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spk06: Welcome to the DELIC Logistics second quarter 2022 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist 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 a touch-tone phone. 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 Blake Fernandez. Please go ahead.
spk01: Good morning. I would like to thank everyone for joining us on this webcast to discuss Delic Logistics Partners' second quarter 22 financial results. Joining me on today's call will be Uzi Amin, our general partner's chairman, Avigal Surak, president, Ruben Spiegel, CFO, and 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 trends 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, and Form 10-K or quarterly report on Form 10-Q filed with the SEC, along with the press release associated with this call. The company assumes no obligation to update any forward-looking statements or information which speak as of their respective dates. On today's call, we'll begin with comments from both Uzi and Avigol, then Reuven will provide a financial overview, and I will review results, and then we'll have Q&A session. With that, I'll turn the call to Uzi. Thanks, Blake, and good morning, everybody.
spk05: DKL has delivered consistent results through various business cycles. Elevated global commodity prices and geopolitical unrest underscore the benefits, and reliance upon traditional energy assets, including midstream infrastructure. DKL is well positioned to benefit from increasing activity in the Permian Basin, and the three bear assets offer additional growth opportunities, both geographically and in new product lines. The significant increase in third-party revenue from the transaction helps propel DKL toward more of a true standalone entity. This should help distinguish DKL from other sponsor-based MLPs and attract capital with a diminishing number of MLP investment options. The company is positioned well, and this is an opportune time to hand the reins to our new president, Avigal Sorek.
spk08: Thank you, Uzi, and it's great to be back at ELEC. Unit holder returns have been a critical part of the DKL story since going public. We increased the quarterly distribution 38 times in a row, and we remain on track to deliver a 5% increase year over year. On an annual basis, this puts our dividend yield around 7%. On June 1st, we closed the Free Bear acquisition. I would like to welcome the Free Bear team to the Delac family. This is an exciting addition to our portfolio that adds increased third-party revenue, expanded product mix into natural gas and water, and widens our footprint into the Delaware basin. On our legacy permanent gathering system, we continue to see a strong demand from producer and expect ongoing volume increases. The outlook remains solid, and we are focused on operating the asset safely and reliably while integrating the new three bear assets. I'm looking forward to working closely with our team to continue to produce positive results for our unit holders and maximize the value of the company. Finally, I would like to thank Uzi for many years of leadership and mentorship. With that, I will turn the call over to Uri.
spk07: Thank you, Avigal. Our distributable cash flow, as adjusted for three bear transaction costs, was approximately $56 million in the second quarter of 2022. That compared to $54 million in the second quarter of 2021. Our DCF coverage ratio, as adjusted for transaction costs, was 1.3 times for the second quarter compared to 1.32 times for the prior year period. EBITDA was $65 million, which includes $6.2 million of transaction costs associated with the three bear acquisitions. Our board approved an increase in the quarterly distribution to 98.5 cents per limited partner unit for the quarter ended June 30th. This distribution will be paid on August 11th to unit holders of record as of August 4th, 2022, and will remain on track to deliver our 5% target year-over-year. At June 30th, 2022, DKL had $119 million available capacity on our $1 billion credit facility. Our total debt was $1.5 billion, and the total leverage ratio was approximately 4.7 times, which is well within the 5.5 times currently allowable under our credit facility. Please note that the balance sheet reflects the three-year acquisition, which closed on June 1st. This resulted in an increase in the leverage ratio, which we expect to reduce over time. Now I will turn the call over to Blake to discuss the results.
