10-Q 1 dkl-20220331.htm 10-Q dkl-20220331
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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 endedMarch 31, 2022
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
dkl-20220331_g1.jpg
45-5379027
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
7102 Commerce Way
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 ClassTrading SymbolName of Each Exchange on Which Registered
Common Units Representing Limited Partnership InterestsDKLNew 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 filerAccelerated 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 April 29, 2022, there were 43,473,782 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, 2022
Item 3. Quantitative and Qualitative Disclosures about Market Risk
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, 2022December 31, 2021
ASSETS
Current assets:  
Cash and cash equivalents$2,726 $4,292 
Accounts receivable20,350 15,384 
Inventory1,779 2,406 
Other current assets1,466 951 
Total current assets26,321 23,033 
Property, plant and equipment:  
Property, plant and equipment724,921 715,870 
Less: accumulated depreciation(276,587)(266,482)
Property, plant and equipment, net448,334 449,388 
Equity method investments 249,893 250,030 
Operating lease right-of-use assets19,135 20,933 
Goodwill12,203 12,203 
Marketing contract intangible, net114,774 116,577 
Rights-of-way39,705 37,280 
Other non-current assets24,901 25,627 
Total assets$935,266 $935,071 
LIABILITIES AND DEFICIT  
Current liabilities: 
Accounts payable$12,627 $8,160 
Accounts payable to related parties50,282 64,423 
Interest payable16,317 5,024 
Excise and other taxes payable4,023 5,280 
Current portion of operating lease liabilities6,688 6,811 
Accrued expenses and other current liabilities6,327 7,117 
Total current liabilities96,264 96,815 
Non-current liabilities:  
Long-term debt905,536 898,970 
Asset retirement obligations6,600 6,476 
Operating lease liabilities, net of current portion12,401 14,071 
Other non-current liabilities20,987 22,731 
Total non-current liabilities945,524 942,248 
Equity (Deficit):
Common unitholders - public; 9,162,504 units issued and outstanding at March 31, 2022 (8,774,053 at December 31, 2021)
170,696 166,067 
Common unitholders - Delek Holdings; 34,311,278 units issued and outstanding at March 31, 2022 (34,696,800 at December 31, 2021)
(277,218)(270,059)
Total deficit(106,522)(103,992)
Total liabilities and deficit $935,266 $935,071 

See accompanying notes to the condensed consolidated financial statements
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Financial Statements
Delek Logistics Partners, LP
Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited)
(in thousands, except unit and per unit data)
Three months ended
March 31,
20222021
Net revenues:
   Affiliates (1)
$123,754 $96,194 
   Third party 82,827 56,719 
     Net revenues206,581 152,913 
Cost of sales:
Cost of materials and other126,194 81,171 
Operating expenses (excluding depreciation and amortization presented below)17,543 14,250 
Depreciation and amortization9,861 10,247 
Total cost of sales153,598 105,668 
Operating expenses related to wholesale business (excluding depreciation and amortization presented below)564 561 
General and administrative expenses5,095 4,105 
Depreciation and amortization474 492 
Other operating expense (income), net12 (83)
Total operating costs and expenses159,743 110,743 
Operating income46,838 42,170 
Interest expense, net14,250 9,737 
Income from equity method investments (7,026)(4,049)
Other (income) expense, net(1)31 
Total non-operating expenses, net7,223 5,719 
Income before income tax expense39,615 36,451 
Income tax expense101 184 
Net income attributable to partners$39,514 $36,267 
Comprehensive income attributable to partners$39,514 $36,267 
Net income per limited partner unit:
Common units - basic$0.91 $0.83 
Common units - diluted$0.91 $0.83 
Weighted average limited partner units outstanding:
Common units - basic43,471,536 43,443,336 
Common units - diluted43,481,572 43,449,059 
Cash distributions per limited partner unit$0.98 $0.92 
(1)    See Note 2 for a description of our material affiliate revenue 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 HoldingsTotal
Balance at December 31, 2021$166,067 $(270,059)$(103,992)
Cash distributions (1)
(8,570)(33,830)(42,400)
Net income attributable to partners8,328 31,186 39,514 
Delek Holdings unit sale to public5,110 (5,110)— 
Other(239)595 356 
Balance at March 31, 2022$170,696 $(277,218)$(106,522)
(1) Cash distributions include a nominal amount related to distribution equivalents on vested phantom units for the three months ended March 31, 2022.
Common - Public Common - Delek HoldingsTotal
Balance at December 31, 2020$164,614 $(272,915)$(108,301)
Cash distributions(7,914)(31,619)(39,533)
Net income attributable to partners7,261 29,006 36,267 
Other139 38 177 
Balance at March 31, 2021$164,100 $(275,490)$(111,390)

