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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 ended9/30/2022
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-20220930_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 October 28, 2022, there were 43,492,179 common limited partner units outstanding.


Table of Contents
Delek Logistics Partners, LP
Quarterly Report on Form 10-Q
For the Quarterly Period Ended September 30, 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)
September 30, 2022December 31, 2021
ASSETS
Current assets:  
Cash and cash equivalents$14,945 $4,292 
Accounts receivable53,351 15,384 
Inventory2,490 2,406 
Other current assets2,424 951 
Total current assets73,210 23,033 
Property, plant and equipment:  
Property, plant and equipment1,178,334 715,870 
Less: accumulated depreciation(302,734)(266,482)
Property, plant and equipment, net875,600 449,388 
Equity method investments 248,005 250,030 
Customer relationship intangible, net203,966  
Marketing contract intangible, net111,169 116,577 
Rights-of-way55,230 37,280 
Goodwill26,609 12,203 
Operating lease right-of-use assets24,329 20,933 
Other non-current assets20,122 25,627 
Total assets$1,638,240 $935,071 
LIABILITIES AND DEFICIT  
Current liabilities: 
Accounts payable$53,053 $8,160 
Accounts payable to related parties173,170 64,423 
Interest payable18,012 5,024 
Excise and other taxes payable6,759 5,280 
Current portion of operating lease liabilities7,775 6,811 
Accrued expenses and other current liabilities7,189 7,117 
Total current liabilities265,958 96,815 
Non-current liabilities:  
Long-term debt1,448,772 898,970 
Asset retirement obligations9,152 6,476 
Operating lease liabilities, net of current portion11,798 14,071 
Other non-current liabilities16,817 22,731 
Total non-current liabilities1,486,539 942,248 
Equity (Deficit):
Common unitholders - public; 9,180,901 units issued and outstanding at September 30, 2022 (8,774,053 at December 31, 2021)
168,911 166,067 
Common unitholders - Delek Holdings; 34,311,278 units issued and outstanding at September 30, 2022 (34,696,800 at December 31, 2021)
(283,168)(270,059)
Total deficit(114,257)(103,992)
Total liabilities and deficit $1,638,240 $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 endedNine months ended
September 30,September 30,
2022202120222021
Net revenues:
   Affiliates (1)
$127,150 $123,519 $375,270 $308,435 
   Third party 166,875 66,108 392,086 202,583 
     Net revenues294,025 189,627 767,356 511,018 
Cost of sales: 
Cost of materials and other177,740 105,129 480,295 274,995 
Operating expenses (excluding depreciation and amortization presented below)25,065 17,073 62,892 46,286 
Depreciation and amortization19,067 9,666 41,876 29,393 
Total cost of sales221,872 131,868 585,063 350,674 
Operating expenses related to wholesale business (excluding depreciation and amortization presented below)836 515 2,105 1,741 
General and administrative expenses11,959 5,898 30,826 15,933 
Depreciation and amortization473 490 1,421 1,469 
Other operating (income) expense, net(132)273 (120)54 
Total operating costs and expenses235,008 139,044 619,295 369,871 
Operating income59,017 50,583 148,061 141,147 
Interest expense, net22,559 14,529 53,621 35,924 
Income from equity method investments (8,567)(7,261)(22,666)(17,952)
Other income, net(36)(115)(39)(118)
Total non-operating expenses, net13,956 7,153 30,916 17,854 
Income before income tax expense (benefit)45,061 43,430 117,145 123,293 
Income tax expense (benefit)387 (194)793 156 
Net income attributable to partners$44,674 $43,624 $116,352 $123,137 
Comprehensive income attributable to partners$44,674 $43,624 $116,352 $123,137 
Net income per limited partner unit:
Basic$1.03 $1.00 $2.68 $2.83 
Diluted$1.03 $1.00 $2.67 $2.83 
Weighted average limited partner units outstanding:
Basic43,485,779 43,454,535 43,477,801 43,447,739 
Diluted43,515,960 43,468,289 43,499,837 43,457,857 
Cash distributions per common limited partner unit$0.990 $0.950 $2.955 $3.800 
(1) See Note 3 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 June 30, 2022$168,611 $(285,070)$(116,459)
Cash distributions (1)
(9,229)(33,797)(43,026)
Net income attributable to partners
9,430 35,244 44,674 
Other
99 455 554 
Balance at September 30, 2022$168,911 $(283,168)$(114,257)
Common - Public Common - Delek HoldingsTotal
Balance at June 30, 2021$164,679 $(272,525)$(107,846)
Cash distributions(8,237)(32,661)(40,898)
Net income attributable to partners
8,745 34,879 43,624 
Other
94 273 367 
Balance at September 30, 2021$165,281 $(270,034)$(104,753)
Common - Public Common - Delek HoldingsTotal
Balance at December 31, 2021$166,067 $(270,059)$(103,992)
Cash distributions (1)
(26,779)(101,251)(128,030)
Net income attributable to partners24,543 91,809 116,352 
Delek Holdings unit sale to public5,110 (5,110)— 
Other(30)1,443 1,413 
Balance at September 30, 2022$168,911 $(283,168)$(114,257)
Common - Public Common - Delek HoldingsTotal
Balance at December 31, 2020$164,614 $(272,915)$(108,301)
Cash distributions(24,153)(96,246)(120,399)
Net income attributable to partners24,673 98,464 123,137 
Other147 663 810 
Balance at September 30, 2021$165,281 $(270,034)$(104,753)

