dkl-20230630000155279712/312023Q2FALSEP5Yhttp://fasb.org/us-gaap/2023#RevenueFromContractWithCustomerExcludingAssessedTaxhttp://fasb.org/us-gaap/2023#RevenueFromContractWithCustomerExcludingAssessedTaxhttp://fasb.org/us-gaap/2023#RevenueFromContractWithCustomerExcludingAssessedTaxhttp://fasb.org/us-gaap/2023#RevenueFromContractWithCustomerExcludingAssessedTaxP5Y911100015527972023-01-012023-06-3000015527972023-08-01xbrli:shares00015527972023-06-30iso4217:USD00015527972022-12-310001552797dkl:ThirdPartyMember2023-06-300001552797dkl:ThirdPartyMember2022-12-310001552797srt:AffiliatedEntityMember2023-06-300001552797srt:AffiliatedEntityMember2022-12-310001552797us-gaap:CustomerRelationshipsMember2023-06-300001552797us-gaap:CustomerRelationshipsMember2022-12-310001552797dkl:MarketingContractMember2023-06-300001552797dkl:MarketingContractMember2022-12-310001552797us-gaap:LimitedPartnerMemberdkl:CommonPublicMember2023-06-300001552797us-gaap:LimitedPartnerMemberdkl:CommonPublicMember2022-12-310001552797dkl:CommonDelekMemberus-gaap:LimitedPartnerMember2023-06-300001552797dkl:CommonDelekMemberus-gaap:LimitedPartnerMember2022-12-310001552797srt:AffiliatedEntityMember2023-04-012023-06-300001552797srt:AffiliatedEntityMember2022-04-012022-06-300001552797srt:AffiliatedEntityMember2023-01-012023-06-300001552797srt:AffiliatedEntityMember2022-01-012022-06-300001552797dkl:ThirdPartyMember2023-04-012023-06-300001552797dkl:ThirdPartyMember2022-04-012022-06-300001552797dkl:ThirdPartyMember2023-01-012023-06-300001552797dkl:ThirdPartyMember2022-01-012022-06-3000015527972023-04-012023-06-3000015527972022-04-012022-06-3000015527972022-01-012022-06-30iso4217:USDxbrli:shares0001552797us-gaap:LimitedPartnerMemberdkl:CommonPublicMember2023-03-310001552797dkl:CommonDelekMemberus-gaap:LimitedPartnerMember2023-03-3100015527972023-03-310001552797us-gaap:LimitedPartnerMemberdkl:CommonPublicMember2023-04-012023-06-300001552797dkl:CommonDelekMemberus-gaap:LimitedPartnerMember2023-04-012023-06-300001552797us-gaap:LimitedPartnerMemberdkl:CommonPublicMember2022-03-310001552797dkl:CommonDelekMemberus-gaap:LimitedPartnerMember2022-03-3100015527972022-03-310001552797us-gaap:LimitedPartnerMemberdkl:CommonPublicMember2022-04-012022-06-300001552797dkl:CommonDelekMemberus-gaap:LimitedPartnerMember2022-04-012022-06-300001552797us-gaap:LimitedPartnerMemberdkl:CommonPublicMember2022-06-300001552797dkl:CommonDelekMemberus-gaap:LimitedPartnerMember2022-06-3000015527972022-06-300001552797us-gaap:LimitedPartnerMemberdkl:CommonPublicMember2023-01-012023-06-300001552797dkl:CommonDelekMemberus-gaap:LimitedPartnerMember2023-01-012023-06-300001552797us-gaap:LimitedPartnerMemberdkl:CommonPublicMember2021-12-310001552797dkl:CommonDelekMemberus-gaap:LimitedPartnerMember2021-12-3100015527972021-12-310001552797us-gaap:LimitedPartnerMemberdkl:CommonPublicMember2022-01-012022-06-300001552797dkl:CommonDelekMemberus-gaap:LimitedPartnerMember2022-01-012022-06-300001552797dkl:PublicStockOfferingMemberus-gaap:LimitedPartnerMemberdkl:CommonPublicMember2022-01-012022-06-300001552797dkl:PublicStockOfferingMemberdkl:CommonDelekMemberus-gaap:LimitedPartnerMember2022-01-012022-06-300001552797dkl:A3BearDelawareHoldingMember2022-04-08xbrli:pure0001552797dkl:A3BearAcquisitionMember2022-06-012022-06-010001552797dkl:A3BearAcquisitionMember2023-04-012023-06-300001552797dkl:A3BearAcquisitionMember2023-01-012023-06-300001552797dkl:A3BearAcquisitionMember2022-04-012022-06-300001552797dkl:A3BearAcquisitionMember2022-01-012022-06-300001552797dkl:A3BearAcquisitionMember2022-06-010001552797srt:MinimumMembersrt:AffiliatedEntityMember2023-01-012023-06-300001552797srt:MaximumMembersrt:AffiliatedEntityMember2023-01-012023-06-300001552797dkl:OmnibusAgreementMembersrt:AffiliatedEntityMember2012-11-072012-11-070001552797dkl:OmnibusAgreementMemberdkl:DelekUsMemberus-gaap:OtherNoncurrentLiabilitiesMembersrt:AffiliatedEntityMember2023-04-012023-06-300001552797dkl:OmnibusAgreementMemberdkl:DelekUsMemberus-gaap:OtherNoncurrentLiabilitiesMembersrt:AffiliatedEntityMember2023-01-012023-06-300001552797dkl:OmnibusAgreementMemberdkl:DelekUsMembersrt:AffiliatedEntityMember2022-12-310001552797dkl:OmnibusAgreementMemberdkl:DelekUsMembersrt:AffiliatedEntityMember2023-06-300001552797dkl:OmnibusAgreementMemberus-gaap:OperatingExpenseMemberdkl:DelekUsMembersrt:AffiliatedEntityMember2022-01-012022-06-300001552797dkl:OmnibusAgreementMemberus-gaap:OperatingExpenseMemberdkl:DelekUsMembersrt:AffiliatedEntityMember2022-04-012022-06-300001552797dkl:OmnibusAgreementMemberus-gaap:OperatingExpenseMemberdkl:DelekUsMembersrt:AffiliatedEntityMember2023-04-012023-06-300001552797dkl:OmnibusAgreementMemberus-gaap:OperatingExpenseMemberdkl:DelekUsMembersrt:AffiliatedEntityMember2023-01-012023-06-300001552797dkl:DPGManagementAgreementOperatingServiceAndConstructionFeePaidToPartnershipMembersrt:AffiliatedEntityMember2023-04-012023-06-300001552797dkl:DPGManagementAgreementOperatingServiceAndConstructionFeePaidToPartnershipMembersrt:AffiliatedEntityMember2022-04-012022-06-300001552797dkl:DPGManagementAgreementOperatingServiceAndConstructionFeePaidToPartnershipMembersrt:AffiliatedEntityMember2022-01-012022-06-300001552797dkl:DPGManagementAgreementOperatingServiceAndConstructionFeePaidToPartnershipMembersrt:AffiliatedEntityMember2023-01-012023-06-300001552797srt:AffiliatedEntityMember2023-02-092023-02-090001552797srt:AffiliatedEntityMember2023-05-152023-05-150001552797us-gaap:SubsequentEventMembersrt:AffiliatedEntityMember2023-08-142023-08-140001552797srt:AffiliatedEntityMember2022-02-082022-02-080001552797srt:AffiliatedEntityMember2022-05-122022-05-120001552797srt:AffiliatedEntityMember2022-08-112022-08-110001552797us-gaap:LeaseholdsAndLeaseholdImprovementsMember2023-06-300001552797dkl:GatheringAndProcessingMemberdkl:ServiceRevenueThirdPartyMember2023-04-012023-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberdkl:ServiceRevenueThirdPartyMember2023-04-012023-06-300001552797dkl:ServiceRevenueThirdPartyMemberdkl:StorageAndTransportationMember2023-04-012023-06-300001552797dkl:ServiceRevenueThirdPartyMember2023-04-012023-06-300001552797dkl:GatheringAndProcessingMemberdkl:ServiceRevenueAffiliateMember2023-04-012023-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberdkl:ServiceRevenueAffiliateMember2023-04-012023-06-300001552797dkl:ServiceRevenueAffiliateMemberdkl:StorageAndTransportationMember2023-04-012023-06-300001552797dkl:ServiceRevenueAffiliateMember2023-04-012023-06-300001552797dkl:GatheringAndProcessingMemberdkl:ProductRevenueThirdPartyMember2023-04-012023-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberdkl:ProductRevenueThirdPartyMember2023-04-012023-06-300001552797dkl:ProductRevenueThirdPartyMemberdkl:StorageAndTransportationMember2023-04-012023-06-300001552797dkl:ProductRevenueThirdPartyMember2023-04-012023-06-300001552797dkl:GatheringAndProcessingMemberdkl:ProductRevenueAffiliateMember2023-04-012023-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberdkl:ProductRevenueAffiliateMember2023-04-012023-06-300001552797dkl:ProductRevenueAffiliateMemberdkl:StorageAndTransportationMember2023-04-012023-06-300001552797dkl:ProductRevenueAffiliateMember2023-04-012023-06-300001552797dkl:GatheringAndProcessingMembersrt:AffiliatedEntityMember2023-04-012023-06-300001552797dkl:WholesaleMarketingAndTerminallingMembersrt:AffiliatedEntityMember2023-04-012023-06-300001552797srt:AffiliatedEntityMemberdkl:StorageAndTransportationMember2023-04-012023-06-300001552797dkl:GatheringAndProcessingMember2023-04-012023-06-300001552797dkl:WholesaleMarketingAndTerminallingMember2023-04-012023-06-300001552797dkl:StorageAndTransportationMember2023-04-012023-06-300001552797dkl:GatheringAndProcessingMemberdkl:ServiceRevenueThirdPartyMember2022-04-012022-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberdkl:ServiceRevenueThirdPartyMember2022-04-012022-06-300001552797dkl:ServiceRevenueThirdPartyMemberdkl:StorageAndTransportationMember2022-04-012022-06-300001552797dkl:ServiceRevenueThirdPartyMember2022-04-012022-06-300001552797dkl:GatheringAndProcessingMemberdkl:ServiceRevenueAffiliateMember2022-04-012022-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberdkl:ServiceRevenueAffiliateMember2022-04-012022-06-300001552797dkl:ServiceRevenueAffiliateMemberdkl:StorageAndTransportationMember2022-04-012022-06-300001552797dkl:ServiceRevenueAffiliateMember2022-04-012022-06-300001552797dkl:GatheringAndProcessingMemberdkl:ProductRevenueThirdPartyMember2022-04-012022-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberdkl:ProductRevenueThirdPartyMember2022-04-012022-06-300001552797dkl:ProductRevenueThirdPartyMemberdkl:StorageAndTransportationMember2022-04-012022-06-300001552797dkl:ProductRevenueThirdPartyMember2022-04