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,
20222021
Cash flows from operating activities:
Net income$39,514 $36,267 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization10,335 10,739 
Non-cash lease expense1,798 2,018 
Amortization of customer contract intangible assets1,803 1,803 
Amortization of deferred revenue(444)(538)
Amortization of deferred financing costs and debt discount847 625 
Income from equity method investments (7,026)(4,049)
Dividends from equity method investments 6,613 3,730 
Other non-cash adjustments492 274 
Changes in assets and liabilities:  
Accounts receivable(4,966)3,354 
Inventories and other current assets112 1,020 
Accounts payable and other current liabilities14,157 (390)
Accounts receivable/payable to related parties(14,141)7,359 
Non-current assets and liabilities, net(1,174)(480)
Net cash provided by operating activities47,920 61,732 
Cash flows from investing activities:  
Purchases of property, plant and equipment(10,613)(6,119)
Proceeds from sales of property, plant and equipment 12 83 
Purchases of intangible assets(2,425)(474)
Distributions from equity method investments550 3,924 
Equity method investment contributions (1,379)
Net cash used in investing activities(12,476)(3,965)
Cash flows from financing activities:  
Distributions to common unitholders - public(8,570)(7,914)
Distributions to common unitholders - Delek Holdings(33,830)(31,619)
Proceeds from revolving credit facility113,600 77,500 
Payments on revolving credit facility(107,500)(86,600)
Payments on financing lease liabilities(710) 
Net cash used in financing activities(37,010)(48,633)
Net (decrease) increase in cash and cash equivalents(1,566)9,134 
Cash and cash equivalents at the beginning of the period4,292 4,243 
Cash and cash equivalents at the end of the period$2,726 $13,377 
Supplemental disclosures of cash flow information:  
Cash paid during the period for:  
Interest$2,110 $4,937 
Non-cash investing activities:  
Increase in accrued capital expenditures in accounts payable/receivable related parties$ $3,119 
Decrease in accrued capital expenditures and other$(1,527)$(1,439)
Non-cash financing activities:
Non-cash lease liability arising from obtaining right of use assets during the period$ $2,623 
See accompanying notes to the condensed consolidated financial statements
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Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 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 (the “Purchaser”), a subsidiary of the Partnership, entered into a Membership Interest 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 (the “Purchased Interests”), related to Seller’s crude oil and gas gathering, processing and transportation businesses, as well as water disposal and recycling operations, in the Delaware Basin in New Mexico (the “Purchase Agreement”). The Partnership also entered into a guaranty agreement with the Seller in order to guaranty the payment obligations of the Purchaser under the Purchase Agreement. See Note 14 for further information.
Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with 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 U.S. 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, 2021 (our "Annual Report on Form 10-K"), filed with the U.S. Securities and Exchange Commission (the "SEC") on February 25, 2022 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, 2021 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
In the current period, we reassessed the classification of certain expenses and made certain reclassification adjustments to better represent the nature of those expenses. Accordingly, we have made reclassifications to the prior period in order to conform to this revised current period classification, which resulted in an immaterial decrease in the prior period general and administrative expenses and an increase in the prior period operating expenses.
Risks and Uncertainties Arising from the COVID-19 Pandemic
During the quarter ended March 31, 2022, the economic environment in which we operate continued to improve as a result of the widespread availability of vaccines and testing in the U.S. over recent months which, in turn, has contributed to return to work, return to schools, and increased travel, with a corresponding increase in the demand for vehicle motor fuel and jet fuel. While we continue to face uncertainties around the COVID-19 Pandemic in terms of new variants, these stabilization trends as well as other factors impacting demand for our products, such as the global supply constraints caused by the military conflict between Russia and the Ukraine have mitigated the risks that remaining Pandemic-related uncertainties could have a material adverse impact on our financial position or results of operations. While these remaining uncertainties did not have a material impact on the preparation of our unaudited financial statements as of and for the three months ended March 31, 2022, to the extent these uncertainties were identified and were believed to have had a material impact on our prior year period results of operations or financial position based on the requirements for assessing such financial statement impact under GAAP, we have considered them in the preparation of our unaudited financial statements as of and for the three months ended March 31, 2022.
New Accounting Pronouncements Adopted During 2022
There were no new accounting pronouncements adopted during the three months ended March 31, 2022.
Accounting Pronouncements Not Yet Adopted
ASU No. 2021-05, Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments
In July 2021, the FASB issued an amendment which is intended to provide lease classification guidance for Lessors on how to classify and account for a lease with variable lease payments that do not depend on a reference index or a rate. The amendments are effective for fiscal years beginning after December 15, 2021, for all entities, and interim periods within those fiscal years for public business entities and
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Notes to Condensed Consolidated Financial Statements (Unaudited)
interim periods within fiscal years beginning after December 15, 2022, for all other entities. The Partnership is evaluating the impact of this guidance but does not believe this new guidance will have a material impact on its condensed consolidated financial statements and related disclosures.
ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848)
In March 2020, the FASB issued an amendment which is intended to provide temporary optional expedients and exceptions to GAAP guidance on contracts, hedge accounting and other transactions affected by the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank rates. This guidance is effective for all entities any time beginning on March 12, 2020 through December 31, 2022 and may be applied from the beginning of an interim period that includes the issuance date of the ASU. The Partnership is evaluating the impact of this guidance but does not currently expect that adopting this new guidance will have a material impact on its condensed consolidated financial statements and related disclosures.

Note 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.
Other Agreements with Delek Holdings
In addition to the commercial agreements described above, the Partnership has entered into the following agreements with Delek Holdings:
Slurry Clarifying Services Agreement
We executed a series of agreements with DK Trading & Supply, LLC (“DKT&S”) and Alon Refining Krotz Springs, whereby the Partnership will operate and maintain a facility, located within the Krotz Springs, Louisiana refinery, to process slurry for DKT&S. Using a process that incorporates horizontal and vertical centrifuges, we will remove metals, ash, and other solids from the slurry. The clarified product can then be sold to DKT&S or one of its affiliates. As consideration for the processing services, we will receive a fixed rate per barrel processing fee in addition to a margin-based payment. The Partnership and DKT&S have agreed to a minimum delivery commitment volume to be processed in the facility. The initial term of the agreement is for a period of three years, and thereafter, will continue a year-to-year basis unless canceled by either party.
Omnibus Agreement
The Partnership entered into an omnibus agreement with Delek Holdings, Delek Logistics Operating, LLC, Lion Oil Company, LLC (formerly known as Lion Oil Company) and certain of the Partnership's and Delek Holdings' other subsidiaries on November 7, 2012, which has been amended from time to time in connection with acquisitions from Delek Holdings (collectively, as amended, 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 $4.6 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. We were reimbursed a nominal amount by Delek Holdings during the three months ended March 31, 2022. There were no reimbursements by Delek Holdings during the three months ended March 31, 2021. 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, 2022, there was no receivable from related parties for these matters. These reimbursements are recorded as reductions to operating expense. There were no reimbursements for these matters in each of the three month periods ended March 31, 2022 and 2021.
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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 2022. Total fees paid to the Partnership were $0.4 million for both the three months ended March 31, 2022 and 2021, 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 ("RINs"), 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.
A summary of revenue, purchases from affiliates and expense transactions with Delek Holdings and its affiliates are as follows (in thousands):
Three Months Ended March 31,
20222021
Revenues$123,754 $96,194 
Purchases from Affiliates$105,885 $65,815 
Operating and maintenance expenses
$11,476 $10,084 
General and administrative expenses
$3,068 $2,119 
Quarterly Cash Distributions
In February 2022, we paid quarterly cash distributions of $42.4 million, of which $33.8 million were paid to Delek Holdings. In February 2021, we paid quarterly cash distributions of $39.5 million, of which $31.6 million were paid to Delek Holdings and our general partner. On April 25, 2022, our board of directors declared a quarterly cash distribution totaling $42.6 million, based on the available cash as of the date of determination, for the end of the first quarter of 2022, payable on May 12, 2022, of which $33.6 million is expected to be paid to Delek Holdings.

Note 3 - 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 2 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.
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Notes to Condensed Consolidated Financial Statements (Unaudited)
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 $448.3 million net property, plant, and equipment balance as of March 31, 2022, $406.1 million is subject to operating leases under our commercial agreements. These agreements do not include options for the lessee to purchase our leasing equipment, nor do they include any material residual value guarantees or material restrictive covenants.
The following table represents a disaggregation of revenue for the pipeline and transportation and wholesale marketing and terminalling segments for the periods indicated (in thousands):
Three Months Ended March 31, 2022
Pipelines and Transportation Wholesale Marketing and Terminalling Consolidated
Service Revenue - Third Party$4,782 $ $4,782 
Service Revenue - Affiliate (1)
4,004 8,545 12,549 
Product Revenue - Third Party 78,045 78,045 
Product Revenue - Affiliate 31,746 31,746 
Lease Revenue - Affiliate 67,019 12,440 79,459 
Total Revenue$75,805 $130,776 $206,581 
(1) Net of $1.8 million of amortization expense for the three months ended March 31, 2022, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.

