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spk09: Good day and welcome to the DELIC Logistics Partners first quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. And to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Blake Fernandez. Please go ahead, sir. Good morning.
spk03: I would like to thank everyone for joining us on today's webcast to discuss Delos Logistics Partners' first quarter 22 financial results. Joining me on today's call will be Uzi Umeen, our general partner's chairman and CEO, and Reuven Spiegel, CFO, as well as other members of our management team. As a reminder, this conference call will contain forward-looking statements as that term is defined under federal securities laws including, without limitation, statements regarding guidance and future business outlook. These statements involve risks and uncertainties that may cause actual results or tend to differ materially from our forecast. For more information, please refer to the risk factors discussed in the company's most recent filing, annual report, or Form 10-K and Form 8-K filed with the SEC, along with the associated press release. The company assumes no obligation to update any forward-looking statements or information which speak of respective dates. On today's call, Ruben will begin with financial overview, I will review results, and Uzi will offer a few closing strategic remarks. With that, I will turn the call over to Ruben.
spk02: Thank you, Blake. Our distributable cash flow was approximately $52 million in the first quarter of 2022, compared to $53 million in the first quarter of 21. Our DCF coverage ratio was 1.21, for the first quarter compared to 1.31 in the prior year period. EBITDA was 66 million, which represents 12% increase over prior year period. Our board approved an increase in the quarterly distribution to 98 cents per limited partner unit for the quarter ended March 31st. This distribution will be paid on May 12th to unit holders of record on May 5th and represents 0.5% increase from the fourth quarter of 2021 and 6.5% increase from the first quarter of 2021. At March 31st, DKL had $586 million of available capacity on our $850 million credit facility. Our total debt was $906 million, and the total leverage ratio was approximately 3.3 times, which is well within the 5.25 times currently allowable under our credit facility. Now I will turn the call over to Blake to discuss the results.
spk03: Thanks, Ruben. In our pipelines and transportation segment, the first quarter 22 contribution margin was 43.2 million, which is broadly in line compared to 41.7 million in the first quarter of last year. In our wholesale marketing and terminaling segment, the contribution margin was 19 million for the first quarter of this year compared to 15 million in the first quarter of 21. The increase was primarily driven by stronger volumes in the big spring marketing and terminaling facilities. During the first quarter of 22, equity income from our crude oil joint venture pipelines was approximately $7 million compared to $4 million in the prior year period. This increase was largely driven by strong volumes at both Caddo and Red River joint ventures. Capital expenditures were approximately $9.1 million in the first quarter of 22, which consisted of $7 million of growth spending and $2.1 million of sustaining maintenance. The outlook for 22 includes total gross capital expenditures of $73 million, including $59 million of growth and 14 million of maintenance capital. As a reminder, growth capital is predominantly being allocated toward the Permian Gathering business. Please note, four-year guidance excludes capital associated with the Plan 3 bear acquisition in the second half of the year. With that, I will turn the call over to Uzi for his closing comments.
spk05: Thanks, Blake, and good morning, everybody. DKL is well positioned moving into 2022. Our legacy Permian Gathering business is seeing strong producer nominations where we expect to at least double volumes from the fourth quarter of last year to the fourth quarter of this year. This robust level of industry activity provided us with confidence to move forward with the planned acquisition of Three Bear. This acquisition provides us with multiple benefits, including more size and scale, significant increase in third-party fixed fee revenue, diversification into the Delaware portion of the Permanent Basin, and expanding our product mix into natural gas and work. We see this as an attractive valuation multiple, and the transaction is expected to be immediately accretive to our DCF ratio. Finally, the recent increase in the quarterly distribution of $0.98 per unit marks 37 consecutive quarters of distribution growth for our company. Based on macro indicators and the lack of planned maintenance at the Delacus refining system, we remain confident in our ability to continue rewarding our unit holders. With that, Operator, can you please open the call for questions?
spk08: Yes, sir.
spk09: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star then 2. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Spiro Dunas with Credit Suisse. Please go ahead.