-012022-06-300001552797dkl:GatheringAndProcessingMemberdkl:ProductRevenueAffiliateMember2022-04-012022-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberdkl:ProductRevenueAffiliateMember2022-04-012022-06-300001552797dkl:ProductRevenueAffiliateMemberdkl:StorageAndTransportationMember2022-04-012022-06-300001552797dkl:ProductRevenueAffiliateMember2022-04-012022-06-300001552797dkl:GatheringAndProcessingMembersrt:AffiliatedEntityMember2022-04-012022-06-300001552797dkl:WholesaleMarketingAndTerminallingMembersrt:AffiliatedEntityMember2022-04-012022-06-300001552797srt:AffiliatedEntityMemberdkl:StorageAndTransportationMember2022-04-012022-06-300001552797dkl:GatheringAndProcessingMember2022-04-012022-06-300001552797dkl:WholesaleMarketingAndTerminallingMember2022-04-012022-06-300001552797dkl:StorageAndTransportationMember2022-04-012022-06-300001552797dkl:GatheringAndProcessingMemberdkl:ServiceRevenueThirdPartyMember2023-01-012023-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberdkl:ServiceRevenueThirdPartyMember2023-01-012023-06-300001552797dkl:ServiceRevenueThirdPartyMemberdkl:StorageAndTransportationMember2023-01-012023-06-300001552797dkl:ServiceRevenueThirdPartyMember2023-01-012023-06-300001552797dkl:GatheringAndProcessingMemberdkl:ServiceRevenueAffiliateMember2023-01-012023-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberdkl:ServiceRevenueAffiliateMember2023-01-012023-06-300001552797dkl:ServiceRevenueAffiliateMemberdkl:StorageAndTransportationMember2023-01-012023-06-300001552797dkl:ServiceRevenueAffiliateMember2023-01-012023-06-300001552797dkl:GatheringAndProcessingMemberdkl:ProductRevenueThirdPartyMember2023-01-012023-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberdkl:ProductRevenueThirdPartyMember2023-01-012023-06-300001552797dkl:ProductRevenueThirdPartyMemberdkl:StorageAndTransportationMember2023-01-012023-06-300001552797dkl:ProductRevenueThirdPartyMember2023-01-012023-06-300001552797dkl:GatheringAndProcessingMemberdkl:ProductRevenueAffiliateMember2023-01-012023-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberdkl:ProductRevenueAffiliateMember2023-01-012023-06-300001552797dkl:ProductRevenueAffiliateMemberdkl:StorageAndTransportationMember2023-01-012023-06-300001552797dkl:ProductRevenueAffiliateMember2023-01-012023-06-300001552797dkl:GatheringAndProcessingMembersrt:AffiliatedEntityMember2023-01-012023-06-300001552797dkl:WholesaleMarketingAndTerminallingMembersrt:AffiliatedEntityMember2023-01-012023-06-300001552797srt:AffiliatedEntityMemberdkl:StorageAndTransportationMember2023-01-012023-06-300001552797dkl:GatheringAndProcessingMember2023-01-012023-06-300001552797dkl:WholesaleMarketingAndTerminallingMember2023-01-012023-06-300001552797dkl:StorageAndTransportationMember2023-01-012023-06-300001552797dkl:GatheringAndProcessingMemberdkl:ServiceRevenueThirdPartyMember2022-01-012022-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberdkl:ServiceRevenueThirdPartyMember2022-01-012022-06-300001552797dkl:ServiceRevenueThirdPartyMemberdkl:StorageAndTransportationMember2022-01-012022-06-300001552797dkl:ServiceRevenueThirdPartyMember2022-01-012022-06-300001552797dkl:GatheringAndProcessingMemberdkl:ServiceRevenueAffiliateMember2022-01-012022-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberdkl:ServiceRevenueAffiliateMember2022-01-012022-06-300001552797dkl:ServiceRevenueAffiliateMemberdkl:StorageAndTransportationMember2022-01-012022-06-300001552797dkl:ServiceRevenueAffiliateMember2022-01-012022-06-300001552797dkl:GatheringAndProcessingMemberdkl:ProductRevenueThirdPartyMember2022-01-012022-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberdkl:ProductRevenueThirdPartyMember2022-01-012022-06-300001552797dkl:ProductRevenueThirdPartyMemberdkl:StorageAndTransportationMember2022-01-012022-06-300001552797dkl:ProductRevenueThirdPartyMember2022-01-012022-06-300001552797dkl:GatheringAndProcessingMemberdkl:ProductRevenueAffiliateMember2022-01-012022-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberdkl:ProductRevenueAffiliateMember2022-01-012022-06-300001552797dkl:ProductRevenueAffiliateMemberdkl:StorageAndTransportationMember2022-01-012022-06-300001552797dkl:ProductRevenueAffiliateMember2022-01-012022-06-300001552797dkl:GatheringAndProcessingMembersrt:AffiliatedEntityMember2022-01-012022-06-300001552797dkl:WholesaleMarketingAndTerminallingMembersrt:AffiliatedEntityMember2022-01-012022-06-300001552797srt:AffiliatedEntityMemberdkl:StorageAndTransportationMember2022-01-012022-06-300001552797dkl:GatheringAndProcessingMember2022-01-012022-06-300001552797dkl:WholesaleMarketingAndTerminallingMember2022-01-012022-06-300001552797dkl:StorageAndTransportationMember2022-01-012022-06-3000015527972023-07-012023-06-3000015527972024-01-012023-06-3000015527972025-01-012023-06-3000015527972026-01-012023-06-3000015527972027-01-012023-06-300001552797us-gaap:LimitedPartnerMember2023-04-012023-06-300001552797us-gaap:LimitedPartnerMember2022-04-012022-06-300001552797us-gaap:LimitedPartnerMember2023-01-012023-06-300001552797us-gaap:LimitedPartnerMember2022-01-012022-06-300001552797us-gaap:LimitedPartnerMemberdkl:CommonUnitsMember2023-04-012023-06-300001552797us-gaap:LimitedPartnerMemberdkl:CommonUnitsMember2022-04-012022-06-300001552797us-gaap:LimitedPartnerMemberdkl:CommonUnitsMember2023-01-012023-06-300001552797us-gaap:LimitedPartnerMemberdkl:CommonUnitsMember2022-01-012022-06-300001552797dkl:FifthThirdBankMemberdkl:SecondAmendedandRestatedCreditAgreementMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2023-06-300001552797dkl:FifthThirdBankMemberdkl:SecondAmendedandRestatedCreditAgreementMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2022-12-310001552797us-gaap:LineOfCreditMemberdkl:DKLTermFacilityMember2023-06-300001552797us-gaap:LineOfCreditMemberdkl:DKLTermFacilityMember2022-12-310001552797dkl:A2028NotesMemberus-gaap:SeniorNotesMember2023-06-300001552797dkl:A2028NotesMemberus-gaap:SeniorNotesMember2022-12-310001552797us-gaap:SeniorNotesMemberdkl:A2025NotesMember2023-06-300001552797us-gaap:SeniorNotesMemberdkl:A2025NotesMember2022-12-310001552797dkl:FifthThirdBankMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberdkl:DklRevolverMember2022-10-132022-10-130001552797us-gaap:DebtInstrumentRedemptionPeriodOneMemberus-gaap:RevolvingCreditFacilityMembersrt:ScenarioForecastMemberus-gaap:LineOfCreditMemberdkl:DklRevolverMember2023-01-012023-12-31dkl:payment0001552797us-gaap:RevolvingCreditFacilityMemberus-gaap:DebtInstrumentRedemptionPeriodTwoMemberus-gaap:LineOfCreditMemberdkl:DklRevolverMember2022-10-132022-10-130001552797us-gaap:RevolvingCreditFacilityMemberus-gaap:DebtInstrumentRedemptionPeriodTwoMembersrt:ScenarioForecastMemberus-gaap:LineOfCreditMemberdkl:DklRevolverMember2024-01-012024-12-310001552797us-gaap:SecuredDebtMemberus-gaap:PrimeRateMemberdkl:FifthThirdBankMemberdkl:DKLRevolverDelekLogisticsTermFacilityMemberdkl:DebtInstrumentInterestRatePeriodOneMember2022-10-132022-10-130001552797dkl:DebtInstrumentInterestRatePeriodTwoMemberus-gaap:SecuredDebtMemberus-gaap:PrimeRateMemberdkl:FifthThirdBankMemberdkl:DKLRevolverDelekLogisticsTermFacilityMember2022-10-132022-10-130001552797us-gaap:SecuredDebtMemberdkl:SecuredOvernightFinancingRateSOFRMemberdkl:FifthThirdBankMemberdkl:DKLRevolverDelekLogisticsTermFacilityMemberdkl:DebtInstrumentInterestRatePeriodOneMember2022-10-132022-10-130001552797dkl:DebtInstrumentInterestRatePeriodTwoMemberus-gaap:SecuredDebtMemberdkl:SecuredOvernightFinancingRateSOFRMemberdkl:FifthThirdBankMemberdkl:DKLRevolverDelekLogisticsTermFacilityMember2022-10-132022-10-130001552797us-gaap:SecuredDebtMemberdkl:FifthThirdBankMemberdkl:DKLRevolverDelekLogisticsTermFacilityMemberdkl:DebtInstrumentInterestRatePeriodOneMember2022-10-132022-10-130001552797dkl:DebtInstrumentInterestRatePeriodTwoMemberus-gaap:SecuredDebtMemberdkl:FifthThirdBankMemberdkl:DKLRevolverDelekLogisticsTermFacilityMember2022-10-132022-10-130001552797dkl:DKLRevolverSeniorSecuredRevolvingCommitmentMemberdkl:FifthThirdBankMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2022-10-130001552797dkl:USLCSublimitMemberdkl:FifthThirdBankMemberus-gaap:LetterOfCreditMemberdkl:DklRevolverMember2022-10-130001552797dkl:FifthThirdBankMemberdkl:USSwingLineSublimitMemberus-gaap:LineOfCreditMemberdkl:DklRevolverMember2022-10-130001552797dkl:FifthThirdBankMemberdkl:SecondAmendedandRestatedCreditAgreementMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2023-01-012023-06-300001552797dkl:DKLRevolverSeniorSecuredRevolvingCommitmentMembersrt:MinimumMemberus-gaap:PrimeRateMemberdkl:FifthThirdBankMemberus-gaap:LineOfCreditMember2022-10-132022-10-130001552797dkl:DKLRevolverSeniorSecuredRevolvingCommitmentMemberus-gaap:PrimeRateMemberdkl:FifthThirdBankMembersrt:MaximumMemberus-gaap:LineOfCreditMember2022-10-132022-10-130001552797dkl:DKLRevolverSeniorSecuredRevolvingCommitmentMemberdkl:SecuredOvernightFinancingRateSOFRMemberdkl:FifthThirdBankMemberus-gaap:LineOfCreditMemberdkl:DebtInstrumentInterestRatePeriodOneMember2022-10-132022-10-130001552797dkl:DKLRevolverSeniorSecuredRevolvingCommitmentMemberdkl:DebtInstrumentInterestRatePeriodTwoMemberdkl:SecuredOvernightFinancingRateSOFRMemberdkl:FifthThirdBankMemberus-gaap:LineOfCreditMember2022-10-132022-10-130001552797dkl:DKLRevolverSeniorSecuredRevolvingCommitmentMembersrt:MinimumMemberdkl:FifthThirdBankMemberus-gaap:LineOfCreditMemberdkl:TotalLeverageRatioInterestRateMember2022-10-132022-10-130001552797dkl:DKLRevolverSeniorSecuredRevolvingCommitmentMemberdkl:FifthThirdBankMembersrt:MaximumMemberus-gaap:LineOfCreditMemberdkl:TotalLeverageRatioInterestRateMember2022-10-132022-10-130001552797dkl:FifthThirdBankMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2023-06-300001552797dkl:FifthThirdBankMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2022-12-310001552797dkl:A2028NotesMemberus-gaap:SeniorNotesMember2021-05-240001552797dkl:A2028NotesMemberus-gaap:SeniorNotesMemberus-gaap:FairValueInputsLevel1Member2023-06-300001552797dkl:A2028NotesMemberus-gaap:SeniorNotesMemberus-gaap:FairValueInputsLevel1Member2022-12-310001552797us-gaap:SeniorNotesMemberdkl:A2025NotesMember2017-05-230001552797dkl:A2025NotesMemberus-gaap:SeniorNotesMemberus-gaap:FairValueInputsLevel1Member2023-06-300001552797dkl:A2025NotesMemberus-gaap:SeniorNotesMemberus-gaap:FairValueInputsLevel1Member2022-12-310001552797dkl:DelekUSHoldingsInc.Member2023-01-012023-06-3000015527972022-01-012022-03-3100015527972023-01-012023-03-310001552797dkl:RedRiverMember2023-06-300001552797dkl:RedRiverMember2023-01-012023-06-30utr:bblutr:D0001552797dkl:RedRiverMember2023-06-300001552797dkl:RedRiverMember2022-12-310001552797dkl:RedRiverMember2023-04-012023-06-300001552797dkl:RedRiverMember2022-04-012022-06-300001552797dkl:RedRiverMember2023-01-012023-06-300001552797dkl:RedRiverMember2022-01-012022-06-300001552797dkl:CPLLCAndRangelandEnergyMember2023-01-012023-06-30dkl:jointVenture0001552797dkl:CPLLCMember2023-06-300001552797dkl:AndeavorLogisticsMember2023-06-300001552797dkl:JointVenturesMember2023-06-300001552797dkl:JointVenturesMember2022-12-310001552797dkl:JointVenturesMember2023-04-012023-06-300001552797dkl:JointVenturesMember2022-04-012022-06-300001552797dkl:JointVenturesMember2023-01-012023-06-300001552797dkl:JointVenturesMember2022-01-012022-06-300001552797dkl:RedRiverMember2022-12-310001552797dkl:CPLLCMember2022-12-310001552797dkl:AndeavorLogisticsMember2022-12-31dkl:segment0001552797dkl:GatheringAndProcessingMemberus-gaap:OperatingSegmentsMembersrt:AffiliatedEntityMember2023-04-012023-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberus-gaap:OperatingSegmentsMembersrt:AffiliatedEntityMember2023-04-012023-06-300001552797us-gaap:OperatingSegmentsMembersrt:AffiliatedEntityMemberdkl:StorageAndTransportationMember2023-04-012023-06-300001552797us-gaap:OperatingSegmentsMemberdkl:InvestmentsInPipelineJointVenturesMembersrt:AffiliatedEntityMember2023-04-012023-06-300001552797us-gaap:CorporateNonSegmentMembersrt:AffiliatedEntityMember2023-04-012023-06-300001552797dkl:GatheringAndProcessingMemberdkl:ThirdPartyMemberus-gaap:OperatingSegmentsMember2023-04-012023-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberdkl:ThirdPartyMemberus-gaap:OperatingSegmentsMember2023-04-012023-06-300001552797dkl:ThirdPartyMemberus-gaap:OperatingSegmentsMemberdkl:StorageAndTransportationMember2023-04-012023-06-300001552797dkl:ThirdPartyMemberus-gaap:OperatingSegmentsMemberdkl:InvestmentsInPipelineJointVenturesMember2023-04-012023-06-300001552797us-gaap:CorporateNonSegmentMemberdkl:ThirdPartyMember2023-04-012023-06-300001552797dkl:GatheringAndProcessingMemberus-gaap:OperatingSegmentsMember2023-04-012023-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberus-gaap:OperatingSegmentsMember2023-04-012023-06-300001552797us-gaap:OperatingSegmentsMemberdkl:StorageAndTransportationMember2023-04-012023-06-300001552797us-gaap:OperatingSegmentsMemberdkl:InvestmentsInPipelineJointVenturesMember2023-04-012023-06-300001552797us-gaap:CorporateNonSegmentMember2023-04-012023-06-300001552797dkl:GatheringAndProcessingMemberus-gaap:OperatingSegmentsMemberdkl:SupplyContractsMember2023-04-012023-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberus-gaap:OperatingSegmentsMemberdkl:SupplyContractsMember2023-04-012023-06-300001552797us-gaap:OperatingSegmentsMemberdkl:SupplyContractsMemberdkl:StorageAndTransportationMember2023-04-012023-06-300001552797us-gaap:OperatingSegmentsMemberdkl:InvestmentsInPipelineJointVenturesMemberdkl:SupplyContractsMember2023-04-012023-06-300001552797us-gaap:CorporateNonSegmentMemberdkl:SupplyContractsMember2023-04-012023-06-300001552797dkl:SupplyContractsMember2023-04-012023-06-300001552797dkl:GatheringAndProcessingMemberus-gaap:OperatingSegmentsMembersrt:AffiliatedEntityMember2022-04-012022-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberus-gaap:OperatingSegmentsMembersrt:AffiliatedEntityMember2022-04-012022-06-300001552797us-gaap:OperatingSegmentsMembersrt:AffiliatedEntityMemberdkl:StorageAndTransportationMember2022-04-012022-06-300001552797us-gaap:OperatingSegmentsMemberdkl:InvestmentsInPipelineJointVenturesMembersrt:AffiliatedEntityMember2022-04-012022-06-300001552797us-gaap:CorporateNonSegmentMembersrt:AffiliatedEntityMember2022-04-012022-06-300001552797dkl:GatheringAndProcessingMemberdkl:ThirdPartyMemberus-gaap:OperatingSegmentsMember2022-04-012022-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberdkl:ThirdPartyMemberus-gaap:OperatingSegmentsMember2022-04-012022-06-300001552797dkl:ThirdPartyMemberus-gaap:OperatingSegmentsMemberdkl:StorageAndTransportationMember2022-04-012022-06-300001552797dkl:ThirdPartyMemberus-gaap:OperatingSegmentsMemberdkl:InvestmentsInPipelineJointVenturesMember2022-04-012022-06-300001552797us-gaap:CorporateNonSegmentMemberdkl:ThirdPartyMember2022-04-012022-06-300001552797dkl:GatheringAndProcessingMemberus-gaap:OperatingSegmentsMember2022-04-012022-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberus-gaap:OperatingSegmentsMember2022-04-012022-06-300001552797us-gaap:OperatingSegmentsMemberdkl:StorageAndTransportationMember2022-04-012022-06-300001552797us-gaap:OperatingSegmentsMemberdkl:InvestmentsInPipelineJointVenturesMember2022-04-012022-06-300001552797us-gaap:CorporateNonSegmentMember2022-04-012022-06-300001552797dkl:GatheringAndProcessingMemberus-gaap:OperatingSegmentsMemberdkl:SupplyContractsMember2022-04-012022-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberus-gaap:OperatingSegmentsMemberdkl:SupplyContractsMember2022-04-012022-06-300001552797us-gaap:OperatingSegmentsMemberdkl:SupplyContractsMemberdkl:StorageAndTransportationMember2022-04-012022-06-300001552797us-gaap:OperatingSegmentsMemberdkl:InvestmentsInPipelineJointVenturesMemberdkl:SupplyContractsMember2022-04-012022-06-300001552797us-gaap:CorporateNonSegmentMemberdkl:SupplyContractsMember2022-04-012022-06-300001552797dkl:SupplyContractsMember2022-04-012022-06-300001552797dkl:GatheringAndProcessingMemberus-gaap:OperatingSegmentsMembersrt:AffiliatedEntityMember2023-01-012023-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberus-gaap:OperatingSegmentsMembersrt:AffiliatedEntityMember2023-01-012023-06-300001552797us-gaap:OperatingSegmentsMembersrt:AffiliatedEntityMemberdkl:StorageAndTransportationMember2023-01-012023-06-300001552797us-gaap:OperatingSegmentsMemberdkl:InvestmentsInPipelineJointVenturesMembersrt:AffiliatedEntityMember2023-01-012023-06-300001552797us-gaap:CorporateNonSegmentMembersrt:AffiliatedEntityMember2023-01-012023-06-300001552797dkl:GatheringAndProcessingMemberdkl:ThirdPartyMemberus-gaap:OperatingSegmentsMember2023-01-012023-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberdkl:ThirdPartyMemberus-gaap:OperatingSegmentsMember2023-01-012023-06-300001552797dkl:ThirdPartyMemberus-gaap:OperatingSegmentsMemberdkl:StorageAndTransportationMember2023-01-012023-06-300001552797dkl:ThirdPartyMemberus-gaap:OperatingSegmentsMemberdkl:InvestmentsInPipelineJointVenturesMember2023-01-012023-06-300001552797us-gaap:CorporateNonSegmentMemberdkl:ThirdPartyMember2023-01-012023-06-300001552797dkl:GatheringAndProcessingMemberus-gaap:OperatingSegmentsMember2023-01-012023-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberus-gaap:OperatingSegmentsMember2023-01-012023-06-300001552797us-gaap:OperatingSegmentsMemberdkl:StorageAndTransportationMember2023-01-012023-06-300001552797us-gaap:OperatingSegmentsMemberdkl:InvestmentsInPipelineJointVenturesMember2023-01-012023-06-300001552797us-gaap:CorporateNonSegmentMember2023-01-012023