Three Months Ended March 31, 2021
Pipelines and TransportationWholesale Marketing and Terminalling Consolidated
Service Revenue - Third Party$1,927 $82 $2,009 
Service Revenue - Affiliate (1)
1,224 8,082 9,306 
Product Revenue - Third Party 54,710 54,710 
Product Revenue - Affiliate 16,387 16,387 
Lease Revenue - Affiliate 61,824 8,677 70,501 
Total Revenue$64,975 $87,938 $152,913 
(1) Net of $1.8 million of amortization expense for the three months ended March 31, 2021, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.
As of March 31, 2022, we expect to recognize $1.4 billion in future lease revenues, for periods up to financial year 2030, 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 March 31, 2022 were as follows (in thousands):
Remainder of 2022$206,379 
2023268,042 
2024192,400 
2025169,227 
2026 and thereafter573,893 
Total expected revenue on remaining performance obligations$1,409,941 


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Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 4 - 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 March 31, 2022, the only potentially dilutive units outstanding consist of unvested phantom units.
Our distributions earned with respect to a given period are declared subsequent to quarter end. Therefore, the table below represents total cash distributions applicable to the period in which the distributions are earned. The expected date of distribution for the distributions earned during the period ended March 31, 2022 is May 12, 2022.
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):
Three Months Ended March 31,
20222021
Net income attributable to partners$39,514 $36,267 
Less: Limited partners' distribution42,604 39,968 
Earnings in excess (deficit) of distributions$(3,090)$(3,701)
Limited partners' earnings on common units:
Distributions$42,604 $39,968 
Allocation of earnings in excess (deficit) of distributions(3,090)(3,701)
Total limited partners' earnings on common units$39,514 $36,267 
Weighted average limited partner units outstanding:
Common units - basic43,471,536 43,443,336 
Common units - diluted 43,481,572 43,449,059 
Net income per limited partner unit:
Common units - basic$0.91 $0.83 
Common units - diluted (1)
$0.91 $0.83 
(1) There were no outstanding common units excluded from the diluted earnings per unit calculation for the three months ended March 31, 2022 and 2021.

Note 5 - Inventory
Inventories consisted of $1.8 million and $2.4 million of refined petroleum products as of March 31, 2022 and December 31, 2021, respectively, each of which are net of lower of cost or net realizable value reserve of a nominal amount. Inventory is stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. We recognize lower of cost or net realizable value charges as a component of cost of materials and other in the consolidated statements of income and comprehensive income.

Note 6 - Long-Term Obligations
7.125% Senior Notes due 2028
On May 24, 2021, the Partnership and our wholly owned subsidiary Delek Logistics Finance Corp. ("Finance Corp." and together with the Partnership, the "Issuers") issued $400.0 million in aggregate principal amount of 7.125% senior notes due 2028 (the "2028 Notes") at par, pursuant to an indenture with U.S. Bank, National Association as trustee. The 2028 Notes are general unsecured senior obligations of the Issuers and are unconditionally guaranteed jointly and severally on a senior unsecured basis by the Partnership's subsidiaries other than Finance Corp., and will be unconditionally guaranteed on the same basis by certain of the Partnership’s future subsidiaries. The 2028 Notes rank equal in right of payment with all existing and future senior indebtedness of the Issuers, and senior in right payment to any future subordinated indebtedness of the Issuers. The 2028 Notes will mature on June 1, 2028, and interest on the 2028 Notes is payable semi-annually in arrears on each June 1 and December 1, commencing December 1, 2021.
At any time prior to June 1, 2024, the Issuers may redeem up to 35% of the aggregate principal amount of the 2028 Notes with the net cash proceeds of one or more equity offerings by the Partnership at a redemption price of 107.125% of the redeemed principal amount,
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Notes to Condensed Consolidated Financial Statements (Unaudited)
plus accrued and unpaid interest, if any, subject to certain conditions and limitations. Prior to June 1, 2024, the Issuers may also redeem all or part of the 2028 Notes at a redemption price of the principal amount plus accrued and unpaid interest, if any, plus a "make whole" premium, subject to certain conditions and limitations. In addition, beginning on June 1, 2024, the Issuers may, subject to certain conditions and limitations, redeem all or part of the 2028 Notes, at a redemption price of 103.563% of the redeemed principal for the twelve-month period beginning on June 1, 2024, 101.781% for the twelve-month period beginning on June 1, 2025, and 100.00% beginning on June 1, 2026 and thereafter, plus accrued and unpaid interest, if any.
In the event of a change of control, accompanied or followed by a ratings downgrade within a certain period of time, subject to certain conditions and limitations, the Issuers will be obligated to make an offer for the purchase of the 2028 Notes from holders at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest.
As of March 31, 2022, we had $400.0 million in outstanding principal amount under the 2028 Notes, and the effective interest rate was 7.05%. Outstanding borrowings under the 2028 Notes include deferred financing costs amounting to $5.5 million as of March 31, 2022.
DKL Credit Facility
On September 28, 2018, the Partnership entered into a third amended and restated senior secured revolving credit agreement (hereafter, the "DKL Credit Facility") with Fifth Third Bank ("Fifth Third"), as administrative agent, and a syndicate of lenders with total lender commitments of $850.0 million. The DKL Credit Facility contains a dual currency borrowing tranche that permits draw downs in U.S. or Canadian dollars. The DKL Credit Facility also contains an accordion feature whereby the Partnership can increase the size of the credit facility to an aggregate of $1.0 billion, subject to receiving increased or new commitments from lenders and the satisfaction of certain other conditions precedent.
The obligations under the DKL Credit Facility remain secured by first priority liens on substantially all of the Partnership's and its subsidiaries' tangible and intangible assets.
The DKL Credit Facility has a maturity date of September 28, 2023. Borrowings denominated in U.S. dollars bear interest at either a U.S. dollar prime rate, plus an applicable margin, or the LIBOR, plus an applicable margin, at the election of the borrowers. Borrowings denominated in Canadian dollars bear interest at either a Canadian dollar prime rate, plus an applicable margin, or the Canadian Dealer Offered Rate, plus an applicable margin, at the election of the borrowers.
The applicable margin in each case and the fee payable for any unused revolving commitments vary based upon the Partnership's most recent total leverage ratio calculation delivered to the lenders, as called for and defined under the terms of the DKL Credit Facility. At March 31, 2022, the weighted average interest rate for our borrowings under the facility was approximately 2.67%. Additionally, the DKL Credit Facility requires us to pay a leverage ratio dependent quarterly fee on the average unused revolving commitment. As of March 31, 2022, this fee was 0.30% per year.
As of March 31, 2022, we had $264.1 million of outstanding borrowings under the DKL Credit Facility, with no letters of credit in place. Unused credit commitments under the DKL Credit Facility as of March 31, 2022 were $585.9 million.
6.750% Senior Notes Due 2025
On May 23, 2017, the Partnership and Delek Logistics Finance Corp., a Delaware corporation and a wholly-owned subsidiary of the Partnership (“Finance Corp.” and together with the Partnership, the “Issuers”), issued $250.0 million in aggregate principal amount of 6.75% senior notes due 2025 (the “2025 Notes”) at a discount. The 2025 Notes are general unsecured senior obligations of the Issuers. The 2025 Notes are unconditionally guaranteed jointly and severally on a senior unsecured basis by the Partnership's existing subsidiaries (other than Finance Corp., the "Guarantors") and will be unconditionally guaranteed on the same basis by certain of the Partnership’s future subsidiaries. The 2025 Notes rank equal in right of payment with all existing and future senior indebtedness of the Issuers, and senior in right of payment to any future subordinated indebtedness of the Issuers. Interest on the 2025 Notes is payable semi-annually in arrears on each May 15 and November 15.
The Issuers may, subject to certain conditions and limitations, redeem all or part of the 2025 Notes at a redemption price of 103.375% of the redeemed principal during the twelve-month period beginning on May 15, 2021, 101.688% for the twelve-month period beginning on May 15, 2022 and 100.00% beginning on May 15, 2023 and thereafter, plus accrued and unpaid interest, if any. In the event of a change of control, accompanied or followed by a ratings downgrade within a certain period of time, subject to certain conditions and limitations, the Issuers will be obligated to make an offer for the purchase of the 2025 Notes from holders at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest.
On April 25, 2018, we made an offer to exchange the 2025 Notes and the related guarantees that were validly tendered and not validly withdrawn for an equal principal amount of exchange notes that are freely tradeable, as required under the terms of the original indenture. The terms of the exchange notes that were issued in May 2018 as a result of the exchange (also referred to as the "2025 Notes") are substantially identical to the terms of the original 2025 Notes.
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Notes to Condensed Consolidated Financial Statements (Unaudited)
As of March 31, 2022, we had $250.0 million in outstanding principal amount of the 2025 Notes. As of March 31, 2022, the effective interest rate related to the 2025 Notes was approximately 7.20%.
Outstanding borrowings under the 2025 Notes include deferred financing costs and debt discount of $2.3 million and $0.7 million, respectively, as of March 31, 2022, and $2.5 million and $0.8 million, respectively, as of December 31, 2021.

