Delek Us Holdings, Inc. · NYSE:DK
Delek Us — Tel Aviv Stock Exchange Investor Presentation November 2018
53 slides from Delek Us's conference presentation, Nov 19, 2018
Slide 1: Delek US Holdings Investor Presentation – Tel Aviv Stock Exchange
EX 99.1 Delek US Holdings, Inc. Investor Presentation – Tel Aviv Stock Exchange November 2018
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 Refining Market Environment
Current Refining Market Environment
Slide 5: US Crude Oil Production is Growing
US Crude Oil Production is Growing • US is likely now the largest global crude oil producer • According to the EIA Short-Term Energy Outlook (STEO) • Permian production makes up the largest percentage of US crude oil production by basin • Currently producing more than 3.6 million bpd (1) • Global pr
Slide 6: Brent – WTI Differential
Brent – WTI Differential Transportation economics should keep the differential wide (1)(2) • Current Brent-WTI differential is $10.16(1) versus $6.13 in Indication of Cushing Sourced Export Transport Economics Nov. 2017 5.89- $9.16 $5.34 - $8.81 $0.30 $7.50 $0.25 • Transportation economics should pl
Slide 7: Permian Basin Outlook
Permian Basin Outlook Production continues to grow while incremental takeaway capacity outlook is uncertain (1) • Steady growth has continued in production Average Annual Crude Oil Production (Mbpd) (2) • Drilling supported by improved technology and low and WTI-Midland Price costs 6.00 $58.82 $57.8
Slide 8: U.S. Refineries Advantaged Relative to Global Peers
U.S. Refineries Advantaged Relative to Global Peers (1) • US Refiners are more complex on average allowing World Refining Crude Distillation Capacity more production flexibility (Barrels per Calendar Day unless otherwise noted) • U.S. complexity 11.5 versus 7.0 global average • In addition to comple
Slide 9: 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 10: 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 will decrease ULSD demand $5 • Led to upside pressure on the HFSO curve over past month -$5 • If scrubber adoption is less than projected, results in
Slide 11: Crack Spread Could Continue to Widen Further
Crack Spread Could Continue to Widen Further Crack spreads have come in from 2017 high; could widen depending on IMO impact and global growth • Over last year Brent-WTI forward curve for 4Q18 and 2019 has widened to nearly $10/bbl • In November 2017 the forward curve was approximately $5.78 for 4Q18
Slide 12: Delek US Overview
Delek US Overview
Slide 13: Current Delek US Corporate Structure
Current Delek US Corporate Structure 94.6% Delek US Holdings, Inc. ownership interest (1) NYSE: DK Market Cap: $3.16 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 N
Slide 14: Investment Overview
Investment Overview • Current Price: $38.55/share(1) • Market Capitalization: $3.16 billion(1) Overview (NYSE: DK) • NYSE: DKL: (Market cap $747mm) Owns 63.4%, including 2% GP(2) • 3Q18 Net Income: $179.8 million; Adjusted EBITDA: $310.6 million(3) • September 30, 2018 balance sheet: Flexible Financ
Slide 15: 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 Growing gathering system Refining (1) Logistics (2) Asphalt Retail Renewables • 6th largest independent • 10 terminals 6 asphalt terminals located • Approx
Slide 16: 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 1% • 75,000 bpd crude oil Crude throughput Throughput WTI 18% 100% WTI • 8.7 complexit
Slide 17: Integrated Retail System
Integrated Retail System Integrated wholesale marketing and retail network at Big Spring; complementary to west Texas • Current Retail Operations • Prior Retail Experience • Approximately 300 store retail system in • Built Southeast U.S. retail system with 348 stores Central/west Texas and New Mexic
Slide 18: Growth and Market Opportunities
Growth and Market Opportunities
Slide 19: Krotz Springs Refinery - Alkylation Project
