Delek Us Holdings, Inc. · NYSE:DK
Delek Us — Investor Presentation (August 2019)
42 slides from Delek Us's investor presentation, Aug 5, 2019
Slide 1: Delek US Holdings, Inc. Investor Presentation August 2019
Exhibit 99.1 Delek US Holdings, Inc. Investor Presentation August 2019
Slide 2: Disclaimers
Disclaimers Forward Looking Statements: Delek US Holdings, Inc. (“Delek US”) and Delek Logistics Partners, LP (“Delek Logistics”; and collectively with Delek US, “we” or “our”) are traded on the New York Stock Exchange in the United States under the symbols “DK” and ”DKL”, respectively. These slides
Slide 3: Investment Overview
Investment Overview • Current Price: $41.58/share(1) • Market Capitalization: $3.2 billion(1) Overview (NYSE: DK) • NYSE: DKL: (Market cap $781mm)(1) Owns 63.4%, including 2% GP(2) • 2Q19 Net Income: $77.3 million; adjusted EBITDA: $204.9 million(3) • June 30, 2019 balance sheet: Flexible Financial
Slide 4: Integrated Company with Asset Diversity and Scale
Integrated Company with Asset Diversity and Scale Strategically located assets with growing crude oil optionality Access to Cushing; 35,000 bpd Source 207,000 bpd from Permian increasing to 100,000 bpd first half Basin 2020 • Growing gathering system • Wink to Webster JV Crude oil Pipeline Refining
Slide 5: WTI-Linked Refining System
WTI-Linked Refining System System with over 300,000 bpd of crude oil throughput capacity and growing crude oil optionality Tyler, Texas Increasing Access to Cushing Crude Oil Grades, bpd YTD 2Q19 • 75,000 bpd crude oil Tyler(1) 11% Crude Current throughput st Throughput Crude Oil 1 Half 2020 • 8.7 c
Slide 6: Brent – WTI Differential
Brent – WTI Differential Transportation economics should keep the differential wide Indication of Cushing Sourced Export Transport Economics (1)(2) • Transportation economics should play a role in the $6.50 - $11.14 differential – barrels need incentive to clear market $10.00 $0.30 $8.00 $1.03 • Cur
Slide 7: Permian Basin Outlook
Permian Basin Outlook Production continues to grow while incremental takeaway capacity outlook is uncertain • Steady growth has continued in production Average Annual Crude Oil Production (Mbpd) (1) • Drilling supported by improved technology and low costs and WTI-Midland Price (2) • Low break-even
Slide 8: Market Update
Market Update Trends benefit Delek US’ WTI-linked refining system • Crack spread increased y/y in 2Q19 Increasing US Gulf Coast WTI 5-3-2 (2) • Refining industry utilization currently 93%(1) $18.00 • Crack spread improved from early 2019 levels $16.00 $14.00 $12.00 • Brent-WTI differential supportiv
Slide 9: Delek US Adjusted EBITDA Case
Delek US Adjusted EBITDA Case Potential Earnings Power of Current Model (1) Refining Basic Assumptions* Potential Case Segment Adjusted EBITDA Midland – Cushing Differential -$2.50 $1,200 (2) Current Operations $1,075 WTI HSD 5-3-2 Crack Spread $13.50 (2) $1,000 (2) (2) (3) $40 $915 (3) $60 $15 WTI
Slide 10: Delek US Potential Free Cash Flow
Delek US Potential Free Cash Flow Potential EBITDA and Base Level Capital Expenditure Assumption Indicative Long Term Free Cash Flow Available for Cash Return to Shareholders & to Support Growth Initiatives(1) 1000 $915 (2) $100 900 $120 800 $130 700 600 $55 $120 500 $390(2) 400 300 200 Sustaining C
Slide 11: Capital Allocation Framework
Capital Allocation Framework Balance the following objectives using a rigorous and disciplined capital allocation program to create long-term value for our shareholders: • Invest: Capital allocation program focuses on safety, maintenance, and reliability as priority • Grow: Maintain financial streng
Slide 12: Capital Allocation Discipline
Capital Allocation Discipline Cash Balance & Net Debt (DK Ex. DKL)(1) • Maintaining strong balance sheet • Should support ability to invest in the business and $1,128 $1,090 $1,079 $1,013 $984 return cash to shareholders $927 $946 • Provides ability to act quickly to take advantage of opportunities
Slide 13: Capital Allocation Discipline in Practice – Cash Returned to Shareholders
Capital Allocation Discipline in Practice – Cash Returned to Shareholders Delek US Cash Returned(1) LTM 2Q19 Cash Returned to Shareholders as % of Current Market Cap(2)(3) Expect to repurchase $40 million in 3Q19 16.0% LTM 2Q19 returned $439.0 million or ~14% of current market cap to 14% 14.0% share
Slide 14: Growth and Market Opportunities
Growth and Market Opportunities
