Delek Us Holdings, Inc. · NYSE:DK
Delek Us — Investor Presentation (September 2019)
41 slides from Delek Us's investor presentation, Sep 11, 2019
Slide 1: Delek US Holdings, Inc. Investor Presentation
Exhibit 99.1 Delek US Holdings, Inc. Investor Presentation September 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: $36.08/share(1) • Market Capitalization: $2.7 billion(1) Overview (NYSE: DK) • NYSE: DKL: (Market cap $725mm)(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 CADDO RIO
Slide 5: 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 2005
Slide 6: Improving the Base: Progressing Toward Sustainable Adjusted EBITDA
Improving the Base: Progressing Toward Sustainable Adjusted EBITDA of ~$800mm to >$1B • Divesting Underperforming Assets Adjusted EBITDA ($mm) • Throughout ’18 divested Paramount, CA/AltAir Renewables, West Coast Asphalt terminals, Long Beach, CA (collectively removed ~$35mm of annual carrying costs
Slide 7: Transforming Adjusted EBITDA Toward Midstream
Transforming Adjusted EBITDA Toward Midstream • Midstream to comprise increasing % of YTD 2019 future adjusted EBITDA Adjusted EBITDA (1) • More stable revenue stream 18% -7% • Higher multiple business 4% • Refining free cash flow funds midstream build-out 85% • E&P and MLP capital constraints creat
Slide 8: 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 (1) • Delek US announced goal to achieve midstream target Strong Adjusted EBITDA Growth Profile from Midstream
Slide 9: 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 control crude throughput capacity quality and cost • >250,000 dedicated acres; Points of origin:
Slide 10: Midstream: Wink to Webster Crude Oil Long Haul Pipeline Joint Venture
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 11: 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 12: 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 13: 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 2Q19 • 75,000 bpd crude oil Tyler(1) 11% Crude Current throughput st Throughput Crude Oil 1 Half 2020 • 8.7 complexity WTI Capacity Access Crude Oil Access 100% • Light crude oil r
Slide 14: 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 15: Capital Allocation Framework
Capital Allocation Framework Four pillars 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 growing d
Slide 16: Capital Allocation – Balanced & Flexible
Capital Allocation – Balanced & Flexible Capital Allocation Philosophy Historical Adjusted EBITDA • Targeting >$1B Adjusted EBITDA in Coming Years • $442mm adjusted EBITDA 1H19(1) Income Tax Expense Interest Expense, Net • Underpinned by midstream growth Flexible • Growth Capital and Buybacks to Fle
Slide 17: 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 18: 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 ~16% of current market cap to 14% 14.0% share
Slide 19: Market Opportunities & Valuation
Market Opportunities & Valuation
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 2Q19 Refiners’ Middle Distillates Yield % (1) (2) (3) • Refining system product yields • Middle distillate: average approx. 115,000 bpd of distillate or (4)
Slide 21: 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 '19E P/E Multiple 10-yr avg P/E DK 7.9 x 10.6 x • Consistently growing dividend results in yield well S&P 500 17.7x 15.3 x above S&
Slide 22: 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 23: Appendix
Appendix
Slide 24: 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 25: 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 26: Current Delek US Corporate Structure
Current Delek US Corporate Structure 94.6% Delek US Holdings, Inc. ownership interest (1) NYSE: DK Market Cap: $2.7 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 27: Market Data
Market Data
Slide 28: IMO 2020 Current impact on oil and product markets
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 -$5 • If scrubber adoption is less than projected, could resu
Slide 29: Access to Midland Crude Oil Benefits Margins
Access to Midland Crude Oil Benefits Margins WTI Midland vs. WTI Cushing Crude Oil Pricing (1) ($ 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-19 Jan-11 Jan-12 Jan-13 Jan-14 Jan
Slide 30: 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 -$30 Jul-10 Jul-11 Jul-12 Jul-13
Slide 31: Reconciliations
Reconciliations
Slide 32: Non-GAAP Reconciliation of Alkylation Project EBITDA
Non-GAAP Reconciliation of Alkylation Project EBITDA(1) Reconciliation of Forecast Incremental U.S. GAAP Net Income (Loss) to Forecast Incremental EBITDA for Alkylation Project ($ in millions) Annual Amount Forecasted Incremental Net Income $ 33.2 Add Forecasted Incremental Amounts for: Interest Exp
Slide 33: 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 34: 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 Six Months Ended June 30, 30, Reconciliation of Net Income (Loss) attributable to Delek to Adjusted EBITDA 2019 2018 2019 2018 (Unaudited) (Una
Slide 35: 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 36: 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 37: DKL: Reconciliation of Cash Available for Distribution
DKL: Reconciliation of Cash Available for Distribution 4 (dollars in millions, except coverage) Q2013 (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
Slide 38: DKL: Income Statement and Non-GAAP EBITDA Reconciliation
DKL: Income Statement and Non-GAAP 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 $165.1 $108.9 $589.7 $104.1 $111.9 $107.5 $124.7 $448.1 Cost of Sales (811.4
Slide 39: Non-GAAP Reconciliation of Increased Paline Pipeline Tariff EBITDA
Non-GAAP Reconciliation of Increased Paline Pipeline Tariff EBITDA(1) Reconciliation of Forecast Incremental U.S. GAAP Net Income (Loss) to Forecast Incremental EBITDA for Paline Pipeline Tariff Increase ($ in millions) Annual Monthly Forecasted Incremental Net Income $ 10.8 $ 0.9 Add Forecasted Inc
Slide 40: 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 41: Investor Relations Contacts
Investor Relations Contacts: Blake Fernandez, SVP IR/Market Intelligence 615-224-1312
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