Krotz Springs Refinery- Alkylation Project • Alkylation unit with 6,000 bpd capacity Change in Yields, in 000 bpd • Approx. $113.0 million estimated capital costs with $82.0 million spent as of September 30, 2018 Gasoline Diesel/Jet Heavy Oils Other 8.7 11.1 • Improves refinery flexibility 8.0 • Con
Slide 20: Growing Midstream - Big Spring Gathering System
Growing Midstream - Big Spring Gathering System Delek US’ Gathering Helps Control Crude Oil Quality and Costs into Refineries • 250-mile gathering system, 300Kbpd • Allows Delek US to get closer to throughput capacity wellhead to control crude oil quality • Currently more than 200,000 and cost dedic
Slide 21: 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 22: 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 2Q18 Refiners’ Middle Distillates Yield % (1) (2) (4) • Refining system product yields • Middle distillate: average approx. 119,000 bpd of distillate or 44%
Slide 23: Logistics Assets Positioned for Growth
Logistics Assets Positioned for Growth
Slide 24: Investment Overview (Delek Logistics)
Investment Overview • Current Price: $30.75/unit (1) • Market Capitalization: $747 million (1) Overview (NYSE: DKL) • Current Distribution: $0.790/LP unit qtr.; $3.16/LP unit annualized (2) • Current Yield: 10.28% (1) (2) • Distribution per LP unit growth rate target = minimum of 10% annually throug
Slide 25: 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 26: Delek Logistics Financial Update
Delek Logistics Financial Update
Slide 27: Increased Distribution with Conservative Coverage and Leverage
Increased Distribution with Conservative Coverage and Leverage Distribution per unit has been increased twenty-three consecutive times since the IPO $0.790 $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 $0.4
Slide 28: DKL: Consistent Distribution Growth Returned Value to Unitholders
DKL: Consistent Distribution Growth Returned Value to Unitholders Returned 10.93% Compounded Annualized Growth Rate since IPO (Price appreciation and distributions) $55 $50 $45 $40 $13.68 cumulative Distribution/ LP unit $35 $30 $25 $20 Price per LP unit + .Cumulative Distribution/unit + unit.Cumula
Slide 29: Organic Projects Create Platform to Support Midstream Growth
Organic Projects Create Platform to Support Midstream Growth Supports Delek US’ goal to generate $370 million to $390 million of annual midstream EBITDA(3) • Executed on drop downs and organic growth Strong EBITDA Growth Profile from Midstream Initiatives (1) initiatives over last year to drive mids
Slide 30: 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 Difference $ in millions between -$2.50 Expected Incremental Benefit from Company Initiatives/Projects $1,400 and -$6.00 Midland-Cushing $160 $205 $1,200 differential
Slide 31: Delek US Forecast Case - Free Cash Flow Potential
Delek US Forecast Case - Free Cash Flow Potential Under current Midland-Cushing conditions and 10-year average crack spreads Indicative Free Cash Flow Available for Buybacks, Dividend Growth & Growth Capex $ in millions 1200 $1,013 $100 1000 $120 $80 800 $130 600 $55 $120 $408 400 Sustaining200 Cape
Slide 32: 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 33: Capital Allocation Discipline in Practice
Capital Allocation Discipline in Practice • Maintaining strong balance sheet Capital Allocation(1) • DK excluding DKL in a net cash position 9/30/18 • 2017 RINs waiver - El Dorado and Krotz Spring valued at $59.3m $ in millions Expect to return $445 million or ~14% of current market cap to sharehold
Slide 34: 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 $1.1 billion of cash; net debt of $752.9 million; net cash excl. DKL of $4.8 million(1) • Operations positioned to generate strong cas
Slide 35: Delek US Successfully Executing on Strategic Initiatives
Delek US Successfully Executing on Strategic Initiatives Unlocked Value from Alon Transaction • On Track to Capture $130 million to $140 million of Annualized Estimated Synergy Targets Synergies as of August 2018 ($ in millions) • Original estimate of $85 million to $105 million $130-$140 $36.5 • Si
