Delek Us Holdings, Inc. · NYSE:DK
Delek Us — Investor Presentation (November 2019)
50 slides from Delek Us's investor presentation, Nov 22, 2019
Slide 1: Investor Presentation – Royal Beach Hotel November 2019
Exhibit 99.1 Delek US Holdings, Inc. Investor Presentation – Royal Beach Hotel November 2019
Slide 2: Today's Speakers
Today’s Speakers Ezra Uzi Yemin (Chairman, President and Chief Executive Officer) Ezra Uzi Yemin has served as the Chairman of our Board since December 2012, as our Chief Executive Officer since June 2004 and as our President and a director since April 2001. Mr. Yemin also served as our treasurer fr
Slide 3: 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 4: Current Macro Environment
Current Macro Environment
Slide 5: Global Energy Supply/Demand Continues to Evolve
Global Energy Supply/Demand Continues to evolve (1) (1) Oil continues to play a leading role in the world’s energy mix, with growing demand driven by commercial transportation and feedstocks for the chemicals industry Natural gas grows the most of any energy type, reaching a quarter of all deman
Slide 6: Growing Production in US is Light vs Heavy
Growing Production in US is Light vs Heavy (1) (1) 1) Source: U.S. Energy Information Administration, Monthly Crude Oil and Natural Gas Production 6
Slide 7: US Shifting to Long Crude – Net Exporter
US Shifting to Long Crude – Net Exporter The U.S. will drive the bulk of growth in global oil production until 2024, according to the International Energy Agency’s Oil 2019 report and will become a net exporter in 2021. “The second wave of the U.S. shale revolution is coming. It will see the Unite
Slide 8: IMO 2020
IMO 2020 • International Maritime Organization putting in place new rules in 2020 • Changing the allowable sulfur levels in marine fuels from 3.5% to 0.5% • Goes into effect January 1, 2020 • Displaces an estimated 1.5-3.0 MMBPD of fuel oil, creates ~0.5-2.0 MMBPD distillate demand into marine fuel
Slide 9: Delek US Overview
Delek US Overview
Slide 10: Current Delek US Corporate Structure
Current Delek US Corporate Structure 94.6% ownership interest (1) Delek US Holdings, Inc. NYSE: DK Delek Logistics GP, LLC (the General Partner) 61.4% interest in LP units 2.0% interest General Partner interest incentive distribution rights Delek Logistics Partners, LP NYSE: DKL 1) As of September 3
Slide 11: Investment Overview
Investment Overview (NYSE: DK) • September, 2019 balance sheet: Flexible Financial Position to • Delek US: approx. $1.0 billion of cash; $2.0 billion of debt • Includes $6.4 million cash and $841 million debt of DKL Support Midstream Growth • Net debt (excl. DKL) of $159 million • Over 275,000 dedic
Slide 12: 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 CADDO RIO
Slide 13: Niche Market = Margin Strength
Niche Market = Margin Strength Permian Centric Assets Offer Advantaged Access Indication of Permian/Brent Export Economics (1) • Transportation economics should set the differential; barrels need incentive to clear market $10.00 ~$7-9/bbl • Incremental barrel must be exported $8.00 • Permian should
Slide 14: PADD Refining System with Crude Slate Optionality
PADD 3 Refining System with Crude Slate Optionality Tyler, Texas Increasing Access to Cushing Crude Oil Grades, bpd YTD 3Q19 (1) • 75,000 bpd crude oil 8% Tyler Crude Current 1% throughput st Throughput Crude Oil 1 Half 2020 • 8.7 complexity WTI Capacity Access Crude Oil Access 100% • Light crude oi
Slide 15: Retail: Diversifies EBITDA Stream
Retail: Diversifies EBITDA Stream • ~80% integration with existing downstream operations offering synergies and competitive advantage • Operate approximately 263 C-stores in Central and West Texas and New Mexico • Divesting underperforming stores • Net store count declines into ’20 • Rebrand 7-Eleve
Slide 16: Growth and Market Opportunities
Growth and Market Opportunities
Slide 17: Midstream: Big Spring Gathering System
Midstream: Big Spring Gathering System Delek US’ Gathering Helps Control Crude Oil Quality and Cost into Refineries • Approximately 200-mile gathering system, 350Kbpd • Getting closer to wellhead allows us to control throughput capacity crude quality and cost • >275,000 dedicated acres; Points of or