spk07: Hi, this is Chad. I'm for Spiro. It sounds like financing three-bear acquisition will primarily be debt. So with leverage increasing in the future, are you targeting getting back near that 3.3 times leverage ratio reported in 1-2-22, or are you comfortable running leverage at a higher rate than that longer term?
spk05: That's a great question. Good morning. Let's take it into two phases. First of all, the leverage is going up because of the three bear acquisition, but the underlying business, because of the growth in the Permian and the gathering, and the fact that there's no maintenance in DK refineries, the leverage over the next year with the underlying business, the basic business, will be fine. Then that makes us comfortable with the three bear acquisition to be financed with debt. With that being said, we always say that we can go up, but then quickly try to deleverage like we did in the last two years after several drop-downs. So what we expect to happen is we will go up with the leverage and then... because of the performance of the business, because of the decay, refinery is performing well, and because of the growth in the premium, also in the three bear, we expect that leverage to come down.
spk07: Okay, that's helpful. And then just second question, does this financing change the way you think about the timing of drop-downs going forward, or is your prior messaging around the two identified asset drops still intact?
spk05: Well, we said all along that we need to look at Croats carefully, but the wing to Webster, we said that when it's going to be fully vetted and fully utilized, which we expect sometimes in 23, and of course, at that time, the differentials are starting to open, we expect this event to happen over the next 12 to 18 months. So sometimes in 2023, if things go the right way, we should expect the drop-down of W2W.
spk07: Okay, great. That's really helpful. Thanks for the time today.
spk09: Again, if you have a question, please press star, then 1. This concludes our question and answer session. I would like to turn the conference back over to Mr. Uzi Amin for any closing remarks. Please go ahead, sir.
spk05: Well, first, thank you for taking the time to talk to us this morning. I'd like to thank the people around the table, my colleagues. I'd like to thank the board of directors. I'd like to thank you investors for your interest and confidence in us as our performance both in and share performance looks really good.
spk04: But mostly I'd like to thank the employees of this great company that make it what it is. Thank you. Have a great morning.
spk09: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. you Good day and welcome to the Delic Logistics Partners first quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. And to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Blake Fernandez. Please go ahead, sir. Good morning.
spk03: I would like to thank everyone for joining us on today's webcast to discuss Delos Logistics Partners' first quarter 22 financial results. Joining me on today's call will be Uzi Umeen, our general partner's chairman and CEO, and Reuven Spiegel, CFO, as well as other members of our management team. As a reminder, this conference call will contain forward-looking statements, as that term is defined under federal securities laws including, without limitation, statements regarding guidance and future business outlook. These statements involve risks and uncertainties that may cause actual results or tend to differ materially from our forecast. For more information, please refer to the risk factors discussed in the company's most recent filing annual report for Form 10-K and Form 8-K filed with the SEC, along with the associated press release. The company assumes no obligation to update any forward-looking statements or information which speak of respective dates. On today's call, Ruben will begin with financial overview, I will review results, and Uzi will offer a few closing strategic remarks. With that, I will turn the call over to Ruben.
spk02: Thank you, Blake. Our distributable cash flow was approximately 52 million in the first quarter of 2022, compared to 53 million in the first quarter of 21. Our DCF coverage ratio was 1.21, for the first quarter compared to 1.31 in the prior year period. EBITDA was 66 million, which represents 12% increase over prior year period. Our board approved an increase in the quarterly distribution to 98 cents per limited partner unit for the quarter ended March 31st. This distribution will be paid on May 12th to unit holders of record on May 5th and represents 0.5% increase from the fourth quarter of 2021 and 6.5% increase from the first quarter of 2021. At March 31st, DKL had $586 million of available capacity on our $850 million credit facility. Our total debt was $906 million, and the total leverage ratio was approximately 3.3 times, which is well within the 5.25 times currently allowable under our credit facility. Now I will turn the call over to Blake to discuss the results.
