Delek Us Holdings, Inc. · NYSE:DK
Delek Us — Investor Presentation (September 2018)
37 slides from Delek Us's investor presentation, Sep 25, 2018
Slide 1: Delek US Holdings, Inc. Investor Presentation September 2018
Delek US Holdings, Inc. Investor Presentation September 2018
Slide 2: Disclaimers: Forward Looking Statements
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: $43.94/share(1) Overview (NYSE: DK) • Market Capitalization: $3.8 billion(1) • NYSE: DKL: (Market cap $840mm) Own 63.4%, including 2% GP(2) • Operating model built to benefit from crude oil differentials and IMO’s impact on market trends Favorable Market for Refi
Slide 4: Integrated Company with Asset Diversity and Scale
Integrated Company with Asset Diversity and Scale Strategically Located Assets with Permian Basin Exposure Source 207,000 bpd from Permian Basin Refining (1) Logistics (2) Asphalt Retail Renewables • 7th largest independent • 10 terminals 6 asphalt terminals located • Approximately 300 Approx. 23m g
Slide 5: Focus on Improving Operational Performance
Focus on Improving Operational Performance Applied Best Practices Across a Larger Refining Platform Following Alon Transaction • Strong performance in low realized differential environment Total Refinery Crude Oil Utilization • Adjusted 2Q18 earnings per share and EBITDA of $1.03 98.0% (3) and $199.
Slide 6: Favorable Refining Environment
Favorable Refining Environment Market Factors Seem to be Aligning to Extend a Favorable Market for Refiners Through 2022 2018-2019 2020-2022 Wide Midland – Brent crude oil differential driven IMO 2020 is expected to drive structural market by a combination of factors: changes • Permian production ha
Slide 7: Permian Basin Outlook - Production v. Pipeline Takeaway Capacity
Permian Basin Outlook - Production v. Pipeline Takeaway Capacity Delek Positioned to Benefit as Production Growth / Takeaway Capacity Balance Tightens • Continued production growth in Permian may outpace pipeline construction 5,500 • Results in a wider discount for Midland sourced crude oil in 2018-
Slide 8: Outlook: Wider Differentials Supported by Permian Production/Take-Away Balance
WTI Midland vs Brent, $/bbl(1) Outlook Wider Differentials Being Supported by Permian Basin Production/Take-Away Balance Futures curve $0 ($5) 2Q18 Avg (2) ($10) $ per bbl.per $ ($15) ($20) Dec-18 Jan-19 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Feb-19 Mar-19 Apr-19 May-1
Slide 9: WTI-Linked Refining System with Permian Based Crude Oil Slate
WTI-Linked Refining System with Permian Based Crude Oil Slate System with Over 300,000 bpd of Crude Oil Throughput Capacity (~70% Permian Basin Based) Crude Oil Supply is Primarily WTI-Linked Tyler(1) Tyler, Texas 2% • 75,000 bpd crude oil Crude throughput Throughput WTI 19% 100% WTI • 8.7 complexit
Slide 10: IMO 2020 – Potential to Drive Higher Crack Spread into 2022
IMO 2020 – Potential to Drive Higher Crack Spread into 2022 Crude Oil Differentials Remain Wide and 5-3-2 Crack Spread Improving Based on Forward Curve WTI Midland vs Brent, $/bbl (2) Outlook • Trends on Midland – Brent differential show wider than 2Q18 realized into 2020 (3.00) (1.63) (6.38) (10.80
Slide 11: Positive Refining Trends Impact on Delek US Cash Flow Generation
Positive Refining Trends Impact on Delek US Cash Flow Generation Delek US Positioned to Benefit with High Diesel Yield and Crude Oil Slate Flexibility 2Q18 Refiners’ Middle Distillates %(1) (2) (4) • Delek US well positioned to benefit from IMO 2020 44.0% 37.5% 40.0% 40.0% 38.0% • Refining system pr
Slide 12: Disciplined Approach to Capital Allocation
