Le Lézard
Classified in: Oil industry, Business, Covid-19 virus
Subjects: ERN, ERP, DIV

Delek US Holdings Reports Second Quarter 2022 Results


BRENTWOOD, Tenn., Aug. 4, 2022 /PRNewswire/ -- Delek US Holdings, Inc. (NYSE: DK) ("Delek US") today announced financial results for its second quarter ended June 30, 2022. Delek US reported second quarter 2022 net income of $361.8 million, or $5.05 per share, versus a net loss of $(56.7) million, or $(0.77) per share, for the quarter ended June 30, 2021. On an adjusted basis, Delek US reported Adjusted net income of $314.5 million, or $4.40 per share, for the second quarter 2022. This compares to Adjusted net loss of $(33.9) million, or $(0.46) per share, in the prior year. Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") was $518.4 million for the second quarter compared to Adjusted EBITDA of $46.1 million in the prior year.

Avigal Soreq, President and Chief Executive Officer of Delek US, stated, "The Board has approved a reinstatement of the "regular" quarterly dividend at $0.20 per share as well as an expansion of the share repurchase authorization to $400 million. Based on the current outlook, we expect to repurchase approximately $25 to $35 million of stock in the third quarter, while simultaneously further enhancing the balance sheet. We expect that the combination of full year dividend payments, along with announced share repurchases through the third quarter, will result in approximately $135 million of cash returns to shareholders in 2022, with upside depending on potential buyback activity in the fourth quarter. Our organic growth initiatives remain intact in both the midstream and retail segments. Finally, I would like to welcome the 3 Bear team to our organization. This acquisition closed early on June 1st and offers third party revenue, an expanded product mix and geographic diversification into the Delaware portion of the Permian."

Uzi Yemin, Executive Chairman of Delek US, stated, "The combination of multiple factors including: global capacity rationalization, post COVID demand recovery, reduced utilization trends in China and capacity outages stemming from the Russian/Ukraine conflict, have led to unprecedented strength in refining margins. This coupled with record utilization rates within our system led to record results in the quarter. I'm pleased to hand off the reins of CEO to Avigal Soreq with the company on strong financial footing including a cash balance of $1.24 billion and an outlook for strong cash generation into the future."

Regular Quarterly Dividend and Share Repurchase

On June 21, 2022 the company announced a special dividend of $0.20 per share that was paid on July 20, 2022. On August 1, 2022 the Board of Directors approved a regular quarterly cash dividend of $0.20 per share. Shareholders of record on August 22, 2022 will receive this cash dividend payable on September 6, 2022.

The Board also approved an approximately $170 million increase in its share repurchase authorization, bringing the total amount available for repurchases under current authorizations to $400 million. Delek US expects to commence the program with share repurchases of approximately $25 to $35 million of Delek US common stock during the third quarter 2022.

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Consolidated Results

Net income attributable to Delek in the second quarter 2022 was $361.8 million compared to a $(56.7) million net loss in the second quarter 2021. On an adjusted basis, Adjusted net income was $314.5 million in the second quarter 2022 compared to Adjusted net loss of $(33.9) million in the second quarter 2021. The $348.4 million improvement in Adjusted net income is primarily attributable to improvements in refining operating results and contribution margins compared to the prior year quarter, including the impact of higher refining utilization rates and crack spreads during the current quarter compared to the prior period. See below for further discussion of operating results and contribution margin across our segments.

Refining Segment Results

Refining contribution margin increased to $618.3 million in the second quarter 2022 from $14.1 million in the second quarter 2021, while Adjusted segment contribution margin was $557.4 million in the second quarter 2022 compared to $37.9 million in the second quarter 2021. On a year-over-year basis, our refining segment results were favorably impacted by improvements in crack spreads and increased demand, attributable in part to low clean product inventories and continued macroeconomic improvements around the pandemic combined with the impact of sanctions on Russian oil supply. We also experienced marked improvements in our refining utilization rates compared to the prior year period. Additionally, during the second quarter 2022, Delek US's benchmark crack spreads were up an average of approximately 181.7% from prior-year levels, though the refineries' ability to capture crack spreads continues to be negatively impacted by elevated RIN costs with an ongoing burden of the RFS program on small refineries.

Logistics Segment Results

The logistics segment contribution margin in the second quarter 2022 was $69.3 million compared to $64.2 million in the second quarter 2021, where Adjusted segment contribution margin was $69.5 million compared to $64.0 million in the prior year quarter. Overall performance benefited from strong refinery utilization rates and closing of the 3 Bear Delaware Holding - NM, LLC ("3 Bear") acquisition on June 1, 2022 (the "3 Bear Acquisition").

