Delek Logistics Partners, LP (DKL): Business Model Canvas [11-2024 Updated]
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Delek Logistics Partners, LP (DKL) Bundle
In the dynamic world of energy logistics, Delek Logistics Partners, LP (DKL) stands out with a robust business model that emphasizes efficiency and reliability. This post delves into the essential components of DKL's Business Model Canvas, highlighting their strategic
- partnerships
- key activities
- customer relationships
Delek Logistics Partners, LP (DKL) - Business Model: Key Partnerships
Collaborations with Delek Holdings for logistics services
Delek Logistics Partners engages in long-term commercial agreements with Delek Holdings, providing various logistics services including crude oil gathering, transportation, and storage. In the nine months ending September 30, 2024, net revenues from affiliate transactions totaled $411.4 million.
The partnership includes minimum volume commitment agreements that secure a stable revenue base during periods of low activity. As of September 30, 2024, Delek Logistics had a total debt of $1.9 billion, which includes obligations related to these agreements.
Joint ventures for pipeline investments
Delek Logistics has strategically invested in joint ventures to enhance its pipeline infrastructure. Notably, the acquisition of a 50% equity interest in W2W Holdings, which includes a 15.6% indirect interest in the Wink to Webster pipeline, was completed for $83.9 million.
This pipeline system plays a critical role in facilitating crude oil transport from the Permian Basin to Houston, contributing significantly to the company's operational capabilities. The investment in pipeline joint ventures yielded an increase in segment EBITDA by $9.1 million during the nine months ended September 30, 2024.
Partnerships with third-party producers for service expansion
Delek Logistics has expanded its service offerings through partnerships with third-party producers, particularly in the Permian Basin. The company’s revenue from third-party services for the same period was approximately $319.4 million.
The partnership approach allows Delek Logistics to leverage existing infrastructure, increasing throughput and enhancing market competitiveness. The company has also seen an increase in cash distributions to partners, totaling $147.4 million for the first nine months of 2024.
| Partnership Type | Key Metrics | Financial Impact |
|---|---|---|
| Collaboration with Delek Holdings | Net Revenues: $411.4 million | Total Debt: $1.9 billion |
| Joint Ventures | W2W Holdings Acquisition: $83.9 million | Increase in EBITDA: $9.1 million |
| Third-Party Partnerships | Revenue from Third-Party Services: $319.4 million | Cash Distributions: $147.4 million |
Delek Logistics Partners, LP (DKL) - Business Model: Key Activities
Gathering and processing crude oil and natural gas
Delek Logistics Partners engages in the gathering and processing of crude oil and natural gas as a core activity. For the nine months ended September 30, 2024, the net revenues from the gathering and processing segment amounted to $270.1 million, compared to $280.5 million for the same period in 2023. The segment's EBITDA for this period was $161.0 million, reflecting a slight decrease from $161.0 million in the previous year.
The company has made significant investments in infrastructure, including a new natural gas processing plant in the Permian Basin, which is projected to have a capacity of approximately 110 MMcf/d and an anticipated EBITDA contribution of around $40 million.
Transportation and storage of refined products
Transportation and storage are critical activities for Delek Logistics Partners. The total revenue for the storage and transportation segment was $98.9 million for the nine months ended September 30, 2024, down from $107.5 million for the same period in 2023. The operating expenses for this segment increased by 11.9%, totaling $89.5 million.
The company operates a network of pipelines and storage facilities, ensuring efficient delivery and storage of refined products. The average tariff adjustments for transportation services increased by approximately 1.3% in 2024, aligning with inflation-based indices.
Wholesale marketing and terminalling services
Delek Logistics also focuses on wholesale marketing and terminalling services, which generated $361.8 million in revenue for the nine months ended September 30, 2024, compared to $378.2 million for the same period in 2023. The segment's EBITDA was $75.7 million.
The company has established long-term fee-based commercial agreements with Delek Holdings for marketing and terminalling services. These agreements typically span five to ten years and are subject to periodic rate adjustments.
| Key Activity | Revenue (in millions) | EBITDA (in millions) | Operating Expenses (in millions) |
|---|---|---|---|
| Gathering and Processing | $270.1 | $161.0 | N/A |
| Transportation and Storage | $98.9 | N/A | $89.5 |
| Wholesale Marketing and Terminalling | $361.8 | $75.7 | N/A |
As of September 30, 2024, Delek Logistics holds approximately $1.1 billion in unfulfilled performance obligations related to its commercial agreements, indicating a stable future revenue stream.
