Delek Us Holdings, Inc. · NYSE:DK
Delek Us — Investor Presentation (December 2018)
39 slides from Delek Us's investor presentation, Dec 4, 2018
Slide 1: Delek US Holdings, Inc. Investor Presentation December 2018
Delek US Holdings, Inc. Investor Presentation December 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: $39.76/share(1) • Market Capitalization: $3.26 billion(1) Overview (NYSE: DK) • NYSE: DKL: (Market cap $746mm) 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 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 Growing gathering system Refining (1) Logistics (2) Asphalt Retail Renewables • 6th largest independent • 10 terminals 6 asphalt terminals located • Approx
Slide 5: 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 6: Brent – WTI Differential
Brent – WTI Differential Transportation economics should keep the differential wide (1)(2) • Transportation economics should play a role in the Indication of Cushing Sourced Export Transport Economics differential $10.00 $6.04 - $9.48 $5.49 - $9.13 $8.00 $0.90 • Current break-even transport economic
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 7.00 70.00 $59.63
Slide 8: Delek US Forecast Case EBITDA
Delek US Forecast Case EBITDA Under current Midland-Cushing conditions Forecast Case Segment EBITDA $1,400 RefiningRefiningBasic Assumptions*Assumptions $1,200 $165 $35 Midland – Cushing Differential -$6.00 Midland Differential (2) $1,013 HSD 5-3-2 Crack Spread $1,000 $978 HSDULSD 5-3-2 Crack5-3- 2S
Slide 9: Delek US Forecast Case Free Cash Flow Potential
Delek US Forecast Case Free Cash Flow Potential Under current Midland-Cushing conditions Indicative Free Cash Flow Available for Buybacks, Dividend Growth & Growth Capex 1200 (2) $1,013 $100 1000 $120 $80 800 $130 600 $55 $120 $408 400 Sustaining200 Capex 0 Delek US Cash Taxes Interest Dividends Sus
Slide 10: 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 11: 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 Expect to return $445 million or ~14% of current market cap • Investing in the business to shareholders in 2018 through buybacks and dividends • 4 refi
Slide 12: Growth and Market Opportunities
Growth and Market Opportunities
Slide 13: 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 Gasoline Diesel/Jet Heavy Oils Other 8.7 September 30, 2018 11.1 8.0 8.0 • Improves refinery flexibility 2
Slide 14: 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 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: 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 3Q18 Refiners’ Middle Distillates Yield % (1) (2) (3) • Refining system product yields • Middle distillate: average approx. 115,000 bpd of distillate or 43%
Slide 17: 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 18: 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 $390 million of annual midstream EBITDA • Big Spring logistics assets dropdown closed Strong EBITDA Growth Profile from Midstream Initiatives (1) in March 2018, effective March 1 ($ in mi
Slide 19: 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 20: 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 21: Appendix
Appendix
Slide 22: Total Consolidated Cash Flows 2Q18 to 3Q18
Total Consolidated Cash Flows 2Q18 to 3Q18 1,600 367.9 1,400 (182.4) 1,200 1,132.8 (85.5) 1,109.1 (113.1) (7.4) (3.2) 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 S
Slide 23: 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 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: $3.26 billion(2) Delek Logistics GP, LLC (the General Partner) 61.4% interest in LP units 2.0% interest General partner interest Incentive distribution Delek Logistics Partners, LP rights N
Slide 26: Robust Synergy Opportunity from DK/ALJ Combination
Robust Synergy Opportunity from DK/ALJ Combination Steady improvement in expected synergies from transaction ($ 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 27: Market Data
Delek Market Data
Slide 28: IMO 2020
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 decreases ULSD demand $5 • Led to upside pressure on the HFSO curve over past month -$5 • If scrubber adoption is less than projected, results in
Slide 29: Access to Midland Crude Oil Benefits Margins
Access to Midland Crude Oil Benefits Margins WTI Midland vs. WTI Cushing Crude Oil Pricing ($ 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 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 -$30 Jul-17 Jul-10 Jul-11 Jul-12
Slide 31: Reconciliations
Reconciliations
Slide 32: Non-GAAP Reconciliation of Potential Alkylation Project EBITDA
Non-GAAP Reconciliation of Potential Alkylation Project EBITDA(1) Reconcilation of Forecast U.S. GAAP Net Income (Loss) to Forecast EBITDA for Alkylation Project ($ in millions) Forecasted Range Forecasted Net Income $ 24.1 $ 27.3 Add: Interest expense, net - - Income tax expense 14.0 15.8 Depreciat
Slide 33: 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 34: 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 35: 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 36: 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 37: 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 38: 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 39: 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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