Note 7 - Equity
We had 9,162,504 common limited partner units held by the public outstanding as of March 31, 2022. Additionally, as of March 31, 2022, Delek Holdings owned an 78.9% limited partner interest in us, consisting of 34,311,278 common limited partner units.
On April 14, 2022, we filed a shelf registration statement with the SEC, which was declared on April 29, 2022, which provides the Partnership the ability to offer up to $200.0 million of our common limited partner units from time to time and through one or more methods of distribution, subject to market conditions and our capital needs.
On December 22, 2021, Delek Holdings issued a press release regarding a program to sell up to 434,590 common limited partner units representing limited partner interests in the Partnership. We will not sell any securities under this program and we will not receive any proceeds from the sale of the securities by Delek Holdings.
Equity Activity
The table below summarizes the changes in the number of limited partner units outstanding from December 31, 2021 through March 31, 2022.
Common - PublicCommon - Delek HoldingsTotal
Balance at December 31, 20218,774,053 34,696,800 43,470,853 
Unit-based compensation awards (1)
2,929  2,929 
Delek Holdings resale of units385,522 (385,522) 
Balance at March 31, 20229,162,504 34,311,278 43,473,782 
(1) Unit-based compensation awards are presented net of 1,088 units withheld for taxes as of March 31, 2022.
Issuance of Additional Securities
Our Partnership Agreement authorizes us to issue an unlimited number of additional partnership securities for the consideration and on the terms and conditions determined by our general partner without the approval of the unitholders. Costs associated with the issuance of securities are allocated to all unitholders' capital accounts based on their ownership interest at the time of issuance.
Cash Distributions
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 EndedTotal Quarterly Distribution Per Limited Partner UnitTotal Cash Distribution
(in thousands)
Date of DistributionUnitholders Record Date
March 31, 2021$0.920 $39,968 May 14, 2021May 10, 2021
June 30, 2021$0.940 $40,846 August 11, 2021August 5, 2021
September 30, 2021$0.950 $41,286 November 10, 2021November 5, 2021
December 31, 2021$0.975 $42,384 February 8, 2022February 1, 2022
March 31, 2022$0.980 $42,604 
May 12, 2022 (1)
May 5, 2022
(1) Expected date of distribution.

Note 8 - Equity Based Compensation
The Delek Logistics GP, LLC 2012 Long-Term Incentive Plan (the "LTIP") was adopted by the Delek Logistics GP, LLC board of directors in connection with the completion of our initial public offering in November 2012. The LTIP is administered by the Conflicts Committee of the board of our general partner. Equity-based compensation expense is included in general and administrative expenses in the
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accompanying condensed consolidated statements of income and comprehensive income and is immaterial for the three months ended March 31, 2022 and 2021.
On June 9, 2021, the LTIP was amended to increase the number of units representing limited partner interest in the Partnership (the "Common Units") authorized for issuance by 300,000 Common Units to 912,207 Common Units. Additionally, the term of the LTIP was extended to June 9, 2031.

Note 9 - Equity Method Investments
In May 2019, the Partnership, through its wholly owned indirect subsidiary DKL Pipeline, LLC (“DKL Pipeline”), entered into a Contribution and Subscription Agreement (the “Contribution Agreement”) with Plains Pipeline, L.P. (“Plains”) and Red River Pipeline Company LLC (“Red River”). Pursuant to the Contribution Agreement, DKL Pipeline contributed $124.7 million, substantially all of which was financed by borrowings under the DKL Credit Facility, to Red River in exchange for a 33% membership interest in Red River and DKL Pipeline’s admission as a member of Red River. In addition, we contributed $0.4 million of startup capital pursuant to the Amended and Restated Limited Liability Company Agreement. Red River, which owns a crude oil pipeline running from Cushing, Oklahoma to Longview, Texas, completed a planned expansion project to increase the pipeline capacity and commenced operations on the completed expansion project in 2020. During the three months ended March 31, 2022, we made no capital contributions. During the three months ended March 31, 2021, we made additional capital contributions totaling $1.4 million based on capital calls received.
Summarized unaudited financial information for Red River on a 100% basis is shown below (in thousands):
March 31, 2022December 31, 2021
Current Assets$28,830 $28,735 
Non-current Assets$401,283 $403,692 
Current liabilities$6,637 $10,040 
Three Months Ended March 31,
20222021
Revenues$22,686 $9,043 
Gross profit$15,601 $3,625 
Operating income$15,419 $3,439 
Net income$15,396 $3,439 
We have two 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 (the "Caddo Pipeline") and a 33% membership interest in the entity formed with Rangeland Energy II, LLC ("Rangeland Energy") to operate the other pipeline system (the "Rio Pipeline"). During 2018, Rangeland Energy was acquired by Andeavor (which was subsequently acquired by Marathon Petroleum Corporation) and the legal entity in which we have an equity investment became Andeavor Logistics Rio Pipeline LLC ("Andeavor Logistics").
Combined summarized unaudited financial information for these two equity method investees on a 100% basis is shown below (in thousands):
March 31, 2022December 31, 2021
Current assets$17,382 $15,010 
Non-current assets$239,755 $242,599 
Current liabilities$2,916 $1,492 
Three Months Ended March 31,
20222021
Revenues$8,895 $9,626 
Gross profit$4,238 $4,966 
Operating income$3,568 $4,478 
Net Income$3,569 $4,179 
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Notes to Condensed Consolidated Financial Statements (Unaudited)
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):
March 31, 2022December 31, 2021
Red River$144,567 $144,041 
CP LLC$61,926 $61,670 
Andeavor Logistics$43,400 $44,319 
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 pipelines and transportation segment.

