Delek Us Holdings, Inc. · NYSE:DK
Delek Us — Investor Presentation (August 2018)
44 slides from Delek Us's investor presentation, Aug 8, 2018
Slide 1: Delek US Holdings, Inc. Investor Presentation August 2018
Ex. 99.1 Delek US Holdings, Inc. Investor Presentation August 2018
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: $51.39/share (1) Overview (NYSE: DK) • Market Capitalization: $4.3 billion (1) • NYSE: DKL: (Market cap $697mm) Own 63.4%, including 2% GP (2) •Refining crude slate is approximately 70% Permian Basin crude Permian Focused •Big Spring, TX refinery located in Howar
Slide 4: Second Quarter 2018 Highlights
Second Quarter 2018 Highlights • Adjusted 2Q18 earnings per share of $1.03 and EBITDA of $199.1million • Including RINs mark-to-market adjustment earnings per share of $1.22 and EBITDA of $220.9 million • Performance includes an estimated realized Midland-Cushing differential of $3.00/bbl • Executio
Slide 5: Integrated Company with Asset Diversity and Scale
Integrated Company with Asset Diversity and Scale Strategically Located Assets with Permian Basin Exposure Refining (1) Logistics (2) Asphalt Retail Renewables • 7th largest independent • 10 terminals 6 asphalt terminals located • Approximately 300 Approx. 23m gallons refiner • Approximately 1,290 i
Slide 6: Delek US Permian Focused WTI-Linked Crude Oil Refining System
Delek US Permian Focused WTI-Linked Crude Oil Refining System Current Refining Market Environment
Slide 7: 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) Tyler, Texas El Dorado, Arkansas Big Spring, Texas Krotz Springs, Louisiana • 75,000 bpd crude • 80,000 bpd crude • 73,000 bpd crude • 74,000 bpd cru
Slide 8: Midland WTI-Brent Crude Oil Price Differential Trends Improving
Midland WTI-Brent Crude Oil Price Differential Trends Improving Differential is additive to crack spread trends in the current market environment WTI versus Brent has widened • WTI Midland vs Brent, $/bbl (1) Outlook Began in early 2017 • Cushing-Brent Differential Midland-Cushing Differential $5 Fu
Slide 9: Permian Basin Attractive Drilling Economics Support Growth
Permian Basin Attractive Drilling Economics Support Growth Production continued to grow through crude oil price volatility Crude Oil Production Grew Despite Rig Decline (1) • Crude oil production benefited by low 3,500 600 breakeven costs and improved 3,000 500 efficiencies 2,500 400 2,000 300 • As
Slide 10: Permian Basin Outlook - Production v. Pipeline Takeaway Capacity
Permian Basin Outlook - Production v. Pipeline Takeaway Capacity Production growth may tighten balance as it approaches takeaway capacity 5,500 $1.50 5,000 4,500 ($3.50) 4,000 Capacity under construction 3,500 Capacity ramping up ($8.50) 3,000 2,500 ($13.50) 2,000 ($/bbl) Differential Midland WTI Pr
Slide 11: Crack Spread Cycle Turning Up
Crack Spread Cycle Turning Up Crack spread expected to continue upward trend $50 Brent-WTI Cushing Spread Per Barrel WTI 5-3-2 Gulf Coast Crack Spread Per Barrel 2010 2011 2012 2013 2014 2015 2016 2017 2018F $40 Avg: Avg: Avg: Avg: Avg: Avg: Avg: Avg: Avg: $9.08 $23.78 $26.91 $18.08 $12.60 $15.67 $1
Slide 12: Initiatives Underway to Create Sustainable Value
Initiatives Underway to Create Sustainable Value
Slide 13: Value Unlocked From Alon Transaction
Over Last Year Value Has Been Unlocked From Alon Transaction Simplified Corporate Structure, Divested Non-Core Assets, Unlocked Logistics Value and Captured Synergies • Simplified Corporate Structure • On February 7, 2018, acquired remaining limited partner units of Alon USA Partners (ALDW); Delek U
Slide 14: Robust Synergy Opportunity from DK/ALJ Combination
Robust Synergy Opportunity from DK/ALJ Combination Steady improvement in expected synergies from transaction ($ 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 15: Krotz Springs Improvement Initiatives
Krotz Springs Improvement Initiatives Areas of focus to add flexibility and increase margin potential from refinery Improve Units to Add Product Flexibility • Alkylation Project – approx. $103.0 million cost; 1Q19 expected completion • Estimated annual EBITDA (1) $35-$40 million Crude – Transportati