(1) Cash distributions include $0.2 million related to distribution equivalents on vested phantom units for the three and nine months ended September 30, 2022.











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)
Nine Months Ended September 30,
20222021
Cash flows from operating activities:
Net income$116,352 $123,137 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization43,297 30,862 
Non-cash lease expense13,584 6,967 
Amortization of customer contract intangible assets5,408 5,408 
Amortization of deferred revenue(1,332)(1,475)
Amortization of deferred financing costs and debt discount2,743 2,169 
Income from equity method investments (22,666)(17,952)
Dividends from equity method investments 22,954 14,849 
Other non-cash adjustments1,784 1,413 
Changes in assets and liabilities:  
Accounts receivable(9,108)(2,745)
Inventories and other current assets1,260 109 
Accounts payable and other current liabilities18,875 12,323 
Accounts receivable/payable to related parties108,747 47,483 
Non-current assets and liabilities, net(4,416)(272)
Net cash provided by operating activities297,482 222,276 
Cash flows from investing activities:  
Purchases of property, plant and equipment(76,852)(12,352)
Business Combination, net of cash acquired(625,413) 
Proceeds from sales of property, plant and equipment 143 275 
Purchases of intangible assets(4,702)(746)
Distributions from equity method investments1,737 6,245 
Equity method investment contributions (1,393)
Net cash used in investing activities(705,087)(7,971)
Cash flows from financing activities:  
Distributions to common unitholders - public(26,779)(24,153)
Distributions to common unitholders - Delek Holdings(101,251)(96,246)
Proceeds from revolving credit facility966,300 236,000 
Payments on revolving credit facility(417,400)(721,700)
Proceeds from issuance of senior notes 400,000 
Deferred financing costs paid(701)(6,216)
Payments on financing lease liabilities(1,911)(1,369)
Net cash provided by (used) in financing activities418,258 (213,684)
Net increase in cash and cash equivalents10,653 621 
Cash and cash equivalents at the beginning of the period4,292 4,243 
Cash and cash equivalents at the end of the period$14,945 $4,864 
Supplemental disclosures of cash flow information:  
Cash paid during the period for:  
Interest$37,890 $19,170 
Income taxes$43 $ 
Non-cash investing activities:  
(Decrease) increase in accrued capital expenditures and other$(1,019)$1,638 
Non-cash financing activities:
Non-cash lease liability arising from obtaining right of use assets during the period$9,553 $8,750 
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, 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”), 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 “3 Bear Acquisition”). The 3 Bear Acquisition was completed on June 1, 2022 (the "Acquisition Date"). See Note 2 for further information.
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.
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
Certain prior period amounts have been reclassified in order to conform to the current period presentation.
Accounting Pronouncements Not Yet Adopted
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 adoption of this guidance will not have a material impact on the Partnership's condensed consolidated financial statements and related disclosures.

