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Delek Logistics Partners, LP (DKL)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 results: Net revenues $246.35M, diluted EPS $0.83, GAAP EBITDA $90.1M, Adjusted EBITDA $120.9M; distribution raised to $1.115/unit (50th consecutive increase). Management reiterated confidence in FY Adjusted EBITDA guidance of $480–$520M and highlighted Libby 2 commissioning and stronger wholesale margins .
  • Versus estimates: Revenue missed S&P Global consensus ($246.35M vs $275.76M), while Adjusted EBITDA outpaced EBITDA consensus ($120.9M vs $119.3M); S&P shows normalized EPS beat (1.41 vs 1.19)*. Diluted EPS ($0.83) was below one Street forecast; stock dipped ~2.1% pre-market on mixed headline vs expectations .
  • Sequential/trend: Net income and CFO rose materially QoQ (CFO $107.4M vs $31.6M in Q1), supported by Libby 2 progress and increased wholesale margins; segment strength in Gathering & Processing (G&P) with acquisitions (H2O, Gravity) offsetting wholesale contract changes .
  • Liquidity/capital: Closed $700M 7.375% senior notes (due 2033), boosting liquidity to >$1B and revolving capacity (~$1.1B available); leverage ~4.32x at quarter-end .
  • Catalyst: Execution on Libby 2 ramp, sour gas treating/AGI progress, sustained distribution growth, and achieving FY guidance are key narratives likely to drive unit price and estimate revisions .

What Went Well and What Went Wrong

What Went Well

  • Adjusted EBITDA up 18% YoY to $120.9M, driven by H2O and Gravity operations, W2W dropdown impacts, and improved wholesale margins .
  • G&P segment Adjusted EBITDA rose to $78.0M (from $54.7M YoY) on incremental EBITDA from Gravity and H2O Midstream acquisitions .
  • Strategic progress: Libby 2 gas processing plant completed; management emphasized ongoing work on AGI and sour gas treating to expand processing capacity. “We are increasingly confident in our full year Adjusted EBITDA guidance of $480mm to $520mm” — Avigal Soreq .

What Went Wrong

  • Revenue ($246.35M) below S&P Global consensus ($275.76M)*; wholesale Adjusted EBITDA declined YoY ($23.3M vs $30.2M) after Big Spring marketing agreement assignment to Delek US .
  • GAAP EBITDA ($90.1M) lower than S&P EBITDA consensus ($119.31M)*, reflecting non-GAAP adjustments (sales-type lease accounting, transaction costs) that are excluded from Adjusted EBITDA .
  • Corporate Adjusted EBITDA loss widened slightly YoY (−$7.9M vs −$7.1M), signaling ongoing overhead headwinds amid growth investments .

Financial Results

Core Financials (GAAP and Adjusted)

MetricQ4 2024Q1 2025Q2 2025
Net Revenues ($USD Millions)$209.863 $249.930 $246.350
Net Income ($USD Millions)$35.305 $39.034 $44.574
Diluted EPS ($/unit)$0.68 $0.73 $0.83
GAAP EBITDA ($USD Millions)$73.839 $85.486 $90.089
Adjusted EBITDA ($USD Millions)$107.242 $116.541 $120.891
Cash from Operations ($USD Millions)$49.898 $31.550 $107.423
Total Debt ($USD Millions)$1,875.397 $2,145.730 $2,211.426
Cash & Equivalents ($USD Millions)$5.384 $2.107 $1.436
Total Capital Spending ($USD Millions)$49.436 $71.943 $119.189

Margins vs Prior Periods and S&P Estimates

MetricQ4 2024Q1 2025Q2 2025
EBITDA Margin %29.9%*28.4%*32.3%*
Net Income Margin %16.8%*15.6%*18.1%*

Values marked with * retrieved from S&P Global.

Segment Adjusted EBITDA and Revenues

SegmentQ2 2024 Adjusted EBITDA ($M)Q2 2025 Adjusted EBITDA ($M)Q2 2024 Revenues ($M)Q2 2025 Revenues ($M)
Gathering & Processing$54.7 $78.0 $92.643 $117.767
Wholesale Marketing & Terminalling$30.2 $23.3 $135.600 $104.615
Storage & Transportation$16.8 $16.9 $36.385 $23.968
Investments in Pipeline JVs (income)$7.9 $10.5 ——
Corporate (Adjusted EBITDA loss)$(7.1) $(7.9) ——

KPIs

KPIQ1 2025Q2 2025
Libby Delaware NG G&P (Mcfd)59,809 60,940
Crude Oil Gathering (avg bpd, Delaware)122,226 137,167
Midland Water Disposal & Recycling (avg bpd)632,972 600,891
West Texas gross margin per barrel ($)$1.64 $4.12
Terminalling throughputs (avg bpd)135,404 150,971