Slide 15: Wink to Webster Crude Oil Long Haul Pipeline Joint Venture
Wink to Webster Crude Oil Long Haul Pipeline Joint Venture Complements Gathering – Provides Access to Gulf Coast Markets • Wink to Webster Pipeline • 650-mile 36-inch diameter crude oil pipeline • Wink to Webster Pipeline LLC – Exxon, Plains, MPLX, Delek US, Rattler Midstream, Lotus Midstream • Expe
Slide 16: Growing Midstream: Red River Pipeline Joint Venture
Growing Midstream: Red River Pipeline Joint Venture • DKL purchased 33% interest in May 2019; closed effective May 1 • Approx. $128.0 million initial investment; Financed with revolver • Planned expansion from 150 kbpd to 235 kbpd • Expected completion in first half of 2020 • DKL will contribute $20
Slide 17: Growing Midstream - Big Spring Gathering System
Growing Midstream - Big Spring Gathering System Delek US’ Gathering Helps Control Crude Oil Quality and Cost into Refineries • Approximately 200-mile gathering • Allows Delek US to get closer to system, 350Kbpd throughput capacity wellhead to control crude oil quality • Currently more than 250,000 a
Slide 18: Krotz Springs Refinery - Alkylation Project
Krotz Springs Refinery- Alkylation Project • Alkylation unit with 6,000 bpd capacity Change in Yields, in 000 bpd • Completed in early April 2019 • Approx. $138.0 million capital costs Gasoline Diesel/Jet Heavy Oils Other 8.7 • Improves refinery flexibility 11.1 8.0 • Converts lower priced isobutane
Slide 19: DK Operations Positioned to Benefit from IMO 2020
DK Operations Positioned to Benefit from IMO 2020 Delek US positioned to benefit with high value product yields and crude oil slate flexibility 1Q19 Refiners’ Middle Distillates Yield % (1) (2) (3) • Refining system product yields • Middle distillate: average approx. 115,000 bpd of distillate or 44
Slide 20: Delek US' Initiatives Drive Potential EBITDA Growth
Delek US’ Initiatives Drive Potential EBITDA Growth Delek US positioned to generate strong cash flows to return cash to shareholders $ in millions $1,200 $160 $85 $118 $33 $1,000 $915 $20 $15 Red River $40 Regulatory $60 Commercial Initiatives $800 $50 Krotz Alkylation unit $600 $750 $400 Supports D
Slide 21: Expanding Platform to Support Midstream Growth
Expanding Platform to Support Midstream Growth Supports Delek US’ goal to generate approximately $370 million to $395 million of annualized adjusted midstream EBITDA by 2023 (1) • Delek US announced goal to achieve midstream target Strong Adjusted EBITDA Growth Profile from Midstream Initiatives by
Slide 22: Current Valuation Below Peer EV-to-EBITDA
Current Valuation Below Peer EV-to-EBITDA DK positioned to benefit from Midland to Brent crude diffs and IMO; low valuation to peer group • Strong balance sheet with $951.4 million of cash; net debt of $965.3 million; net debt excl. DKL of $129.8 million(1) • Operations positioned to generate strong
Slide 23: An Integrated and Diversified Refining, Logistics and Marketing Company
An Integrated and Financial Flexibility to Diversified Refining, Support Strategic Logistics and Marketing Company Objectives Invest in the Business to Permian Focused Focus on Long-Term Operate Reliably and Refining System Shareholder Returns Safely Growing Midstream Platform to Diversify EBITDA St
Slide 24: Appendix
Appendix
Slide 25: 2Q19 Highlights – Cash Flow
2Q19 Highlights – Cash Flow • Strong financial position, cash generation supports ongoing Total Consolidated Cash Flows reinvestment while returning cash to 1,200 $146.5 shareholders $989.7 ($44.5) 1,000 $142.2 $951.4 • Operating cash flow from continuing ops (excl. working cap) $146.5 million ($202
Slide 26: Guidance
Guidance (1) 3Q19 Guidance Range Low High Consolidated Operating Expenses, $ in millions $165.0 $175.0 Consolidated G&A, $ in millions $63.0 $68.0 Consolidated Depreciation and Amort., $ in millions $51.0 $53.0 Net interest expense, $ in millions $30.0 $32.0 Effective Tax Rate 23% 25% Estimate Dilut
Slide 27: Delek US Growth Focused on Growth through Acquisitions
Delek US Growth Focused on Growth through Acquisitions 2005 to 2007 2011 to 2012 2013 to Current 2011 Crude Oil Increased Gathering SALA Gathering East and West Texas Gathering Lion Oil acquisition 2012 DKL Joint Ventures 2011 Crude Oil Nettleton RIO Pipeline Paline Pipeline Pipeline Caddo Pipeline
Slide 28: Current Delek US Corporate Structure
