Delek US Holdings Reports Second Quarter 2024 Results

• Net loss of $37.2 million or $(0.58) per share, adjusted net loss of $59.3 million or $(0.92) per share, adjusted EBITDA of $107.5 million

• Since the end of 1Q' 2024, we have successfully progressed our SOTP strategy:

Delek US (DK):

• Entered into an agreement to sell our retail assets for $385 million

• Signed a fuel supply agreement with FEMSA for ten years
  
  
  
  

Delek Logistics (DKL):

• DK & DKL agreed to amend and extend intercompany contracts for a period of up to seven years

• DK executed a drop-down of Wink to Webster ("W2W") into DKL

• DKL signed an agreement to acquire H2O Midstream, further adding to its third party cash flows

• DKL announced the final investment decision (FID) on a new gas processing plant
  
  
  
  

• Paid $16.0 million of dividends and increased regular quarterly dividend to $0.255 per share in July

Delek US Holdings, Inc. (NYSE:DK) ("Delek US", "Company") today announced financial results for its second quarter ended June 30, 2024.

"We are excited about the significant progress we have made on our `Sum of the Parts' efforts," said Avigal Soreq, President and Chief Executive Officer of Delek US. "We concluded the strategic review of our retail assets. Following the review, we have announced the sale of our retail business to FEMSA. Delek US & Delek Logistics executed on `win-win' contract amendments and extensions as well as drop-down of our interest in the Wink to Webster pipeline. A combination of our retail sale, drop-down of our interest in the Wink to Webster pipeline, and amendments & extensions of contracts between DK & DKL will allow for a cash infusion of over $500mm in DK with little to no loss in standalone DK EBITDA. At the same time, a combination of contract extensions, acquisition of Wink to Webster interest, new processing plant and acquisition of H2O Midstream will enable DKL to continue to have among the best combination of cash flow growth and distributions amongst its peers."

"Looking ahead, we will continue to execute on our priorities of running safe and reliable operations, making further progress on our strategic initiatives, and delivering shareholder value while maintaining our financial strength and flexibility," Soreq concluded.

For the intercompany transactions, Barclays was the exclusive financial advisor and Bradley Arant Boult Cummings LLP was the legal advisor to Delek US.

Delek US Results

Refining Segment

The refining segment Adjusted EBITDA was $42.1 million in the second quarter 2024 compared with $212.4 million in the same quarter last year, which reflects other inventory impacts of $14.6 million and $96.5 million for second quarter 2024 and 2023, respectively. The decrease over 2023 is primarily due to lower refining crack spreads, partially offset by higher sales volume. During the second quarter 2024, Delek US's benchmark crack spreads were down an average of 21.1% from prior-year levels.

Logistics Segment

The logistics segment Adjusted EBITDA in the second quarter 2024 was $100.6 million compared with $90.9 million in the prior year quarter. The increase over last year's second quarter was driven by strong contributions from Delaware Gathering systems in addition to annual rate increases.

Retail Segment

For the second quarter 2024, Adjusted EBITDA for the retail segment was $12.4 million compared with $15.0 million in the prior-year period. The decrease over 2023 is primarily due to decreased sales as a result of remodeling activities and decreased margins.

Corporate and Other Activity

Adjusted EBITDA from Corporate, Other and Eliminations was a loss of $(47.6) million in the second quarter 2024 compared with a loss of $(58.9) million in the prior-year period. The decreased losses were driven by lower employee related expenses.

Shareholder Distributions

On July 31, 2024, the Board of Directors approved the regular quarterly dividend of $0.255 per share that will be paid on August 19, 2024 to shareholders of record on August 12, 2024.

Liquidity

As of June 30, 2024, Delek US had a cash balance of $657.9 million and total consolidated long-term debt of $2,461.7 million, resulting in net debt of $1,803.8 million. As of June 30, 2024, Delek Logistics Partners, LP (NYSE:DKL) ("Delek Logistics") had $5.1 million of cash and $1,566.3 million of total long-term debt, which are included in the consolidated amounts on Delek US' balance sheet. Excluding Delek Logistics, Delek US had $652.8 million in cash and $895.4 million of long-term debt, or a $242.6 million net debt position.