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDAFY 2025$480–$520M $480–$520M (confidence reiterated) Maintained
Coverage RatioFY 2025 YE~1.3x ~1.3x Maintained
Capital ExpendituresFY 2025$220–$250M $220–$250M Maintained
Quarterly DistributionQ2 2025$1.110/unit (Q1 declared) $1.115/unit (Q2 declared) Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
Libby 2 gas plant commissioningFID announced; heavy capex; commissioning started in Q1 Commissioning completed; ramp to capacity in 2H25 Positive execution; capacity ramping
Sour gas treating & AGIFID at Libby complex; AGI wells planned Progressing on AGI wells and sour gas handling; competitive differentiator Advancing capabilities
Deconsolidation from DK / third-party EBITDA mixThird-party contribution ~70% pro forma Q4; ~80% after intercompany agreements in Q1 Reinforced independence; >$1B liquidity; ongoing steps to unlock value Continued separation & liquidity
Wholesale marketing margins / Big Spring agreementLower margins; Big Spring marketing assignment impacted Wholesale Wholesale margins improved QoQ; YoY still lower due to agreement assignment to DK Stabilizing QoQ; YoY headwind persists
Water acquisitions integration (H2O, Gravity)Closed Gravity; exceeding expectations; integration underway Integration progressing; expanding combined crude/water offering in Midland Ongoing synergy capture
Macro/regulatory (EPA SRE context via DK)OPEC, macro cited; SRE uncertainty noted at DK EPA granted SREs to DK in Aug 2025; potential indirect sentiment benefit Regulatory tailwinds for sponsor
Liquidity/leverageRevolver capacity and note offering plans Closed $700M notes; liquidity >$1B; leverage ~4.32x at Q2 Stronger liquidity; leverage elevated but manageable

Management Commentary

  • “We are increasingly confident in our full year Adjusted EBITDA guidance of $480mm to $520mm” — Avigal Soreq .
  • “Successfully completed new Libby 2 gas processing plant... look to further expand the overall processing capacity... strengthen and grow Delek Logistics through prudent management of liquidity and leverage” — Avigal Soreq .
  • Q1 call framing the strategy: increasing economic separation from DK to ~80% third‑party cash flow; Libby 2 commissioning; AGI wells to sequester acid gas; integrated crude/gas/water offering in Delaware — Avigal Soreq and Reuven Spiegel .
  • Q2 call highlights: Completed commissioning of Libby 2; plan to fill to capacity; continued distribution growth; focus on liquidity and leverage to support growth .

Q&A Highlights

  • Intercompany agreements: Clarified deconsolidation steps between DK and DKL; ~80% third-party EBITDA pro forma without material net impact to either entity’s EBITDA — Robert Wright .
  • Customer activity/contracting mix: Stable Midland volumes; produced water volumes expected to increase despite volatility; limited direct commodity exposure; lower second-half capex run-rate — Avigal Soreq and Reuven Spiegel .
  • Q2 call tone: Confidence in Libby 2 ramp, sour gas capabilities, distribution policy, and FY guidance; emphasis on operational efficiency and margin improvement .

Estimates Context

Metric (S&P Global)Q2 2025 ConsensusQ2 2025 Actual (S&P)Company-Reported Actual
Revenue ($USD)$275.76M$246.35M$246.35M
EBITDA ($USD)$119.31M$79.53MGAAP: $90.09M ; Adj: $120.89M
Primary EPS ($/unit)$0.9155$1.4065Diluted EPS: $0.83
EPS Normalized ($/unit)$1.19$1.4065N/A in release

Values in this table retrieved from S&P Global.*

Implications:

  • Revenue miss vs consensus likely driven by Wholesale contract shift (Big Spring assignment) and affiliate revenue reduction; Adjusted EBITDA beat suggests Street may recalibrate to company’s non‑GAAP construct that includes sales-type lease throughput fees .
  • EPS comparisons depend on definition: normalized EPS beat, but reported diluted EPS ($0.83) may appear below some forecasts; expect analysts to refine EPS frameworks given lease-accounting impacts .

Key Takeaways for Investors

  • Execution is on plan: Adjusted EBITDA growth, Libby 2 commissioning completed, and confidence in FY $480–$520M guide; watch ramp-to-capacity and sour gas/AGI milestones in 2H25 for upside validation .
  • Mix shift continues: Strong G&P contribution (acquisitions, dropdowns) offsets Wholesale headwinds; segment momentum supports distribution sustainability at $1.115/unit and potential continued increases .
  • Liquidity fortified: $700M notes at 7.375% push liquidity >$1B with revolver capacity (~$1.1B); leverage ~4.32x is elevated but manageable if Adjusted EBITDA guide is met; monitor deleveraging path and coverage ratio trajectory to ~1.3x by YE .
  • Estimates likely to adjust: Street may lift Adjusted EBITDA expectations and normalize EPS frameworks, while trimming revenue forecasts to reflect affiliate/contract changes; headline EPS may remain noisy due to lease accounting .
  • Trading: Near-term volatility around revenue/EPS optics vs strong Adjusted EBITDA narrative; catalysts include Libby 2 ramp, margin performance in West Texas ($4.12/bbl), and continued distribution hikes .
  • Medium-term thesis: Integrated crude/gas/water footprint in Permian, growing third‑party economics, and advancing sour gas capabilities create durable growth runway; continued deconsolidation from DK should support valuation .
  • Monitor regulatory backdrop: EPA SRE decisions benefit DK sponsor sentiment; indirect tailwinds possible, but DKL drivers remain operational execution and capital allocation .

References:

  • Q2 2025 8-K and Exhibit 99.1 press release: .
  • Q2 2025 press release (duplicate Business Wire): .
  • Distribution press release (Q2 2025): .
  • Debt offering press release: .
  • Q1 2025 press release and transcript: .
  • Q4 2024 8-K: .
  • Q2 2025 earnings call (external): .
  • Stock reaction (external): .

Values marked with * retrieved from S&P Global.