spk01: Thanks, Reuben. In our pipelines and transportation segment, the second quarter 22 contribution margin was $48.4 million compared to $45.2 million in the second quarter of last year. The increase was primarily attributable to strong refinery utilization rates at Dellick U.S. In our wholesale marketing and terminaling segment, contribution margin was $16 million in the second quarter of this year compared to $19 million in the second quarter of last year. The decrease was primarily driven from lower margins in the West Texas wholesale business. During the second quarter of 22, equity income from our crude oil joint venture pipelines was approximately $7.1 million compared to $6.6 million in the prior year. This increase was mainly driven by strong volumes at both Caddo and Red River joint ventures. Moving to capital expenditures, we spent around $26.7 million in the second quarter of this year, which consisted of $26.3 million of growth spending and $400,000 for sustaining maintenance. The outlook for 22 includes total gross capital expenditures of $116 million, including $108 million of growth and $8 million of maintenance capital. This reflects the early closing of the three bear acquisition and additional growth opportunities in the legacy Permian gathering business. Based on strong producer demand, we now expect to double DPG volumes from the fourth quarter of 21 levels by the end of the third quarter of 22.
spk00: With that, operator, can you please open the call for questions?
spk06: Thank you. 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 are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.
spk11: Our first question comes from Michael Cosimano with Pickering Energy Partners.
spk06: Please go ahead.
spk04: Hey, good morning, everyone. I really just had one question on the doubling the permanent gathering volumes. You know, quarter to quarter, it looks like volumes were a little flat, so I was hoping you could talk through what that ramp looks like and maybe some of the drivers driving the big hockey stick, if you will, going into next quarter.
spk02: Sure, this is Odell. I think what you need to look at is both what we see both on the pipeline and also on the trucking. And this is also what we looked on both on Q4 and also what we expected to have in Q3. So if we're combining both the pipeline production along with also the trucking production, this is where we're getting into those labels.
spk03: Okay, got it. That's helpful.
spk10: Thank you. Thanks, Michael.
spk12: As we see no questions at this point, this concludes the question and answer session.
spk06: I would like to turn the conference back over to Abigail Torek for any closing remarks.
spk08: Thank you. So I would like to thank the investors of trusting in us and joining the call to the management here on the table that worked very hard on this quarter, the board, the big support of the board, and mostly our employees. Thank you so much, and we'll talk next quarter. Thank you.
spk11: The conference has now concluded.
spk06: Thank you for attending today's presentation. You may now disconnect. you Thank you. Good day and welcome to the DELIC Logistics second quarter 2022 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist 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 1 on a touch-tone phone. To withdraw your question, please press star, then 2. Please note this event is being recorded. I would now like to turn the conference over to Blake Fernandez. Please go ahead.
spk01: Good morning. I would like to thank everyone for joining us on this webcast to discuss Delic Logistics Partners' second quarter 22 financial results. Joining me on today's call will be Uzi Amin, our General Partners Chairman, Avagal Surak, President, Ruben Spiegel, CFO, and 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 trends 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, and Form 10-K, or quarterly report, form 10Q filed with the SEC, along with the press release associated with this call. The company assumes no obligation to update any forward-looking statements or information which speak as of their respective dates. On today's call, we'll begin with comments from both Uzi and Abigail, then Reuven will provide a financial overview, and I will review results, and then we'll have Q&A session. With that, I'll turn the call to Uzi. Thanks, Blake, and good morning, everybody.
spk05: DKL has delivered consistent results through various business cycles. Elevated global commodity prices and geopolitical unrest underscore the benefits and reliance upon traditional energy assets, including midstream infrastructure. DKL is well positioned to benefit from increasing activity in the Permian Basin and that we bear assets over additional growth opportunities, both geographically and in new product lines. The significant increase in third-party revenue from the transaction helps propel DKL toward more of a true standalone entity. This should help distinguish DKL from other sponsor-based MLPs and attract capital with a diminishing number of MLP investment options. The company is positioned well, and this is an opportune time to hand the reins to our new president, Avigal Sorek.