Note 10 - Segment Data
We aggregate our operating segments into three reportable segments: (i) pipelines and transportation; (ii) wholesale marketing and terminalling; and (iii) investment in pipeline joint ventures.
Our operating segments adhere to the accounting policies used for our consolidated financial statements. Our operating segments are managed separately because each segment requires different industry knowledge, technology and marketing strategies. Decisions concerning the allocation of resources and assessment of operating performance are made based on this segmentation. Management measures the operating performance of each of its reportable segments based on segment contribution margin, with the exception of investments in pipeline joint ventures segment, which is measured based on net income. Segment contribution margin is defined as net revenues less cost of materials and other and operating expenses, excluding depreciation and amortization.
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Notes to Condensed Consolidated Financial Statements (Unaudited)
The following is a summary of business segment operating performance as measured by contribution margin, with the exception of investments in pipeline joint ventures segment, which is measured based on net income, for the periods indicated (in thousands):
(in thousands)Three Months Ended March 31,
20222021
Pipelines and Transportation
Net revenues:
Affiliate$71,023 $63,048 
Third party4,782 1,927 
Total pipelines and transportation 75,805 64,975 
Cost of materials and other19,602 13,079 
Operating expenses (excluding depreciation and amortization)12,958 10,172 
Segment contribution margin$43,245 $41,724 
Capital spending (1)
$8,149 $5,845 
Wholesale Marketing and Terminalling
Net revenues:
Affiliate (2)
$52,731 $33,146 
Third party78,045 54,792 
Total wholesale marketing and terminalling130,776 87,938 
Cost of materials and other106,592 68,092 
Operating expenses (excluding depreciation and amortization)5,149 4,639 
Segment contribution margin$19,035 $15,207 
Capital spending (1)
$937 $1,954 
Investments in Pipeline Joint Ventures
Income from equity method investments$(7,026)$(4,049)
Equity method investments contributions$ $(1,379)
Consolidated
Net revenues:
Affiliate$123,754 $96,194 
Third party82,827 56,719 
Total Consolidated206,581 152,913 
Cost of materials and other126,194 81,171 
Operating expenses (excluding depreciation and amortization presented below)18,107 14,811 
Contribution margin62,280 56,931 
General and administrative expenses5,095 4,105 
Depreciation and amortization10,335 10,739 
Other operating expense (income), net12 (83)
Operating income46,838 42,170 
Interest expense, net14,250 9,737 
Income from equity method investments(7,026)(4,049)
Other (income) expense, net(1)31 
Total non-operating expenses, net7,223 5,719 
Income before income tax expense39,615 36,451 
Income tax expense101 184 
Net income attributable to partners$39,514 $36,267 
Capital spending (1)
$9,086 $7,799 
(1) There were no capital contributions to equity method investments for the three months ended March 31, 2022. Capital spending for the three months ended March 31, 2021 excludes contributions to equity method investments in the amount of $1.4 million.
(2) Affiliate revenue for the wholesale marketing and terminalling segment is presented net of amortization expense related to a customer contract intangible asset. See Note 3 for additional information.
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Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table summarizes the total assets for each segment as of March 31, 2022 and December 31, 2021 (in thousands). Assets for each segment include property, plant and equipment, equity method investments, intangible assets and inventory.
March 31, 2022December 31, 2021
Pipelines and transportation $455,145 $452,690 
Wholesale marketing and terminalling205,686 211,723 
Investments in pipeline joint ventures249,893 250,030 
Other (1)
24,542 20,628 
     Total assets935,266 $935,071 
(1) Other includes cash and cash equivalents and related party receivables and other assets which are recorded at the corporate level.
Property, plant and equipment, accumulated depreciation and depreciation expense for the pipelines and transportation and wholesale marketing and terminalling reportable segments as of and for the three months ended March 31, 2022 were as follows (in thousands):
Pipelines and TransportationWholesale Marketing and TerminallingConsolidated
Property, plant and equipment$604,323 $120,598 $724,921 
Less: accumulated depreciation(213,750)(62,837)(276,587)
Property, plant and equipment, net$390,573 $57,761 $448,334 
Depreciation expense for the three months ended March 31, 2022$7,937 $2,398 $10,335 
In accordance with ASC 360, Property, Plant & Equipment, we evaluate the realizability of property, plant and equipment as events occur that might indicate potential impairment. There were no indicators of impairment of our property, plant and equipment as of March 31, 2022.

Note 11 - Income Taxes
For tax purposes, each partner of the Partnership is required to take into account its share of income, gain, loss and deduction in computing its federal and state income tax liabilities, regardless of whether cash distributions are made to such partner by the Partnership. The taxable income reportable to each partner takes into account differences between the tax basis and fair market value of our assets, financial reporting bases of assets and liabilities, the acquisition price of such partner's units and the taxable income allocation requirements under our Partnership Agreement.
The Partnership is not a taxable entity for federal income tax purposes. While most states do not impose an entity level tax on partnership income, the Partnership is subject to entity level tax in both Tennessee and Texas.

