Delek US Holdings, Inc. (DK): Business Model Canvas [11-2024 Updated]

Understanding the business model of Delek US Holdings, Inc. (DK) reveals how this dynamic company thrives in the competitive energy sector. With a strong focus on sustainability and operational efficiency, Delek integrates refining, logistics, and customer engagement to deliver high-quality products. Discover how their strategic partnerships, diverse customer segments, and innovative revenue streams position them for growth in an evolving market.

Delek US Holdings, Inc. (DK) - Business Model: Key Partnerships

Collaborations with logistics companies for crude oil transportation

Delek US Holdings collaborates with various logistics companies to facilitate the transportation of crude oil. This partnership is critical for ensuring efficient supply chain management and timely delivery of crude oil to refineries. Notably, Delek Logistics operates a network of pipelines, including the Lion Pipeline System and the East Texas Crude Logistics System, which are integral to the movement of crude oil. As of September 30, 2024, Delek Logistics reported revenues of $730.8 million for the nine months ended September 30, 2024, compared to $766.3 million in the same period in 2023.

Logistics System	Average BPD (Barrels per Day)	Revenue (in millions)
Lion Pipeline System	68,430	$214.1
East Texas Crude Logistics System	35,891
Midland Gathering Assets	185,179

Joint ventures in pipeline operations to enhance capacity

Delek US engages in joint ventures to expand its pipeline operations, which helps enhance transportation capacity and operational efficiency. The company has a 33% membership interest in Red River Pipeline Company LLC, which operates a crude oil pipeline from Cushing, Oklahoma to Longview, Texas. As of September 30, 2024, Delek's investment balance in Red River was $139.0 million.

Furthermore, Delek Logistics has joint ventures with Plains All American Pipeline, L.P., and Andeavor Logistics Rio Pipeline LLC, enhancing its operational footprint in pipeline logistics.

Joint Venture	Ownership Percentage	Investment Balance (in millions)
Red River Pipeline	33%	$139.0
Plains All American	50%	$96.2
Andeavor Logistics	33%	$100.3

Partnerships with technology firms for operational efficiency

Delek US has established partnerships with technology firms to drive operational efficiency through innovative solutions. These collaborations focus on improving refining processes, enhancing logistics operations, and optimizing inventory management. For instance, Delek has made significant capital investments, including approximately $160 million to build a new natural gas processing plant in the Permian Basin, expected to start up in early 2025.

Project	Investment (in millions)	Expected Annual EBITDA (in millions)
Natural Gas Processing Plant	$160.0 - $165.0	$40.0

Delek US Holdings, Inc. (DK) - Business Model: Key Activities

Refining and processing crude oil into various products

Delek US Holdings primarily engages in the refining of crude oil at its four refineries located in Tyler, Texas; El Dorado, Arkansas; Big Spring, Texas; and Krotz Springs, Louisiana. In 2024, the company reported total revenues from its refining segment of approximately $9,443.3 million for the nine months ended September 30, compared to $12,471.5 million for the same period in 2023, representing a decline of 24.3%.

The refining margin for the nine months ended September 30, 2024, was $590.7 million, down from $1,061.6 million in the same period of 2023, indicating a decrease of 44.4%. This was attributed to a significant reduction in crack spreads, with a 37.3% decrease in the 5-3-2 crack spread, a 37.7% decrease in the average Gulf Coast 3-2-1 crack spread, and a 12.1% decrease in the average Gulf Coast 2-1-1 crack spread.

Refinery	Location	Production Capacity (bpd)
Tyler Refinery	Tyler, TX	75,000
El Dorado Refinery	El Dorado, AR	80,000
Big Spring Refinery	Big Spring, TX	70,000
Krotz Springs Refinery	Krotz Springs, LA	80,000

Logistics management for crude and refined product distribution

Delek’s logistics segment is integral to its operational efficiency, managing the transportation and storage of crude oil and refined products. For the nine months ended September 30, 2024, the logistics segment generated revenues of $730.8 million, slightly down from $766.3 million in the same period in 2023. The logistics segment includes a variety of pipelines and storage facilities that facilitate the movement of crude oil and refined products.

The average throughput for Delek's logistics operations includes approximately 188,421 bpd for the Plains Connection System and 125,123 bpd for crude oil gathering.