-06-300001552797dkl:GatheringAndProcessingMemberus-gaap:OperatingSegmentsMemberdkl:SupplyContractsMember2023-01-012023-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberus-gaap:OperatingSegmentsMemberdkl:SupplyContractsMember2023-01-012023-06-300001552797us-gaap:OperatingSegmentsMemberdkl:SupplyContractsMemberdkl:StorageAndTransportationMember2023-01-012023-06-300001552797us-gaap:OperatingSegmentsMemberdkl:InvestmentsInPipelineJointVenturesMemberdkl:SupplyContractsMember2023-01-012023-06-300001552797us-gaap:CorporateNonSegmentMemberdkl:SupplyContractsMember2023-01-012023-06-300001552797dkl:SupplyContractsMember2023-01-012023-06-300001552797dkl:GatheringAndProcessingMemberus-gaap:OperatingSegmentsMembersrt:AffiliatedEntityMember2022-01-012022-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberus-gaap:OperatingSegmentsMembersrt:AffiliatedEntityMember2022-01-012022-06-300001552797us-gaap:OperatingSegmentsMembersrt:AffiliatedEntityMemberdkl:StorageAndTransportationMember2022-01-012022-06-300001552797us-gaap:OperatingSegmentsMemberdkl:InvestmentsInPipelineJointVenturesMembersrt:AffiliatedEntityMember2022-01-012022-06-300001552797us-gaap:CorporateNonSegmentMembersrt:AffiliatedEntityMember2022-01-012022-06-300001552797dkl:GatheringAndProcessingMemberdkl:ThirdPartyMemberus-gaap:OperatingSegmentsMember2022-01-012022-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberdkl:ThirdPartyMemberus-gaap:OperatingSegmentsMember2022-01-012022-06-300001552797dkl:ThirdPartyMemberus-gaap:OperatingSegmentsMemberdkl:StorageAndTransportationMember2022-01-012022-06-300001552797dkl:ThirdPartyMemberus-gaap:OperatingSegmentsMemberdkl:InvestmentsInPipelineJointVenturesMember2022-01-012022-06-300001552797us-gaap:CorporateNonSegmentMemberdkl:ThirdPartyMember2022-01-012022-06-300001552797dkl:GatheringAndProcessingMemberus-gaap:OperatingSegmentsMember2022-01-012022-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberus-gaap:OperatingSegmentsMember2022-01-012022-06-300001552797us-gaap:OperatingSegmentsMemberdkl:StorageAndTransportationMember2022-01-012022-06-300001552797us-gaap:OperatingSegmentsMemberdkl:InvestmentsInPipelineJointVenturesMember2022-01-012022-06-300001552797us-gaap:CorporateNonSegmentMember2022-01-012022-06-300001552797dkl:GatheringAndProcessingMemberus-gaap:OperatingSegmentsMemberdkl:SupplyContractsMember2022-01-012022-06-300001552797dkl:WholesaleMarketingAndTerminallingMemberus-gaap:OperatingSegmentsMemberdkl:SupplyContractsMember2022-01-012022-06-300001552797us-gaap:OperatingSegmentsMemberdkl:SupplyContractsMemberdkl:StorageAndTransportationMember2022-01-012022-06-300001552797us-gaap:OperatingSegmentsMemberdkl:InvestmentsInPipelineJointVenturesMemberdkl:SupplyContractsMember2022-01-012022-06-300001552797us-gaap:CorporateNonSegmentMemberdkl:SupplyContractsMember2022-01-012022-06-300001552797dkl:SupplyContractsMember2022-01-012022-06-300001552797us-gaap:SubsequentEventMember2023-07-262023-07-26
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 | 6/30/2023 | |
or
| | | | | | | | |
☐ | | 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 August 1, 2023, there were 43,586,176 common limited partner units outstanding.
Delek Logistics Partners, LP
Quarterly Report on Form 10-Q
For the Quarterly Period Ended June 30, 2023

| | |
2 |  |
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)
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 7,715 | | | $ | 7,970 | |
Accounts receivable | 65,844 | | | 53,314 | |
Accounts receivable from related parties | 7,402 | | | — | |
Inventory | 3,078 | | | 1,483 | |
Other current assets | 1,395 | | | 2,463 | |
Total current assets | 85,434 | | | 65,230 | |
Property, plant and equipment: | | | |
Property, plant and equipment | 1,291,972 | | | 1,240,684 | |
Less: accumulated depreciation | (350,233) | | | (316,680) | |
Property, plant and equipment, net | 941,739 | | | 924,004 | |
Equity method investments | 242,747 | | | 257,022 | |
Customer relationship intangible, net | 190,388 | | | 199,440 | |
Marketing contract intangible, net | 105,760 | | | 109,366 | |
Rights-of-way, net | 57,006 | | | 55,990 | |
Goodwill | 27,051 | | | 27,051 | |
Operating lease right-of-use assets | 22,635 | | | 24,788 | |
Other non-current assets | 19,796 | | | 16,408 | |
Total assets | $ | 1,692,556 | | | $ | 1,679,299 | |
LIABILITIES AND DEFICIT | | | |
Current liabilities: | | | |
Accounts payable | $ | 14,510 | | | $ | 57,403 | |
Accounts payable to related parties | — | | | 6,055 | |
Current portion of long-term debt | 15,000 | | | 15,000 | |
Interest payable | 5,305 | | | 5,308 | |
Excise and other taxes payable | 7,338 | | | 8,230 | |
Current portion of operating lease liabilities | 8,168 | | | 8,020 | |
Accrued expenses and other current liabilities | 6,123 | | | 6,202 | |
Total current liabilities | 56,444 | | | 106,218 | |
Non-current liabilities: | | | |
Long-term debt, net of current portion | 1,729,338 | | | 1,646,567 | |
Operating lease liabilities, net of current portion | 10,478 | | | 12,114 | |
Asset retirement obligations | 9,685 | | | 9,333 | |
Other non-current liabilities | 16,113 | | | 15,767 | |
Total non-current liabilities | 1,765,614 | | | 1,683,781 | |
Equity (Deficit): | | | |
Common unitholders - public; 9,274,898 units issued and outstanding at June 30, 2023 (9,257,305 at December 31, 2022) | 167,760 | | | 172,119 | |
Common unitholders - Delek Holdings; 34,311,278 units issued and outstanding at June 30, 2023 (34,311,278 at December 31, 2022) | (297,262) | | | (282,819) | |
Total deficit | (129,502) | | | (110,700) | |
Total liabilities and deficit | $ | 1,692,556 | | | $ | 1,679,299 | |
See accompanying notes to the condensed consolidated financial statements
| | |
3 |  |
Delek Logistics Partners, LP
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
(In thousands, except unit and per unit data)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2023 | | 2022 | | 2023 | | 2022 | | |
Net revenues | | | | | | | | | |
Affiliate (1) | $ | 132,993 | | | $ | 124,366 | | | $ | 257,992 | | | $ | 248,120 | | | |
Third Party | 113,918 | | | 142,384 | | | 232,444 | | | 225,211 | | | |
Net revenues | 246,911 | | | 266,750 | | | 490,436 | | | 473,331 | | | |
Cost of sales: | | | | | | | | | |
Cost of materials and other - affiliate (1) | 92,042 | | | 143,730 | | | 183,113 | | | 249,615 | | | |
Cost of materials and other - third party | 36,083 | | | 32,630 | | | 71,108 | | | 52,939 | | | |
Operating expenses (excluding depreciation and amortization presented below) | 28,476 | | | 20,284 | | | 52,691 | | | 37,827 | | | |
Depreciation and amortization | 22,469 | | | 12,948 | | | 42,233 | | | 22,809 | | | |
Total cost of sales | 179,070 | | | 209,592 | | | 349,145 | | | 363,190 | | | |
Operating expenses related to wholesale business (excluding depreciation and amortization presented below) | 480 | | | 705 | | | 1,005 | | | 1,269 | | | |
General and administrative expenses | 6,611 | | | 13,773 | | | 14,121 | | | 18,868 | | | |
Depreciation and amortization | 1,258 | | | 474 | | | 2,599 | | | 948 | | | |
(Gain) loss on disposal of assets | (455) | | | — | | | (313) | | | 12 | | | |
Total operating costs and expenses | 186,964 | | | 224,544 | | | 366,557 | | | 384,287 | | | |
Operating income | 59,947 | | | 42,206 | | | 123,879 | | | 89,044 | | | |
Interest expense, net | 35,099 | | | 16,812 | | | 67,680 | | | 31,062 | | | |
Income from equity method investments | (7,285) | | | (7,073) | | | (13,601) | | | (14,099) | | | |
Other income, net | (19) | | | (2) | | | (21) | | | (3) | | | |
Total non-operating expenses, net | 27,795 | | | 9,737 | | | 54,058 | | | 16,960 | | | |
Income before income tax expense | 32,152 | | | 32,469 | | | 69,821 | | | 72,084 | | | |
Income tax expense | 256 | | | 305 | | | 558 | | | 406 | | | |
Net income attributable to partners | $ | 31,896 | | | $ | 32,164 | | | $ | 69,263 | | | $ | 71,678 | | | |
Comprehensive income attributable to partners | $ | 31,896 | | | $ | 32,164 | | | $ | 69,263 | | | $ | 71,678 | | | |
| | | | | | | | | |
Net income per limited partner unit: | | | | | | | | | |
Basic | $ | 0.73 | | | $ | 0.74 | | | $ | 1.59 | | | $ | 1.65 | | | |
Diluted | $ | 0.73 | | | $ | 0.74 | | | $ | 1.59 | | | $ | 1.65 | | | |
| | | | | | | | | |
Weighted average limited partner units outstanding: | | | | | | | | | |
Basic | 43,577,428 | | | 43,475,931 | | | 43,573,716 | | | 43,473,746 | | | |
Diluted | 43,597,282 | | | 43,502,983 | | | 43,591,726 | | | 43,491,796 | | | |
| | | | | | | | | |
Cash distributions per common limited partner unit | $ | 1.035 | | | $ | 0.985 | | | $ | 2.060 | | | $ | 1.965 | | | |
(1) See Note 3 for a description of our material affiliate revenue and purchases transactions.
