Alon USA Partners LP — Merger or Acquisition (November 2017)
44 slides from Alon USA Partners LP's merger presentation, Nov 22, 2017
Slide 1: Delek US Holdings, Inc. Investor Presentation - Tel Aviv Stock Exchange
November 22, 2017 Delek US Holdings, Inc. Investor Presentation - Tel Aviv Stock Exchange
Slide 2: Today's Speakers
Today’s Speakers 2 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
Slide 3: Disclaimers
Disclaimers 3 Forward Looking Statements: Delek US Holdings, Inc. (“Delek US”) and Delek Logistics Partners, LP (“Delek Logistics”; collectively with Delek US, defined as “we”, “our”) and Alon USA Partners, LP (“Alon Partners”) are traded on the New York Stock Exchange in the United States under the
Slide 4: Current Refining Market Environment
Current Refining Market Environment
Slide 5: US Crude Oil Production is Growing
5 OPEC production increases led to dramatic decline in oil prices Permian Basin production continued to grow as oil price declined In November 2016, OPEC agreed to first oil output cut in eight years Permian Production up 51% since Oct. 2014 and 24% since Nov. 2016 Permian Production, 2018-2
Slide 6: WTI-Brent Crude Oil Price Differential Trends Improving
Differential is additive to crack spread trends in the current market environment WTI-Brent Crude Oil Price Differential Trends Improving 6 1) Differential source: Bloomberg 11/17/18. -$30 -$25 -$20 -$15 -$10 -$5 $0 $5 $10 Jan -0 7 A u g-0 7 M ar-0 8 Oct -0 8 M ay-0 9 D e c-0 9 Ju l-1 0 Fe b -1 1 Se
Slide 7: Light-Heavy Crude Oil Price Differential Trends Improving
WTI versus Mars and Maya differentials favor light crude oil refineries Light-Heavy Crude Oil Price Differential Trends Improving 7 1) Differential source: Argus – November 20, 2017; NYMEX futures prices. -$6.00 -$4.00 -$2.00 $0.00 $2.00 $4.00 $6.00 Jan -1 5 M ar-1 5 M ay-1 5 Ju l-1 5 Se p -1 5 N o
Slide 8: U.S. Refineries have Advantages compared to Global Peers
8 1. Sources: Oil & Gas Journal and Stancil data. 2. Henry Hub natural gas prices. U.S. Refineries have Advantages compared to Global Peers US Refiners are more complex on average allowing more production flexibility U.S. complexity 11.5 versus 7.0 global average In addition to complexity, adv
Slide 9: Crack Spread Cycle Turning Up
Crack Spread Cycle Turning Up Crack spread at highest since 2015 and expected to continue upward trend 9 -$30 -$20 -$10 $0 $10 $20 $30 $40 $50 1 0 -J a n -1 0 1 0 -Ma r- 1 0 1 0 -Ma y -1 0 1 0 -J u l- 1 0 1 0 -S e p -1 0 1 0 -N o v -1 0 1 0 -J a n -1 1 1 0 -Ma r- 1 1 1 0 -Ma y -1 1 1 0 -J u l- 1 1 1
Slide 10: Delek US Overview
Delek US Overview
Slide 11: Current Delek US Corporate Structure
11 Current Delek US Corporate Structure (1) As of September 30, 2017, a 5.4% interest in the Delek US ownership interest in the general partner is held by three members of senior management of Delek US. The remaining ownership interest is indirectly held by Delek US. (2) Market cap based on share an
Slide 12: Investment Highlights
Investment Highlights 12 • Net income of $1.29 per share • Adjusted net income of $0.81 per share • Adjusted EBITDA of $195.9 million Strong Third Quarter 2017 Performance (1) • Closed on July 1, 2017 • Purchased the remaining 53% ownership that DK did not already own in an all stock transaction; ex
Slide 13: Integrated Company with Asset Diversity and Scale
Integrated Company with Asset Diversity and Scale Strategically Located Assets with Permian Basin Exposure 13 Retail • Approximately 300 stores • Southwest US locations • Largest licensee of 7- Eleven stores in the US • West Texas wholesale marketing business Asphalt • 14 asphalt terminals located i
Slide 14: Strategic Combination with Financial Flexibility to Support Growth and Unlock Value
Strategic Combination with Financial Flexibility to Support Growth and Unlock Value 14 • Grown through opportunistic acquisitions across multiple market cycles • Expertise to invest in/improve operations • Strong balance sheet • Low cost reliable operator • Retail expertise/largest 7-Eleven licensee
Slide 15: WTI-Linked Crude Oil Refining System
WTI-Linked Crude Oil Refining System
Slide 16: WTI-Linked Refining System with Permian Based Crude Oil Slate
System with Over 300,000 bpd of Crude Oil Throughput Capacity (~69% Permian Basin Based) WTI-Linked Refining System with Permian Based Crude Oil Slate 16 Tyler, Texas • 75,000 bpd crude throughput • 8.7 complexity • Light crude refinery • Permian Basin and east Texas sourced crude El Dorado, Arkansa
