Delek Us Holdings, Inc. · NYSE:DK
Delek Us — Investor Presentation (May 2019)
40 slides from Delek Us's investor presentation, May 7, 2019
Slide 1: Delek US Holdings, Inc. Investor Presentation May 2019
Exhibit 99.1 Delek US Holdings, Inc. Investor Presentation May 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: $36.22/share(1) • Market Capitalization: $2.8 billion(1) Overview (NYSE: DK) • NYSE: DKL: (Market cap $801 mm)(1) Owns 63.4%, including 2% GP(2) • 1Q19 Net Income: $149.3 million; Adjusted EBITDA: $237.5 million(3) • March 31, 2019 balance sheet: Flexible Financi
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 • Ap
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 16% 1% • 75,000 bpd crude oil Crude throughput Throughput WTI 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 $6.50 - $11.14 $10.00 $0.30 • Current break-even transport economics for exporting fro
Slide 7: Permian Basin Outlook
Permian Basin Outlook Production continues to grow while incremental takeaway capacity outlook is uncertain • Steady growth has continued in production Average Annual Crude Oil Production (Mbpd) (1) • Drilling supported by improved technology and low costs and WTI-Midland Price (2) • Low break-even
Slide 8: Market Update
Market Update Trends benefit Delek US’ WTI-linked refining system • Crack spread has increased through 1Q19 Increasing US Gulf Coast WTI 5-3-2 (2) • Refining industry utilization currently 89.2% (1) $20.00 • Gasoline industry inventory position improved through 1Q19 • Gasoline crack spread increased
Slide 9: Delek US Forecast Case EBITDA
Delek US Forecast Case EBITDA Potential Earnings Power of Current Model (1) Refining Basic Assumptions* Forecast Case Segment EBITDA Midland – Cushing Differential -$2.50 $1,200 Current Operations $1,050 (2) WTI HSD 5-3-2 Crack Spread $13.50 (2) $1,000 $40 (2) (2) $900 (3) $60 WTI ULSD 5-3-2 Crack S
Slide 10: Delek US Forecast Case Free Cash Flow
Delek US Forecast Case Free Cash Flow Potential Based on Potential Earnings Power of Current Model; Long Term Average Market Prices Indicative Free Cash Flow Available for Buybacks, Dividend Growth & Growth Capex(1) 1000 (2) $900 $100 900 $120 800 700 $130 600 $55 500 $120 (2) 400 $375 300 Sustainin
Slide 11: 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 12: 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 • Provides ability to act quickly to take advantage of opportunities • DK
Slide 13: Cash Returned to Shareholders
Capital Allocation Discipline in Practice – Cash Returned to Shareholders Delek US Cash Returned(1) 2018 Cash Returned to Shareholders as % of Market Cap(2)(3) Expect to repurchase $60 million in 2Q19 18.0% LTM 1Q19 returned $400.0 million or ~14% of current market cap to 16.0% 15% shareholders thro
Slide 14: Growth and Market Opportunities
Growth and Market Opportunities
Slide 15: Krotz Springs Refinery - Alkylation Project
Krotz Springs Refinery- Alkylation Project • Alkylation unit with 6,000 bpd capacity Change in Yields, in 000 bpd • Completed in early April 2019 • Approx. $138.0 million capital costs Gasoline Diesel/Jet Heavy Oils Other 8.7 • Improves refinery flexibility 11.1 8.0 • Converts lower priced isobutane
Slide 16: Growing Midstream - Big Spring Gathering System
Growing Midstream - Big Spring Gathering System Delek US’ Gathering Helps Control Crude Oil Quality and Costs into Refineries • Approximately 200-mile gathering • Allows Delek US to get closer to system, 300Kbpd throughput capacity wellhead to control crude oil quality • Currently more than 200,000
Slide 17: Potential Permian Basin Crude Oil Long Haul Pipeline
Growing Midstream – Potential Permian Basin Crude Oil Long Haul Pipeline • Exploring potential options for a joint venture long haul crude oil pipeline • Targeting 5-7x annual EBITDA multiple over life of project • Big Spring gathering system can provide source of Big Spring barrels for long haul pi
Slide 18: 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 4Q18 Refiners’ Middle Distillates Yield % (1) (2) (3) • Refining system product yields • Middle distillate: average approx. 115,000 bpd of distillate or 44