See accompanying notes to the condensed consolidated financial statements
| | |
4 |  |
Delek Logistics Partners, LP
Condensed Consolidated Statements of Partners' Equity (Deficit) (Unaudited)
(in thousands)
| | | | | | | | | | | | | | | | | |
| Common - Public | | Common - Delek Holdings | | Total |
Balance as of March 31, 2023 | $ | 170,522 | | | $ | (287,944) | | | $ | (117,422) | |
Cash distributions | (9,496) | | | (35,168) | | | (44,664) | |
Net income attributable to partners | 6,783 | | | 25,113 | | | 31,896 | |
Other | (49) | | | 737 | | | 688 | |
Balance as of June 30, 2023 | $ | 167,760 | | | $ | (297,262) | | | $ | (129,502) | |
| | | | | | | | | | | | | | | | | |
| Common - Public | | Common - Delek Holdings | | Total |
Balance as of Balance as of March 31, 2022 | $ | 170,696 | | | $ | (277,218) | | | $ | (106,522) | |
Cash distributions | (8,980) | | | (33,624) | | | (42,604) | |
Net income attributable to partners | 6,785 | | | 25,379 | | | 32,164 | |
Other | 110 | | | 393 | | | 503 | |
Balance as of Balance as of June 30, 2022 | $ | 168,611 | | | $ | (285,070) | | | $ | (116,459) | |
| | | | | | | | | | | | | | | | | |
| Common - Public | | Common - Delek Holdings | | Total |
Balance as of December 31, 2022 | $ | 172,119 | | | $ | (282,819) | | | $ | (110,700) | |
Cash distributions | (18,938) | | | (70,166) | | | (89,104) | |
Net income attributable to partners | 14,723 | | | 54,540 | | | 69,263 | |
Other | (144) | | | 1,183 | | | 1,039 | |
Balance as of June 30, 2023 | $ | 167,760 | | | $ | (297,262) | | | $ | (129,502) | |
| | | | | | | | | | | | | | | | | |
| Common - Public | | Common - Delek Holdings | | Total |
Balance as of December 31, 2021 | $ | 166,067 | | | $ | (270,059) | | | $ | (103,992) | |
Cash distributions | (17,550) | | | (67,454) | | | (85,004) | |
Net income attributable to partners | 15,113 | | | 56,565 | | | 71,678 | |
Delek Holdings unit sale to public | 5,110 | | | (5,110) | | | — | |
Other | (129) | | | 988 | | | 859 | |
Balance as of June 30, 2022 | $ | 168,611 | | | $ | (285,070) | | | $ | (116,459) | |
See accompanying notes to the condensed consolidated financial statements
| | |
5 |  |
Delek Logistics Partners, LP
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
| | | | | | | | | | | | | |
| Six Months Ended June 30, |
| 2023 | | 2022 | | |
Cash flows from operating activities: | | | | | |
Net income | $ | 69,263 | | | $ | 71,678 | | | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation and amortization | 44,832 | | | 23,757 | | | |
Non-cash lease expense | 4,447 | | | 11,484 | | | |
Amortization of customer contract intangible assets | 3,605 | | | 3,606 | | | |
Amortization of deferred revenue | (887) | | | (888) | | | |
Amortization of deferred financing costs and debt discount | 2,316 | | | 1,776 | | | |
Income from equity method investments | (13,601) | | | (14,099) | | | |
Dividends from equity method investments | 17,049 | | | 13,717 | | | |
Other non-cash adjustments | 1,707 | | | 1,118 | | | |
Changes in assets and liabilities: | | | | | |
Accounts receivable | (3,143) | | | 300 | | | |
Inventories and other current assets | (1,664) | | | 263 | | | |
Accounts payable and other current liabilities | (46,245) | | | (2,142) | | | |
Accounts receivable/payable to related parties | (13,457) | | | 27,068 | | | |
Non-current assets and liabilities, net | (420) | | | (4,581) | | | |
Net cash provided by operating activities | 63,802 | | | 133,057 | | | |
Cash flows from investing activities: | | | | | |
| | | | | |
Purchases of property, plant and equipment | (55,421) | | | (35,506) | | | |
Proceeds from sales of property, plant and equipment | 455 | | | 11 | | | |
Purchases of intangible assets | (1,367) | | | (3,797) | | | |
Business Combination, net of cash acquired | — | | | (621,772) | | | |
Distributions from equity method investments | 1,440 | | | 1,737 | | | |
| | | | | |
Net cash used in investing activities | (54,893) | | | (659,327) | | | |
Cash flows from financing activities: | | | | | |
| | | | | |
Distributions to common unitholders - public | (18,938) | | | (17,550) | | | |
Distributions to common unitholders - Delek Holdings | (70,166) | | | (67,454) | | | |
| | | | | |
Proceeds from revolving facility | 238,500 | | | 867,500 | | | |
Payments on revolving facility | (148,000) | | | (244,600) | | | |
Payments on term loan debt | (7,500) | | | — | | | |
| | | | | |
Deferred financing costs paid | (1,603) | | | (701) | | | |
Payments on financing lease liabilities | (1,457) | | | (1,407) | | | |
Net cash (used in) provided by financing activities | (9,164) | | | 535,788 | | | |
Net (decrease) increase in cash and cash equivalents | (255) | | | 9,518 | | | |
Cash and cash equivalents at the beginning of the period | 7,970 | | | 4,292 | | | |
Cash and cash equivalents at the end of the period | 7,715 | | | 13,810 | | | |
| | | | | | | | | | | | | |
| |
| | | | | |
Supplemental disclosures of cash flow information: | | | | | |
Cash paid during the period for: | | | | | |
Interest | $ | 65,367 | | | $ | 28,275 | | | |
Income taxes | $ | 20 | | | $ | 40 | | | |
Non-cash investing activities: | | | | | |
Increase in accrued capital expenditures and other | $ | 53 | | | $ | 306 | | | |
| | | | | |
Non-cash financing activities: | | | | | |
| | | | | |
Non-cash lease liability arising from obtaining right of use assets during the period | $ | 3,456 | | | $ | 8,433 | | | |
See accompanying notes to the condensed consolidated financial statements
| | |
6 |  |
Notes to 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"). On April 8, 2022, DKL Delaware Gathering, LLC, a subsidiary of the Partnership, entered into a Membership Interest Purchase Agreement (the “3 Bear Purchase Agreement”) with 3 Bear Energy – New Mexico LLC (the “Seller”) to purchase 100% of the limited liability company interests in 3 Bear Delaware Holding – NM, LLC (“3 Bear”) (subsequently renamed to DKL Delaware Gathering - NM, LLC ("Delaware Gathering")), related to the Seller’s crude oil and natural gas gathering, processing and transportation businesses, as well as water disposal and recycling operations, in the Delaware Basin of New Mexico (the “Delaware Gathering Acquisition”). The Delaware Gathering Acquisition was completed on June 1, 2022 (the "Acquisition Date").
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 substantial 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, El Dorado and Big Spring refineries.
Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with United States ("U.S.") 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, 2022 (our "Annual Report on Form 10-K"), filed with the U.S. Securities and Exchange Commission (the "SEC") on March 1, 2023 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, 2022 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.
Reclassifications
Certain prior period amounts have been reclassified in order to conform to the current period presentation.
2. Acquisitions
Delaware Gathering (formerly 3 Bear)
We completed the Delaware Gathering Acquisition on June 1, 2022, in which we acquired crude oil and natural gas gathering, processing, and transportation and storage operations, as well as water disposal and recycling operations, located in the Delaware Basin of New Mexico. The purchase price for the Delaware Gathering Acquisition was $628.3 million. The Delaware Gathering Acquisition was financed through a combination of cash on hand and borrowings under the DKL Credit Facility.
For the three and six months ended June 30, 2023, we incurred no incremental direct acquisition and integration costs. For the three and six months ended June 30, 2022, we incurred $6.2 million and $6.4 million, respectively, in incremental direct acquisition and integration costs that principally consist of legal, advisory and other professional fees. Such costs are included in general and administrative expenses in the accompanying condensed consolidated statements of income for these periods.
The Delaware Gathering Acquisition was accounted for using the acquisition method of accounting, whereby the purchase price was allocated to the tangible and intangible assets acquired and the liabilities assumed based on their fair values. The excess of the consideration paid over the fair value of the net assets acquired was recorded as goodwill.
| | |
7 |  |
Notes to Condensed Consolidated Financial Statements (Unaudited)
Determination of Purchase Price
The table below presents the purchase price (in thousands):
| | | | | |
Base purchase price: | $ | 624,700 | |
Add: closing net working capital (as defined in the 3 Bear Purchase Agreement) | 3,600 | |
Less: closing indebtedness (as defined in the 3 Bear Purchase Agreement) | (80,618) | |
Cash paid for the adjusted purchase price | 547,682 | |
Cash paid to payoff 3 Bear credit agreement (as defined in the 3 Bear Purchase Agreement) | 80,618 | |
Purchase price | $ | 628,300 | |
Purchase Price Allocation
The following table summarizes the final fair values of assets acquired and liabilities assumed in the Delaware Gathering Acquisition as of June 1, 2022 (in thousands):
| | | | | | | | |
Assets acquired: | | |
Cash and cash equivalents | | $ | 2,678 | |
Accounts receivables, net | | 28,859 | |
Inventories | | 1,836 | |
Other current assets | | 986 | |
Property, plant and equipment | | 382,799 | |
Operating lease right-of-use assets | | 7,427 | |
Goodwill | | 14,848 | |
Customer relationship intangible, net | | 210,000 | |
Rights-of-way | | 13,490 | |
Other non-current assets | | 500 |
Total assets acquired | | 663,423 | |
| | |
Liabilities assumed: | | |
Accounts payable | | 8,020 | |
Accrued expenses and other current liabilities | | 22,382 | |
| | |
Current portion of operating lease liabilities | | 1,029 | |
Asset retirement obligations | | 2,261 | |
Operating lease liabilities, net of current portion | | 1,431 | |
Total liabilities assumed | | 35,123 | |
Fair value of net assets acquired | | $ | 628,300 | |
The fair value of property, plant and equipment was based on the combination of the cost and market approaches. Key assumptions in the cost approach include determining the replacement cost by evaluating recently published data and adjusting replacement cost for physical deterioration, functional and economic obsolescence. We used the market approach to measure the value of certain assets through an analysis of recent sales or offerings of comparable properties.