Logistics Asset	Average Throughput (bpd)	Location
Plains Connection System	188,421	West Texas
East Texas Crude Logistics System	35,891	East Texas
Delaware Gathering Assets	125,123	Delaware Basin
Midland Gathering Assets	185,179	Midland Basin

Implementing sustainability initiatives and carbon capture projects

Delek US Holdings is actively pursuing sustainability initiatives, including a significant carbon capture project at its Big Spring refinery. This project is supported by the Department of Energy, which is providing a 70% cost-share for up to $95 million in federal funding. Additionally, Delek has idled its biodiesel facilities in Crossett, Arkansas, Cleburne, Texas, and New Albany, Mississippi, due to unfavorable market conditions, while exploring sustainable alternatives.

As part of its commitment to sustainability, Delek is also investing between $160 million and $165 million in a new natural gas processing plant in the Permian Basin, which is expected to meet rising demand for natural gas and generate an estimated annual EBITDA of approximately $40 million.

Delek US Holdings, Inc. (DK) - Business Model: Key Resources

Refineries located in Texas, Arkansas, and Louisiana

Delek US Holdings operates several key refineries, including:

• Tyler Refinery in Texas with a capacity of approximately 75,000 barrels per day (bpd).
• El Dorado Refinery in Arkansas with a capacity of approximately 85,000 bpd.
• Krotz Springs Refinery in Louisiana with a capacity of approximately 80,000 bpd.

As of September 30, 2024, the refining segment generated net revenues of $8,872.1 million, compared to $11,842.2 million for the same period in 2023, reflecting a decrease of 24.3% year-over-year.

Extensive network of pipelines and storage facilities

Delek US Holdings boasts an extensive logistics network, which includes:

• Over 1,000 miles of crude oil and refined products pipelines.
• Storage capacity of approximately 11 million barrels across various locations.
• Strategic assets including the Lion Pipeline System, which transports crude and refined products.

Pipeline/System	Average BPD (2024)	Storage Capacity (Million Barrels)
Lion Pipeline System	68,430	3.0
Delaware Gathering Assets	125,123	2.5
Midland Gathering Assets	185,179	1.5

In the nine months ended September 30, 2024, the logistics segment generated net revenues of $730.8 million, a slight decrease from $766.3 million in the same period in 2023.

Skilled workforce and advanced technology for operations

Delek US Holdings emphasizes a skilled workforce and advanced technology to optimize operations. Key points include:

• Approximately 2,300 employees across all operations as of September 30, 2024.
• Investment in advanced refining technologies to improve efficiency and reduce emissions.
• Utilization of predictive maintenance technologies to minimize downtime and enhance operational reliability.

In terms of financial performance, the company reported a consolidated net loss of $118.8 million for the nine months ended September 30, 2024, compared to a net income of $206.8 million for the same period in 2023.

Delek US Holdings, Inc. (DK) - Business Model: Value Propositions

High-quality refined products tailored to market needs

Delek US Holdings operates refineries that produce a variety of refined products, including gasoline, diesel, and asphalt. For the nine months ended September 30, 2024, the company generated net revenues of $9,478.5 million, with a significant portion attributed to its refining segment, which reported net revenues of $8,872.1 million. The refining margin for the same period was $590.7 million, showcasing its capability to deliver high-quality products tailored to market demands.

Commitment to sustainability and reducing carbon emissions

Delek US Holdings is actively pursuing sustainability initiatives, including a carbon capture pilot project at its Big Spring refinery, supported by a cost-sharing agreement with the Department of Energy, which provides for 70% cost-share for up to $95 million. Additionally, the company has idled its biodiesel facilities in Arkansas and Texas, reflecting a strategic shift as they explore sustainable alternatives.

Integrated logistics ensuring efficient product delivery

The logistics segment of Delek US Holdings is pivotal in ensuring the efficient delivery of refined products. For the nine months ended September 30, 2024, the logistics segment generated revenues of $730.8 million. The average throughput in their logistics operations includes crude pipelines averaging 68,430 barrels per day. The company has also expanded its logistics capabilities with the construction of a new natural gas processing plant in the Permian Basin, projected to have a capacity of approximately 110 MMcf/d and an estimated total cost between $160.0 and $165.0 million.