Current Delek US Corporate Structure 94.6% Delek US Holdings, Inc. ownership interest (1) NYSE: DK Market Cap: $3.2 billion(2) Delek Logistics GP, LLC (the General Partner) 61.4% interest in LP units 2.0% interest General partner interest Incentive distribution Delek Logistics Partners, LP rights NY
Slide 29: Market Data
Market Data
Slide 30: IMO 2020
IMO 2020 Current impact on oil and product markets • Market is pricing a higher scrubber uptake rate WTI-HSFO Spread (1) • Increased scrubber uptakes could decrease ULSD demand $5 • Led to upside pressure on the HFSO curve over past month -$5 • If scrubber adoption is less than projected, could resu
Slide 31: Access to Midland Crude Oil Benefits Margins
Access to Midland Crude Oil Benefits Margins WTI Midland vs. WTI Cushing Crude Oil Pricing (1) ($ per barrel) $2.00 $0.00 ($2.00) ($4.00) ($6.00) ($8.00) ($10.00) ($12.00) ($14.00) ($16.00) ($18.00) Jul-19 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan
Slide 32: U.S Refining Environment Trends
U.S Refining Environment Trends Refined Product Margins and WTI-Linked Feedstock Favor Delek US (1) (2) (2) $50 Brent-WTI Cushing Spread Per Barrel WTI 5-3-2 Gulf Coast Crack Spread Per Barrel LLS 5-3-2 Gulf Coast Crack Spread Per Barrel $40 $30 $20 $10 $0 -$10 -$20 -$30 Jul-10 Jul-11 Jul-12 Jul-13
Slide 33: Reconciliations
Reconciliations
Slide 34: Non-GAAP Reconciliation of Alkylation Project EBITDA
Non-GAAP Reconciliation of Alkylation Project EBITDA(1) Reconciliation of Forecast Incremental U.S. GAAP Net Income (Loss) to Forecast Incremental EBITDA for Alkylation Project ($ in millions) Annual Amount Forecasted Incremental Net Income $ 33.2 Add Forecasted Incremental Amounts for: Interest Exp
Slide 35: Non-GAAP Reconciliation of Krotz Springs Potential Dropdown EBITDA
Non-GAAP Reconciliation of Krotz Springs Potential Dropdown EBITDA(1) Krotz Springs Logistics Drop Down Reconciliation of Forecast Incremental U.S. GAAP Net Income (Loss) to Forecast Incremental EBITDA ($ in millions) Forecasted Range Forecasted Incremental Net Income $ 2.9 $ 3.3 Add Forecasted Incr
Slide 36: Non-GAAP Reconciliations of Adjusted EBITDA
Non-GAAP Reconciliations of Adjusted EBITDA Delek US Holdings, Inc. Reconciliation of Amounts Reported Under U.S. GAAP $ in millions Three Months Ended June 30, Reconciliation of Net Income (Loss) attributable to Delek to Adjusted EBITDA 2019 2018 (Unaudited) Reported net income (loss) attributable
Slide 37: DKL: Increased Distribution with Conservative Coverage and Leverage
DKL: Increased Distribution with Conservative Coverage and Leverage Distribution per unit has been increased twenty-six consecutive times since the IPO $0.810 $0.820 $0.850 $0.750 $0.770 $0.790 $0.680 $0.690 $0.705 $0.715 $0.725 $0.610 $0.630 $0.655 $0.550 $0.570 $0.590 $0.475 $0.490 $0.510 $0.530 $
Slide 38: DKL: Reconciliation of Cash Available for Distribution
DKL: Reconciliation of Cash Available for Distribution (dollars in millions, except coverage) 2013 (2) 1Q14 (2) 2Q14(2) 3Q14(2) 4Q14(2) 2014 (2) 1Q15(2) 2Q15 3Q15 4Q15 2015 (3) 1Q16 2Q16 3Q16 4Q16 2016 (3) Reconciliation of Distributable Cash Flow to net cash from operating activities Net cash provi
Slide 39: DKL: Income Statement and Non-GAAP EBITDA Reconciliation
DKL: Income Statement and Non-GAAP EBITDA Reconciliation 2013(1) 1Q14(1) 2Q14 3Q14 4Q14 2014 (1) 1Q15(2) 2Q15 3Q15 4Q15 2015 1Q16 2Q16 3Q16 4Q16 2016 Net Revenue $907.4 $203.5 $236.3 $228.0 $173.3 $841.2 $143.5 $172.1 $165.1 $108.9 $589.7 $104.1 $111.9 $107.5 $124.7 $448.1 Cost of Sales (811.4) (172
Slide 40: Non-GAAP Reconciliation of Increased Paline Pipeline Tariff EBITDA
Non-GAAP Reconciliation of Increased Paline Pipeline Tariff EBITDA(1) Reconciliation of Forecast Incremental U.S. GAAP Net Income (Loss) to Forecast Incremental EBITDA for Paline Pipeline Tariff Increase ($ in millions) Annual Monthly Forecasted Incremental Net Income $ 10.8 $ 0.9 Add Forecasted Inc
Slide 41: Non-GAAP Reconciliation of Red River Joint Venture Adjusted EBITDA
Non-GAAP Reconciliation of Red River Joint Venture Adjusted EBITDA(1) Delek Logistics Partners, LP Reconciliation of Forecasted Incremental Annualized Net Income to Forecasted Incremental Annualized Adjusted EBITDA for the Red River Pipeline Joint Venture ($ in millions) Pre-Expansion Range Post-Exp
Slide 42: Investor Relations Contacts
Investor Relations Contacts: Blake Fernandez, SVP IR/Market Intelligence 615-224-1312 Keith Johnson, VP IR 615-435-1366
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