The fair value of customer relationships was based on the income approach. Key assumptions in the income approach include projected revenue attributable to customer relationships, attrition rate, operating margins and discount rates.
The fair values discussed above were based on significant inputs that are not observable in the market and, therefore, represent Level 3 measurements.
The fair values of all other current assets and payables were equivalent to their carrying values due to their short-term nature.
The goodwill recognized in the Delaware Gathering Acquisition is primarily attributable to enhancing our third party revenues, further diversification of our customer and product mix, expanding our footprint into the Delaware basin and bolstering our Environmental, Social and Governance ("ESG") optionality through furthering carbon capture opportunities and greenhouse gas reduction projects currently underway. This goodwill is deductible for income tax purposes. Goodwill related to the Delaware Gathering Acquisition is included in the Gathering and Processing segment.
| | |
8 |  |
Notes to Condensed Consolidated Financial Statements (Unaudited)
Unaudited Pro Forma Financial Information
The following table summarizes the unaudited pro forma financial information of the Partnership assuming the Delaware Gathering Acquisition had occurred on January 1, 2021. The unaudited pro forma financial information has been adjusted to give effect to certain pro forma adjustments that are directly related to the Delaware Gathering Acquisition based on available information and certain assumptions that management believes are factually supportable. The most significant pro forma adjustments relate to (i) incremental interest expense and amortization of deferred financing costs associated with revolving credit facility borrowings incurred in connection with the Delaware Gathering Acquisition, (ii) incremental depreciation resulting from the estimated fair values of acquired property, plant and equipment, (iii) incremental amortization resulting from the estimated fair value of the acquired customer relationship intangibles, (iv) accounting policy alignment and (v) transaction costs. The unaudited pro forma financial information excludes any expected cost savings or other synergies as a result of the Delaware Gathering Acquisition. The unaudited pro forma financial information is not necessarily indicative of the results of operations that would have been achieved had the Delaware Gathering Acquisition been effective as of the date presented, nor is it indicative of future operating results of the combined company. Actual results may differ significantly from the unaudited pro forma financial information.
| | | | | | | | | | | | | |
| | | | | |
(in thousands, except per unit data) | | | Three Months Ended June 30, 2022 | | Six Months Ended June 30, 2022 |
Net sales | | | $ | 314,909 | | | $ | 571,849 | |
Net income attributable to partners | | | $ | 35,511 | | | $ | 65,392 | |
Net income per limited partner unit: | | | | | |
Basic income per unit | | | $ | 0.82 | | | $ | 1.50 | |
Diluted income per unit | | | $ | 0.82 | | | $ | 1.50 | |
3. 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.
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 $4.3 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 and six months ended June 30, 2023. We were reimbursed a nominal amount by Delek Holdings during the three and six months ended June 30, 2022. 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 June 30, 2023 and December 31, 2022, 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 and six month periods ended June 30, 2023 and 2022.
| | |
9 |  |
Notes to Condensed Consolidated Financial Statements (Unaudited)
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 2023. Total fees paid to the Partnership were $0.4 million for both the three months ended June 30, 2023 and 2022, respectively, and $0.8 million for both the six months ended June 30, 2023 and 2022, respectively, 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.
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.
A summary of revenue, purchases and expense transactions with Delek Holdings and its affiliates are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
Revenues | $ | 132,993 | | | $ | 124,366 | | | $ | 257,992 | | | $ | 248,120 | |
Purchases | $ | 92,042 | | | $ | 143,730 | | | $ | 183,113 | | | $ | 249,615 | |
Operating and maintenance expenses | $ | 13,812 | | | $ | 11,787 | | | $ | 31,798 | | | $ | 23,263 | |
General and administrative expenses | $ | 4,618 | | | $ | 3,084 | | | $ | 7,879 | | | $ | 6,152 | |
Quarterly Cash Distributions
| | | | | | | | |
Date of Distribution | | Distributions paid to Delek Holdings (in thousands) |
February 9, 2023 | | $ | 34,998 | |
May 15, 2023 | | $ | 35,169 | |
August 14, 2023 (1) | | $ | 35,512 | |
| | |
Total | | $ | 105,679 | |
| | |
February 8, 2022 | | $ | 33,829 | |
May 12, 2022 | | $ | 33,625 | |
August 11, 2022 | | $ | 33,797 | |
| | |
Total | | $ | 101,251 | |
(1) On July 26, 2023, the board of directors of our general partner declared this quarterly cash distribution based on the available cash as of the date of determination.
| | |
10 |  |
Notes to Condensed Consolidated Financial Statements (Unaudited)
4. Revenues
We generate revenue by charging fees for gathering, transporting, offloading and storing crude oil; for storing intermediate products and feed stocks; for distributing, transporting and storing refined products; for marketing refined products output of Delek Holdings' Tyler and Big Spring refineries; and for wholesale marketing in the West Texas area. A significant portion of our revenue is derived from long-term commercial agreements with Delek Holdings, which provide for annual fee adjustments for increases or decreases in the CPI, PPI or the FERC index (refer to Note 3 for a more detailed description of these agreements). In addition to the services we provide to Delek Holdings, we also generate substantial revenue from crude oil, intermediate and refined products transportation services for, and terminalling and marketing services to, third parties primarily in Texas, New Mexico, Tennessee and Arkansas. Certain of these services are provided pursuant to contractual agreements with third parties. Payment terms require customers to pay shortly after delivery and do not contain significant financing components.
The majority of our commercial agreements with Delek Holdings meet the definition of a lease because: (1) performance of the contracts is dependent on specified property, plant or equipment and (2) it is remote that one or more parties other than Delek Holdings will take more than a minor amount of the output associated with the specified property, plant or equipment. As part of our adoption of ASC 842, Leases ("ASC 842"), we applied the permitted practical expedient to not separate lease and non-lease components under the predominance principle to designated asset classes associated with the provision of logistics services. We have determined that the predominant component of the related agreements currently in effect is the lease component. Therefore, the combined component is accounted for under the applicable lease accounting guidance. Of our $941.7 million net property, plant, and equipment balance as of June 30, 2023, $339.7 million is subject to operating leases under our commercial agreements. These agreements do not include options for the lessee to purchase our leased assets, nor do they include any material residual value guarantees or material restrictive covenants.
The following table represents a disaggregation of revenue for the gathering and processing, wholesale marketing and terminalling, and storage and transportation segments for the periods indicated (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2023 |
| Gathering and Processing | | Wholesale Marketing and Terminalling | | Storage and Transportation | | | | | | Consolidated |
Service Revenue - Third Party | $ | 17,270 | | | $ | — | | | $ | 3,112 | | | | | | | $ | 20,382 | |
Service Revenue - Affiliate (1) | 2,121 | | | 10,886 | | | 14,335 | | | | | | | 27,342 | |
Product Revenue - Third Party | 26,785 | | | 66,751 | | | — | | | | | | | 93,536 | |
Product Revenue - Affiliate | 3,673 | | | 28,892 | | | — | | | | | | | 32,565 | |
Lease Revenue - Affiliate | 43,388 | | | 12,298 | | | 17,400 | | | | | | | 73,086 | |
Total Revenue | $ | 93,237 | | | $ | 118,827 | | | $ | 34,847 | | | | | | | $ | 246,911 | |
| | | | | | | | | | | |
|
| Three Months Ended June 30, 2022 |
| Gathering and Processing | | Wholesale Marketing and Terminalling | | Storage and Transportation | | | | | | Consolidated |
Service Revenue - Third Party | $ | 1,579 | | | $ | — | | | $ | 3,733 | | | | | | | $ | 5,312 | |
Service Revenue - Affiliate (1) | 4,011 | | | 8,242 | | | — | | | | | | | 12,253 | |
Product Revenue - Third Party | 17,642 | | | 119,430 | | | — | | | | | | | 137,072 | |
Product Revenue - Affiliate | 2,963 | | | 26,843 | | | — | | | | | | | 29,806 | |
Lease Revenue - Affiliate | 38,631 | | | 11,025 | | | 32,651 | | | | | | | 82,307 | |
Total Revenue | $ | 64,826 | | | $ | 165,540 | | | $ | 36,384 | | | | | | | $ | 266,750 | |
| | | | | | | | | | | |
|
|
| Six Months Ended June 30, 2023 |
| Gathering and Processing | | Wholesale Marketing and Terminalling | | Storage and Transportation | | | | | | Consolidated |
Service Revenue - Third Party | $ | 30,449 | | | $ | — | | | $ | 3,409 | | | | | | | $ | 33,858 | |
Service Revenue - Affiliate (1) | 6,422 | | | 20,157 | | | 34,944 | | | | | | | 61,523 | |
Product Revenue - Third Party | 53,277 | | | 145,309 | | | — | | | | | | | 198,586 | |
Product Revenue - Affiliate | 8,343 | | | 43,150 | | | — | | | | | | | 51,493 | |
Lease Revenue - Affiliate | 87,178 | | | 22,520 | | | 35,278 | | | | | | | 144,976 | |
Total Revenue | $ | 185,669 | | | $ | 231,136 | | | $ | 73,631 | | | | | | | $ | 490,436 | |
| | |
11 |  |
Notes to Condensed Consolidated Financial Statements (Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2022 |
| Gathering and Processing | | Wholesale Marketing and Terminalling | | Storage and Transportation | | Consolidated |
Service Revenue - Third Party | $ | 3,290 | | | $ | — | | | $ | 6,805 | | | $ | 10,095 | |
Service Revenue - Affiliate (1) | 8,015 | | | 16,787 | | | — | | | 24,802 | |
Product Revenue - Third Party | 17,642 | | | 197,474 | | | — | | | 215,116 | |
Product Revenue - Affiliate | 2,963 | | | 58,589 | | | — | | | 61,552 | |
Lease Revenue - Affiliate | 74,960 | | | 23,466 | | | 63,340 | | | 161,766 | |
Total Revenue | $ | 106,870 | | | $ | 296,316 | | | $ | 70,145 | | | $ | 473,331 | |
(1) Net of $1.8 million of amortization expense for both the three months ended June 30, 2023 and June 30, 2022 and $3.6 million for the six months ended June 30, 2023 and June 30, 2022, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.
As of June 30, 2023, we expect to recognize approximately $1.3 billion in lease revenues related to our unfulfilled performance obligations pertaining to the minimum volume commitments and capacity utilization under the non-cancelable terms of our commercial agreements with Delek Holdings. Most of these agreements have an initial term ranging from five to ten years, which may be extended for various renewal terms. We disclose information about remaining performance obligations that have original expected durations of greater than one year.