Retail Segment Results

For the second quarter 2022, contribution margin, on both a GAAP and adjusted basis, was $18.2 million compared to $21.9 million and $22.0 million on a GAAP and adjusted basis, respectively, in the prior-year period for the retail segment. Merchandise sales were approximately $83.4 million with an average retail margin of 34.0% in the second quarter 2022, compared to merchandise sales of approximately $84.5 million with an average retail margin of 32.7% in the prior-year period. Approximately 44.9 million retail fuel gallons were sold at an average margin of $0.33 per gallon in the second quarter 2022 compared to 43.0 million retail fuel gallons sold at an average margin of $0.39 per gallon in the second quarter 2021. In the second quarter 2022, the average merchandise store count was 248 compared to 252 in the prior-year period. On a same-store-sales basis in the second quarter 2022, merchandise sales increased 0.1% and fuel gallons sold increased 5.8% compared to the prior-year period.

Corporate and Other Activity

Contribution margin from Corporate, Other and Eliminations was a loss of $28.3 million in the second quarter 2022 compared to a loss of $35.5 million in the prior-year period, where Adjusted contribution margin was a $27.4 million loss compared to a $35.7 million loss in the same quarter of 2021, and where these amounts include inter-segment eliminations.

Returns from the Wink-to-Webster crude oil pipeline, in which Delek owns a 15% indirect joint venture interest, is currently reflected in income from equity method investments in the condensed consolidated statements of income, and is expected to ratably increase throughout the year. The 36-inch diameter pipeline, which is fully contracted with minimum volume commitments ("MVCs"), will originate in the Permian Basin and have destination points in the Houston market.

Liquidity

As of June 30, 2022, Delek US had a cash balance of $1.24 billion and total consolidated long-term debt of $2.82 billion, resulting in Net debt of $1.57 billion.  As of June 30, 2022, Delek Logistics Partners, LP (NYSE: DKL) ("Delek Logistics") had $13.8 million of cash and $1.52 billion of total long-term debt, which are included in the consolidated amounts on Delek US' balance sheet. Excluding Delek Logistics, Delek US had approximately $1.23 billion in cash and $1.30 billion of long-term debt, or a $64.7 million Net debt position.

Second Quarter 2022 Results | Conference Call Information

Delek US will hold a conference call to discuss its second quarter 2022 results on Thursday, August 4, 2022 at 10:00 a.m. Central Time. Investors will have the opportunity to listen to the conference call live by going to www.DelekUS.com and clicking on the Investor Relations tab. Participants are encouraged to register at least 15 minutes early to download and install any necessary software. Presentation materials accompanying the call will be available on the investor relations tab of the Delek US website approximately ten minutes prior to the start of the call. For those who cannot listen to the live broadcast, the online replay will be available on the website for 90 days.

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Investors may also wish to listen to Delek Logistics' (NYSE: DKL) second quarter 2022 earnings conference call that will be held on Thursday, August 4, 2022 at 9:00 a.m. Central Time and review Delek Logistics' earnings press release. Market trends and information disclosed by Delek Logistics may be relevant to the logistics segment reported by Delek US. Both a replay of the conference call and press release for Delek Logistics will be available online at www.deleklogistics.com.

About Delek US Holdings, Inc.

Delek US Holdings, Inc. is a diversified downstream energy company with assets in petroleum refining, logistics, renewable fuels and convenience store retailing. The refining assets consist primarily of refineries operated in Tyler and Big Spring, Texas, El Dorado, Arkansas and Krotz Springs, Louisiana with a combined nameplate crude throughput capacity of 302,000 barrels per day.

The logistics operations primarily consist of Delek Logistics Partners, LP (NYSE: DKL). Delek US Holdings, Inc. and its affiliates own approximately 78.9% (including the general partner interest) of Delek Logistics Partners, LP at June 30, 2022. Delek Logistics Partners, LP is a growth-oriented master limited partnership focused on owning and operating midstream energy infrastructure assets. 

The convenience store retail segment operates approximately 248 convenience stores in West Texas and New Mexico.

