Delek Logistics Partners, LP Reports First Quarter 2017 Results
4:15 pm ET May 8, 2017 (Globe Newswire) Print
-- Increased drilling activity in the Permian Basin benefiting operations
-- Declared quarterly distribution of $0.69 per limited partner unit; increased by 13.1 percent year-over-year
-- Reported first quarter 2017 net cash from operating activities of $23.5 million and distributable cash flow of $20.6 million
Delek Logistics Partners, LP (NYSE:DKL) ("Delek Logistics") today announced its financial results for the first quarter 2017. For the three months ended March 31, 2017, Delek Logistics reported net income attributable to all partners of $14.6 million, or $0.43 per diluted common limited partner unit. This compares to net income attributable to all partners of $15.4 million, or $0.54 per diluted common limited partner unit, in the first quarter 2016. Distributable cash flow was $20.6 million in the first quarter 2017, compared to $20.4 million in the prior-year period.
For the first quarter 2017, earnings before interest, taxes, depreciation and amortization ("EBITDA") was $23.9 million compared to $23.7 million in the prior-year period. Improved performance in the wholesale marketing and terminalling segment, led by a higher gross margin per barrel in west Texas, were the primary factors offsetting the effect of lower performance on a year-over-year basis from the SALA Gathering System and the Paline Pipeline, as well as the effect of sixteen days of planned downtime at Delek US' Tyler, Texas refinery during the first quarter 2017.
Uzi Yemin, Chairman and Chief Executive Officer of Delek Logistics' general partner, remarked: "During the first quarter, our position in the Permian Basin benefited from increased drilling activity, which has translated into better margins in our west Texas wholesale operation and increased volumes on our RIO joint venture crude oil pipeline. Also, late in the first quarter, volume on the Paline Pipeline benefited from crude oil price differentials widening, as the price environment supported third party crude oil shipments to the Gulf Coast. The Caddo joint venture crude oil pipeline, which began operations in January, quickly increased throughput during the first quarter. We maintained financial flexibility, ending the quarter with approximately $301 million of capacity on our credit facility and a leverage ratio of 3.8 times. Our financial position supported the 13.1 percent year-over-year increase in our declared first quarter distribution."
Yemin concluded, "We have continued to experience the benefits from our Permian Basin position into the second quarter, as drilling activity and crude oil production have continued to increase. Once Delek US has successfully completed the acquisition of the remaining outstanding common stock of Alon USA Energy, Inc. that it does not already own, it should create additional growth opportunities through future potential drop downs and the ability to provide logistics support to a refining system with significant access to the Permian Basin. We remain focused on creating long term value for our unit holders, as we evaluate potential third party growth opportunities and partnering with Delek US. We anticipate that the financial flexibility provided by our balance sheet and focus on growth initiatives should support a distribution per limited partner unit increase of at least 10% annually through 2019."
Distribution and Liquidity
On April 24, 2017, Delek Logistics declared a quarterly cash distribution for the first quarter of $0.69 per limited partner unit, which equates to $2.76 per limited partner unit on an annualized basis. This distribution is expected to be paid on May 12, 2017 to unitholders of record on May 5, 2017. This represents a 1.5 percent increase from the fourth quarter 2016 distribution of $0.68 per limited partner unit, or $2.72 per limited partner unit on an annualized basis, and a 13.1 percent increase over Delek Logistics' first quarter 2016 distribution of $0.61 per limited partner unit, or $2.44 per limited partner unit annualized. For the first quarter 2017, the total cash distribution declared to all partners, including IDRs, was approximately $21.0 million. Based on the declared distribution for the first quarter 2017, the distributable cash flow coverage ratio for the first quarter was 0.98x.
As of March 31, 2017, Delek Logistics had total debt of approximately $392.0 million. Additional borrowing capacity, subject to certain covenants, under the $700.0 million credit facility was approximately $300.5 million.
Financial Results
Revenue for the first quarter 2017 was $129.5 million compared to $104.1 million in the prior year period. The increase in revenue is primarily due to higher prices in the west Texas wholesale business. On a year-over-year basis the performance from the operations was stable. Total operating expenses were $10.4 million, which was in line with $10.5 million in the first quarter 2016. Total segment contribution margin was $26.5 million in the first quarter of 2017 compared to $26.8 million in the first quarter 2016. General and administrative expenses were $2.8 million for the first quarter 2017, in line with $2.9 million in the prior-year period.
Pipelines and Transportation Segment
The contribution margin in the first quarter 2017 was $16.1 million compared to $20.3 million in the first quarter 2016. This change was primarily due to reduced performance in the Paline Pipeline. During the first quarter 2017, the Paline Pipeline was a FERC regulated pipeline with a tariff established for potential shippers, compared to the prior year period when the pipeline capacity was under contract with two third-parties for a monthly fee. Also, lower volume on the SALA Gathering System on a year-over-year basis was a factor in the change in contribution margin. Operating expenses were $8.2 million in the first quarter 2016 compared to $7.7 million in the prior year period.
Wholesale Marketing and Terminalling Segment
During the first quarter 2017, contribution margin was $10.4 million, compared to $6.6 million in the first quarter 2016. This increase was primarily due to improved performance in the west Texas wholesale operations and lower operating expenses on a year-over-year basis. Operating expenses decreased to $2.2 million in the first quarter 2017, compared to $2.7 million in the prior year period.
In the west Texas wholesale business, average throughput in the first quarter 2017 was 14,467 barrels per day compared to 14,370 barrels per day in the first quarter 2016. The wholesale gross margin in west Texas increased year-over-year to $2.72 per barrel and included approximately $1.1 million, or $0.86 per barrel, from renewable identification numbers (RINs) generated in the quarter. During the first quarter 2016, the wholesale gross margin was $0.53 per barrel and included $1.5 million from RINs, or $1.18 per barrel. On a year-over-year basis, the gross margin per barrel benefited from higher drilling activity in the Permian Basin that increased fuel demand and improved the supply/demand balance.
Average terminalling throughput volume of 114,900 barrels per day during the quarter decreased on a year-over-year basis from 118,218 barrels per day in the first quarter 2016 primarily due to lower throughput at the Tyler, Texas terminal. During the first quarter 2017, average volume under the east Texas marketing agreement with Delek US was 63,396 barrels per day compared to 66,414 barrels per day during the first quarter 2016. Both fees from the east Texas marketing agreement and Tyler terminal volumes were lower due to sixteen days of planned downtime at Delek US' Tyler, Texas refinery during the first quarter 2017.