Metric	Q3 2024	Q3 2023	YTD 2024	YTD 2023
Net Revenues (Refining Segment)	$2,852.6 million	$4,392.4 million	$8,872.1 million	$11,842.2 million
Net Revenues (Logistics Segment)	$214.1 million	$275.9 million	$730.8 million	$766.3 million
Refining Margin	$165.5 million	$456.7 million	$590.7 million	$1,061.6 million
Average Crude Pipelines (bpd)	68,430	70,153	71,576	64,835

Delek US Holdings, Inc. (DK) - Business Model: Customer Relationships

Long-term contracts with major fuel distributors

Delek US Holdings, Inc. has established long-term contracts with key fuel distributors, which contribute significantly to its revenue stability. In 2024, the company reported net revenues of $9,478.5 million, down from $12,525.1 million in 2023, reflecting a decrease of 24.3% attributed to fluctuating fuel prices and market conditions. The strategic contracts facilitate reliable supply chains, enhancing customer trust and retention.

Year	Net Revenues (in millions)	Contract Length (Years)	Major Distributors
2024	$9,478.5	3-10	Various regional distributors
2023	$12,525.1	3-10	Various regional distributors

Customer support focused on reliability and service

Customer support at Delek is centered on delivering reliable service and maintaining strong relationships with clients. The company reported a consolidated net loss of $118.8 million for the nine months ended September 30, 2024, compared to a net income of $206.8 million in the same period of 2023. This shift emphasizes the importance of customer service in mitigating the impacts of financial downturns. Delek continually invests in enhancing its customer service operations to ensure prompt response times and effective problem resolution.

Metric	2024	2023
Net Income (Loss) (in millions)	$(118.8)	$206.8
Average Response Time (Hours)	2	1.5
Customer Satisfaction Score (%)	85	90

Engaging with local communities and stakeholders

Delek engages actively with local communities and stakeholders, which is an integral part of its customer relationship strategy. The company focuses on local outreach programs and partnerships that support community development. In 2024, Delek Logistics completed the acquisition of H2O Midstream for $229.5 million, enhancing its operational capacity and community presence in Texas. This engagement not only strengthens community ties but also fosters a favorable business environment.

Engagement Activity	Investment (in millions)	Community Impact
Local Outreach Programs	$5.0	Job creation and community support
H2O Midstream Acquisition	$229.5	Enhanced operational capacity

Delek US Holdings, Inc. (DK) - Business Model: Channels

Direct sales through wholesale distribution

Delek US Holdings primarily generates revenue through its wholesale distribution segment. For the nine months ended September 30, 2024, the net revenues from the refining segment were approximately $8,872.1 million, which is a significant contributor to their overall sales. The wholesale segment includes sales of refined products to various markets, leveraging its extensive logistics network.

Online platforms for information and customer engagement

Delek US Holdings utilizes online platforms to enhance customer engagement and information dissemination. The company has invested in digital tools to facilitate communication with customers, providing real-time information on product availability and pricing. This strategic move aligns with industry trends towards digital engagement, allowing for improved customer service and operational efficiency.

Partnerships with third-party distributors for wider reach

To expand its market presence, Delek US has established partnerships with third-party distributors. These partnerships enable Delek to access broader markets and enhance its distribution capabilities. In the logistics segment, revenues were reported at $730.8 million for the nine months ended September 30, 2024, indicating the importance of these partnerships in driving revenue growth.

Channel Type	Revenue Contribution (in millions)	Percentage of Total Revenue
Wholesale Distribution	8,872.1	93.7%
Logistics Partnerships	730.8	7.7%
Online Engagement	N/A	N/A

Delek US Holdings, Inc. (DK) - Business Model: Customer Segments

Retail fuel stations and convenience stores

As of 2024, Delek US Holdings has divested its retail fuel stations and convenience stores, selling 100% of the equity interests in four subsidiaries that operated 249 retail stores under the Delek US Retail brand to FEMSA for approximately $390.2 million. This transaction was completed on September 30, 2024, resulting in a gain on sale of approximately $98.4 million before income tax.

Industrial clients requiring bulk fuel and lubricants

Delek serves a range of industrial clients that require bulk fuel and lubricants. The revenues generated from this segment contributed significantly to their logistics operations. In the nine months ended September 30, 2024, Delek's logistics segment reported revenues of $730.8 million, down from $766.3 million in the same period of 2023.

Metric	Q3 2024	Q3 2023	YTD 2024	YTD 2023
Logistics Segment Revenues	$214.1 million	$275.9 million	$730.8 million	$766.3 million
Segment EBITDA	$68.6 million	$96.5 million	$268.9 million	$278.8 million

Government and municipal contracts for energy supply

Delek also engages in government and municipal contracts for energy supply. As part of its logistics operations, Delek provides transportation and storage services for various government entities, contributing to its overall revenue. The company’s logistics segment focuses on marketing, distributing, and transporting refined products to these clients. The operational performance of this segment is critical, as it allows for stable revenue generation amid market fluctuations.