Note 12 - Commitments and Contingencies
Litigation
In the ordinary conduct of our business, we are from time to time subject to lawsuits, investigations and claims, including environmental claims and employee-related matters. Although we cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against us, including civil penalties or other enforcement actions, we do not believe that any currently pending legal proceeding or proceedings to which we are a party will have a material adverse effect on our financial statements. See "Crude Oil and Other Releases" below for discussion of an enforcement action.
Environmental, Health and Safety
We are subject to extensive federal, state and local environmental and safety laws and regulations enforced by various agencies, including the Environmental Protection Agency (the "EPA"), the United States Department of Transportation, the Occupational Safety and Health Administration, as well as numerous state, regional and local environmental, safety and pipeline agencies. These laws and regulations govern the discharge of materials into the environment, waste management practices and pollution prevention measures, as well as the safe operation of our pipelines and the safety of our workers and the public. Numerous permits or other authorizations are required under these laws and regulations for the operation of our terminals, pipelines, saltwells, trucks and related operations, and may be subject to revocation, modification and renewal.
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Notes to Condensed Consolidated Financial Statements (Unaudited)
These laws and permits raise potential exposure to future claims and lawsuits involving environmental and safety matters, which could include soil, surface water and groundwater contamination, air pollution, personal injury and property damage allegedly caused by substances which we may have handled, used, released or disposed of, transported, or that relate to pre-existing conditions for which we may have assumed responsibility. We believe that our current operations are in substantial compliance with existing environmental and safety requirements. However, there have been and we expect that there will continue to be ongoing discussions about environmental and safety matters between us and federal and state authorities, including the receipt and response to notices of violations, citations and other enforcement actions, some of which have resulted or may result in changes to operating procedures and in capital expenditures. While it is often difficult to quantify future environmental or safety related expenditures, we anticipate that continuing capital investments and changes in operating procedures will be required to comply with existing and new requirements, as well as evolving interpretations and enforcement of existing laws and regulations.
Releases of hydrocarbons or hazardous substances into the environment could, to the extent the event is not insured, or is not a reimbursable event under the Omnibus Agreement, subject us to substantial expenses, including costs to respond to, contain and remediate a release, to comply with applicable laws and regulations and to resolve claims by governmental agencies or other persons for personal injury, property damage, response costs, or natural resources damages.
Crude Oil and Other Releases
During the three months ended March 31, 2022, there were no significant releases.
In August 2021, a release of finished product from our Greenville pipeline occurred near Dixon, Texas (the "Greenville Dixon Release"). Cleanup operations, site maintenance and remediation on this release are currently on-going where such costs incurred as of March 31, 2022 totaled $3.6 million. Additionally, as of March 31, 2022 we have accrued $0.5 million for remediation and other such matters related to this release. The affected area is currently being treated to bring it to acceptable residential levels protective of groundwater.
On October 3, 2019, a release of diesel fuel involving one of our pipelines occurred near Sulphur Springs, Texas (the "Sulphur Springs Release"). Cleanup operations, site maintenance and remediation on this release have been completed with closure granted and ground water monitoring wells removed. We filed suit in January 2020 against a third party contractor, seeking damages related to this release; two related actions were filed in November and December 2020 by and against the contractor's insurance company seeking judgments related to insurance coverage. We have not received notification that any legal action with respect to fines and penalties will be pursued by the regulatory agencies.
For other releases that occurred in prior years, we have received regulatory closure or a majority of the cleanup and remediation efforts are substantially complete. We expect regulatory closure in 2022 for the release sites that have not yet received it and do not anticipate material costs associated with any fines or penalties or to complete activities that may be needed to achieve regulatory closure. Regulatory authorities could require additional remediation based on the results of our remediation efforts. We may incur additional expenses as a result of further scrutiny by regulatory authorities and continued compliance with laws and regulations to which our assets are subject. As of March 31, 2022, we have accrued $0.3 million for remediation and other such matters related to these releases.
Expenses incurred for the remediation of these crude oil and other releases are included in operating expenses in our condensed consolidated statements of income and comprehensive income. The majority of our releases have been subsequently reimbursed by Delek Holdings pursuant to the terms of the Omnibus Agreement, with the exception of the Sulphur Springs Release and the Greenville Dixon Release noted above as they are not covered under the Omnibus Agreement. Reimbursements are recorded as a reduction to operating expense. We do not believe the total costs associated with these events, whether alone or in the aggregate, including any fines or penalties and net of available insurance, indemnification or reimbursement, will have a material adverse effect upon our business, financial condition or results of operations.
During the three months ended March 31, 2022, there were no crude oil and other releases remediation expenses, net of reimbursable expenses. During the three months ended March 31, 2021, the crude oil and other releases remediation expenses, net of reimbursable costs, were immaterial.
Other Commitments
In connection with the Permian Gathering System Acquisition (formerly known as the Big Spring Gathering Acquisition), we agreed to expend $33.8 million to construct additional Receipt Points on our gathering pipeline at the request of Delek Holdings producers with which we have dedicated acreage agreements, to be owned and operated by the Partnership. Such Receipt Points, once completed, result in incremental pipeline revenues, subject to the minimum volume commitments and other terms of the throughput and deficiency commercial agreement with Delek Holdings, entered into in connection with this Acquisition. As of March 31, 2022 and March 31, 2021, the Partnership had $4.2 million and $28.4 million remaining commitments under the Receipt Point construction provision of the Permian Gathering System Acquisition agreement. Additionally, both Delek Holdings and the Partnership continue to identify and secure dedicated acreage and producer agreements that require construction of receipt points and also provide the opportunity for additional pipeline volumes, but that are not required under the original commitment. Related to these incremental agreements, the Partnership has begun
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Notes to Condensed Consolidated Financial Statements (Unaudited)
construction or otherwise separately committed to construct receipt points where the estimated remaining costs to complete totaled $45.8 million as of March 31, 2022, all of which is expected to be expended during 2022.

Note 13 - Leases
We lease certain pipeline and transportation equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.
Our leases do not have any outstanding renewal options. Certain leases also include options to purchase the leased equipment.
Certain of our lease agreements include rates based on equipment usage and others include rate inflationary indices based increases. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The following table presents additional information related to our operating leases in accordance ASC 842:
Three Months Ended March 31,
(in thousands)20222021
Lease Cost (1)
Operating lease cost$2,641 $2,744 
Short-term lease cost319 147 
Variable lease costs936  
Total lease cost$3,896 $2,891 
Other Information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$(2,641)$(2,744)
Leased assets obtained in exchange for new operating lease liabilities$ $2,623 
Three Months Ended March 31,
20222021
Weighted-average remaining lease term (years) for operating leases3.23.5
Weighted-average discount rate (2) operating leases
5.8 %5.9 %
Weighted-average remaining lease term (years) for financing lease1.92.7
Weighted-average discount rate (2) financing lease
1.9 %1.8 %
(1) Includes an immaterial amount of financing lease.
(2) Our discount rate is primarily based on our incremental borrowing rate in accordance with ASC 842.     

Note 14 - Subsequent Events
Distribution Declaration
On April 25, 2022, our general partner's board of directors declared a quarterly cash distribution of $0.98 per unit, payable on May 12, 2022, to unitholders of record on May 5, 2022.
Planned 3 Bear Energy - New Mexico, LLC Acquisition
On April 8, 2022, DKL Delaware Gathering, LLC (the “Purchaser”), a subsidiary of the Partnership, entered into a Membership Interest 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 (the “Purchased Interests”), related to Seller’s crude oil and gas gathering, processing and transportation businesses, as well as water disposal and recycling operations, in the Delaware Basin in New Mexico (the “Purchase Agreement”). The Partnership also entered into a guaranty agreement with the Seller in order to guaranty the payment obligations of the Purchaser under the Purchase Agreement.
The purchase price for the Purchased Interests is $624.7 million, subject to customary adjustments under the Purchase Agreement for net working capital and indebtedness. The Purchaser paid a deposit under the Purchase Agreement of approximately $31.2 million. The deposit may be retained by the Seller upon certain termination events described in the Purchase Agreement. At closing, the deposit will be applied to the purchase price to be paid under the Purchase Agreement.
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Notes to Condensed Consolidated Financial Statements (Unaudited)
The transactions contemplated by the Purchase Agreement are expected to close around mid-year 2022. The closing is subject to customary closing conditions set forth in the Purchase Agreement, including regulatory approvals. The Purchase Agreement also contains representations and warranties of the parties, indemnification obligations, termination rights, and other covenants and agreements.
Shelf Registration Statement
On April 14, 2022, we filed a shelf registration statement with the SEC, which was declared effective on April 29, 2022, which provides the Partnership the ability to offer up to $200.0 million of our common limited partner units from time to time and through one or more methods of distribution, subject to market conditions and our capital needs.


