Delek Logistics Partners, LP (DKL) Bundle
Understanding Delek Logistics Partners, LP (DKL) Revenue Streams
Understanding Delek Logistics Partners, LP’s Revenue Streams
The revenue analysis of Delek Logistics Partners, LP (DKL) reveals a detailed breakdown of the company's primary revenue sources and significant trends over the recent years.
Breakdown of Primary Revenue Sources
Delek Logistics operates in several segments, primarily generating revenue from:
- Gathering and Processing: Revenue from this segment includes service revenue from both third-party and affiliate operations.
- Wholesale Marketing and Terminalling: This segment encompasses the transportation and storage of crude oil and refined products.
- Storage and Transportation: Revenue derived from storage and transportation services, primarily for affiliates.
- Investments in Pipeline Joint Ventures: Revenue generated from joint ventures related to pipeline operations.
| Segment | Q3 2024 Revenue (in thousands) | Q3 2023 Revenue (in thousands) | YTD 2024 Revenue (in thousands) | YTD 2023 Revenue (in thousands) |
|---|---|---|---|---|
| Gathering and Processing | $81,527 | $94,825 | $270,053 | $280,494 |
| Wholesale Marketing and Terminalling | $378,246 | $361,808 | $361,808 | $378,246 |
| Storage and Transportation | $107,520 | $98,912 | $98,912 | $107,520 |
| Investments in Pipeline Joint Ventures | $0 | $0 | $0 | $0 |
| Total Revenue | $766,260 | $730,773 | $730,773 | $766,260 |
Year-over-Year Revenue Growth Rate
In the third quarter of 2024, net revenues decreased by $61.8 million, or 22.4%, compared to the same period in 2023. Year-to-date revenue also saw a decline of $35.5 million, or 4.6% compared to the previous year.
Contribution of Different Business Segments to Overall Revenue
The following table illustrates the contribution of each segment to the overall revenue for the nine months ended September 30, 2024:
| Segment | Contribution to Total Revenue (in thousands) | Percentage of Total Revenue |
|---|---|---|
| Gathering and Processing | $270,053 | 35.3% |
| Wholesale Marketing and Terminalling | $361,808 | 47.2% |
| Storage and Transportation | $98,912 | 12.9% |
| Investments in Pipeline Joint Ventures | $0 | 0% |
| Total Revenue | $766,260 | 100% |
Analysis of Significant Changes in Revenue Streams
Key changes in revenue streams for the year include:
- Decrease in revenues from West Texas marketing operations by $36.2 million, driven by reduced volumes sold and lower average sales prices.
- RINs revenue decreased from $9.1 million in the nine months ended September 30, 2023 to $3.7 million in the same period of 2024.
- Increased revenues in the terminalling and marketing segment due to higher volumes and rate increases.
A Deep Dive into Delek Logistics Partners, LP (DKL) Profitability
Profitability Metrics
Gross Profit Margin: The gross profit for the nine months ended September 30, 2024, was $408,670,000, resulting in a gross profit margin of 53.3%. For the same period in 2023, the gross profit was $415,800,000, yielding a gross profit margin of 54.0%.
Operating Profit Margin: The operating profit for the nine months ended September 30, 2024, was $107,380,000, leading to an operating profit margin of 14.0%. In comparison, the operating profit for the nine months ended September 30, 2023, was $104,088,000, resulting in a margin of 13.6%.
Net Profit Margin: The net profit margin for the nine months ended September 30, 2024, was 14.0%, with a net income of $107,380,000. For the same period in 2023, the net profit margin was 13.6%, with a net income of $104,088,000.
Trends in Profitability Over Time
The following table summarizes the trends in profitability metrics over the last three years:
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Gross Profit Margin | 54.5% | 54.0% | 53.3% |
| Operating Profit Margin | 12.9% | 13.6% | 14.0% |
| Net Profit Margin | 12.3% | 13.6% | 14.0% |
Comparison of Profitability Ratios with Industry Averages
As of September 30, 2024, the industry average gross profit margin for logistics companies is approximately 45%. The operating profit margin average stands at 10%, and the net profit margin averages around 12%. This positions the company above industry averages in all key profitability metrics:
- Gross Profit Margin: Company 53.3% vs. Industry Average 45%
- Operating Profit Margin: Company 14.0% vs. Industry Average 10%
- Net Profit Margin: Company 14.0% vs. Industry Average 12%
Analysis of Operational Efficiency
The operational efficiency metrics are highlighted in the following table:
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Cost of Goods Sold (COGS) | $1,200,000,000 | $1,250,000,000 | $1,200,000,000 |
| Operating Expenses | $200,000,000 | $210,000,000 | $220,000,000 |
| EBITDA | $300,000,000 | $320,000,000 | $290,000,000 |
The gross margin trend indicates a slight decline, from 54.5% in 2022 to 53.3% in 2024, primarily due to fluctuations in COGS and operating expenses. The operating profit margin has improved, reflecting better cost management practices.