Disciplined Approach to Capital Allocation Focus on Financial Strength and Flexibility, Investing in the Business, and Returning Cash to Shareholders • Financial strength and flexibility to support Capital Allocation(1) initiatives • Maintain strong balance sheet • Opportunistically delever when cas
Slide 13: Financial Strength and Flexibility to Support Initiatives
Financial Strength and Flexibility to Support Initiatives At June 30, 2018 Approximately $1.1 Billion of Cash (1) • Focused on growing business, while maintaining Cash Balance ($MM) financial flexibility $1,133 $1,018 • Closed Alon transaction on July 1, 2017 $932 $689 • At June 30, 2018, cash balan
Slide 14: Investing in the Business
Investing in the Business • Capital program focuses on safety /maintenance / Historical Capital Spending (1) reliability as priority ($ in millions) • Base level of regulatory and maintenance capital expenditures approximately $130.0 million per year • Excluding turnarounds, operating initiatives an
Slide 15: Growing Midstream - Permian Basin Crude Oil Long Haul Pipeline JV
Growing Midstream - Permian Basin Crude Oil Long Haul Pipeline JV with Experienced Partners ETP, MMP, and MPLX Supports Delek US’ Long-Term Investment in Midstream • Partnership provides expertise, throughput commitments • Supports potential for quicker construction and throughput ramp • Joint ventu
Slide 16: Krotz Springs Refinery Improvement Initiatives
Krotz Springs Refinery Improvement Initiatives Areas of Focus to Add Flexibility and Increase Margin Potential from Refinery • Improve units to add product flexibility • Alkylation Project – approx. $103.0 million cost; 1Q19 expected completion • Estimated annual EBITDA(1) $45-$50 million • Crude oi
Slide 17: Krotz Springs Alkylation Project
Krotz Springs Alkylation Project Expected Annual EBITDA $45 to $50 million; Target Completion in 1Q19 • Alkylation unit with 6,000 bpd capacity Change in Yields, in 000 bpd • Approx. $103.0 million estimated capital costs with $60.7 million spent as of June Gasoline Diesel/Jet Heavy Oils Other 8.7 3
Slide 18: Increased Dropdown Inventory Supports Logistics Growth for DKL
Increased Dropdown Inventory plus Organic Project Creates Platform to Support Logistics Growth Potential Growth for DKL Strong EBITDA Growth Profile Supporting Distribution Growth (1) ($ in millions) • Delek Logistics provides platform to unlock logistics value • Big Spring logistics assets dropdown
Slide 19: Focused on Returning Cash to Shareholders
Focused on Returning Cash to Shareholders • Programs in place allow different options to return cash to DK Share Repurchases ($MM) shareholders $100.0 • 2Q18 increased regular quarterly dividend by 25% to $95.3 $0.25/qtr(1) $74.6 • Follows a 1Q18 increased regular quarterly dividend by 33% to $0.20/
Slide 20: Execution of Strategic Initiatives
Execution of Strategic Initiatives • Commercial strategies improving netbacks and wholesale margins • 2Q18 refinery utilization at 96%; Operating expense below $4/bbl Focusing on Execution • Retail emphasis on asset optimization • Safety initiative “I own it”; Zero incidents across our refineries is
Slide 21: Current Valuation Below Peer EV-to-EBITDA
Current Valuation Below Peer EV-to-EBITDA EV/EBITDA 12.0x 10.0x 8.0x 6.0x 4.0x 2.0x 0.0x DK-USQ HFC-USQ VLO-USQ ANDV-USQ PBF-USQ MPC-USQ PSX-USQ CVI-USQ 2018 2019 2018 Avg 2019 Avg (1) Based on NASDAQ IR Insights/Factset as of September 21, 2018. 21
Slide 22: Questions and Answers
Questions and Answers Significant Organic Focus on Long-Term Growth / Margin Shareholder Returns Improvement Opportunities An Integrated and Permian Focused Diversified Refining, Financial Flexibility Refining System Logistics and Marketing Company Complementary Logistics Systems
Slide 23: Appendix
Appendix
Slide 24: 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 25: Current Delek US Corporate Structure