Slide 16: Krotz Springs Alkylation Project
Krotz Springs Alkylation Project Expected annual EBITDA $35 to $40 million; Target completion in 1Q19 • Alkylation unit with 6,000 bpd capacity Change in Yields, in 000 bpd • Approx. $103.0 million estimated capital costs with $60.7 million spent as of June 30, 2018 Gasoline Diesel/Jet Heavy Oils Ot
Slide 17: Logistics Assets Positioned for Growth
Logistics Assets Positioned for Growth
Slide 18: Delek Logistics Overview
Overview • Current Price: $28.69/unit (1) NYSE: DKL • Market Capitalization: $697 million (1) (2) Logistics Segment Consist of DKL • Current Distribution: $0.770/LP unit qtr.; $3.08/LP unit annualized • Current Yield: 11.0% (1)(2) • Distribution per LP unit growth rate target = minimum of 10% annual
Slide 19: Logistics Assets Positioned to Benefit from Permian Basin Activity
Logistics Assets Positioned to Benefit from Permian Basin Activity Growing logistics assets support crude sourcing and product marketing for customers Pipelines/Transportation Segment • ~805 miles (1) of crude and product transportation pipelines, including the 195 mile crude oil pipeline from Longv
Slide 20: Increased Drop Down Inventory Creates Platform for Logistics Growth
Increased Drop Down Inventory plus Organic Project Creates Platform to Support Logistics Growth Potential Growth for DKL Strong EBITDA Growth Profile Supporting Distribution Growth (1) ($ in millions) • Delek Logistics provides platform to unlock $250.0 logistics value • Increased access to Permian
Slide 21: Big Spring Dropdown Expected to Provide Growth
Big Spring Dropdown Expected to Provide Growth • Closed in March with an effective date of March 1, 2018 • Purchase price of $315.0 million, which equates to a 7.8x EBITDA multiple. • Expected annualized EBITDA of $40.2 million (1) • Financed through a combination of cash on hand and borrowings on t
Slide 22: Positive Outlook for Paline Pipeline and West Texas Wholesale
Positive Outlook for Paline Pipeline and West Texas Wholesale Paline Pipeline West Texas Wholesale • Approximately 195-mile 42 kbpd crude oil pipeline from • Operates in an area around the Permian Basin; Longview, TX south to Beaumont complementary to Delek US refining / retail in region: • Allows s
Slide 23: Future Potential Dropdowns to DKL Expected to Benefit Delek US
Future Potential Dropdowns to DKL Expected to Benefit Delek US Cash Flow Supports Long Term Distribution Growth at Delek Logistics Delek US GP and IDR Ownership is in DKL in the high splits • DKL distribution was $0.77/unit for 2Q 2018 Total Quarterly Distribution Per Unit Unitholders General Partne
Slide 24: DKL: Increased Distribution with Conservative Coverage and Leverage
DKL: Increased Distribution with Conservative Coverage and Leverage Distribution per unit has been increased twenty-two consecutive times since the IPO $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 $0.405 $
Slide 25: Opportunities for Retail
Opportunities for Retail Integrated wholesale marketing and retail network at Big Spring; complementary to DKL West Texas Current Retail Operations Prior Retail Experience • Approximately 300 store retail system in • Built Southeast U.S. retail system Central/West Texas and New Mexico with 348 store
Slide 26: Solid Financial Position
Solid Financial Position
Slide 27: Financial Strength and Flexibility to Support Initiatives
Financial Strength and Flexibility to Support Initiatives At June 30, 2018 approximately $1.1 billion of cash Cash Balance ($MM) (1) • Focused on growing business, while maintaining $1,133 $1,018 financial flexibility $932 • Sold retail assets in Nov. 2016 for $535 million $689 • Closed Alon transac
Slide 28: Capital Allocation Focused on Long-Term Value Creation
Capital Allocation Focused on Long-Term Value Creation • Invest in the business Historical Capital Spending (3) • 2018 spending includes the Alkylation Project at Krotz Springs ($ in millions) • 1Q 2019 El Dorado Turnaround planning underway • Programs in place allow different options to return cash
