limited partner units outstanding:
Basic	44,406,356		43,569,963
Diluted	44,422,817		43,585,297

Cash distributions per common limited partner unit	$	1.070	$	1.025

(1) See Note 2 for a description of our material affiliate revenue and purchases transactions.

See accompanying notes to the condensed consolidated financial statements


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Financial Statements

Delek Logistics Partners, LP

Condensed Consolidated Statements of Partners' Equity (Deficit) (Unaudited)

(in thousands)


	Common - Public		Common - Delek Holdings		Total
Balance as of December 31, 2023	$	160,402	$	(322,271)	$	(161,869)
Cash distributions	(10,012)		(36,198)		(46,210)
Net income attributable to partners	7,404		25,244		32,648
Issuance of units	132,327		—		132,327
Other	(70)		707		637
Balance as of March 31, 2024	$	290,051	$	(332,518)	$	(42,467)


	Common - Public		Common - Delek Holdings		Total
Balance as of December 31, 2022	$	172,119	$	(282,819)	$	(110,700)
Cash distributions	(9,442)		(34,998)		(44,440)
Net income attributable to partners	7,940		29,427		37,367
Other	(95)		446		351
Balance as of March 31, 2023	$	170,522	$	(287,944)	$	(117,422)

See accompanying notes to the condensed consolidated financial statements


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Financial Statements

Delek Logistics Partners, LP

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)


	Three Months Ended March 31,
	2024		2023
Cash flows from operating activities:
Net income	$	32,648	$	37,367
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	26,495		21,105
Non-cash lease expense	1,939		2,200
Amortization of marketing contract intangible	1,803		1,803
Amortization of deferred revenue	(572)		(444)
Amortization of deferred financing costs and debt discount	1,250		1,127

Income from equity method investments	(8,490)		(6,316)
Dividends from equity method investments	9,509		9,238
Loss on extinguishment of debt	3,571		—
Other non-cash adjustments	1,492		780
Changes in assets and liabilities:
Accounts receivable	(15,862)		2,165
Inventories and other current assets	670		(1,482)
Accounts payable and other current liabilities	(2,359)		(36,430)
Accounts receivable/payable to related parties	(8,145)		(1,578)
Non-current assets and liabilities, net	(91)		(345)
Net cash provided by operating activities	43,858		29,190
Cash flows from investing activities:

Purchases of property, plant and equipment	(11,255)		(27,837)
Proceeds from sales of property, plant and equipment	42		—
Purchases of intangible assets	(781)		(582)

Distributions from equity method investments	2,133		1,440

Net cash used in investing activities	(9,861)		(26,979)
Cash flows from financing activities:

Distributions to common unitholders - public	(10,012)		(9,442)
Distributions to common unitholders - Delek Holdings	(36,198)		(34,998)
Proceeds from term debt	650,000		—
Payments on term debt	(531,250)		(3,750)
Proceeds from revolving facility	184,900		143,500
Payments on revolving facility	(400,200)		(93,400)
Proceeds from issuance of units	132,327		—


Payments on other financing agreements	(6,214)		—

Deferred financing costs paid	(10,946)		(400)
Other financing activities	(487)		(727)
Net cash (used in) provided by financing activities	(28,080)		783
Net increase in cash and cash equivalents	5,917		2,994
Cash and cash equivalents at the beginning of the period	3,755		7,970
Cash and cash equivalents at the end of the period	$	9,672	$	10,964




Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	28,503	$	20,210

Non-cash investing activities:
Increase in accrued capital expenditures	$	3,910	$	8,258

Non-cash financing activities:

Non-cash lease liability arising from obtaining right of use assets during the period	$	537	$	3,456

See accompanying notes to the condensed consolidated financial statements


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Notes to the Condensed Consolidated Financial Statements (Unaudited)

Delek Logistics Partners, LP

Notes to the Condensed Consolidated Financial Statements (Unaudited)

1. Organization and Basis of Presentation

As used in this report, the terms "Delek Logistics Partners, LP," the "Partnership," "we," "us," or "our" may refer to Delek Logistics Partners, LP, one or more of its consolidated subsidiaries or all of them taken as a whole. The Partnership is a Delaware limited partnership formed in April 2012 by Delek US Holdings, Inc. ("Delek Holdings") and its subsidiary Delek Logistics GP, LLC, our general partner (our "general partner").