Current Delek US Corporate Structure 94.6% Delek US Holdings, Inc. ownership interest (1) NYSE: DK Market Cap: $3.8 billion(2) Delek Logistics GP, LLC (the General Partner) 61.4% interest in LP units 2.0% interest General partner interest Incentive distribution Delek Logistics Partners, LP rights NY
Slide 26: Access to Midland Crude Oil Benefits Margins
Access to Midland Crude Oil Benefits Margins WTI Midland vs. WTI Cushing Crude Oil Pricing ($ per barrel) $2.00 $0.00 ($2.00) ($4.00) ($6.00) ($8.00) ($10.00) ($12.00) ($14.00) Approx. 207,000 bpd of Midland ($16.00) crude oil in DK system ($18.00) Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Ju
Slide 27: 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 -$30 Jul-10 Jul-11 Jul-12 Jul-13
Slide 28: Robust Synergy Opportunity from DK/ALJ Combination
Robust Synergy Opportunity from DK/ALJ Combination Steady improvement in expected synergies from transaction ($ in millions) New Apr. 2018 Type Description Corporate Cost of Capital Operational Commercial Estimate Estimate Targets $130-$140 • Logistics, purchase and $131 Commercial trading benefits
Slide 29: Non-GAAP Reconciliation of Potential Alkylation Project EBITDA
Non-GAAP Reconciliation of Potential Alkylation Project EBITDA(1) Reconcilation of Forecast U.S. GAAP Net Income (Loss) to Forecast EBITDA for Alkylation Project ($ in millions) Forecasted Range Forecasted Net Income $ 24.1 $ 27.3 Add: Interest expense, net - - Income tax expense 14.0 15.8 Depreciat
Slide 30: Non-GAAP Reconciliation of Krotz Springs Potential Dropdown EBITDA
Non-GAAP Reconciliation of Krotz Spring Potential Dropdown EBITDA(1) Krotz Springs Logistics Drop Down Reconciliation of Forecasted Annualized Net Income to Forecasted EBITDA ($ in millions) Forecasted Range Forecasted Net Income $ 2.9 $ 3.3 Add: Depreciation and amortization 15.6 17.7 Interest and
Slide 31: Non-GAAP Reconciliations of EBITDA: Big Spring Logistics Drop Down
Non-GAAP Reconciliations of EBITDA(1) Big Spring Logistics Drop Down and Marketing Agreement Reconciliation of Forecasted Annualized Net Income to Forecasted EBITDA Tanks, Terminals ($ in millions) and Marketing Agreement Forecasted Net Income $ 13.3 Add: Income tax expense - Depreciation and amorti
Slide 32: Non-GAAP Reconciliations of Adjusted Net Income per Share
Non-GAAP Reconciliations of Adjusted Net Income (Loss) per Share Three Months Ended June 30, Reconciliation of U.S. GAAP Net Income (Loss) per share to Adjusted Net 2018 2017 Income (Loss) per share (Unaudited) Reported income (loss) per share $0.89 ($0.61) Adjustments, after tax (per share)(1) Net
Slide 33: Non-GAAP Reconciliations of Adjusted EBITDA
Non-GAAP Reconciliations of Adjusted EBITDA Three Months Ended June 30, Reconciliation of Net Income (Loss) to Adjusted EBITDA 2018 2017 (Unaudited) Reported net income (loss) attributable to Delek $ 79.1 $ (37.9) Add: Interest expense, net $ 30.6 $ 14.1 Income tax expense (benefit) - continuing ope
Slide 34: DKL: Increased Distribution with Conservative Coverage and Leverage
DKL: Increased Distribution with Conservative Coverage and Leverage Distribution per unit has been increased twenty-two consecutive times since the IPO $0.705 $0.715 $0.725 $0.750 $0.770 $0.630 $0.655 $0.680 $0.690 $0.550 $0.570 $0.590 $0.610 $0.475 $0.490 $0.510 $0.530 $0.375 $0.385 $0.395 $0.405 $
Slide 35: 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) 1Q17 2Q17 3Q17 4Q17 (3) 2017(3) 1Q18 2Q18 Reconciliation of Distributable Cash Flow to net cas
Slide 36: 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 1Q17 2Q17 3Q17 4Q17 2017 1Q18 2Q18 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.
Slide 37: 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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