Slide 18: Midstream: Wink to Webster Crude Oil Long Haul Pipeline
Midstream: 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 Midst
Slide 19: Midstream: Red River Pipeline Joint Venture
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 $20.0 milli
Slide 20: 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 3Q19 Refiners’ Middle Distillates Yield % (1) (2) (3) • Refining system product yields • Middle distillate: average approx. 115,000 bpd of distillate or 43%
Slide 21: Delek Logistics Partners, LP Overview
Delek Logistics Partners, LP Overview
Slide 22: Investment Overview
Investment Overview • Current Price: $31.61/unit(1) • Market Capitalization: $772 million(1) Overview (NYSE: DKL) • Current Distribution: $0.880/LP unit qtr.; $3.52/LP unit annualized(2) • Current Yield: 10.99%(2) • Distribution per LP unit growth rate target = minimum of 10% annually through 2019 •
Slide 23: Logistics Assets Positioned to Benefit from Permian Basin Activity
Logistics Assets Positioned to Benefit from Permian Basin Activity Growing logistics assets support crude sourcing and product marketing for customers Pipelines/Transportation Segment • ~805 miles (1) of crude and product transportation pipelines, including the 195 mile crude oil pipeline from Longv
Slide 24: Increased Distribution with Conservative Coverage and Leverage
Increased Distribution with Conservative Coverage and Leverage Distribution per unit has been increased twenty-seven consecutive times since the IPO $0.375 $0.385 $0.395 $0.405 $0.415 $0.425 $0.475 $0.490 $0.510 $0.530 $0.550 $0.570 $0.590 $0.610 $0.630 $0.655 $0.680 $0.690 $0.705 $0.715 $0.725 $0.7
Slide 25: Financial Overview
Financial Overview
Slide 26: Midstream: Utilizing Free Cash Flow & Strong Balance Sheet to Fund Growth
Midstream: Utilizing Free Cash Flow & Strong Balance Sheet to Fund Growth Supports goal to generate approximately $370 million to $395 million of annualized midstream adjusted EBITDA by ’23 • Delek US announced goal to achieve midstream target Strong Adjusted EBITDA Growth Profile from Midstream Ini
Slide 27: Transforming Adjusted EBITDA Toward Midstream
Transforming Adjusted EBITDA Toward Midstream • Midstream to comprise increasing % of YTD 3Q19 future adjusted EBITDA Adjusted EBITDA (1) -10% • More stable revenue stream 22% • Higher multiple business • Refining free cash flow funds midstream 5% build-out 83% • E&P and MLP capital constraints crea
Slide 28: Improving the Base: Progressing Toward Sustainable Adjusted EBITDA
Improving the Base: Progressing Toward Sustainable Adjusted EBITDA of ~$800mm to >$1B • Divesting Underperforming Assets • Throughout ’18 divested Paramount, CA/AltAir Renewables, West Coast Asphalt terminals, Long Beach, CA (collectively Adjusted EBITDA ($mm) removed ~$35mm of annual carrying costs
Slide 29: Capital Allocation Framework
Capital Allocation Framework Four priorities underpinned by a rigorous and disciplined capital allocation program to create long-term value: Priorities: • Invest: Capital allocation program focuses on safety, maintenance, and reliability as top priority • Dividends: Maintain a competitive and growin
Slide 30: Capital Allocation Discipline in Practice – Cash Returned to Shareholders
Capital Allocation Discipline in Practice – Cash Returned to Shareholders Delek US Cash Returned(1) LTM 3Q19 Cash Returned to Shareholders as % of Market Cap(2)(3) Expect to repurchase $30 million in 4Q19 16.0% 14% LTM 3Q19 returned $391.0 million to shareholders through buybacks and 14.0% dividends
Slide 31: Valuation Opportunity
Valuation Opportunity • Energy sector severely discounted versus broader market Metrics vs. S&P 500 (3) • DK earnings stream to become more stable with midstream growth '20E P/E Multiple 10-yr avg P/E DK 11.4 x 10.6 x • Consistently growing dividend results in yield well S&P 500 17.01 15.3 x above S
Slide 32: 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 EBTIDA St