Slide 17: Delek US' WTI Linked Crude Oil Supply has Continued to Grow
By 2018 WTI-linked barrels accounted for 90% of the crude oil slate; Benefitting from Current Differentials Delek US’ WTI Linked Crude Oil Supply has Continued to Grow 17 Ability to increase WTI-linked barrels in 2018 • Krotz Springs – LLS vs Midland – Ability to increase Midland barrels by 10 kbpd;
Slide 18: Krotz Springs Alkylation Project
Expected annual EBITDA $35-$40 million; Target completion in 1Q19 Krotz Springs Alkylation Project 18 • Alkylation unit with 6,000 bpd capacity • Approx. $103.0 estimated capital costs with $20.0 million spent as of Sept. 30, 2017 • Improves refinery flexibility • Converts lower priced iso-butane in
Slide 19: Opportunities for Retail
Opportunities for Retail Integrated wholesale marketing and retail network at Big Spring; complementary to DKL west Texas 19 Current Retail Operations • Approximately 300 store retail system in Central/west Texas and New Mexico • Supplies ~635 branded sites, including substantially all of Alon’s ret
Slide 20: Logistics Assets Positioned for Growth
Logistics Assets Positioned for Growth
Slide 21: Logistics Assets Positioned to Benefit from Permian Basin Activity
~805 miles (1) of crude oil and product transportation pipelines, including the 195 mile crude oil pipeline from Longview to Nederland, TX ~ 600 mile crude oil gathering system in AR Storage facilities with 7.3 million barrels of active shell capacity Rail Offloading Facility Pipelines/Trans
Slide 22: Increased Drop Down Inventory Creates Platform to Support Logistics Growth
Increased Drop Down Inventory Creates Platform to Support Logistics Growth 22 Potential Growth for DKL • Delek Logistics Partners provides platform to unlock logistics value • Increased access to Permian and Delaware basin through presence of Big Spring refinery • Improves ability to develop crude o
Slide 23: Delek Logistics Financial Update
Delek Logistics Financial Update
Slide 24: DKL: Increased Distribution with Conservative Coverage and Leverage
24 (1) MQD = minimum quarterly distribution set pursuant to the Partnership Agreement. (2) Distribution coverage based on distributable cash flow divided by distribution amount in each period. Please see page 42 for reconciliation. (3) 3Q17 based on total distributions paid on November 14, 2017. (4)
Slide 25: Delek US GP and IDR Ownership is in DKL in the high splits
25 Delek US GP and IDR Ownership is in DKL in the high splits Future Potential Dropdowns to DKL Benefit Delek US Cash Flow Supports Long Term Distribution Growth at Delek Logistics Total Quarterly Distribution Per Unit Target Amount Unitholders General Partner Minimum Quarterly Distribution below $0
Slide 26: DKL: Consistent Distribution Growth Returned Value to Unitholders
26 (1) Quarterly distributions are included based on payment date to calculated cumulative distribution during period since IPO in November 2012. Data through 11/20/17. DKL: Consistent Distribution Growth Returned Value to Unitholders $10 $15 $20 $25 $30 $35 $40 $45 $50 $55 N o v-1 2 D e c-1 2 Jan -
Slide 27: Solid Financial Position
Solid Financial Position
Slide 28: Strong Performance by Delek US in 3Q17 Versus Expectations
28 Source: Company reports, Bloomberg and J.P. Morgan estimates; J.P. Morgan 3Q summary report on 11/13/17 Strong Performance by Delek US in 3Q17 Versus Expectations Delek US led the refining sector with actual results compared to early October expectations 41% 41% 37% 25% 21% 20% 13% 2% DK MPC HFC
Slide 29: Financial Strength and Flexibility to Support Initiatives
Financial Strength and Flexibility to Support Initiatives At September 30, 2017 approximately $832 million of cash 29 • Focused on growing business, while maintaining financial flexibility • Sold retail assets in Nov. 2016 for $535 million • Closed Alon transaction on July 1, 2017 • At September 30
Slide 30: Capital Allocation Focused on Long-Term Value Creation
Invest in the business Forecast 2017 capex includes spending on Alon assets for six months Commenced Alky unit project at Krotz Springs 2018 El Dorado Turnaround planning underway Consent decree spending at Big Spring Programs in place allow different options to return cash to shareholde