Delek Logistics Partners, LP (DKL) - Business Model: Key Resources
Extensive network of logistics assets
Delek Logistics Partners operates an extensive network of logistics assets primarily located in key regions such as the Permian Basin and the Gulf Coast. This network supports the transportation and storage of crude oil and natural gas, facilitating efficient operations across its service offerings.
As of September 30, 2024, Delek Logistics reported total revenues of $730.8 million, with significant contributions from various segments:
| Segment | Net Revenues (in thousands) |
|---|---|
| Gathering and Processing | $280,494 |
| Wholesale Marketing and Terminalling | $378,246 |
| Storage and Transportation | $107,520 |
| Total | $766,260 |
Pipeline infrastructure in key regions
The pipeline infrastructure is a critical asset for Delek Logistics, allowing the company to transport crude oil and natural gas efficiently. The company owns and operates several pipelines, including a long-haul crude oil pipeline system through its joint venture in the Wink to Webster project.
In August 2024, Delek Logistics acquired a 50% equity interest in Permian Pipeline Holdings, LLC, which holds the Wink to Webster pipeline, for a total consideration of $83.9 million. This strategic acquisition enhances the company's pipeline capabilities and expands its operational footprint in the region, enabling it to serve a broader customer base.
Skilled workforce and operational expertise
Delek Logistics Partners benefits from a skilled workforce with expertise in pipeline operations, logistics, and regulatory compliance. The company emphasizes the importance of human resources in maintaining operational efficiency and safety standards across its assets.
As of September 30, 2024, Delek Logistics reported an increase in net income attributable to partners amounting to $107.4 million, reflecting the operational efficiency and expertise of its workforce in managing logistics and pipeline operations. The effective management of these human resources has been crucial in navigating the complexities of the energy sector.
Delek Logistics Partners, LP (DKL) - Business Model: Value Propositions
Reliable and efficient midstream services
Delek Logistics Partners, LP (DKL) offers a robust suite of midstream services, including gathering, transportation, and storage of crude oil, natural gas, and refined products. As of September 30, 2024, DKL reported net revenues of $214.1 million for the third quarter, compared to $275.8 million for the same period in 2023, indicating a shift in revenue streams due to changes in accounting practices related to sales-type leases.
The partnership's operational efficiency is underscored by a significant increase in net cash provided by operating activities, which rose to $156.4 million for the nine months ended September 30, 2024, up from $110.6 million in the previous year. This improvement highlights DKL's ability to effectively manage its operations and respond to market demands.
Customized logistics solutions for clients
DKL focuses on providing tailored logistics solutions to meet the diverse needs of its clientele, primarily in the energy sector. The company has established long-term, fee-based commercial agreements with Delek Holdings, which ensure stable revenue streams and facilitate customized service offerings. The average daily throughput for crude oil gathering was reported at 125,123 bpd for the third quarter of 2024, up from 111,973 bpd in the same quarter of 2023.
Additionally, DKL's recent acquisition of Permian Pipeline Holdings on August 5, 2024, enhances its logistics capabilities and positions the partnership to better serve its customers with increased flexibility and efficiency. The company’s ability to adapt its services to client specifications is a key component of its value proposition.
| Service Type | Q3 2024 Revenue ($ million) | Q3 2023 Revenue ($ million) | Change (%) |
|---|---|---|---|
| Gathering and Processing | 81.5 | 94.8 | -14.0 |
| Wholesale Marketing and Terminalling | 106.9 | 147.1 | -27.2 |
| Storage and Transportation | 25.6 | 33.9 | -24.4 |
| Total | 214.1 | 275.8 | -22.3 |
Commitment to sustainability and reducing carbon footprint
Delek Logistics is increasingly focused on sustainability initiatives, aiming to reduce its carbon footprint through strategic investments and operational practices. The company made a significant decision in early 2024 to build a new natural gas processing plant in the Permian Basin with a capacity of approximately 110 MMcf/d. This facility is projected to generate an EBITDA of around $40 million, aligning with DKL's commitment to environmentally responsible operations.