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Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 2 - Acquisitions
3 Bear Acquisition
We completed the 3 Bear 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 3 Bear Acquisition was $628.1 million. The 3 Bear Acquisition was financed through a combination of cash on hand and borrowings under the DKL Credit Facility.
For the three and nine months ended September 30, 2022, we incurred $4.2 million and $10.6 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.
Our consolidated financial and operating results reflect the 3 Bear Acquisition operations beginning June 1, 2022. Our results of operations included revenue and net income of $60.9 million and $8.3 million, respectively, for the three months ended September 30, 2022 and $81.5 million and $9.8 million, respectively, for the nine months ended September 30, 2022.
The 3 Bear 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.
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)
3,390 
Less: closing indebtedness (as defined in the 3 Bear Purchase Agreement)
(80,618)
Cash paid for the adjusted purchase price547,472 
Cash paid to payoff 3 Bear credit agreement (as defined in the 3 Bear Purchase Agreement)80,618 
Purchase price$628,090 

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Notes to Condensed Consolidated Financial Statements (Unaudited)
Purchase Price Allocation
The following table summarizes the preliminary fair values of assets acquired and liabilities assumed in the 3 Bear Acquisition as of June 1, 2022 (in thousands):
Assets acquired:
Cash and cash equivalents$2,677 
Accounts receivables, net28,859 
Inventories1,831 
Other current assets986 
Property, plant and equipment382,800 
Operating lease right-of-use assets7,427 
Goodwill14,406 
Customer relationship intangible, net (1)
210,000 
Rights-of-way (1)
13,490 
Other non-current assets500
Total assets acquired662,976 
Liabilities assumed:
Accounts payable8,020 
Accrued expenses and other current liabilities22,145 
Current portion of operating lease liabilities1,029 
Asset retirement obligations2,261 
Operating lease liabilities, net of current portion1,431 
Total liabilities assumed34,886 
Fair value of net assets acquired$628,090 
(1)The acquired intangible assets amount includes the following identified intangibles:
Customer relationship intangible that is subject to amortization with a preliminary fair value of $210.0 million, which will be amortized over an 11.6-year useful life. We recognized amortization expense for the three and nine months ended September 30, 2022 is $4.5 million and $6.0 million, respectively. The estimated amortization is $18.0 million for each of the five succeeding fiscal years.    
Rights-of-way intangible that is subject to amortization with a preliminary fair value of $13.5 million, which will be amortized over the weighted-average useful life of 25.4 years. We recognized amortization expense for the three and nine months ended September 30, 2022 of $0.2 million. The estimated amortization is $0.6 million for each of the five succeeding fiscal years.
These fair value estimates are preliminary and therefore, the final fair value of assets acquired and liabilities assumed and the resulting effect on our financial position may change once all necessary information has become available, the final working capital adjustment is complete, and we finalize our valuations. To the extent possible, estimates have been considered and recorded, as appropriate, for the items above based on the information available as of September 30, 2022. We will continue to evaluate these items until they are satisfactorily resolved and adjust our purchase price allocation accordingly, within the allowable measurement period (not to exceed one year from the date of acquisition), as defined by Accounting Standards Codification ("ASC") 805, Business Combinations ("ASC 805").
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 3 Bear 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 3 Bear Acquisition is included in the 3 Bear operations segment.

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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 3 Bear 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 3 Bear 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 3 Bear 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 3 Bear Acquisition. The unaudited pro forma financial information is not necessarily indicative of the results of operations that would have been achieved had the 3 Bear 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.
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands, except per unit data)2022202120222021
Net sales$294,025 $235,521 $865,874 $618,547 
Net income attributable to partners$48,703 $37,174 $117,430 $86,894 
Net income per limited partner unit:
Basic income per unit$1.12 $0.86 $2.70 $2.00 
Diluted income per unit$1.12 $0.86 $2.70 $2.00 