Slide 36: Delek US Successfully Executing on Strategic Initiatives
Delek US Successfully Executing on Strategic Initiatives Strong balance sheets allows DK to invest, grow, and return cash to shareholders Changes in 2018 Estimated Consensus EBITDA(1) • Focused on Growing Permian Basin Platform • Alon USA transaction doubled size of organization $839 • Announced mid
Slide 37: 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 38: Appendix
Appendix
Slide 39: Total Consolidated Cash Flows 2Q18 to 3Q18
Total Consolidated Cash Flows 2Q18 to 3Q18 1,600 352.1 1,400 (182.4) 1,200 1,132.8 (85.5) 12.6 1,109.1 (113.1) (7.4) 1,000 800 600 400 200 0 6/30/2018 Cash Operating Cash Net Debt Cash Capital Return of Capital Net Distributions Other 9/30/2018 Cash Balance Flow from Repayment Expenditures and to Sh
Slide 40: Guidance
Guidance 4Q18 Guidance Low High Total Crude Throughput 275,000 285,000 Realized Midland-Cushing Discount, $/bbl $10.00 $10.50 Consolidated Operating Expenses, $ in millions $160.0 $170.0 Consolidated G&A, $ in millions $64.0 $69.0 Consolidated Depreciation and Amort., $ in millions $50.0 $52.0 Net i
Slide 41: Delek US Growth Focused on Growth through Acquisitions
Delek US Growth Focused on Growth through Acquisitions 2005 to 2007 2011 to 2012 2013 to Current 2011 Crude Oil Increased Gathering SALA Gathering East and West Texas Gathering Lion Oil acquisition 2012 DKL Joint Ventures 2011 Crude Oil Nettleton RIO Pipeline Paline Pipeline Pipeline Caddo Pipeline
Slide 42: Robust Synergy Opportunity from DK/ALJ Combination
Robust Synergy Opportunity from DK/ALJ Combination Steady improvement in expected synergies from transaction ($ in millions) New Apr. 2018 Type Description Corporate Cost of Capital Operational Commercial Estimate Estimate Targets $130-$140 • Logistics, purchase and $131 Commercial trading benefits
Slide 43: Market Data
Delek Market Data
Slide 44: Access to Midland Crude Oil Benefits Margins
Access to Midland Crude Oil Benefits Margins WTI Midland vs. WTI Cushing Crude Oil Pricing ($ 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 ($18.00) Jul-12 Jul-11 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Ju
Slide 45: Reconciliations
Reconciliations
Slide 46: Non-GAAP Reconciliation of Potential Alkylation Project EBITDA
Non-GAAP Reconciliation of Potential Alkylation Project EBITDA(1) Reconcilation of Forecast U.S. GAAP Net Income (Loss) to Forecast EBITDA for Alkylation Project ($ in millions) Forecasted Range Forecasted Net Income $ 24.1 $ 27.3 Add: Interest expense, net - - Income tax expense 14.0 15.8 Depreciat
Slide 47: Non-GAAP Reconciliation of Krotz Spring 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 48: Non-GAAP Reconciliations of Big Spring Potential Dropdown EBITDA
Non-GAAP Reconciliations of Big Spring Potential Dropdown 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 exp
Slide 49: Non-GAAP Reconciliations of Adjusted EBITDA
Non-GAAP Reconciliations of Adjusted EBITDA Three Months Ended September 30, Reconciliation of Net Income (Loss) to Adjusted EBITDA 2018 2017 (Unaudited) Reported net income (loss) attributable to Delek $ 179.8 $ 104.4 Add: Interest expense, net 29.8 33.2 Loss on extinguishment of debt 0.1 Income ta
Slide 50: Non-GAAP Reconciliations of Adjusted Net Income
Non-GAAP Reconciliations of Adjusted Net Income Three Months Ended September 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 $2.03 $1.29 Adjustments, after tax (per share) Net inventory valuati
Slide 51: 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 3Q18 Reconciliation of Distributable Cash Flow to ne
Slide 52: 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 3Q18 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
Slide 53: 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
Delek US Holdings — Tel Aviv Stock Exchange Investor Presentation November 2018 on 6ix