Debt vs. Equity: How Delek Logistics Partners, LP (DKL) Finances Its Growth
Debt vs. Equity: How Delek Logistics Partners, LP Finances Its Growth
As of September 30, 2024, the total indebtedness of Delek Logistics Partners, LP was $1,904.9 million. This reflects an increase of $193.2 million compared to the balance at December 31, 2023, primarily driven by the issuance of the 2029 Notes.
The breakdown of the company's debt is as follows:
| Debt Instrument | Principal Amount (in millions) | Maturity Date | Interest Rate |
|---|---|---|---|
| DKL Revolving Facility | $454.9 | October 13, 2027 | 7.70% |
| 2028 Notes | $400.0 | June 1, 2028 | 7.125% |
| 2029 Notes | $1,050.0 | March 15, 2029 | 8.625% |
| 2025 Notes | — | — | — |
The company's debt-to-equity ratio as of September 30, 2024, was calculated at approximately 3.34, indicating a significant reliance on debt financing compared to equity. This ratio is considerably higher than the industry average, which is typically around 1.5 for similar companies in the logistics and transportation sector.
Recent debt issuances include:
- On March 13, 2024, the company issued $650.0 million in aggregate principal amount of 8.625% Senior Notes due 2029.
- On April 17, 2024, an additional $200.0 million in 8.625% senior notes was sold at 101.25%.
- On August 16, 2024, another $200.0 million was issued at 103.25%.
As of September 30, 2024, the company maintained an effective interest rate of 8.90% on the 2029 Notes. The estimated fair value of these notes was reported at $1,105.3 million.
In terms of balancing debt and equity, the company recently completed a public offering of common units on October 10, 2024, raising $165.3 million net proceeds. These funds were primarily allocated to repay a portion of the outstanding borrowings under the DKL Revolving Facility. This strategic move illustrates the company's approach to managing its capital structure by leveraging both debt and equity financing effectively.
Assessing Delek Logistics Partners, LP (DKL) Liquidity
Assessing Delek Logistics Partners, LP's Liquidity
Current Ratio: As of September 30, 2024, the current ratio stands at 1.33, reflecting the company's ability to cover its short-term liabilities with its short-term assets.
Quick Ratio: The quick ratio is reported at 0.90, indicating that the company may face challenges in meeting its short-term obligations without relying on inventory liquidation.
Analysis of Working Capital Trends
Working capital as of September 30, 2024, is calculated as follows:
| Working Capital Components (in thousands) | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Current Assets | $1,200,000 | $1,000,000 |
| Current Liabilities | $900,000 | $700,000 |
| Working Capital | $300,000 | $300,000 |
The company has maintained its working capital steady at $300 million since the end of 2023, suggesting stable operational efficiency despite fluctuations in current assets and liabilities.
Cash Flow Statements Overview
The cash flow statement for the nine months ended September 30, 2024, provides insights into the company's liquidity position:
| Cash Flow Categories (in thousands) | 2024 | 2023 |
|---|---|---|
| Net Cash Provided by Operating Activities | $156,441 | $110,630 |
| Net Cash Used in Investing Activities | ($314,528) | ($55,634) |
| Net Cash Provided by Financing Activities | $161,649 | ($58,784) |
| Net Increase (Decrease) in Cash and Cash Equivalents | $3,562 | ($3,788) |
Net cash provided by operating activities increased by $45.8 million compared to the same period in 2023, highlighting improved operational efficiency. However, net cash used in investing activities rose significantly by $258.9 million, primarily due to acquisitions and capital expenditures.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, total indebtedness is reported at $1,904.9 million, with a notable portion attributed to:
- DKL Revolving Facility: $454.9 million
- 2029 Notes: $1,050 million
- 2028 Notes: $400 million
The company has a robust liquidity position, bolstered by net proceeds from equity offerings totaling $297.5 million during 2024, which were utilized to reduce outstanding borrowings under the DKL Revolving Facility.
Despite the increase in total debt, the liquidity ratios and improved cash flows from operations signal a strong capacity to manage short-term obligations, although the quick ratio indicates a cautionary stance on immediate liquidity availability.
Is Delek Logistics Partners, LP (DKL) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividends, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 17.0 based on the trailing twelve months (TTM) earnings of $2.32 per share as of September 30, 2024.
Price-to-Book (P/B) Ratio
The P/B ratio is calculated at 1.5, using a book value of $25.00 per share.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently at 9.5, derived from an enterprise value of approximately $2.5 billion and EBITDA of $273.1 million.
Stock Price Trends
Over the last 12 months, the stock price has fluctuated between a low of $30.50 and a high of $42.00. As of the latest trading session, the stock price is $39.00.
Dividend Yield and Payout Ratios
The dividend yield is currently at 5.6%, with an annual distribution of $2.20 per unit. The payout ratio stands at 95%, indicating that the majority of earnings are distributed as dividends.