Slide 19: 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 $ in millions $1,200 $150 $58 $108 $1,000 $900 $20 $33 $40 Regulatory $60 Commercial Initiatives $800 $50 Krotz Alkylation unit $600 $750 $400 Supports DK’s objective
Slide 20: Organic Projects Create Platform to Support Midstream Growth
Organic Projects Create Platform to Support Midstream Growth Supports Delek US’ goal to generate approximately $350 million to $370 million of annual midstream EBITDA by 2023 • Paline Pipeline tariff increase Strong EBITDA Growth Profile from Midstream Initiatives (1) • Incentive tariff of $0.75/bbl
Slide 21: 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 $989.7 million of cash; net debt of $771.4 million; net debt excl. DKL of $71.6 million(1) • Operations positioned to generate strong
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: 1Q19 Highlights – Cash Flow
1Q19 Highlights – Cash Flow • Financial position and cash flow Total Consolidated Cash Flows generation in 1Q19 supported 1,400 investment in the business and returning cash to shareholders $133.4 1,200 $1,079.3 • Operating cash flow from ( $127.0) $989.7 1,000 continuing ops $133.4 million ($96.0 )
Slide 25: Guidance
Guidance 2Q19 Guidance Range Low High Consolidated Operating Expenses, $ in millions $165.0 $175.0 Consolidated G&A, $ in millions $57.0 $62.0 Consolidated Depreciation and Amort., $ in millions $52.0 $53.0 Net interest expense, $ in millions $28.0 $30.0 Effective Tax Rate 23% 25% Estimate Diluted S
Slide 26: 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 27: Current Delek US Corporate Structure
Current Delek US Corporate Structure 94.6% Delek US Holdings, Inc. ownership interest (1) NYSE: DK Market Cap: $2.8 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 28: Market Data
Market Data
Slide 29: 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 could decrease ULSD demand $5 • Led to upside pressure on the HFSO curve over past month -$5 • If scrubber adoption is less than projected, could resu
Slide 30: Access to Midland Crude Oil Benefits Margins
Access to Midland Crude Oil Benefits Margins WTI Midland vs. WTI Cushing Crude Oil Pricing ($ 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-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Ju
Slide 31: 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 -$30 Jul-10 Jul-11 Jul-12 Jul-13
Slide 32: Reconciliations
Reconciliations
Slide 33: Non-GAAP Reconciliation of Potential Project EBITDA
Non-GAAP Reconciliation of Potential Project EBITDA(1) Reconciliation of Forecast Incremental U.S. GAAP Net Income (Loss) to Forecast Incremental EBITDA for Alkylation Project ($ in millions) Annual Amount Forecasted Incremental Net Income $ 33.2 Add Forecasted Incremental Amounts for: Interest Expe
Slide 34: Non-GAAP Reconciliation of Krotz Spring Potential Dropdown EBITDA
Non-GAAP Reconciliation of Krotz Spring Potential Dropdown EBITDA(1) Reconciliation of Forecast Incremental U.S. GAAP Net Income (Loss) to Forecast Incremental EBITDA for Krotz Sprins Logistics Drop Down ($ in millions) Forcasted Range Forecasted Incremental Net Income $ 2.9 $ 3.3 Add Forecasted Inc
Slide 35: Non-GAAP Reconciliations of Adjusted EBITDA
Non-GAAP Reconciliations of Adjusted EBITDA 35
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-five consecutive times since the IPO $0.770 $0.790 $0.810 $0.820 $0.705 $0.715 $0.725 $0.750 $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
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) Reconciliation of Distributable Cash Flow to net cash from operating activities Net cash provi
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 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 $448.1 Cost of Sales (811.4) (172
Slide 39: Non-GAAP Reconciliation of Increased Paline Pipeline Tariff EBITDA
Non-GAAP Reconciliation of Increased Paline Pipeline Tariff EBITDA(1) Reconciliation of Forecast Incremental U.S. GAAP Net Income (Loss) to Forecast Incremental EBITDA for Paline Pipeline Tariff Increase ($ in millions) Annual Monthly Forecasted Incremental Net Income $ 10.8 $ 0.9 Add Forecasted Inc
Slide 40: Investor Relations Contact
Investor Relations Contact: Assi Ginzburg Keith Johnson Executive Vice President, CFO Vice President of Investor Relations 615-224-1158 615-435-1366