Second Quarter 2024 Results | Conference Call Information

Delek US will hold a conference call to discuss its second quarter 2024 results on Tuesday, August 6, 2024 at 11:00 a.m. Central Time. Investors will have the opportunity to listen to the conference call live by going to www.DelekUS.com and clicking on the Investor Relations tab. Participants are encouraged to register at least 15 minutes early to download and install any necessary software. Presentation materials accompanying the call will be available on the investor relations tab of the Delek US website approximately ten minutes prior to the start of the call. For those who cannot listen to the live broadcast, the online replay will be available on the website for 90 days.

Investors may also wish to listen to Delek Logistics' (NYSE:DKL) second quarter 2024 earnings conference call that will be held on Tuesday August 6, 2024 at 11:30 a.m. Central Time and review Delek Logistics' earnings press release. Market trends and information disclosed by Delek Logistics may be relevant to the logistics segment reported by Delek US. Both a replay of the conference call and press release for Delek Logistics will be available online at www.deleklogistics.com.

About Delek US Holdings, Inc.

Delek US Holdings, Inc. is a diversified downstream energy company with assets in petroleum refining, logistics, pipelines, renewable fuels and convenience store retailing. The refining assets consist primarily of refineries operated in Tyler and Big Spring, Texas, El Dorado, Arkansas and Krotz Springs, Louisiana with a combined nameplate crude throughput capacity of 302,000 barrels per day. Pipeline assets include an ownership interest in the 650-mile Wink to Webster long-haul crude oil pipeline. The convenience store retail segment operates approximately 250 convenience stores in West Texas and New Mexico.

The logistics operations include Delek Logistics Partners, LP (NYSE:DKL). Delek Logistics Partners, LP is a growth-oriented master limited partnership focused on owning and operating midstream energy infrastructure assets. Delek US Holdings, Inc. and its subsidiaries owned approximately 72.6% (including the general partner interest) of Delek Logistics Partners, LP at June 30, 2024.

Safe Harbor Provisions Regarding Forward-Looking Statements

This press release contains forward-looking statements that are based upon current expectations and involve a number of risks and uncertainties. Statements concerning current estimates, expectations and projections about future results, performance, prospects, opportunities, plans, actions and events and other statements, concerns, or matters that are not historical facts are "forward-looking statements," as that term is defined under the federal securities laws. These statements contain words such as "possible," "believe," "should," "could," "would," "predict," "plan," "estimate," "intend," "may," "anticipate," "will," "if", "potential," "expect" or similar expressions, as well as statements in the future tense. These forward-looking statements include, but are not limited to, statements regarding throughput at the Company's refineries; crude oil prices, discounts and quality and our ability to benefit therefrom; cost reductions; growth; scheduled turnaround activity; projected capital expenditures and investments into our business; liquidity and EBITDA impacts from strategic and intercompany transactions; the performance and execution of our midstream growth initiatives, including the Permian Gathering System, the Red River joint venture and the Wink to Webster long-haul crude oil pipeline, and the flexibility, benefits and the expected returns therefrom; projected benefits of the Delaware Gathering Acquisition, renewable identification numbers ("RINs") waivers and tax credits and the value and benefit therefrom; cash and liquidity; emissions reductions; opportunities and anticipated performance and financial position.