Slide 29: Initiatives Underway to Create Sustainable Value
Initiatives Underway to Create Sustainable Value Execution of strategic initiatives • $131 million captured on annualized basis in 2Q18 Capturing Synergies • Increased annualized target range to $130 million to $140 million • On track to reach annualized goal in 2018 Investing in the Business • Impr
Slide 30: Current Valuation Below Peer EV to EBITDA
Current Valuation Below Peer EV to EBITDA Positioned to benefit from the Midland discount; Executing initiatives to create sustainable value (1) Based on NASDAQ IR Insights/Factset as of August 3, 2018. 30
Slide 31: Questions and Answers
Questions and Answers Significant Organic Focus on Long-Term Growth / Margin Shareholder Returns Improvement Opportunities An Integrated and Permian Focused Diversified Refining, Financial Flexibility Refining System Logistics and Marketing Company Complementary Logistics Systems
Slide 32: Appendix
Appendix
Slide 33: Delek US Focused on Growth through Acquisitions
Delek US Focused on Growth through Acquisitions 2005 to 2007 2011 to 2012 2013 to Current 2011 Crude Increased Gathering SALA Gathering East and West Texas Gathering Lion Oil acquisition 2012 DKL Joint Ventures 2011 Crude Nettleton RIO Pipeline Paline Pipeline Pipeline Caddo Pipeline Logistics $50 m
Slide 34: Current Delek US Corporate Structure
Current Delek US Corporate Structure 94.6% Delek US Holdings, Inc. ownership interest (1) NYSE: DK Market Cap: $4.3 billion (2) Delek Logistics GP, LLC (the General Partner) 61.4% interest in LP units 2.0% interest General partner interest Incentive distribution Delek Logistics Partners, LP rights N
Slide 35: Access to Midland Crude Oil Benefits Margins
Access to Midland Crude Oil Benefits Margins WTI Midland vs. WTI Cushing Crude Oil Pricing ($ per barrel) $2.00 $0.00 ($2.00) ($4.00) ($6.00) ($8.00) Approx. 207,000 ($10.00) bpd of Midland crude oil in DK ($12.00) system ($14.00) Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Jan-11 Jan-12
Slide 36: U.S. Refining Environment Trends
U.S. Refining Environment Trends Refined Product Margins and WTI-Linked Feedstock Favor Delek US Brent-WTI Cushing Spread Per Barrel (1) WTI 5-3-2 Gulf Coast Crack Spread Per Barrel(2) LLS 5-3-2 Gulf Coast Crack Spread Per Barrel (2) $50 $40 $30 $20 $10 $0 -$10 -$20 -$30 Jul-10 Jul-11 Jul-12 Jul-13
Slide 37: Non-GAAP Reconciliations of Potential Alkylation Project EBITDA
Non-GAAP Reconciliations of Potential Alkylation Project EBITDA (1) Reconciliation of Forecast U.S. GAAP Net Income (Loss) to Forecast Forecasted EBITDA for Alkylation Project Range Forecasted Net Income $ 17.8 $ 21.0 Add: Interest Expense, net — — Income tax expense 10.3 12.1 Depreciation and amort
Slide 38: Non-GAAP Reconciliations of Krotz Springs Potential Dropdown EBITDA
Non-GAAP Reconciliations of Krotz Springs Potential Dropdown EBITDA (1) 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 EB
Slide 39: Non-GAAP Reconciliations of EBITDA: Big Spring Logistics Drop Down
Non-GAAP Reconciliations of 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 expense - Depreciation and amort
Slide 40: Non-GAAP Reconciliations of Adjusted Net Income per Share
Non-GAAP Reconciliations of Adjusted Net Income (Loss) per Share Three Months Ended June 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 $0.89 ($0.61) Adjustments, after tax (per share) (1) Net
Slide 41: Non-GAAP Reconciliations of Adjusted EBITDA
Non-GAAP Reconciliations of Adjusted EBITDA Three Months Ended June 30, Reconciliation of Net Income (Loss) to Adjusted EBITDA 2018 2017 (Unaudited) Reported net income (loss) attributable to Delek $79.10 ($37.90) Add: Interest expense, net 30.60 14.10 Income tax expense (benefit) - continuing opera
Slide 42: 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 Reconciliation of Distributable Cash Flow to ne
Slide 43: 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 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 $1
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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