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Management's Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is management’s analysis of our financial performance and of significant trends that may affect our future performance. The MD&A should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and in the Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission ("SEC") on February 25, 2022 (the "Annual Report on Form 10-K"). Those statements in the MD&A that are not historical in nature should be deemed forward-looking statements that are inherently uncertain. See "Forward-Looking Statements" below for a discussion of the factors that could cause actual results to differ materially from those projected in these statements.
Unless otherwise noted or the context requires otherwise, references in this report to "Delek Logistics Partners, LP," the "Partnership," "we," "us," "our," or like terms, may refer to Delek Logistics Partners, LP, one or more of its consolidated subsidiaries or all of them taken as a whole. Unless otherwise noted or the context requires otherwise, references in this report to "Delek Holdings" refer collectively to Delek US Holdings, Inc. and any of its subsidiaries, other than the Partnership and its subsidiaries and its general partner.
On April 8, 2022, DKL Delaware Gathering, LLC (the “Purchaser”), a subsidiary of the Partnership, entered into a Membership Interest 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 (the “Purchased Interests”), related to Seller’s crude oil and gas gathering, processing and transportation businesses, as well as water disposal and recycling operations, in the Delaware Basin in New Mexico (the “Purchase Agreement”). The Partnership also entered into a guaranty agreement with the Seller in order to guaranty the payment obligations of the Purchaser under the Purchase Agreement. See Note 14 for further information.
The Partnership announces material information to the public about the Partnership, its products and services and other matters through a variety of means, including filings with the Securities and Exchange Commission, press releases, public conference calls, the Partnership's website (www.deleklogistics.com), the investor relations section of the website (ir.deleklogistics.com), the news section of its website (www.deleklogistics.com/news), and/or social media, including its Twitter account (@DelekUSLogistics). The Partnership encourages investors and others to review the information it makes public in these locations, as such information could be deemed to be material information. Please note that this list may be updated from time to time.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements reflect our current estimates, expectations and projections about our future results, performance, prospects and opportunities. Forward-looking statements include, among other things, statements regarding the effect, impact, potential duration or other implications of, or expectations expressed with respect to, the COVID-19 Pandemic and the actions of members of the Organization of Petroleum Exporting Countries ("OPEC") and other leading oil producing countries (together with OPEC, "OPEC+") with respect to oil production and pricing, and statements regarding our efforts and plans in response to such events, the information concerning our possible future results of operations, business and growth strategies, financing plans, expectations that regulatory developments or other matters will not have a material adverse effect on our business or financial condition, our competitive position and the effects of competition, the projected growth of the industry in which we operate, the benefits and synergies to be obtained from our completed and any future acquisitions, statements of management’s goals and objectives, and other similar expressions concerning matters that are not historical facts. Words such as “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “appears,” “projects” and similar expressions, as well as statements in future tense, identify forward-looking statements.
Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking information is based on information available at the time and/or management’s good faith belief with respect to future events, and is subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements. Important factors that, individually or in the aggregate, could cause such differences include, but are not limited to:
our substantial dependence on Delek Holdings or its assignees and their support of and respective ability to pay us under our commercial agreements;
our future coverage, leverage, financial flexibility and growth, and our ability to improve performance and achieve distribution growth at any level or at all;
Delek Holdings' future growth, financial performance, share repurchases, crude oil supply pricing and flexibility and product distribution;
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Management's Discussion and Analysis
industry dynamics, including Permian Basin growth, ownership concentration, efficiencies and takeaway capacity;
the age and condition of our assets and operating hazards and other risks incidental to transporting, storing and gathering crude oil, intermediate and refined products, including, but not limited to, costs, penalties, regulatory or legal actions and other effects related to spills, releases and tank failures;
changes in insurance markets impacting costs and the level and types of coverage available;
the timing and extent of changes in commodity prices and demand for refined products and the impact of the COVID-19 Pandemic on such demand;
the wholesale marketing margins we are able to obtain and the number of barrels of product we are able to purchase and sell in our West Texas wholesale business;
the suspension, reduction or termination of Delek Holdings' or its assignees' or third-party's obligations under our commercial agreements including the duration, fees or terms thereof;
the results of our investments in joint ventures;
the ability to secure commercial agreements with Delek Holdings or third parties upon expiration of existing agreements;
the possibility of inefficiencies, curtailments, or shutdowns in refinery operations or pipelines, whether due to infection in the workforce or in response to reductions in demand as a result of the COVID-19 Pandemic;
disruptions due to equipment interruption or failure, or other events, including terrorism, sabotage or cyber attacks, at our facilities, Delek Holdings’ facilities or third-party facilities on which our business is dependent;
changes in the availability and cost of capital of debt and equity financing;
our reliance on information technology systems in our day-to-day operations;
changes in general economic conditions, including uncertainty regarding the timing, pace and extent of economic recovery in the United States due to the COVID-19 Pandemic or future pandemics;
the effects of existing and future laws and governmental regulations, including, but not limited to, the rules and regulations promulgated by the Federal Energy Regulatory Commission ("FERC") and state commissions and those relating to environmental protection, pipeline integrity and safety as well as current and future restrictions on commercial and economic activities in response to the COVID-19 Pandemic;
significant operational, investment or other changes required by existing or future environmental statutes and regulations, including international agreements and national or regional legislation and regulatory measures to limit or reduce greenhouse gas emissions;
competitive conditions in our industry including capacity overbuild in areas where we operate;
actions taken by our customers and competitors;
the demand for crude oil, refined products and transportation and storage services;
our ability to successfully implement our business plan;
inability to complete growth projects on time and on budget;
our ability to successfully integrate acquired businesses;
disruptions due to acts of God, natural disasters, casualty losses, severe weather patterns, such as freezing conditions, cyber or other attacks on our electronic systems, and other matters beyond our control which might cause damage to our pipelines, terminal facilities and other assets and could impact our operating results through increased costs and/or loss of revenue;
changes in the price of RINs could affect our results of operations;
future decisions by OPEC+ regarding production and pricing and disputes between OPEC+ regarding such;
changes or volatility in interest and inflation rates;
labor relations;
large customer defaults;
changes in tax status and regulations;
the effects of future litigation or environmental liabilities that are not covered by insurance; and
other factors discussed elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K.
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Management's Discussion and Analysis
Many of the foregoing risks and uncertainties are, and will be, exacerbated by the COVID-19 Pandemic and any worsening of the global business and economic environment. In light of these risks, uncertainties and assumptions, our actual results of operations and execution of our business strategy could differ materially from those expressed in, or implied by, the forward-looking statements, and you should not place undue reliance upon them. In addition, past financial and/or operating performance is not necessarily a reliable indicator of future performance, and you should not use our historical performance to anticipate results or future period trends. We can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them do, what impact they will have on our results of operations and financial condition.
All forward-looking statements included in this report are based on information available to us on the date of this report. We undertake no obligation to revise or update any forward-looking statements as a result of new information, future events or otherwise.
