Alon USA Partners LP — Merger or Acquisition (November 2017)
42 slides from Alon USA Partners LP's merger presentation, Nov 27, 2017
Slide 1: Delek US Holdings, Inc. Investor Presentation
November 2017 Delek US Holdings, Inc. Investor Presentation
Slide 2: Disclaimers
Disclaimers 2 Forward Looking Statements: Delek US Holdings, Inc. (“Delek US”) and Delek Logistics Partners, LP (“Delek Logistics”; collectively with Delek US, defined as “we”, “our”) and Alon USA Partners, LP (“Alon Partners”) are traded on the New York Stock Exchange in the United States under the
Slide 3: Current Refining Market Environment
Current Refining Market Environment
Slide 4: WTI-Brent Crude Oil Price Differential Trends Improving
Differential is additive to crack spread trends in the current market environment WTI-Brent Crude Oil Price Differential Trends Improving 4 1) Differential source: Bloomberg 11/17/18. -$30 -$25 -$20 -$15 -$10 -$5 $0 $5 $10 Jan -0 7 A u g-0 7 M ar-0 8 Oct -0 8 M ay-0 9 D e c-0 9 Ju l-1 0 Fe b -1 1 Se
Slide 5: WTI versus Mars and Maya differentials favor light crude refineries
WTI versus Mars and Maya differentials favor light crude oil refineries Light-Heavy Crude Oil Price Differential Trends Improving 5 1) Differential source: Argus – November 20, 2017; NYMEX futures prices. -$6.00 -$4.00 -$2.00 $0.00 $2.00 $4.00 $6.00 Jan -1 5 M ar-1 5 M ay-1 5 Ju l-1 5 Se p -1 5 N o
Slide 6: Crack Spread Cycle Turning Up
Crack Spread Cycle Turning Up Crack spread at highest since 2015 and expected to continue upward trend 6 -$30 -$20 -$10 $0 $10 $20 $30 $40 $50 1 0 -J a n -1 0 1 0 -Ma r- 1 0 1 0 -Ma y -1 0 1 0 -J u l- 1 0 1 0 -S e p -1 0 1 0 -N o v -1 0 1 0 -J a n -1 1 1 0 -Ma r- 1 1 1 0 -Ma y -1 1 1 0 -J u l- 1 1 1
Slide 7: Investment Highlights
Investment Highlights (1) Based on price per common share as of close of trading on November 20, 2017. (2) Currently 5.4% of the ownership interest in the general partner is owned by three members of senior management of Delek US (who are also directors of the general partner). The remaining ownersh
Slide 8: Integrated Company with Asset Diversity and Scale
Integrated Company with Asset Diversity and Scale Strategically Located Assets with Permian Basin Exposure 8 Retail • Approximately 300 stores • Southwest US locations • Largest licensee of 7- Eleven stores in the US • West Texas wholesale marketing business Asphalt • 14 asphalt terminals located in
Slide 9: Acquisition of Alon Provides Opportunities to Unlock Value
Transaction completed on July 1; Initiatives underway across the asset base Acquisition of Alon Provides Opportunities to Unlock Value 9 Simplify Corporate Structure: • ALDW Transaction –Announced agreement to purchase remaining 18.4% of ALDW LP units that Delek US does not own, subject to customary
Slide 10: Acquisition of the remaining Alon USA Partners LP Units
Should simplify corporate structure of Delek US Acquisition of the remaining Alon USA Partners LP Units 10 1) Please see page 31 for additional information related to this transaction. • On November 8, 2017, Delek announced definitive agreement to acquire remaining limited partner units of Alon USA
Slide 11: Robust Synergy Opportunity from DK/ALJ Combination
Robust Synergy Opportunity from DK/ALJ Combination 11 Expect to achieve run-rate synergies of approximately $85 - $105 million in 2018; $53.0 million of annualized synergies captured as of Sept. 30, 2017 Type Description Estimate Commercial • Logistics, purchase and trading benefits from a larger pl
Slide 12: Krotz Springs Improvement Initiatives
Areas of focus to add flexibility and increase margin potential from refinery Krotz Springs Improvement Initiatives 12 Improve Units to Add Product Flexibility • Alkylation Project – under construction - provides ability to upgrade low value production into higher value gasoline Crude – Transportati
Slide 13: Krotz Springs Alkylation Project
Expected annual EBITDA $35-$40 million; Target completion in 1Q19 Krotz Springs Alkylation Project 13 • Alkylation unit with 6,000 bpd capacity • Approx. $103.0 estimated capital costs with $20.0 million spent as of Sept. 30, 2017 • Improves refinery flexibility • Converts lower priced iso-butane in
Slide 14: California Initiatives
Assets are non core to Delek US geographic footprint; Exploring ways to derive value and reduce costs California Initiatives 14 • Assets primarily consist of three locations – Paramount, Long Beach and Bakersfield • Refining assets have been idled since 2012 • Alt Air renewable fuels facility operat