spk08: Thank you, Uzi, and it's great to be back at DELIC. Unit holder returns have been a critical part of the DKL story since going public. We increased the quarterly distribution 38 times in a row, and we remain on track to deliver a 5% increase year over year. On an annual basis, this puts our dividend yield around 7%. On June 1st, we closed the three bear acquisitions. I would like to welcome the TreeBear team to the Delac family. This is an exciting addition to our portfolio that adds increased third-party revenue, expanded product mix into natural gas and water, and widens our footprint into the Delaware Basin. On our legacy permanent gathering system, we continue to see a strong demand from producers and expect ongoing volume increases. the outlook remains solid and we are focused on operating the asset safely and reliably while integrating the new three bear assets. I'm looking forward to working closely with our team to continue to produce positive results for our unit holders and maximize the value of the company. Finally, I would like to thank Uzi for many years of leadership and mentorship. With that, I will turn the call over to Ruben.
spk07: Thank you, Abigail. Our distributable cash flow, as adjusted for three bear transaction costs, was approximately $56 million in the second quarter of 2022. That compared to $54 million in the second quarter of 2021. Our DCF coverage ratio, as adjusted for transaction costs, was 1.3 times for the second quarter compared to 1.32 times for the prior year period. EBITDA was 65 million, which includes 6.2 million of transaction costs associated with the three-year acquisition. Our board approved an increase in the quarterly distribution to 98.5 cents per limited partner unit for the quarter ended June 30th. This distribution will be paid on August 11th to unit holders of record as of August 4th, 2022, and will remain on track to deliver our 5% target year-over-year. At June 30th, 2022, DKL had $119 million available capacity on our $1 billion credit facility. Our total debt was $1.5 billion, and the total leverage ratio was approximately 4.7 times, which is well within the 5.5 times currently allowable under our credit facility. Please note that the balance sheet reflects the three-year acquisition, which closed on June 1st. This resulted in an increase in the leverage ratio, which we expect to reduce over time. Now I will turn the call over to Blake to discuss the results.
spk01: Thanks, Reuven. In our pipelines and transportation segment, the second quarter 22 contribution margin was $48.4 million compared to $45.2 million in the second quarter of last year. The increase was primarily attributable to strong refinery utilization rates at Delic US. In our wholesale marketing and terminaling segment, contribution margin was $16 million in the second quarter of this year compared to $19 million in the second quarter of last year. The decrease was primarily driven from lower margins in the West Texas wholesale business. During the second quarter of 22, equity income from our crude oil joint venture pipelines was approximately 7.1 million compared to 6.6 million in the prior year. This increase was mainly driven by strong volumes at both Caddo and Red River joint ventures. Moving to capital expenditures, we spent around $26.7 million in the second quarter of this year, which consisted of $26.3 million of growth spending and $400,000 for sustaining maintenance. The outlook for 22 includes total gross capital expenditures of $116 million, including $108 million of growth and $8 million of maintenance capital. This reflects the early closing of the three bear acquisition and additional growth opportunities in the legacy Permian gathering business. Based on strong producer demand, we now expect to double DPG volumes from the fourth quarter of 21 levels by the end of the third quarter of 22.
spk00: With that, operator, can you please open the call for questions?
spk12: Thank you.
spk06: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your hands before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Michael Cosimano with Pickering Energy Partners. Please go ahead.
spk04: Hey, good morning, everyone. I really just had one question on the doubling the permanent gathering volumes. You know, quarter to quarter, it looks like volumes were a little flat, so I was hoping you could talk through what that ramp looks like and maybe some of the drivers driving the big hockey stick, if you will, going into next quarter.
spk02: Sure, this is Odele. I think what you need to look at is both what we see both on the pipeline and also on the trucking. And this is also what we looked on both on Q4 and also what we expected to have in Q3. So if we're combining both the pipeline production along with also the trucking production, this is where we're getting into those labels.
spk03: Okay, got it. That's helpful. Thank you.
spk10: Thanks, Michael.
spk06: As we see no questions at this point, this concludes the question and answer session. I would like to turn the conference back over to Abigail Torek for any closing remarks.
spk08: Thank you. So I would like to thank the investors of trusting in us and joining the call to the management here around the table that worked very hard on this quarter, the board, the big support of the board, and mostly our employees. Thank you so much, and we'll talk next quarter. Thank you.
spk11: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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