Our unfulfilled performance obligations as of June 30, 2023 were as follows (in thousands):
| | | | | |
Remainder of 2023 | $ | 164,244 | |
2024 | 238,217 | |
2025 | 208,949 | |
2026 | 199,857 | |
2027 and thereafter | 477,381 | |
Total expected revenue on remaining performance obligations | $ | 1,288,648 | |
5. Net Income per Unit
Basic net income per unit applicable to limited partners is computed by dividing limited partners' interest in net income by the weighted-average number of outstanding common units. Diluted net income per unit applicable to common limited partners includes the effects of potentially dilutive units on our common units. As of June 30, 2023, the only potentially dilutive units outstanding consist of unvested phantom units.
The table below represents total cash distributions applicable to the period in which the distributions are earned. Payments made to our unitholders are determined in relation to actual distributions declared and are not based on the net income allocations used in the calculation of net income per unit. The calculation of net income per unit is as follows (dollars in thousands, except units and per unit amounts):
| | |
12 |  |
Notes to Condensed Consolidated Financial Statements (Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
Net income attributable to partners | $ | 31,896 | | | $ | 32,164 | | | $ | 69,263 | | | $ | 71,678 | |
Less: Limited partners' distribution | 45,112 | | | 42,832 | | | 89,776 | | | 85,436 | |
Earnings in excess (deficit) of distributions | $ | (13,216) | | | $ | (10,668) | | | $ | (20,513) | | | $ | (13,758) | |
| | | | | | | |
Limited partners' earnings on common units: | | | | | | | |
Distributions | $ | 45,112 | | | $ | 42,832 | | | $ | 89,776 | | | $ | 85,436 | |
Allocation of earnings in excess (deficit) of distributions | (13,216) | | | (10,668) | | | (20,513) | | | (13,758) | |
Total limited partners' earnings on common units | $ | 31,896 | | | $ | 32,164 | | | $ | 69,263 | | | $ | 71,678 | |
| | | | | | | |
Weighted average limited partner units outstanding: | | | | | | | |
Basic | 43,577,428 | | | 43,475,931 | | | 43,573,716 | | | 43,473,746 | |
Diluted | 43,597,282 | | | 43,502,983 | | | 43,591,726 | | | 43,491,796 | |
| | | | | | | |
Net income per limited partner unit: | | | | | | | |
Basic | $ | 0.73 | | | $ | 0.74 | | | $ | 1.59 | | | $ | 1.65 | |
Diluted (1) | $ | 0.73 | | | $ | 0.74 | | | $ | 1.59 | | | $ | 1.65 | |
(1) Outstanding common units totaling 11,180 and 35,383 were excluded from the diluted earnings per unit calculation for the three and six months ended June 30, 2023, respectively. Outstanding common units totaling 2,153 and 1,083 were excluded from the diluted earnings per unit calculation for the three and six months ended June 30, 2022, respectively.
6. Long-Term Obligations
Outstanding borrowings under the Partnership’s debt instruments are as follows (in thousands):
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
DKL Revolving Facility | $ | 811,000 | | | $ | 720,500 | |
DKL Term Facility | 292,500 | | | 300,000 | |
2028 Notes | 400,000 | | | 400,000 | |
2025 Notes | 250,000 | | | 250,000 | |
Principal amount of long-term debt | 1,753,500 | | | 1,670,500 | |
Less: Unamortized discount and deferred financing costs | $ | 9,162 | | | 8,933 | |
Total debt, net of unamortized discount and deferred financing costs | $ | 1,744,338 | | | 1,661,567 | |
Less: Current portion of long-term debt and notes payable | $ | 15,000 | | | 15,000 | |
Long-term debt, net of current portion | $ | 1,729,338 | | | $ | 1,646,567 | |
DKL Credit Facility
The DKL Term Facility principal $300.0 million was drawn on October 13, 2022. This senior secured facility requires four quarterly amortization payments of $3.8 million in 2023 and three quarterly amortization payments of $7.5 million in 2024 with final maturity and principal due on October 13, 2024. At the Partnership's option, borrowings bear interest at either the Adjusted Term Secured Overnight Financing Rate benchmark (“SOFR”) or U.S. dollar prime rate, plus an applicable margin. The applicable margin is 2.50% for the first year of the DKL Term Facility and 3.00% for the second year for U.S. dollar prime rate borrowings. SOFR rate borrowings include a credit spread adjustment of 0.10% to 0.25% plus an applicable margin of 3.50% for the first year and 4.00% for the second year. At June 30, 2023 and December 31, 2022, the weighted average borrowing rate was approximately 8.41% and 7.92%, respectively. The effective interest rate was 9.98% as of June 30, 2023.
The DKL Revolving Facility has a total capacity of $900.0 million, including up to $115.0 million for letters of credit and $25.0 million in swing line loans. This facility has a maturity date of October 13, 2027 and requires a quarterly unused commitment fee based on average commitment usage, currently at 0.50% per annum. Interest is measured at either the U.S. dollar prime rate plus an applicable margin of 1.00% to 2.00% depending on the Partnership’s Total Leverage Ratio (as defined in the DKL Credit Agreement), or a SOFR rate plus a credit spread adjustment of 0.10% or 0.25% and an applicable margin ranging from 2.00% to 3.00% depending on the Partnership’s Total Leverage Ratio. As of June 30, 2023 and December 31, 2022, the weighted average interest rate was 7.57% and 7.55%, respectively. There were no letters of credit outstanding as of June 30, 2023 or December 31, 2022.
| | |
13 |  |
Notes to Condensed Consolidated Financial Statements (Unaudited)
The obligations under the 2022 DKL Credit Facility are secured by first priority liens on substantially all of the Partnership’s and its subsidiaries’ tangible and intangible assets. The carrying values of outstanding borrowings under the 2022 DKL Credit Facility as of June 30, 2023 and December 31, 2022 approximate their fair values.
Our debt facilities contain affirmative and negative covenants and events of default the Partnership considers usual and customary. As of June 30, 2023, we were in compliance with covenants on all of our debt instruments.
2028 Notes
Our 2028 Notes are general unsecured senior obligations comprised of $400.0 million in aggregate principal of 7.125% senior notes maturing June 1, 2028. The 2028 Notes are unconditionally guaranteed jointly and severally on a senior unsecured basis by the Partnership's existing subsidiaries (other than Delek Logistics Finance Corp.) and will be unconditionally guaranteed on the same basis by certain of the Partnership's future subsidiaries. As of June 30, 2023, the effective interest rate was 7.39%. The estimated fair value of the 2028 Notes was $372.1 million and $359.7 million as of June 30, 2023 and December 31, 2022, respectively, measured based upon quoted market prices in an active market, defined as Level 1 in the fair value hierarchy.
2025 Notes
Our 2025 Notes are general unsecured senior obligations comprised of $250.0 million in aggregate principal of 6.75% senior notes maturing on May 15, 2025. The 2025 Notes are unconditionally guaranteed jointly and severally on a senior unsecured basis by the Partnership's existing subsidiaries (other than Delek Logistics Finance Corp.) and will be unconditionally guaranteed on the same basis by certain of the Partnership's future subsidiaries. As of June 30, 2023, the effective interest rate was 7.17%. The estimated fair value of the 2025 Notes was $247.0 million and $243.4 million as of June 30, 2023 and December 31, 2022, respectively, measured based upon quoted market prices in an active market, defined as Level 1 in the fair value hierarchy.
7. Equity
Equity Activity
The table below summarizes the changes in the number of limited partner units outstanding from December 31, 2022 through June 30, 2023.
| | | | | | | | | | | | | | | | | |
| Common - Public | | Common - Delek Holdings (1) | | Total |
Balance at December 31, 2022 | 9,257,305 | | | 34,311,278 | | | 43,568,583 | |
Unit-based compensation awards (2) | 17,593 | | | — | | | 17,593 | |
Balance at June 30, 2023 | 9,274,898 | | | 34,311,278 | | | 43,586,176 | |
(1) As of June 30, 2023, Delek Holdings owned a 78.7% limited partner interest in us.
(2) Unit-based compensation awards are presented net of 5,371 units withheld for taxes as of June 30, 2023.
Our Partnership Agreement sets forth the calculation to be used to determine the amount and priority of available cash distributions that our limited partner unitholders will receive. Our distributions earned with respect to a given period are declared subsequent to quarter end.
The table below summarizes the quarterly distributions related to our quarterly financial results:
| | | | | | | | | | | | | | | | | | |
Quarter Ended | | Total Quarterly Distribution Per Limited Partner Unit | | Total Cash Distribution (in thousands) | | | | |
March 31, 2022 | | $0.980 | | $42,604 | | | | |
June 30, 2022 | | $0.985 | | $42,832 | | | | |
| | | | | | | | |
| | | | | | | | |
March 31, 2023 | | $1.025 | | $44,664 | | | | |
June 30, 2023 | | $1.035 | | $45,112 | | | | |
8. Equity Method Investments
The Partnership owns a 33% membership interest in Red River Pipeline Company LLC ("Red River"), a joint venture operated with Plains Pipeline, L.P. Red River owns a 16-inch crude oil pipeline running from Cushing, Oklahoma to Longview, Texas with capacity of 235,000 bpd.
Summarized financial information for Red River on a 100% basis is shown below (in thousands):
| | |
14 |  |
Notes to Condensed Consolidated Financial Statements (Unaudited)
| | | | | | | | | | | |
| As of June 30, 2023 | | As of December 31, 2022 |
Current Assets | $ | 29,766 | | | $ | 33,365 | |
Non-current Assets | $ | 390,251 | | | $ | 394,267 | |
Current liabilities | $ | 6,069 | | | $ | 5,144 | |
| | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2023 | | 2022 | | 2023 | | 2022 | | |
Revenues | $ | 18,429 | | | $ | 21,449 | | | $ | 37,381 | | | $ | 44,135 | | | |
Gross profit | $ | 11,210 | | | $ | 13,665 | | | $ | 22,697 | | | $ | 29,266 | | | |
Operating income | $ | 12,054 | | | $ | 13,493 | | | $ | 23,348 | | | $ | 28,912 | | | |
Net income | $ | 12,220 | | | $ | 13,481 | | | $ | 23,693 | | | $ | 28,877 | | | |
We have two additional joint ventures that have constructed separate crude oil pipeline systems and related ancillary assets, which are serving third parties and subsidiaries of Delek Holdings. We own a 50% membership interest in the entity formed with an affiliate of Plains All American Pipeline, L.P. ("CP LLC") to operate one of these pipeline systems and a 33% membership interest in the entity formed with Andeavor Logistics Rio Pipeline LLC ("Andeavor Logistics"), formerly known as Rangeland Energy II, LLC ("Rangeland Energy") to operate the other pipeline system.