Investors are cautioned that the following important factors, among others, may affect these forward-looking statements. These factors include, but are not limited to: uncertainty related to timing and amount of future share repurchases and dividend payments; risks and uncertainties with respect to the quantities and costs of crude oil we are able to obtain and the price of the refined petroleum products we ultimately sell, uncertainties regarding future decisions by the Organization of Petroleum Exporting Countries ("OPEC") regarding production and pricing disputes between OPEC members and Russia; risks and uncertainties related to the integration by Delek Logistics of the Delaware Gathering business following its acquisition; Delek US' ability to realize cost reductions; risks related to Delek US' exposure to Permian Basin crude oil, such as supply, pricing, gathering, production and transportation capacity; gains and losses from derivative instruments; risks associated with acquisitions and dispositions; risks and uncertainties with respect to the timing for closing and the possible benefits of the retail and H20 Midstream transactions; acquired assets may suffer a diminishment in fair value as a result of which we may need to record a write-down or impairment in carrying value of the asset; the possibility of litigation challenging renewable fuel standard waivers; changes in the scope, costs, and/or timing of capital and maintenance projects; the ability to grow the Permian Gathering System; the ability of the Red River joint venture to complete the expansion project to increase the Red River pipeline capacity; operating hazards inherent in transporting, storing and processing crude oil and intermediate and finished petroleum products; our competitive position and the effects of competition; the projected growth of the industries in which we operate; general economic and business conditions affecting the geographic areas in which we operate; and other risks described in Delek US' filings with the United States Securities and Exchange Commission (the "SEC"), including risks disclosed in our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other filings and reports with the SEC.

Forward-looking statements should not be read as a guarantee of future performance or results and will not 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. Delek US undertakes no obligation to update or revise any such forward-looking statements to reflect events or circumstances that occur, or which Delek US becomes aware of, after the date hereof, except as required by applicable law or regulation.

Non-GAAP Disclosures:

Our management uses certain "non-GAAP" operational measures to evaluate our operating segment performance and non-GAAP financial measures to evaluate past performance and prospects for the future to supplement our financial information presented in accordance with United States ("U.S.") Generally Accepted Accounting Principles ("GAAP"). These financial and operational non-GAAP measures are important factors in assessing our operating results and profitability and include:

• Adjusting items - certain identified infrequently occurring items, non-cash items, and items that are not attributable to or indicative of our on-going operations or that may obscure our underlying results and trends;
• Adjusted net income (loss) - calculated as net income (loss) attributable to Delek US adjusted for relevant Adjusting items recorded during the period;
• Adjusted net income (loss) per share - calculated as Adjusted net income (loss) divided by weighted average shares outstanding, assuming dilution, as adjusted for any anti-dilutive instruments that may not be permitted for consideration in GAAP earnings per share calculations but that nonetheless favorably impact dilution;
• Earnings before interest, taxes, depreciation and amortization ("EBITDA") - calculated as net income (loss) attributable to Delek US adjusted to add back interest expense, income tax expense, depreciation and amortization;
• Adjusted EBITDA - calculated as EBITDA adjusted for the relevant identified Adjusting items in Adjusted net income (loss) that do not relate to interest expense, income tax expense, depreciation or amortization, and adjusted to include income (loss) attributable to non-controlling interests;
• Refining margin - calculated as gross margin (which we define as sales minus cost of sales) adjusted for operating expenses and depreciation and amortization included in cost of sales;
• Adjusted refining margin - calculated as refining margin adjusted for other inventory impacts, net inventory LCM valuation loss (benefit) and unrealized hedging (gain) loss;
• Refining production margin - calculated based on the regional market sales price of refined products produced, less allocated transportation, Renewable Fuel Standard volume obligation and associated feedstock costs. This measure reflects the economics of each refinery exclusive of the financial impact of inventory price risk mitigation programs and marketing uplift strategies;
• Refining production margin per throughput barrel - calculated as refining production margin divided by our average refining throughput in barrels per day (excluding purchased barrels) multiplied by 1,000 and multiplied by the number of days in the period; and
• Net debt - calculated as long-term debt including both current and non-current portions (the most comparable GAAP measure) less cash and cash equivalents as of a specific balance sheet date.

We believe these non-GAAP operational and financial measures are useful to investors, lenders, ratings agencies and analysts to assess our ongoing performance because, when reconciled to their most comparable GAAP financial measure, they provide improved relevant comparability between periods, to peers or to market metrics through the inclusion of retroactive regulatory or other adjustments as if they had occurred in the prior periods they relate to, or through the exclusion of certain items that we believe are not indicative of our core operating performance and that may obscure our underlying results and trends. "Net debt," also a non-GAAP financial measure, is an important measure to monitor leverage and evaluate the balance sheet.