Slide 33: Appendix
Appendix
Slide 34: Long History of Opportunistic Acquisitions & Value Creation
Long History of Opportunistic Acquisitions & Value Creation Being Nimble and Capturing Market Dislocations / Opportunities DKL Joint Ventures Increased Gathering RIO Pipeline East and West Texas 2011 Caddo Pipeline SALA Gathering Exp. Inv.: ~$104 mm Lion Oil acquisition 2012 2013 2014 2015 2018 2019
Slide 35: 3Q19 Highlights
3Q19 Highlights • Strong financial position with over $1 billion of cash on the balance sheet Total Consolidated Cash Flows 1,400 • Cash flow was robust at approx. $213 $80 million from operating activities 1,200 $133 $1,006 $87 1,000 $951 • Working capital increased cash flow by ($180) approx. $80
Slide 36: Guidance
Guidance 4Q19 Guidance Range Low High Consolidated Operating Expenses, $ in millions $165.0 $175.0 Consolidated G&A, $ in millions $65.0 $70.0 Consolidated Depreciation and Amort., $ in millions $51.0 $53.0 Net interest expense, $ in millions $30.5 $32.5 Effective Tax Rate 23.0% 25.0% Estimate Dilut
Slide 37: Market Data
Market Data
Slide 38: Access to Midland Crude Oil Benefits Margins
Access to Midland Crude Oil Benefits Margins WTI Midland vs. WTI Cushing Crude Oil Pricing (1) ($ 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-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Jul-19 Jan-14 Jan-11 Jan-12 Jan-13 Jan-15 Jan
Slide 39: 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 -$30 Jul-16 Jul-10 Jul-11 Jul-12
Slide 40: Reconciliations
Reconciliations
Slide 41: Non-GAAP Reconciliation of Alkylation Project EBITDA
Non-GAAP Reconciliation of Alkylation Project EBITDA(1) Reconciliation of Forecast Incremental U.S. GAAP Net Income (Loss) to Forecast Incremental EBITDA for Alkylation Project ($ in millions) Annual Amount Forecasted Incremental Net Income $ 33.2 Add Forecasted Incremental Amounts for: Interest Exp
Slide 42: 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 43: 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 Nine Months Ended September 30, September 30, Reconciliation of Net Income attributable to Delek to Adjusted EBITDA 2019 2018 2019 2018 (Unaudited)
Slide 44: 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 Year Ended December 31, Reconciliation of Net Income (Loss) attributable to Delek to Adjusted EBITDA 2018 (Unaudited) Reported net income (loss) attributable to Delek
Slide 45: DKL: Reconciliation of Cash Available for Distribution
DKL: Reconciliation of Cash Available for Distribution (dollars in millions, except coverage) 42013 (2) 1Q14 (2) 2Q14(2) 3Q14(2) 4Q14(2) 2014 (2) 1Q15(2) 2Q15 3Q15 4Q15 2015 (2)(3) 1Q16 2Q16 3Q16 4Q16 2016 (3) Reconciliation of Distributable Cash Flow to net cash from operating activities Net cash p
Slide 46: DKL: Income Statement and Non-GAAP EBITDA Reconciliation
DKL: Income Statement and Non-GAAP EBITDA Reconciliation Delek Logistics Partners LP Income Statement and EBITDA Reconciliation 4 Q2013(1) 1Q14(1) 2Q14 3Q14 4Q14 2014 (1) 1Q15(2) 2Q15 3Q15 4Q15 2015(2) 1Q16 2Q16 3Q16 4Q16 2016 Net Revenue $907.4 $203.5 $236.3 $228.0 $173.3 $841.2 $143.5 $172.1 $165.
Slide 47: Non-GAAP Reconciliation of Increased Paline Pipeline Tariff EBITDA
Non-GAAP Reconciliation of Increased Paline Pipeline Tariff EBITDA(1) Reconciliation of Forecast Incremental U.S. GAAP Net Income (Loss) to Forecast Incremental EBITDA for Paline Pipeline Tariff Increase ($ in millions) Annual Monthly Forecasted Incremental Net Income $ 10.8 $ 0.9 Add Forecasted Inc
Slide 48: 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 49: Non-GAAP Reconciliations of Forecasted EBITDA
Non-GAAP Reconciliations of Forecasted EBITDA Reconciliation of Forecasted Incremental Annualized Net Income to Forecasted Incremental Annualized EBITDA for the Big Springs Gathering System ($ in millions) Forecasted Range Forecasted Incremental Annualized Net Income $ 5.0 $ 10.0 Add Forecasted Incr
Slide 50: Investor Relations Contacts
Investor Relations Contacts: Blake Fernandez, SVP IR/Market Intelligence 615-224-1312
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