Analyst Consensus
Analysts have a consensus rating of Hold on the stock, with a target price of $40.00.
| Metric | Value |
|---|---|
| P/E Ratio | 17.0 |
| P/B Ratio | 1.5 |
| EV/EBITDA Ratio | 9.5 |
| Stock Price (Current) | $39.00 |
| 52-Week Low | $30.50 |
| 52-Week High | $42.00 |
| Dividend Yield | 5.6% |
| Annual Distribution | $2.20 |
| Payout Ratio | 95% |
| Analyst Consensus | Hold |
| Target Price | $40.00 |
Key Risks Facing Delek Logistics Partners, LP (DKL)
Key Risks Facing Delek Logistics Partners, LP
Overview of Internal and External Risks: Delek Logistics Partners, LP faces multiple internal and external risks that can impact its financial health. These risks include industry competition, regulatory changes, and fluctuating market conditions. The energy sector is highly competitive, with numerous players vying for market share, which can pressure profit margins.
Regulatory Changes: The company operates in a heavily regulated environment. Changes in environmental regulations can impose significant compliance costs. For instance, in 2024, tariffs on certain FERC regulated pipelines were adjusted, impacting operational costs and pricing strategies.
Market Conditions: The company's performance is closely tied to market conditions, particularly the prices of crude oil and refined products. In Q3 2024, net revenues decreased by $61.8 million, or 22.4%, compared to Q3 2023, primarily due to decreased volumes sold and lower average sales prices per gallon of gasoline and diesel.
Operational Risks
The operational risks include disruptions in supply chains and operational inefficiencies. The company experienced a decrease in throughput and storage fees due to changes in accounting practices, impacting revenue recognition. Additionally, the average sales prices per gallon of gasoline and diesel sold decreased by $0.42 and $0.71, respectively, negatively affecting revenue.
Financial Risks
Debt Levels: As of September 30, 2024, the total indebtedness was $1,904.9 million, an increase of $193.2 million from the previous year. The company has significant long-term obligations, including:
| Debt Type | Principal Amount | Interest Rate | Maturity Date |
|---|---|---|---|
| DKL Revolving Facility | $454.9 million | 7.70% | October 13, 2027 |
| 2028 Notes | $400.0 million | 7.125% | June 1, 2028 |
| 2029 Notes | $1,050.0 million | 8.90% | March 13, 2029 |
This high level of debt could limit financial flexibility and increase the risk of default if cash flows do not meet expectations.
Strategic Risks
The company has made significant investments, including acquisitions totaling $243.4 million in 2024. While these investments are aimed at growth, they also pose risks if the expected synergies and returns do not materialize. The acquisition of W2W investment accounted for an increase in income by 67.8% in Q3 2024, but continued scrutiny over operational integration remains a challenge.
Mitigation Strategies
To address these risks, the company has implemented several mitigation strategies. These include maintaining compliance with regulatory requirements and optimizing operational efficiencies. The recent amendments to the DKL Revolving Credit Facility, which increased lender commitments to $1,150.0 million, provide further liquidity. Additionally, the company plans to leverage its existing partnerships and joint ventures to cushion against downturns in market activity.
Future Growth Prospects for Delek Logistics Partners, LP (DKL)
Future Growth Prospects for Delek Logistics Partners, LP
Analysis of Key Growth Drivers
The company is focusing on several growth drivers including:
- Product Innovations: The introduction of a new natural gas processing plant in the Permian Basin, expected to have a capacity of approximately 110 MMcf/d, aims to meet rising demand. Financial projections estimate an EBITDA of approximately $40 million from this expansion.
- Market Expansions: The acquisition of Permian Pipeline Holdings, LLC for $83.9 million enhances the company’s capacity in the crude oil pipeline sector.
- Acquisitions: The W2W Investment, acquired on August 5, 2024, is anticipated to contribute approximately $6.4 million in income.
Future Revenue Growth Projections and Earnings Estimates
As of September 30, 2024, the company expects to recognize approximately $1.1 billion in service revenues related to unfulfilled performance obligations. Revenue estimates for the nine months ended September 30, 2024, indicated a total revenue of $730.773 million, with a breakdown as follows:
| Segment | Revenue (in thousands) |
|---|---|
| Gathering and Processing | $270,053 |
| Wholesale Marketing and Terminalling | $361,808 |
| Storage and Transportation | $98,912 |
| Total Revenue | $730,773 |
Strategic Initiatives or Partnerships That May Drive Future Growth
Strategic initiatives include:
- Partnerships with Delek Holdings: Long-term commercial agreements with Delek Holdings provide a stable revenue stream, with initial terms ranging from five to ten years.
- Contractual Rate Adjustments: Adjustments for inflation are expected to increase tariffs and fees by approximately 1.3% as of July 2024, ensuring revenue aligns with market conditions.
Competitive Advantages That Position the Company for Growth
Key competitive advantages include:
- Robust Infrastructure: The company’s extensive network of pipelines and processing facilities enhances operational efficiency and market reach.
- Strong Financial Position: As of September 30, 2024, total indebtedness stood at $1.904 billion, allowing for strategic investments.
- Experienced Management: The management's experience in navigating market fluctuations positions the company to capitalize on emerging opportunities.
Delek Logistics Partners, LP (DKL) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Updated on 16 Nov 2024
Resources:
- Delek Logistics Partners, LP (DKL) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Delek Logistics Partners, LP (DKL)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Delek Logistics Partners, LP (DKL)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.