spk03: Thanks, Ruben. In our pipelines and transportation segment, the first quarter 22 contribution margin was 43.2 million, which is broadly in line compared to 41.7 million in the first quarter of last year. In our wholesale marketing and terminaling segment, the contribution margin was 19 million for the first quarter of this year compared to 15 million in the first quarter of 21. The increase was primarily driven by stronger volumes in the big spring marketing and terminaling facilities. During the first quarter of 22, equity income from our crude oil joint venture pipelines was approximately $7 million compared to $4 million in the prior year period. This increase was largely driven by strong volumes at both Caddo and Red River joint ventures. Capital expenditures were approximately $9.1 million in the first quarter of 22, which consisted of $7 million of growth spending and $2.1 million of sustaining maintenance. The outlook for 22 includes total gross capital expenditures of $73 million, including $59 million of growth, and 14 million of maintenance capital. As a reminder, growth capital is predominantly being allocated toward the Permian Gathering business. Please note, four-year guidance excludes capital associated with the Plan 3 bear acquisition in the second half of the year. With that, I will turn the call over to Uzi for his closing comments.
spk05: Thanks, Blake, and good morning, everybody. DKL is well-positioned moving into 2022. Our legacy Permian Gathering business is seeing strong producer nominations where we expect to at least double volumes from the fourth quarter of last year to the fourth quarter of this year. This robust level of industry activity provided us with confidence to move forward with the planned acquisition of Three Bear. This acquisition provides us with multiple benefits, including more size and scale, significant increase in third-party fixed revenue, diversification into the Delaware portion of the Permanent Basin, and expanding our product mix into natural gas and work. We see this as an attractive valuation multiple, and the transaction is expected to be immediately accretive to our DCF ratios. Finally, the recent increase in the quarterly distribution of 98 cents per unit marks 37 consecutive quarters of distribution growth for our company. Based on macro indicators and the lack of planned maintenance at the Delacus refining system, we remain confident in our ability to continue rewarding our unit holders. With that, Operator, can you please open the call for questions?
spk08: Yes, sir.
spk09: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star then 2. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Spiro Dunas with Credit Suisse. Please go ahead.
spk07: Hi, this is Chad. I'm for Spiro. It sounds like financing three-bear acquisition will primarily be debt. So with leverage increasing in the future, are you targeting getting back near that 3.3 times leverage ratio reported in 1Q22, or are you comfortable running leverage at a higher rate than that longer term?
spk05: That's a great question. Good morning. Let's take it into two phases. First of all, the leverage is going up because of the three bear acquisition, but the underlying business, because of the growth in the Permian and the gathering, and the fact that there's no maintenance in DK refineries, the leverage over the next year with the underlying business, the basic business, will be fine. Then that makes us comfortable with the three bear acquisition to be financed with debt. With that being said, we always say that we can go up, but then quickly try to deleverage like we did in the last two years after several drop-downs. So what we expect to happen is we will go up with the leverage and then... because of the performance of the business, because of the decay, refinery is performing well, and because of the growth in the Permian, also in the three bear, we expect that leverage to come down.
spk07: Okay, that's helpful. And then just second question, does this financing change the way you think about the timing of drop-downs going forward, or is your prior messaging around the two identified asset drops still intact?
spk05: Well, we said all along that we need to look at Croats carefully, but the win to Webster, we said that it's going to be fully vetted and fully utilized, which we expect sometimes in 2023. And, of course, at that time... the differentials are starting to open, we expect this event to happen over the next 12 to 18 months. So sometimes in 2023, if things go the right way, we should expect the drop-down of W2W.
spk07: Okay, great. That's really helpful. Thanks for the time today.
spk09: Again, if you have a question, please press star, then 1. This concludes our question and answer session. I would like to turn the conference back over to Mr. Uzi Amin for any closing remarks. Please go ahead, sir.
spk05: Well, first, thank you for taking the time to talk to us this morning. I'd like to thank the people around the table, my colleagues. I'd like to thank the board of directors. I'd like to thank you investors for your interest and confidence in us as our performance both in In EBITDA and share performance, it looks really good.
spk04: But mostly I'd like to thank the employees of this great company that make it what it is. Thank you. Have a great morning.
spk09: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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