Non-GAAP measures have important limitations as analytical tools, because they exclude some, but not all, items that affect net earnings and operating income. These measures should not be considered substitutes for their most directly comparable U.S. GAAP financial measures. Additionally, because Adjusted net income or loss, Adjusted net income or loss per share, EBITDA and Adjusted EBITDA, Adjusted Refining Margin and Refining Production Margin or any of our other identified non-GAAP measures may be defined differently by other companies in its industry, Delek US' definition may not be comparable to similarly titled measures of other companies. See the accompanying tables in this earnings release for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures.

Significant Transactions During the Quarter Impacting Results:

Restructuring Costs

In 2022, we announced that we are progressing a business transformation focused on enterprise-wide opportunities to improve the efficiency of our cost structure. For the second quarter 2024, we recorded restructuring costs totaling $22.6 million ($17.5 million after-tax) associated with our business transformation. The second quarter 2024 included a $22.1 million impairment related to the decision to temporary idle the Crossett, Arkansas, Cleburne, Texas and New Albany, Mississippi biodiesel facilities, while we explore viable and sustainable alternatives. Our decision to idle these facilities was driven by the decline in the overall biodiesel market and aligns with our continued operational and cost optimization efforts. Restructuring costs of $22.1 million are recorded in asset impairment, $0.1 million are recorded in general and administrative expenses and $0.4 million are included in operating expenses in our consolidated statements of income.

Insurance and Settlement Recoveries

During the second quarter 2024, we received insurance and third party recoveries related to the fire events that occurred during 2021 and 2022, which unfavorably impacted our results in 2021 and 2022. For the three months ended June 30, 2024, we have recognized an additional $14.5 million ($11.2 million after-tax) of property recoveries, which were recorded in other operating income on the consolidated statement of income. These recoveries are not included as an Adjusting item in Adjusted net income and Adjusted EBITDA.

During the second quarter 2024, we received third party recoveries related to the fire events that occurred during 2021, which unfavorably impacted our results in 2021. For three months ended June 30, 2024, we recognized a gain of $10.6 million ($8.2 million after-tax) related to business interruption claims which were recorded in other operating income on the consolidated statement of income. Because business interruption losses are economic in nature rather than recognized, the related recoveries are included as an Adjusting item in Adjusted net income and Adjusted EBITDA. We have additional claims that are outstanding and still pending which could be recognized in future quarters.

Property Settlement

On June 27, 2024, we settled a dispute that was in litigation related to a property that we historically operated as an asphalt and marine fuel terminal both as an owner and, subsequently, as a lessee under an in-substance lease agreement (the "License Agreement"). The settlement included the purchase of the property for $10.0 million and $42.0 million for settlement of the litigation for a total of $52.0 million. As a result of the termination of the License Agreement, we are no longer obligated to remove equipment from the property for certain development activities and as a result we reversed the $17.9 million asset retirement obligation recorded in connection with the Delek/Alon Merger, effective July 1, 2017. Additionally, as a result of the settlement we reduced the non-contingent guarantee and environmental liability which resulted in a gain of $77.5 million. The net gain from this settlement totaled $53.4 million and is recorded in other operating income, net in the condensed consolidated statements of income.

Other Inventory Impact

"Other inventory impact" is primarily calculated by multiplying the number of barrels sold during the period by the difference between current period weighted average purchase cost per barrel directly related to our refineries and per barrel cost of materials and other for the period recognized on a first-in, first-out basis directly related to our refineries. It assumes no beginning or ending inventory, so that the current period average purchase cost per barrel is a reasonable estimate of our market purchase cost for the current period, without giving effect to any build or draw on beginning inventory. These amounts are based on management estimates using a methodology including these assumptions. However, this analysis provides management with a means to compare hypothetical refining margins to current period average crack spreads, as well as provides a means to better compare our results to peers.