Slide 15: Increased Drop Down Inventory Creates Platform to Support Logistics Growth
Increased Drop Down Inventory Creates Platform to Support Logistics Growth 15 Potential Growth for DKL • Delek Logistics Partners provides platform to unlock logistics value • Increased access to Permian and Delaware basin through presence of Big Spring refinery • Improves ability to develop crude o
Slide 16: WTI-Linked Crude Oil Refining System
WTI-Linked Crude Oil Refining System
Slide 17: WTI-Linked Refining System with Permian Based Crude Oil Slate
System with Over 300,000 bpd of Crude Oil Throughput Capacity (~69% Permian Basin Based) WTI-Linked Refining System with Permian Based Crude Oil Slate 17 Tyler, Texas • 75,000 bpd crude throughput • 8.7 complexity • Light crude refinery • Permian Basin and east Texas sourced crude El Dorado, Arkansa
Slide 18: WTI-linked barrels growing in crude oil slate
By 2018 WTI-linked barrels accounted for 90% of the crude oil slate; Benefitting from Current Differentials Delek US’ WTI Linked Crude Oil Supply has Continued to Grow 18 Ability to increase WTI-linked barrels in 2018 • Krotz Springs – LLS vs Midland – Ability to increase Midland barrels by 10 kbpd;
Slide 19: Logistics Assets Positioned for Growth
Logistics Assets Positioned for Growth
Slide 20: Logistics Assets Positioned to Benefit from Permian Basin Activity
NY008LRP - 912119_1.wor -L r - r- rLL P 912119_1.wo San Angelo Fort Worth Dallas Waco Tyler Shreveport Monroe El Dorado Beaumont New Orleans Little Rock Memphis Brentwood Nashville Knoxville Abilene Big Spring Krotz Springs NY008LRP - 912119_1.wor - rL 1.P 912119_ SALA GATHERING SYSTEM AR LA Magnoli
Slide 21: West Texas Wholesale Business Benefiting from Permian Activity
21 West Texas Wholesale Business Benefiting from Permian Activity West Texas Wholesale and Marketing Gross Margin 13,377 Bbl/d 14,353 Bbl/d 15,493 Bbl/d 16,523 Bbl/d 18,156 Bbl/d 16,707 Bbl/d 16,357 Bbl/d 13.482 Bbl/d • Operates in an area around the Permian Basin; Complementary to Delek US refining
Slide 22: Crude oil pipeline Longview to Beaumont tariff and capacity
• Approximately 195 mile 35 kbpd crude oil pipeline – Longview, TX south to Beaumont • Allows shippers ability to ship Midland or Cushing crude barrels to the Gulf Coast • Increased demand for space on pipeline, as crude oil differentials have widened • Increasing temporary incentive tariff based on
Slide 23: Future Potential Dropdowns to DKL Benefit Delek US
23 Delek US GP and IDR Ownership is in DKL in the high splits Future Potential Dropdowns to DKL Benefit Delek US Cash Flow Supports Long Term Distribution Growth at Delek Logistics Total Quarterly Distribution Per Unit Target Amount Unitholders General Partner Minimum Quarterly Distribution below $0
Slide 24: DKL: Increased Distribution with Conservative Coverage and Leverage
24 (1) MQD = minimum quarterly distribution set pursuant to the Partnership Agreement. (2) Distribution coverage based on distributable cash flow divided by distribution amount in each period. Please see page 40 for reconciliation. (3) 3Q17 based on total distributions paid on November 14, 2017. (4)
Slide 25: Opportunities for Retail
Opportunities for Retail Integrated wholesale marketing and retail network at Big Spring; complementary to DKL west Texas 25 Current Retail Operations • Approximately 300 store retail system in Central/west Texas and New Mexico • Supplies ~635 branded sites, including substantially all of Alon’s ret
Slide 26: Solid Financial Position
Solid Financial Position
Slide 27: Financial Strength and Flexibility to Support Initiatives
Financial Strength and Flexibility to Support Initiatives At September 30, 2017 approximately $832 million of cash 27 • Focused on growing business, while maintaining financial flexibility • Sold retail assets in Nov. 2016 for $535 million • Closed Alon transaction on July 1, 2017 • At September 30
Slide 28: Capital Allocation Focused on Long-Term Value Creation
Invest in the business Forecast 2017 capex includes spending on Alon assets for six months Commenced Alky unit project at Krotz Springs 2018 El Dorado Turnaround planning underway Consent decree spending at Big Spring Programs in place allow different options to return cash to shareholde
Slide 29: Initiatives Underway to Create Sustainable Value