Furthermore, regulatory adjustments to tariffs and throughput fees, which increased by approximately 1.3% in July 2024, reflect DKL’s proactive approach to maintaining compliance with environmental regulations while ensuring competitive pricing. The focus on integrating advanced technologies into operations further demonstrates the partnership's dedication to sustainability and efficiency.
Delek Logistics Partners, LP (DKL) - Business Model: Customer Relationships
Long-term contracts with key clients
Delek Logistics Partners has established numerous long-term, fee-based commercial agreements with its primary customer, Delek Holdings. These contracts typically have an initial term of five to seven years, with options for five-year extensions. As of September 30, 2024, the total expected revenue from unfulfilled performance obligations under these agreements is approximately $1.1 billion. This revenue is associated with minimum volume commitments and capacity utilization terms.
| Year | Expected Revenue (in thousands) |
|---|---|
| Remainder of 2024 | $57,026 |
| 2025 | $220,037 |
| 2026 | $201,538 |
| 2027 | $201,538 |
| 2028 and thereafter | $426,350 |
| Total | $1,106,489 |
Focus on customer satisfaction and service reliability
Delek Logistics Partners emphasizes customer satisfaction by maintaining high service reliability. The company’s operational performance is reflected in its EBITDA, which for the nine months ended September 30, 2024, was $273.1 million, a slight decrease compared to $284.2 million for the same period in 2023. This commitment to reliability is also evident in the adjustments made to tariffs and throughput fees, which are indexed to inflation and market conditions, ensuring that the pricing remains competitive and fair.
Regular communication and feedback mechanisms
Delek Logistics Partners has established regular communication channels and feedback mechanisms with its clients. The company engages in periodic reviews and discussions to address any service-related issues and gather client feedback. This approach has helped maintain strong relationships and adapt services to meet evolving customer needs. As part of its operational strategy, the company recorded $24.4 million in interest income for the nine months ended September 30, 2024, primarily from commercial agreements that have been structured to benefit both parties.
Delek Logistics Partners, LP (DKL) - Business Model: Channels
Direct sales to refining customers
Delek Logistics Partners, LP engages in direct sales primarily to refining customers, which constitutes a significant portion of its revenue. For the nine months ended September 30, 2024, the total revenue from direct sales to affiliates was approximately $414.4 million, with the wholesale marketing and terminalling segment contributing $378.2 million. The contractual agreements with refining customers typically have initial terms ranging from five to ten years, which are extendable.
Online platforms for service inquiries
The company utilizes online platforms to facilitate service inquiries and enhance customer engagement. These platforms are designed to streamline communication and provide customers with immediate access to services, pricing, and operational updates. As of September 30, 2024, Delek Logistics has recognized approximately $1.1 billion in service revenues related to unfulfilled performance obligations, highlighting the efficacy of its online channels.
Industry trade shows and networking events
Participation in industry trade shows and networking events is a critical channel for Delek Logistics Partners to showcase its services and establish connections with potential customers. In 2024, the company plans to attend multiple trade shows, which are essential for building relationships within the oil and gas sector. The marketing efforts at these events aim to enhance brand visibility and drive future sales growth.
| Channel Type | Revenue (in thousands) | Percentage of Total Revenue |
|---|---|---|
| Direct Sales to Refining Customers | $414,403 | 54.2% |
| Online Platforms | $1,100,000 (expected) | 143.0% (expected based on future obligations) |
| Trade Shows and Networking Events | Not specified | Not specified |
Delek Logistics Partners, LP (DKL) - Business Model: Customer Segments
Delek Holdings and its refining operations
Delek Logistics Partners, LP primarily serves its parent company, Delek Holdings, Inc., which operates refining facilities that require logistics support for transporting crude oil and refined products. In 2024, Delek Holdings reported total revenues of $3.61 billion for its refining operations, with logistics services provided by DKL being integral to its supply chain. DKL's revenue from Delek Holdings was $411.4 million in the first nine months of 2024, contributing significantly to its overall earnings.