Safe Harbor Provisions Regarding Forward-Looking Statements

This press release contains forward-looking statements that are based upon current expectations and involve a number of risks and uncertainties. Statements concerning current estimates, expectations and projections about future results, performance, prospects, opportunities, plans, actions and events and other statements, concerns, or matters that are not historical facts are "forward-looking statements," as that term is defined under the federal securities laws. These statements contain words such as "possible," "believe," "should," "could," "would," "predict," "plan," "estimate," "intend," "may," "anticipate," "will," "if", "potential," "expect" or similar expressions, as well as statements in the future tense. These forward-looking statements include, but are not limited to, statements regarding throughput at the Company's refineries; crude oil prices, discounts and quality and our ability to benefit therefrom; cost reductions;  growth; scheduled turnaround activity; investments into our business; the performance and execution of our midstream growth initiatives, including the Permian Gathering System, the Red River joint venture and the Wink to Webster long-haul crude oil pipeline, and the flexibility, benefits and the expected returns therefrom; projected benefits of the 3 Bear acquisition, RINs waivers and tax credits and the value and benefit therefrom; cash and liquidity; emissions reductions; opportunities and anticipated performance and financial position.

Investors are cautioned that the following important factors, among others, may affect these forward-looking statements. These factors include, but are not limited to: uncertainty related to timing and amount of future share repurchases and dividend payments; risks and uncertainties with respect to the quantities and costs of crude oil we are able to obtain and the price of the refined petroleum products we ultimately sell, uncertainties regarding future decisions by OPEC regarding production and pricing disputes between OPEC members and Russia; risks and uncertainties related to the integration by Delek Logistics of the 3 Bear business following the recent acquisition; risks and uncertainties related to the Covid-19 pandemic; Delek US' ability to realize cost reductions; risks related to Delek US' exposure to Permian Basin crude oil, such as supply, pricing, gathering, production and transportation capacity; gains and losses from derivative instruments; risks associated with acquisitions and dispositions; acquired assets may suffer a diminishment in fair value as a result of which we may need to record a write-down or impairment in carrying value of the asset; the possibility of litigation challenging renewable fuel standard waivers; changes in the scope, costs, and/or timing of capital and maintenance projects; the ability to grow the Permian Gathering System; the ability of the Red River joint venture to complete the expansion project to increase the Red River pipeline capacity; the ability of the joint venture to construct the Wink to Webster long haul crude oil pipeline; operating hazards inherent in transporting, storing and processing crude oil and intermediate and finished petroleum products; our competitive position and the effects of competition; the projected growth of the industries in which we operate; general economic and business conditions affecting the geographic areas in which we operate; and other risks described in Delek US' filings with the United States Securities and Exchange Commission (the "SEC"), including risks disclosed in our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other filings and reports with the SEC.

Forward-looking statements should not be read as a guarantee of future performance or results and will not be accurate indications of the times at, or by, which such performance or results will be achieved.  Forward-looking information is based on information available at the time and/or management's good faith belief with respect to future events, and is subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements.  Delek US undertakes no obligation to update or revise any such forward-looking statements to reflect events or circumstances that occur, or which Delek US becomes aware of, after the date hereof, except as required by applicable law or regulation.

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Non-GAAP Disclosures:

Our management uses certain "non-GAAP" operational measures to evaluate our operating segment performance and non-GAAP financial measures to evaluate past performance and prospects for the future to supplement our GAAP financial information presented in accordance with U.S. GAAP. These financial and operational non-GAAP measures are important factors in assessing our operating results and profitability and include:

We believe these non-GAAP operational and financial measures are useful to investors, lenders, ratings agencies and analysts to assess our ongoing performance because, when reconciled to their most comparable GAAP financial measure, they provide improved relevant comparability between periods, to peers or to market metrics through the inclusion of retroactive regulatory or other adjustments as if they had occurred in the prior periods they relate to, or through the  exclusion of certain items that we believe are not indicative of our core operating performance and that may obscure our underlying results and trends. "Net debt," also a non-GAAP financial measure,  is an important measure to monitor leverage and evaluate the balance sheet.

Non-GAAP measures have important limitations as analytical tools, because they exclude some, but not all, items that affect net earnings and operating income. These measures should not be considered substitutes for their most directly comparable U.S. GAAP financial measures.  Additionally, because Adjusted net income or loss, Adjusted net income or loss per share, EBITDA and adjusted EBITDA, and Adjusted Segment Contribution Margin or any of our other identified non-GAAP measures may be defined differently by other companies in its industry, Delek US' definition may not be comparable to similarly titled measures of other companies. See the accompanying tables in this earnings release for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures.