Note 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:
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
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Notes to Condensed Consolidated Financial Statements (Unaudited)
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 nine months ended September 30, 2022. There were no reimbursements by Delek Holdings during the three months ended September 30, 2022, or three and nine months ended September 30, 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 September 30, 2022, there was no receivable from related parties for these matters and a nominal receivable from related parties for these matters as of December 31, 2021. These reimbursements are recorded as reductions to operating expense. There were no reimbursements for these matters in each of the three and nine month periods ended September 30, 2022. We were reimbursed a nominal amount for these matters in each of the three and nine month periods ended September 30, 2021.
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 and $1.2 million for the three and nine months ended September 30, 2022 and 2021, 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, 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 September 30,Nine Months Ended September 30,
2022202120222021
Revenues$127,150 $123,519 $375,270 $308,435 
Purchases from Affiliates$124,714 $89,852 $374,329 $229,810 
Operating and maintenance expenses
$16,478 $10,656 $39,741 $30,217 
General and administrative expenses
$4,556 $2,681 $10,708 $6,794 
Quarterly Cash Distributions
In February, May and August 2022, we paid quarterly cash distributions of $42.4 million, $42.6 million and $42.8 million, respectively, of which $33.8 million, $33.6 million and $33.8 million, respectively, were paid to Delek Holdings. In February, May and August 2021, we paid quarterly cash distributions of $39.5 million, $40.0 million and $40.8 million, respectively, of which $31.6 million, $32.0 million and $32.7 million, respectively, were paid to Delek Holdings. On October 25, 2022, our board of directors declared a quarterly cash distribution totaling $43.1 million, based on the available cash as of the date of determination, for the end of the third quarter of 2022, payable on November 10, 2022, of which $34.0 million is expected to be paid to Delek Holdings.
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Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 4 - Revenues
Within our pipeline and transportation and wholesale marketing and terminalling segments, 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 $1,178.3 million net property, plant, and equipment balance as of September 30, 2022, $429.4 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.
As of the 3 Bear Acquisition, our revenue-generating activities include crude oil and natural gas gathering, processing and transportation operations, as well as water disposal and recycling operations, with third parties in the Delaware Basin of New Mexico. For natural gas gathering and processing contracts in which we perform midstream services and also purchase the processed products, we determine if the economic control of the commodities has passed from the producer to us, before or after we perform our services (if at all), to determine whether we are principal or agent in the ultimate sale of the processed product. As a result of these activities, we generate two principal types of revenues:
Product sales revenue - comprised of residual products as a result of our gathering services where 3 Bear meets the definition of the principal rather than an agent, and where such revenue is recognized upon satisfaction of the performance obligation, which is generally upon delivery
Gathering services revenue - comprised of fees charged for one or more of the following services: gathering, processing and transportation of natural gas; gathering, transportation and storage of NGLs; gathering, recycling and disposal of wastewater; and transportation, storage and distribution of crude oil, refined products and other hydrocarbon-based products. The contractual fees are generally related to the volume of natural gas, NGLs, water, crude oil or refined products that are gathered, transported, stored or processed and therefore is not directly impacted by commodity prices.
The following tables represent a disaggregation of revenue for the pipeline and transportation and wholesale marketing and terminalling segments for the periods indicated (in thousands):
Three Months Ended September 30, 2022
Pipelines and Transportation Wholesale Marketing and Terminalling 3 Bear OperationsConsolidated
Service Revenue - Third Party$5,883 $ $10,857 $16,740 
Service Revenue - Affiliate (1)
4,050 9,075  13,125 
Product Revenue - Third Party 102,703 47,432 150,135 
Product Revenue - Affiliate 24,185 2,593 26,778 
Lease Revenue - Affiliate 75,345 11,902  87,247 
Total Revenue$85,278 $147,865 $60,882 $294,025 
(1) Net of $1.8 million of amortization expense for the three months ended September 30, 2022, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.
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Notes to Condensed Consolidated Financial Statements (Unaudited)
Three Months Ended September 30, 2021
Pipelines and TransportationWholesale Marketing and Terminalling Consolidated
Service Revenue - Third Party$5,323 $139 $5,462 
Service Revenue - Affiliate (1)
4,484 9,241 13,725 
Product Revenue - Third Party 60,645 60,645 
Product Revenue - Affiliate 34,325 34,325 
Lease Revenue - Affiliate 66,395 9,075 75,470 
Total Revenue$76,202 $113,425 $189,627 
(1) Net of $1.8 million of amortization expense for the three months ended September 30, 2021, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.
Nine Months Ended September 30, 2022
Pipelines and Transportation Wholesale Marketing and Terminalling 3 Bear OperationsConsolidated
Service Revenue - Third Party$15,978 $ $15,457 $31,435 
Service Revenue - Affiliate (1)
12,065 25,863  37,928 
Product Revenue - Third Party 300,177 60,474 360,651 
Product Revenue - Affiliate 82,774 5,555 88,329 
Lease Revenue - Affiliate 213,646 35,367  249,013 
Total Revenue$241,689 $444,181 $81,486 $767,356 
(1) Net of $5.4 million of amortization expense for the nine months ended September 30, 2022, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.
Nine Months Ended September 30, 2021
Pipelines and TransportationWholesale Marketing and Terminalling Consolidated
Service Revenue - Third Party$12,021 $358 $12,379 
Service Revenue - Affiliate (1)
9,505 25,877 35,382 
Product Revenue - Third Party 190,204 190,204 
Product Revenue - Affiliate 54,453 54,453 
Lease Revenue - Affiliate 190,086 28,514 218,600 
Total Revenue$211,612 $299,406 $511,018 
(1) Net of $5.4 million of amortization expense for the nine months ended September 30, 2021, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.
As of September 30, 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 September 30, 2022 were as follows (in thousands):
Remainder of 2022$74,716 
2023291,514 
2024209,108 
2025183,804 
2026 and thereafter604,928 
Total expected revenue on remaining performance obligations$1,364,070 