Combined summarized financial information for these two equity method investees on a 100% basis is shown below (in thousands):
| | | | | | | | | | | |
| As of June 30, 2023 | | As of December 31, 2022 |
Current assets | $ | 21,449 | | | $ | 18,888 | |
Non-current assets | $ | 226,320 | | | $ | 231,898 | |
Current liabilities | $ | 2,370 | | | $ | 1,973 | |
| | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2023 | | 2022 | | 2023 | | 2022 | | |
Revenues | $ | 13,025 | | | $ | 11,558 | | | $ | 25,171 | | | $ | 20,453 | | | |
Gross profit | $ | 8,375 | | | $ | 7,220 | | | $ | 16,195 | | | $ | 11,458 | | | |
Operating income | $ | 7,278 | | | $ | 6,622 | | | $ | 13,924 | | | $ | 10,190 | | | |
Net Income | $ | 7,405 | | | $ | 6,626 | | | $ | 14,151 | | | $ | 10,195 | | | |
The Partnership's investments in these three entities were financed through a combination of cash from operations and borrowings under the DKL Credit Facility. The Partnership's investment balances in these joint ventures were as follows (in thousands):
| | | | | | | | | | | |
| As of June 30, 2023 | | As of December 31, 2022 |
Red River | $ | 140,940 | | | $ | 149,635 | |
CP LLC | 60,241 | | | 64,056 | |
Andeavor Logistics | 41,566 | | | 43,331 | |
Total Equity Method Investments | $ | 242,747 | | | $ | 257,022 | |
We do not consolidate any part of the assets or liabilities or operating results of our equity method investees. Our share of net income or loss of the investees will increase or decrease, as applicable, the carrying value of our investments in unconsolidated affiliates. With respect to our equity method investments, we determined that these entities do not represent variable interest entities and consolidation is not required. We have the ability to exercise significant influence over each of these joint ventures through our participation in the management committees, which make all significant decisions. However, since all significant decisions require the consent of the other investor(s) without regard to economic interest, we have determined that we have joint control and have applied the equity method of accounting. Our investment in these joint ventures is reflected in our investments in pipeline joint ventures segment.
| | |
15 |  |
Notes to Condensed Consolidated Financial Statements (Unaudited)
9. Segment Data
We aggregate our operating segments into four reportable segments: (i) gathering and processing; (ii) wholesale marketing and terminalling; (iii) storage and transportation; and (iv) investment in pipeline joint ventures. Operations that are not specifically included in the reportable segments are included in Corporate and other segment.
During the fourth quarter 2022, we realigned our reportable segments for financial reporting purposes to reflect changes in the manner in which our Chief Operating Decision Maker ("CODM") uses financial information to make key operating decisions and assess performance. The changes primarily represent reporting the operating results of our pipeline operations and legacy gathering assets and the operating results of the Delaware Gathering operations within a new reportable segment called gathering and processing. Prior to this change, the pipeline operations and legacy gathering assets were reported as part of the pipelines and transportation segment. The remaining operations of the former pipelines and transportation reportable segment was renamed to storage and transportation. Unallocated corporate costs, including general and administrative expenses, interest expense and depreciation and amortization, are now presented in corporate and other. Additionally, the CODM determined that Segment EBITDA is the key performance measure for planning and forecasting purposes and discontinued the use of Contribution Margin as a measure of performance. While this reporting change did not change our consolidated results, segment data for previous years has been restated and is consistent with the current year presentation throughout the financial statements and the accompanying notes.
EBITDA is an important measure used by management to evaluate the financial performance of our core operations. EBITDA is not a GAAP measure, but the components of EBITDA are computed using amounts that are determined in accordance with GAAP. A reconciliation of EBITDA to Net Income is included in the tables below. We define EBITDA as net income (loss) before net interest expense, income tax expense, depreciation and amortization expense, including amortization of customer contract intangible assets, which is included as a component of net revenues in our accompanying condensed consolidated statements of income.
Assets by segment is not a measure used to assess the performance of the Partnership by the CODM and thus is not disclosed.
| | |
16 |  |
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following is a summary of business segment operating performance as measured by EBITDA for the periods indicated (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2023 |
(In thousands) | | Gathering and Processing | | Wholesale Marketing and Terminalling | | Storage and Transportation | | Investments in Pipeline Joint Ventures | | Corporate and Other | | Consolidated |
Net revenues: | | | | | | | | | | | | |
Affiliate | | $ | 49,182 | | | $ | 52,076 | | | $ | 31,735 | | | $ | — | | | $ | — | | | $ | 132,993 | |
Third party | | 44,055 | | | 66,751 | | | 3,112 | | | — | | | — | | | 113,918 | |
Total revenue | | $ | 93,237 | | | $ | 118,827 | | | $ | 34,847 | | | $ | — | | | $ | — | | | $ | 246,911 | |
| | | | | | | | | | | | |
Segment EBITDA | | $ | 52,663 | | | $ | 27,983 | | | $ | 14,978 | | | $ | 7,285 | | | $ | (10,129) | | | $ | 92,780 | |
Depreciation and amortization | | 18,801 | | | 1,880 | | | 2,304 | | | — | | | 742 | | | 23,727 | |
Amortization of customer contract intangible | | — | | | 1,802 | | | — | | | — | | | — | | | 1,802 | |
Interest expense, net | | — | | | — | | | — | | | — | | | 35,099 | | | 35,099 | |
Income tax expense | | | | | | | | | | | | 256 | |
Net income | | | | | | | | | | | | $ | 31,896 | |
| | | | | | | | | | | | |
Capital spending | | $ | 18,877 | | | $ | (2,712) | | | $ | 3,215 | | | $ | — | | | $ | — | | | $ | 19,380 | |
| | | | | | | | | | | | |
| | Three Months Ended June 30, 2022 |
(In thousands) | | Gathering and Processing | | Wholesale Marketing and Terminalling | | Storage and Transportation | | Investments in Pipeline Joint Ventures | | Corporate and Other | | Consolidated |
Net revenues: | | | | | | | | | | | | |
Affiliate | | $ | 45,605 | | | $ | 46,110 | | | $ | 32,651 | | | $ | — | | | $ | — | | | $ | 124,366 | |
Third party | | 19,221 | | | 119,430 | | | 3,733 | | | — | | | — | | | 142,384 | |
Total revenue | | $ | 64,826 | | | $ | 165,540 | | | $ | 36,384 | | | $ | — | | | $ | — | | | $ | 266,750 | |
| | | | | | | | | | | | |
Segment EBITDA | | $ | 38,497 | | | $ | 18,807 | | | $ | 14,529 | | | $ | 7,073 | | | $ | (14,400) | | | $ | 64,506 | |
Depreciation and amortization | | 8,640 | | | 1,668 | | | 2,180 | | | — | | | 934 | | | 13,422 | |
Amortization of customer contract intangible | | — | | | 1,803 | | | — | | | — | | | — | | | 1,803 | |
Interest expense, net | | — | | | — | | | — | | | — | | | 16,812 | | | 16,812 | |
Income tax expense | | | | | | | | | | | | 305 | |
Net income | | | | | | | | | | | | $ | 32,164 | |
| | | | | | | | | | | | |
Capital spending | | $ | 26,630 | | | $ | 96 | | | $ | — | | | $ | — | | | $ | — | | | $ | 26,726 | |
| | | | | | | | | | | | |
|
| | Six Months Ended June 30, 2023 |
(In thousands) | | Gathering and Processing | | Wholesale Marketing and Terminalling | | Storage and Transportation | | Investments in Pipeline Joint Ventures | | Corporate and Other | | Consolidated |
Net revenues: | | | | | | | | | | | | |
Affiliate | | $ | 101,943 | | | $ | 85,827 | | | $ | 70,222 | | | $ | — | | | $ | — | | | $ | 257,992 | |
Third party | | 83,726 | | | 145,309 | | | 3,409 | | | — | | | — | | | 232,444 | |
Total revenue | | $ | 185,669 | | | $ | 231,136 | | | $ | 73,631 | | | $ | — | | | $ | — | | | $ | 490,436 | |
| | | | | | | | | | | | |
Segment EBITDA | | $ | 108,108 | | | $ | 49,937 | | | $ | 28,400 | | | $ | 13,601 | | | $ | (14,108) | | | $ | 185,938 | |
Depreciation and amortization | | 35,248 | | | 3,569 | | | 4,406 | | | — | | | 1,609 | | | 44,832 | |
Amortization of customer contract intangible | | — | | | 3,605 | | | — | | | — | | | — | | | 3,605 | |
Interest expense, net | | — | | | — | | | — | | | — | | | 67,680 | | | 67,680 | |
Income tax expense | | | | | | | | | | | | 558 | |
Net income | | | | | | | | | | | | $ | 69,263 | |
| | | | | | | | | | | | |
Capital spending | | $ | 51,666 | | | $ | 404 | | | $ | 3,411 | | | $ | — | | | $ | — | | | $ | 55,481 | |
| | |
17 |  |
Notes to Condensed Consolidated Financial Statements (Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2022 |
(In thousands) | | Gathering and Processing | | Wholesale Marketing and Terminalling | | Storage and Transportation | | Investments in Pipeline Joint Ventures | | Corporate and Other | | Consolidated |
Net revenues: | | | | | | | | | | | | |
Affiliate | | $ | 85,938 | | | $ | 98,842 | | | $ | 63,340 | | | $ | — | | | $ | — | | | $ | 248,120 | |
Third party | | 20,932 | | | 197,474 | | | 6,805 | | | — | | | — | | | 225,211 | |
Total revenue | | $ | 106,870 | | | $ | 296,316 | | | $ | 70,145 | | | $ | — | | | $ | — | | | $ | 473,331 | |
| | | | | | | | | | | | |
Segment EBITDA | | $ | 70,578 | | | $ | 39,541 | | | $ | 25,637 | | | $ | 14,099 | | | $ | (19,346) | | | $ | 130,509 | |
Depreciation and amortization | | 14,481 | | | 3,046 | | | 4,276 | | | — | | | 1,954 | | | 23,757 | |
Amortization of customer contract intangible | | — | | | 3,606 | | | — | | | — | | | — | | | 3,606 | |
Interest expense, net | | — | | | |