Delek US Holdings, Inc. (DK)

[pete807]

New article this morning:
https://seekingalpha.com/article/4127249-19-straight-distribution-hikes-10-percent-yield-will-coverage-improve-lp?auth_param=i4ud:1d1j02f:dba78d9b2ae2cee2b5fd5156bd783379&uprof=46

DKL is the "yieldco" arm of Delek US Holdings, (DK), its parent/sponsor- its logistics assets exist mainly to serve DK's petroleum refining assets and transportation services. In this type of arrangement, the parent/sponsor sells/drops down assets to the yieldco LP, which in turn funds these acquisitions via a combination of equity and debt. The yieldco usually has an attractive distribution yield in order to garner support for its publicly traded units. DKL and DK both share the same management, and DK owns 94.6% of the GP interest and a 61.5% interest in the LP's common units.
Delek Logistics Partners LP owns and operates logistics and marketing assets for crude oil and intermediate and refined products in the United States. It operates in two segments, Pipelines and Transportation, and Wholesale Marketing and Terminalling.

DKL is seemingly in transition, with management referencing the newly expanded dropdown inventory of its parent/sponsor (DK) as a catalyst for future growth, on the Q3 earnings call.

"(We) believe that the combination of increased dropdown inventory at our sponsor, contribution from our joint venture pipeline project and growth initiative should continue to support our annual distribution growth per limited partner unit of at least 10% through 2019."

DK acquired 81.6% of the assets of Alon USA Partners LP (ALDW) in Q3, and plans to close on the remaining 18.4% of the balance in Q1 2018.

A major part of the allure of this deal is the strengthening of DK's and DKL's positions in the highly active Permian Basin system - DK will become the seventh-largest independent refiner in the Permian.