The Partnership provides gathering, pipeline and other transportation services primarily for crude oil and natural gas customers, storage, wholesale marketing and terminalling services primarily for intermediate and refined product customers, and water disposal and recycling services through its owned assets and joint ventures located primarily in the Permian Basin (including the Delaware sub-basin) and other select areas in the Gulf Coast region. A majority of our existing assets are both integral to and dependent upon the success of Delek Holdings' refining operations, as many of our assets are contracted exclusively to Delek Holdings in support of its Tyler, Texas (the "Tyler Refinery"), El Dorado, Arkansas (the "El Dorado Refinery") and Big Spring, Texas (the "Big Spring Refinery").

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with United States Generally Accepted Accounting Principles ("GAAP") have been condensed or omitted, although management believes that the disclosures herein are adequate to make the financial information presented not misleading. Our unaudited condensed consolidated financial statements have been prepared in conformity with GAAP applied on a consistent basis with those of the annual audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 (our "Annual Report on Form 10-K"), filed with the U.S. Securities and Exchange Commission (the "SEC") on February 28, 2024 and in accordance with the rules and regulations of the SEC. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2023 included in our Annual Report on Form 10-K.

All adjustments necessary for a fair presentation of the financial position and the results of operations for the interim periods presented have been included. All intercompany accounts and transactions have been eliminated. Such intercompany transactions do not include those with Delek Holdings or our general partner, which are presented as related parties in these accompanying condensed consolidated financial statements. All adjustments are of a normal, recurring nature. Operating results for the interim period should not be viewed as representative of results that may be expected for any future interim period or for the full year.

Accounting Pronouncements Not Yet Adopted

ASU 2023-06, Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative

In October 2023, the FASB issued ASU 2023-06 Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative ("ASU 2023-06"). The main provision of ASU 2023-06 is to clarify or improve disclosure and presentation requirements of a variety of topics, which will allow users to more easily compare entities subject to the SEC's existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the FASB accounting standard codification with the SEC's regulations. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Partnership is currently evaluating the provisions of the amendments and the impact on its future condensed consolidated statements, but does not currently expect adopting this new guidance will have a material impact on its condensed consolidated financial statements and related disclosures.

2. Related Party Transactions

Commercial Agreements

The Partnership has a number of long-term, fee-based commercial agreements with Delek Holdings under which we provide various services, including crude oil gathering and crude oil, intermediate and refined products transportation and storage services, and marketing, terminalling and offloading services to Delek Holdings. Most of these agreements have an initial term ranging from five to ten years, which may be extended for various renewal terms at the option of Delek Holdings. The fees under each agreement are payable to us monthly by Delek Holdings or certain third parties to whom Delek Holdings has assigned certain of its rights and are generally subject to increase or decrease on July 1 of each year, by the amount of any change in various inflation-based indices, however, in no event will the fees be adjusted below the amount initially set forth in the applicable agreement. Under each of these agreements, we are required to maintain the capabilities of our pipelines and terminals, such that Delek Holdings may throughput and/or store, as the case may be, specified volumes of crude oil, intermediate and refined products.

See our Annual Report on Form 10-K for a more complete description of our material commercial agreements and other agreements with Delek Holdings.