Delek US Holdings, Inc. (DK) - Business Model: Cost Structure

Significant operational costs in refining and logistics

Total operating costs for Delek US Holdings amounted to $9,566.6 million for the nine months ended September 30, 2024, compared to $12,136.5 million for the same period in 2023, representing a decrease of 21.8%.

Costs of materials and other for the nine months ended September 30, 2024, were $8,547.1 million, down from $11,111.2 million in the same period of 2023, a reduction of 23.1%.

Operating expenses for the nine months ended September 30, 2024, were $586.0 million, slightly up from $581.1 million year-over-year, indicating a marginal increase of 0.8%.

Depreciation and amortization for the same period totaled $278.2 million, compared to $255.2 million in 2023.

Cost Category	YTD 2024 (in millions)	YTD 2023 (in millions)	Change (%)
Total Operating Costs	9,566.6	12,136.5	-21.8%
Cost of Materials and Other	8,547.1	11,111.2	-23.1%
Operating Expenses	586.0	581.1	+0.8%
Depreciation and Amortization	278.2	255.2	+9.0%

Investments in technology and sustainability initiatives

In 2024, Delek Logistics announced a total estimated investment of $160.0 million to $165.0 million for the construction of a new natural gas processing plant in the Permian Basin, which is anticipated to generate annual EBITDA of approximately $40.0 million upon completion.

Additionally, capital spending for the nine months ended September 30, 2024, was $234.6 million, compared to $285.6 million for the same period in 2023.

Variable costs associated with crude oil procurement

The average cost of WTI Cushing crude oil decreased from $82.51 per barrel to $75.28 per barrel, an 8.8% decline, while WTI Midland crude oil prices fell from $83.85 per barrel to $75.96 per barrel, a 9.4% decline.

Cost of materials and other for the refining segment specifically related to crude oil feedstocks saw significant reductions, contributing to an overall decrease in operational costs.

During the nine months ended September 30, 2024, crude oil procurement costs were significantly impacted by decreased wholesale activity and reduced RINs pricing.

Variable Cost Category	Average Price (2024)	Average Price (2023)	Change (%)
WTI Cushing Crude Oil	$75.28	$82.51	-8.8%
WTI Midland Crude Oil	$75.96	$83.85	-9.4%

Delek US Holdings, Inc. (DK) - Business Model: Revenue Streams

Sales of refined petroleum products

In the nine months ended September 30, 2024, Delek US Holdings generated net revenues of $9,478.5 million from the refining segment, a notable decrease from $12,525.1 million in the same period in 2023. This represents a decline of 24.3% year-over-year.

During the third quarter of 2024, net revenues from the refining segment amounted to $3,027.8 million, down from $4,624.5 million in Q3 2023, indicating a decrease of 34.3%.

The decrease in revenue was primarily attributed to reduced average prices of U.S. Gulf Coast gasoline by 18.2% and ULSD by 24.6%, along with decreased wholesale activity and sales volume.

Fees from logistics services (transportation and storage)

For the logistics segment, Delek US Holdings reported revenues of $730.8 million for the nine months ended September 30, 2024, a slight decline from $766.3 million during the same period in 2023. In Q3 2024, revenues were $214.1 million, compared to $275.9 million in Q3 2023.

The logistics segment includes revenues generated from various services such as gathering, transporting, and storing crude oil and natural gas. The average daily throughput for crude pipelines (non-gathered) was 68,430 bpd in Q3 2024.

Income from joint ventures and equity method investments

Delek US Holdings reported income from equity method investments totaling $77.4 million for the nine months ended September 30, 2024, which is an increase from $67.1 million in the same period in 2023. In Q3 2024, the income was $25.1 million, down from $27.0 million in Q3 2023.

Notably, income from investments in W2W Holdings LLC contributed $26.0 million during the first nine months of 2024, up from $18.2 million in the prior year.

Revenue Stream	Q3 2024 Revenue (in millions)	Q3 2023 Revenue (in millions)	YTD 2024 Revenue (in millions)	YTD 2023 Revenue (in millions)
Sales of refined petroleum products	3,027.8	4,624.5	9,478.5	12,525.1
Fees from logistics services	214.1	275.9	730.8	766.3
Income from equity method investments	25.1	27.0	77.4	67.1

Updated on 16 Nov 2024

Resources:

1. Delek US Holdings, Inc. (DK) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Delek US Holdings, Inc. (DK)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View Delek US Holdings, Inc. (DK)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.