Third-party crude oil and natural gas producers
DKL also targets third-party crude oil and natural gas producers who require reliable logistics solutions for transportation and storage. In 2024, DKL generated $319.4 million from third-party revenues, showcasing its ability to attract external clients beyond Delek Holdings. The company provides services such as gathering, processing, and transporting crude oil, which are crucial for producers operating in the Permian Basin and other oil-rich regions.
| Customer Segment | Revenue (2024) | Key Services Provided |
|---|---|---|
| Delek Holdings | $411.4 million | Crude oil transportation, refined product logistics |
| Third-party producers | $319.4 million | Gathering, processing, transportation |
Companies requiring storage and transportation services
In addition to refining and production companies, DKL serves various other businesses needing storage and transportation services. This includes firms in the agricultural and manufacturing sectors that require bulk transport of liquids. In Q3 2024, DKL reported $25.6 million in revenues specifically from its storage and transportation segment. The company operates extensive terminal facilities and pipelines that facilitate efficient storage and distribution of various products.
| Service Type | Revenue (Q3 2024) | Facilities Utilized |
|---|---|---|
| Storage Services | $25.6 million | Terminals and storage tanks |
| Transportation Services | $98.9 million | Pipelines and trucking fleet |
Delek Logistics Partners, LP (DKL) - Business Model: Cost Structure
Operational costs related to logistics and transportation
For the nine months ended September 30, 2024, Delek Logistics Partners reported operational costs associated with logistics and transportation as follows:
- Cost of materials and other: $57.590 million
- Operating expenses (excluding depreciation and amortization): $57.622 million
These figures represent a decrease in costs compared to the same period in 2023, where costs were $65.557 million and $55.586 million, respectively.
Capital expenditures for asset maintenance and expansion
Delek Logistics Partners has made significant capital expenditures to maintain and expand its assets. For the nine months ended September 30, 2024, the total capital spending was:
- Capital expenditures: $90.550 million
This includes investments in pipeline joint ventures and other critical infrastructure. The company also reported a substantial increase in cash used in investing activities, totaling $314.528 million for the same period.
Administrative expenses and interest payments
Administrative expenses have seen fluctuations, with general and administrative expenses reported as:
- General and administrative expenses: $9.280 million for the nine months ended September 30, 2024
- General and administrative expenses for the same period in 2023: $11.112 million
Interest payments on long-term debt have also been significant. The total interest expense for the nine months ended September 30, 2024, was:
- Interest expense: $112.547 million
As of September 30, 2024, the total indebtedness of Delek Logistics Partners was $1.904 billion.
| Cost Structure Component | 2024 Amount (in Millions) | 2023 Amount (in Millions) |
|---|---|---|
| Cost of Materials and Other | 57.590 | 65.557 |
| Operating Expenses | 57.622 | 55.586 |
| Capital Expenditures | 90.550 | 68.628 |
| General and Administrative Expenses | 9.280 | 11.112 |
| Interest Expense | 112.547 | 104.581 |
| Total Indebtedness | 1,904.900 | 1,711.750 |
Delek Logistics Partners, LP (DKL) - Business Model: Revenue Streams
Service fees from logistics operations
Delek Logistics Partners generates significant revenue through service fees associated with its logistics operations. As of September 30, 2024, the partnership reported service revenue from third-party clients amounting to $56.151 million. Additionally, service revenue from affiliates contributed $79.094 million, leading to a total of $135.245 million in service revenues for the nine months ended September 30, 2024.
Revenue from storage and transportation contracts
The storage and transportation segment is another crucial revenue source for Delek Logistics. For the nine months ended September 30, 2024, revenue from storage and transportation contracts reached $98.912 million. This segment has been supported by long-term fee-based commercial agreements with Delek Holdings, which typically have initial terms ranging from five to ten years, ensuring stable cash flows. As of September 30, 2024, the expected revenue from unfulfilled performance obligations related to these contracts is approximately $1.1 billion.
| Year | Total Revenue from Storage and Transportation | Service Revenue from Affiliates |
|---|---|---|
| 2024 (YTD) | $98.912 million | $79.094 million |
| 2023 | $107.520 million | $86.964 million |
Income from joint venture partnerships and investments
Delek Logistics also earns income through its joint venture partnerships and investments. The partnership has various joint ventures that generate revenue through minimum volume commitment agreements. For the nine months ended September 30, 2024, the income from equity method investments amounted to $31.974 million. These joint ventures primarily support Delek Holdings' operations, providing a reliable revenue stream during periods of low activity.
| Type of Income | Amount (YTD 2024) |
|---|---|
| Income from Equity Method Investments | $31.974 million |
| Lease Revenue from Affiliates | $216.551 million |
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.