Initiatives Underway to Create Sustainable Value Current Valuation Below Peer EV to EBITDA 29 (1) Based on NASDAQ IR Insights/Factset as of 11/20/17. Balance sheet with $832 million of cash supports company initiatives Permian focused refining system Margins benefiting from wider discount betw
Slide 30: Questions and Answers
30 Complementary Logistics Systems Significant Organic Growth / Margin Improvement Opportunities Focus on Long Term Shareholder Returns Financial Flexibility Permian Focused Refining System Questions and Answers An Integrated and Diversified Refining, Logistics and Marketing Company
Slide 31: Additional Information
31 Additional Information No Offer or Solicitation This communication relates to a proposed business combination between Delek US and Alon Partners. This announcement is for informational purposes only, and is neither an offer to purchase, nor a solicitation of an offer to sell, any securities, or t
Slide 32: Appendix
Appendix
Slide 33: Non GAAP Reconciliations Delek US EPS and EBITDA
Non GAAP Reconciliations Delek US EPS and EBITDA 33 Three Months Ended September 30, 2017 Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA (Unaudited) Reported net income (loss) per share attributable to Delek $ 104.4 Add: Interest expense, net 33.2 Income tax expense 133.5 Depreciat
Slide 34: Non GAAP Reconciliations of Potential Alky Unit EBITDA
Non GAAP Reconciliations of Potential Alky Unit EBITDA (1) 34 (1) Based on projected range of potential future performance from the alkylation unit project at Krotz Springs. Amounts of EBITDA, net income and timing will vary. Actual amounts will be based on timing of completion, performance of the p
Slide 35: Non GAAP Reconciliations of Potential Dropdown EBITDA
Non GAAP Reconciliations of Potential Dropdown EBITDA (1) 35 (1) Based on projected range of potential future logistics assets that could be dropped to Delek Logistics from Delek US in the future. Amounts of EBITDA, net income and timing will vary, which will affect the potential future EBITDA and a
Slide 36: Delek US Focused on Growth through Acquisitions
Delek US Focused on Growth through Acquisitions (1) Includes logistic assets in purchase price. Purchase price includes working capital for refineries. (2) Mt. Pleasant includes $1.1 million of inventory. 2006 Abilene & San Angelo terminals $55.1 mm 2012 Nettleton Pipeline $12.3 mm 2011 Paline Pipel
Slide 37: Current Delek US Corporate Structure
37 Current Delek US Corporate Structure (1) As of September 30, 2017, a 5.4% interest in the Delek US ownership interest in the general partner is held by three members of senior management of Delek US. The remaining ownership interest is indirectly held by Delek US. (2) Market cap based on share an
Slide 38: -$30 -$20 -$10 $0 $10 $20 $30 $40 $50 J a n -1 Fe
-$30 -$20 -$10 $0 $10 $20 $30 $40 $50 J a n -1 0 Fe b -1 0 Ma r- 1 0 A p r- 1 0 Ma y -1 0 J u n -1 0 J u l- 1 0 A u g -1 0 S e p -1 0 O c t- 1 0 N o v -1 0 D e c -1 0 J a n -1 1 Fe b -1 1 Ma r- 1 1 A p r- 1 1 Ma y -1 1 J u n -1 1 J u l- 1 1 A u g -1 1 S e p -1 1 O c t- 1 1 N o v -1 1 D e c -1 1 J a
Slide 39: ($14.00) ($12.00) ($10.00) ($8.00) ($6.00) ($4.00) ($2.00) $0.00 $2.00 Ja n -1 1 Fe
($14.00) ($12.00) ($10.00) ($8.00) ($6.00) ($4.00) ($2.00) $0.00 $2.00 Ja n -1 1 Fe b -1 1 M ar -1 1 A p r- 11 M ay -1 1 Ju n -1 1 Ju l-1 1 A u g- 1 1 Se p -1 1 O ct-1 1 N o v- 1 1 De c- 1 1 Ja n -1 2 Fe b -1 2 M ar -1 2 A p r- 12 M ay -1 2 Ju n -1 2 Ju l-1 2 A u g- 1 2 Se p -1 2 O ct-1 2 N o v- 1 2
Slide 40: DKL: Reconciliation of Cash Available for Distribution
DKL: Reconciliation of Cash Available for Distribution 40 (1) Distribution based on actual amounts distributed during the periods; does not include a LTIP accrual. Coverage is defined as cash available for distribution divided by total distribution. (2) Results in 2013, 2014 and 2015 are as reported
Slide 41: DKL: Income Statement and Non-GAAP EBITDA Reconciliation
DKL: Income Statement and Non-GAAP EBITDA Reconciliation 41 (1) Includes approximately $2.0 million of estimated annual incremental general and administrative expenses expected to incur as a result of being a separate publicly traded partnership. (2) Interest expense and cash interest both include c
Slide 42: Investor Relations Contact
Investor Relations Contact: Kevin Kremke Keith Johnson Executive Vice President, CFO Vice President of Investor Relations 615-224-1323 615-435-1366
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