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Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 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 September 30, 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 September 30, 2022 is November 10, 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 September 30,Nine Months Ended September 30,
2022202120222021
Net income attributable to partners$44,674 $43,624 $116,352 $123,137 
Less: Limited partners' distribution43,057 41,286 128,493 122,100 
Earnings in excess (deficit) of distributions$1,617 $2,338 $(12,141)$1,037 
Limited partners' earnings on common units:
Distributions$43,057 $41,286 $128,493 $122,100 
Allocation of earnings in excess (deficit) of distributions1,617 2,338 (12,141)1,037 
Total limited partners' earnings on common units$44,674 $43,624 $116,352 $123,137 
Weighted average limited partner units outstanding:
Basic43,485,779 43,454,535 43,477,801 43,447,739 
Diluted 43,515,960 43,468,289 43,499,837 43,457,857 
Net income per limited partner unit:
Basic$1.03 $1.00 $2.68 $2.83 
Diluted (1)
$1.03 $1.00 $2.67 $2.83 
(1) Outstanding common units totaling 3,862 were excluded from the diluted earnings per unit calculation for the nine months ended September 30, 2022. There were no outstanding common units excluded from the diluted earnings per unit calculation for the three and nine months ended September 30, 2021.

Note 6 - Inventory
Inventories consisted of $2.5 million and $2.4 million of refined petroleum products as of September 30, 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 7 - Long-Term Obligations
Outstanding borrowings, net of unamortized debt discounts and certain deferred financing costs, under the Partnership’s existing debt instruments are as follows (in thousands):
September 30, 2022December 31, 2021
Delek Logistics 2028 Notes (1)
$394,968 $394,302 
Delek Logistics Credit Facility (2)
806,405 258,000 
Delek Logistics 2025 Notes (3)
247,399 246,668 
 $1,448,772 $898,970 
(1)Net of deferred financing costs of $5.0 million and $5.7 million at September 30, 2022 and December 31, 2021, respectively.
(2)Net of deferred financing costs of $0.5 million at September 30, 2022.
(3)Net of deferred financing costs of $2.0 million and $2.5 million and debt discount of $0.6 million and $0.8 million at September 30, 2022 and December 31, 2021, respectively.
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Notes to Condensed Consolidated Financial Statements (Unaudited)
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, 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 September 30, 2022, we had $400.0 million in outstanding principal amount under the 2028 Notes, and the effective interest rate was 7.40%.
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 Secured Overnight Financing Rate ("SOFR"), 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 September 30, 2022, the weighted average interest rate for our borrowings under the facility was approximately 5.64%. Additionally, the DKL Credit Facility requires us to pay a leverage ratio dependent quarterly fee on the average unused revolving commitment. As of September 30, 2022, this fee was 0.50% per year.
In August 2020, the Partnership entered into a First Amendment to the DKL Credit Facility which, among other things, permitted the transfer of cash and equity consideration for the elimination of incentive distribution rights held by Delek Logistics GP, LLC, our general partner. It also modified the total leverage ratio and the senior leverage ratio (each as defined in the DKL Credit Facility) calculations to reduce the total funded debt (as defined in the DKL Credit Facility) component thereof by the total amount of unrestricted consolidated cash and cash equivalents on the balance sheet of the Partnership and its subsidiaries up to $20.0 million.
In May 2022, the Partnership entered into Second and Third Amendments to the DKL Credit Facility which, among other things, provided for the transition from a LIBOR benchmark to a term Secured Overnight Financing Rate benchmark (“Term SOFR”) with credit spread adjustments for 1-month and 3-month Term SOFR loans, and provided consent and flexibility related to the previously announced 3 Bear Acquisition with respect to certain covenants in the DKL Credit Facility. We believe we were in compliance with all covenant requirements as of September 30, 2022.
Further, on May 26, 2022, the Partnership entered into a Fourth Amendment (the “Fourth Amendment”) to the DKL Credit Facility. Among other things, the Fourth Amendment: (i) increased the U.S. Revolving Credit Commitments (as defined in the DKL Credit Facility) by an amount equal to $150.0 million, for an aggregate amount of $