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Notes to the Condensed Consolidated Financial Statements (Unaudited)

Other Agreements with Delek Holdings

In addition to the commercial agreements described above, the Partnership has entered into the following agreements with Delek Holdings:

Omnibus Agreement

The Partnership entered into an omnibus agreement with Delek Holdings, our general partner, Delek Logistics Operating, LLC, Lion Oil Company, LLC and certain of the Partnership’s and Delek Holdings' other subsidiaries on November 7, 2012, which has been amended and restated from time to time in connection with acquisitions from Delek Holdings (collectively, as amended and restated, the "Omnibus Agreement"). The Omnibus Agreement governs the provision of certain operational services and reimbursement obligations, among other matters, between the Partnership and Delek Holdings, and obligates us to pay an annual fee of $4.4 million to Delek Holdings for its provision of centralized corporate services to the Partnership.

Pursuant to the terms of the Omnibus Agreement, we are reimbursed by Delek Holdings for certain capital expenditures. These amounts are recorded in other long-term liabilities and are amortized to revenue over the life of the underlying revenue agreement corresponding to the asset. There was no reimbursement by Delek Holdings during the three months ended March 31, 2024 and 2023. Additionally, we are reimbursed or indemnified, as the case may be, for costs incurred in excess of certain amounts related to certain asset failures, pursuant to the terms of the Omnibus Agreement. As of March 31, 2024 and December 31, 2023, there was no receivable from related parties for these matters. These reimbursements are recorded as reductions to operating expenses. There were no reimbursements for these matters in each of the three month periods ended March 31, 2024 and 2023.

Other Transactions

The Partnership manages long-term capital projects on behalf of Delek Holdings pursuant to a construction management and operating agreement (the "DPG Management Agreement") for the construction of gathering systems in the Permian Basin. The majority of the gathering systems have been constructed, however, additional costs pertaining to a pipeline connection that was not acquired by the Partnership continue to be incurred and are still subject to the terms of the DPG Management Agreement. The Partnership is also considered the operator for the project and is responsible for oversight of the project design, procurement and construction of project segments and provides other related services. Pursuant to the terms of the DPG Management Agreement, the Partnership receives a monthly operating services fee and a construction services fee, which includes the Partnership's direct costs of managing the project plus an additional percentage fee of the construction costs of each project segment. The agreement extends through December 2024. Total fees paid to the Partnership were $0.4 million for both the three months ended March 31, 2024 and 2023, which are recorded in affiliate revenue in our condensed consolidated statements of income. Additionally, the Partnership incurs the costs in connection with the construction of the assets and is subsequently reimbursed by Delek Holdings. Amounts reimbursable by Delek Holdings are recorded in accounts receivable from related parties.

Related Party Revolving Credit Facility

On November 6, 2023, the Partnership and certain of its subsidiaries, as guarantors, entered into the Related Party Revolving Credit Facility (as defined below) with Delek Holdings. See Note 5 - Long-Term Obligations for further information.

Summary of Transactions

Revenues from affiliates consist primarily of revenues from gathering, transportation, storage, offloading, Renewable Identification Numbers, wholesale marketing and products terminalling services provided primarily to Delek Holdings based on regulated tariff rates or contractually based fees and product sales. Affiliate operating expenses are primarily comprised of amounts we reimburse Delek Holdings, or our general partner, as the case may be, for the services provided to us under the Partnership Agreement. These expenses could also include reimbursement and indemnification amounts from Delek Holdings, as provided under the Omnibus Agreement. Additionally, the Partnership is required to reimburse Delek Holdings for direct or allocated costs and expenses incurred by Delek Holdings on behalf of the Partnership and for charges Delek Holdings incurred for the management and operation of our logistics assets, including an annual fee for various centralized corporate services, which are included in general and administrative expenses. In addition to these transactions, we purchase refined products and bulk biofuels from Delek Holdings, the costs of which are included in cost of materials and other-affiliate.


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Notes to the Condensed Consolidated Financial Statements (Unaudited)

A summary of revenue, purchases and expense transactions with Delek Holdings and its affiliates are as follows (in thousands):


	Three Months Ended March 31,
	2024		2023
Revenues	$	139,625	$	124,999
Purchases	$	92,882	$	91,071
Operating and maintenance expenses	$	18,218	$	8,823
General and administrative expenses	$	2,999

SEC Form 10-Q filed by Delek Logistics Partners L.P.