Slide 31: Robust Opportunity from DK/ALJ Combination to Create Value
Robust Opportunity from DK/ALJ Combination to Create Value 31 Corporate Cost of Capital Target $85-$105 ($ in millions) Initiatives Underway across the company To Date 9/30/17 $53 Balance sheet with $832 million of cash supports company initiatives WTI-Linked refining system Margins benefiting
Slide 32: Valuation Comparison
Valuation Comparison Current Valuation Below Peer EV to EBITDA (1) 32 (1) Based on NASDAQ IR Insights/Factset as of 11/20/17. Consensus EBITDA(1) 2018: $553 million; 2019: $543 million Current valuation for Delek US below peer group may create attractive opportunity 0.0x 1.0x 2.0x 3.0x 4.0x 5.0x
Slide 33: Questions and Answers
33 Complementary Logistics Systems Significant Organic Growth / Margin Improvement Opportunities Focus on Long Term Shareholder Returns Financial Flexibility WTI-Linked Refining System Questions and Answers An Integrated and Diversified Refining, Logistics and Marketing Company
Slide 34: Additional Information
34 Additional Information No Offer or Solicitation This communication relates to a proposed business combination between Delek US and Alon Partners. This announcement is for informational purposes only, and is neither an offer to purchase, nor a solicitation of an offer to sell, any securities, or t
Slide 35: Appendix
Appendix
Slide 36: Non GAAP Reconciliations Delek US EPS and EBITDA
Non GAAP Reconciliations Delek US EPS and EBITDA 36 Three Months Ended September 30, 2017 Reconciliation of U.S. GAAP Net Income (Loss) to Adjusted EBITDA (Unaudited) Reported net income (loss) per share attributable to Delek $ 104.4 Add: Interest expense, net 33.2 Income tax expense 133.5 Depreciat
Slide 37: Non GAAP Reconciliations of Potential Alky Unit EBITDA
Non GAAP Reconciliations of Potential Alky Unit EBITDA (1) 37 (1) Based on projected range of potential future performance from the alkylation unit project at Krotz Springs. Amounts of EBITDA, net income and timing will vary. Actual amounts will be based on timing of completion, performance of the p
Slide 38: Non GAAP Reconciliations of Potential Dropdown EBITDA
Non GAAP Reconciliations of Potential Dropdown EBITDA (1) 38 (1) Based on projected range of potential future logistics assets that could be dropped to Delek Logistics from Delek US in the future. Amounts of EBITDA, net income and timing will vary, which will affect the potential future EBITDA and a
Slide 39: Delek US Focused on Growth through Acquisitions
Delek US Focused on Growth through Acquisitions (1) Includes logistic assets in purchase price. Purchase price includes working capital for refineries. (2) Mt. Pleasant includes $1.1 million of inventory. 2006 Abilene & San Angelo terminals $55.1 mm 2012 Nettleton Pipeline $12.3 mm 2011 Paline Pipel
Slide 40: -$30 -$20 -$10 $0 $10 $20 $30 $40 $50 J a n -1 Fe
-$30 -$20 -$10 $0 $10 $20 $30 $40 $50 J a n -1 0 Fe b -1 0 Ma r- 1 0 A p r- 1 0 Ma y -1 0 J u n -1 0 J u l- 1 0 A u g -1 0 S e p -1 0 O c t- 1 0 N o v -1 0 D e c -1 0 J a n -1 1 Fe b -1 1 Ma r- 1 1 A p r- 1 1 Ma y -1 1 J u n -1 1 J u l- 1 1 A u g -1 1 S e p -1 1 O c t- 1 1 N o v -1 1 D e c -1 1 J a
Slide 41: ($14.00) ($12.00) ($10.00) ($8.00) ($6.00) ($4.00) ($2.00) $0.00 $2.00 Ja n -1 1 Fe
($14.00) ($12.00) ($10.00) ($8.00) ($6.00) ($4.00) ($2.00) $0.00 $2.00 Ja n -1 1 Fe b -1 1 M ar -1 1 A p r- 11 M ay -1 1 Ju n -1 1 Ju l-1 1 A u g- 1 1 Se p -1 1 O ct-1 1 N o v- 1 1 De c- 1 1 Ja n -1 2 Fe b -1 2 M ar -1 2 A p r- 12 M ay -1 2 Ju n -1 2 Ju l-1 2 A u g- 1 2 Se p -1 2 O ct-1 2 N o v- 1 2
Slide 42: DKL: Reconciliation of Cash Available for Distribution
DKL: Reconciliation of Cash Available for Distribution 42 (1) Distribution based on actual amounts distributed during the periods; does not include a LTIP accrual. Coverage is defined as cash available for distribution divided by total distribution. (2) Results in 2013, 2014 and 2015 are as reported
Slide 43: DKL: Income Statement and Non-GAAP EBITDA Reconciliation
DKL: Income Statement and Non-GAAP EBITDA Reconciliation 43 (1) Includes approximately $2.0 million of estimated annual incremental general and administrative expenses expected to incur as a result of being a separate publicly traded partnership. (2) Interest expense and cash interest both include c
Slide 44: 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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