Business Overview
The Partnership primarily owns and operates crude oil, intermediate and refined products logistics and marketing assets. We gather, transport, offload and store crude oil and intermediate products and market, distribute, transport and store refined products primarily in select regions of the southeastern United States and Texas for Delek Holdings and third parties. 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.
The Partnership is not a taxable entity for federal income tax purposes or the income taxes of those states that follow the federal income tax treatment of partnerships. Instead, for purposes of such income taxes, each partner of the Partnership is required to take into account its share of items of income, gain, loss and deduction in computing its federal and state income tax liabilities, regardless of whether cash distributions are made to such partner by the Partnership. The taxable income reportable to each partner takes into account differences between the tax basis and the fair market value of our assets and financial reporting bases of assets and liabilities, the acquisition price of the partner's units and the taxable income allocation requirements under the Partnership's Second Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement").
The economy continues to recover from the impact of the COVID-19 Pandemic, both globally and domestically. Improved consumer demand resulting from stabilization in cases of COVID-19 and decreasing mortality rates during much of the period and across much of the country, and corresponding to the availability of vaccines, have contributed to improvements in domestic refining margins. However, on February 24, 2022 Russia launched a military invasion on Ukraine (the "Russia-Ukraine war"). In response to the unprovoked invasion, among other sanctions imposed, many countries, including the US, have banned the import of Russian commodities, including oil and gas. Russia is one of the world's top oil and gas suppliers, responsible for providing more than 40% of the natural gas supply to Europe and more than 8% of the world's oil supply. To combat record high oil prices, the Biden administration recently announced the largest release of oil in U.S. history from the nation’s strategic stockpiles, followed by a smaller, but still sizable, release from European countries. While these events have contributed to additional uncertainty in the global market, it's impact on supply of crude oil and refined products has caused significant increases in demand for our customers' products which is expected to continue for much of 2022.
Management has actively responded to the continuing impact of these economic disruptions on our business. To the extent warranted, we continue to monitor the impact and implement measures to mitigate the risk. Such efforts include (but are not limited to) the following:
Reviewing planned production throughputs at our refineries and planning for optimization of operations;
Coordinating planned maintenance activities with possible downtime as a result of possible reductions in throughputs;
Searching for additional storage capacity if needed to store potential builds in crude oil or refined product inventories;
Finding additional suppliers for key or specialty items or securing inventory or priority status with existing vendors;
Continued monitoring of capital expenditures;
Suspending the share repurchase program and dividend distributions until our internal parameters are met for resuming such activities;
Adopting modified remote working where possible and when immediate exposure risk warrants, and where on-site operations are required, taking appropriate safety precautions;
Identifying alternative financing solutions as needed to enhance our access to sources of liquidity; and
Enacting cost reduction measures across the organization, including reducing contract services, reducing overtime and other employee related costs, and reducing or eliminating non-critical travel.
The combination of these efforts has served to mitigate other negative factors impacting our cash flows and operations, and has improved our liquidity positioning, operational flexibility and ability to respond to the continued economic impact of the COVID-19 Pandemic, the Russia-Ukraine War, and other events.
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Management's Discussion and Analysis
See also 'Risk Factors' in Part I, Item 1A. of our Annual Report on Form 10-K for further discussion of risks associated with the COVID-19 Pandemic.
Our Reporting Segments and Assets
Our business consists of three reportable segments:
Pipelines and Transportation
The assets and investments in our pipelines and transportation segment consist of pipelines, tanks, offloading facilities, trucks and ancillary assets, which provide crude oil gathering and crude oil, intermediate and refined products transportation and storage services primarily in support of Delek Holdings' refining operations in Tyler, Texas, El Dorado, Arkansas and Big Spring, Texas. Additionally, the assets in this segment provide crude oil transportation services to certain third parties. In providing these services, we do not take ownership of the products or crude oil that we transport or store. Therefore, we are not directly exposed to changes in commodity prices with respect to this operating segment.
Wholesale Marketing and Terminalling
The assets in our wholesale marketing and terminalling segment consist of refined products terminals and pipelines in Texas, Tennessee, Arkansas and Oklahoma. We generate revenue in our wholesale marketing and terminalling segment by providing marketing services for the refined products output of the Tyler and Big Spring refineries, engaging in wholesale activity at our terminals in West Texas and at terminals owned by third parties, whereby we purchase light products for sale and exchange to third parties, and by providing terminalling services at our refined products terminals to independent third parties and Delek Holdings.
Investments in Pipeline Joint Ventures
The Partnership owns a portion of three joint ventures (accounted for as equity method investments) that have constructed separate crude oil pipeline systems and related ancillary assets, which serve third parties and subsidiaries of Delek Holdings.
2022 Strategic Developments
Slurry Clarifying Services Agreement
We executed a series of agreements with DK Trading & Supply, LLC (“DKT&S”) and Alon Refining Krotz Springs, whereby the Partnership will operate and maintain a facility, located within the Krotz Springs, Louisiana refinery, to process slurry for DKT&S. Using a process that incorporates horizontal and vertical centrifuges, we will remove metals, ash, and other solids from the slurry. The clarified product can then be sold to DKT&S or one of its affiliates. As consideration for the processing services, we will receive a fixed rate per barrel processing fee in addition to a margin-based payment. The Partnership and DKT&S have agreed to a minimum delivery commitment volume to be processed in the facility. The initial term of the agreement is for a period of three years, and thereafter, will continue a year-to-year basis unless canceled by either party.
3 Bear Energy - New Mexico, LLC Acquisition
On April 8, 2022, DKL Delaware Gathering, LLC (the “Purchaser”), a subsidiary of the Partnership, entered into a Membership Interest 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 (the “Purchased Interests”), related to Seller’s crude oil and gas gathering, processing and transportation businesses, as well as water disposal and recycling operations, in the Delaware Basin in New Mexico (the “Purchase Agreement”). The Partnership also entered into a guaranty agreement with the Seller in order to guaranty the payment obligations of the Purchaser under the Purchase Agreement.
The purchase price for the Purchased Interests is $624.7 million, subject to customary adjustments under the Purchase Agreement for net working capital and indebtedness. The Purchaser paid a deposit under the Purchase Agreement of approximately $31.2 million. The deposit may be retained by the Seller upon certain termination events described in the Purchase Agreement. At closing, the deposit will be applied to the purchase price to be paid under the Purchase Agreement.
The transactions contemplated by the Purchase Agreement are expected to close around mid-year 2022. The closing is subject to customary closing conditions set forth in the Purchase Agreement, including regulatory approvals. The Purchase Agreement also contains representations and warranties of the parties, indemnification obligations, termination rights, and other covenants and agreements.
Expansion of connectors project
In connection with the Permian Gathering System Acquisition (formerly known as the Big Spring Gathering Acquisition), we agreed to expend $33.8 million to construct additional Receipt Points to our gathering pipeline at the request of Delek Holdings producers with which we have dedicated acreage agreements, to be owned and operated by the Partnership. Such Receipt Points, once completed, result in
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Management's Discussion and Analysis
incremental pipeline revenues, subject to the minimum volume commitments and other terms of the throughput and deficiency commercial agreement with Delek Holdings, entered into in connection with this Acquisition. Additionally, both Delek Holdings and the Partnership continue to identify and secure dedicated acreage and producer agreements that require construction of receipt points and also provide the opportunity for additional pipeline volumes, but that are not required under the original commitment. Related to these incremental agreements, the Partnership has begun construction or otherwise separately committed