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Delek US Holdings, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(In millions, except share and per share data)



June 30, 2022


December 31, 2021 

As Adjusted(1)

ASSETS





Current assets:





Cash and cash equivalents


$                    1,244.6


$                       856.5

Accounts receivable, net


1,319.4


776.6

Inventories, net of inventory valuation reserves


1,805.9


1,260.7

Other current assets


187.5


126.0

Total current assets


4,557.4


3,019.8

Property, plant and equipment:





Property, plant and equipment


4,107.1


3,645.4

Less: accumulated depreciation


(1,447.1)


(1,338.1)

Property, plant and equipment, net


2,660.0


2,307.3

Operating lease right-of-use assets


190.7


208.5

Goodwill


740.0


729.7

Other intangibles, net


325.8


102.7

Equity method investments


354.6


344.1

Other non-current assets


96.1


100.5

Total assets


$                    8,924.6


$                    6,812.6






LIABILITIES AND STOCKHOLDERS' EQUITY





Current liabilities:





Accounts payable


$                    2,449.6


$                    1,695.3

Current portion of long-term debt


72.0


92.2

Obligation under Supply and Offtake Agreements


770.5


487.5

Current portion of operating lease liabilities


51.4


53.9

Accrued expenses and other current liabilities


885.6


797.8

Total current liabilities


4,229.1


3,126.7

Non-current liabilities:





Long-term debt, net of current portion


2,745.7


2,125.8

Environmental liabilities, net of current portion


112.7


109.5

Asset retirement obligations


41.1


38.3

Deferred tax liabilities


300.3


214.5

Operating lease liabilities, net of current portion


131.9


152.0

Other non-current liabilities


26.4


31.8

Total non-current liabilities


3,358.1


2,671.9

Stockholders' equity:





Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued and outstanding


?


?

Common stock, $0.01 par value, 110,000,000 shares authorized, 88,610,583 shares and 91,772,080 shares issued at June 30, 2022 and December 31, 2021, respectively


0.9


0.9

Additional paid-in capital


1,159.1


1,206.5

Accumulated other comprehensive loss


(3.9)


(3.8)

Treasury stock, 17,575,527 shares, at cost, as of June 30, 2022 and December 31, 2021


(694.1)


(694.1)

Retained earnings


753.0


384.7

Non-controlling interests in subsidiaries


122.4


119.8

Total stockholders' equity


1,337.4


1,014.0

Total liabilities and stockholders' equity


$                    8,924.6


$                    6,812.6


(1)  Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories.

 

5 |

 

Delek US Holdings, Inc.

Condensed Consolidated Statements of Income (Unaudited)

(In millions, except share and per share data)


Three Months Ended June 30,


Six Months Ended June 30,



2022


2021

As Adjusted(1) (2)


2022


2021

As Adjusted(1) (2)

Net revenues


$              5,982.6


$              2,191.5


$            10,441.7


$              4,583.7

Cost of sales:









Cost of materials and other


5,082.6


1,960.6


9,235.1


4,133.4

Operating expenses (excluding depreciation and amortization presented below)


188.5


130.8


328.0


260.7

Depreciation and amortization


62.8


60.5


125.5


122.8

Total cost of sales


5,333.9


2,151.9


9,688.6


4,516.9

Operating expenses related to retail and wholesale business (excluding depreciation and amortization presented below)


34.0


35.4


61.4


60.8

General and administrative expenses


126.5


53.5


179.6


94.6

Depreciation and amortization


5.2


5.8


10.8


12.0

Impairment of goodwill


?


?


?


?

Other operating income, net


(10.3)


(4.9)


(38.7)


(3.0)

Total operating costs and expenses


5,489.3


2,241.7


9,901.7


4,681.3

Operating income (loss)


493.3


(50.2)


540.0


(97.6)

Interest expense, net


43.6


33.1


82.0


62.5

Income from equity method investments


(15.7)


(6.8)


(26.6)


(11.6)

Other (income) expense, net


(3.6)


6.8


(2.3)


5.8

Total non-operating expense, net


24.3


33.1


53.1


56.7

Income (loss) before income tax expense (benefit)


469.0


(83.3)


486.9


(154.3)

Income tax expense (benefit)


100.4


(35.2)


103.5


(43.5)

Net income (loss)


368.6


(48.1)


383.4


(110.8)

Net income attributed to non-controlling interests


6.8


8.6


15.0


15.9

Net income (loss) attributable to Delek


$                361.8


$                 (56.7)


$                368.4


$               (126.7)

Basic income (loss) per share


$                  5.11


$                 (0.77)


$                  5.12


$                 (1.72)

Diluted income (loss) per share


$                  5.05


$                 (0.77)


$                  5.07


$                 (1.72)

Weighted average common shares outstanding:









Basic


70,805,458


73,911,582


72,014,151


73,857,975

Diluted


71,679,954


73,911,582


72,675,313


73,857,975



(1)

Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories.

(2)

In the current period, we reassessed the classification of certain expenses and made certain reclassification adjustments to better represent the nature of those expenses. Accordingly, we have made reclassifications to the prior period in order to conform to this revised current period classification, which resulted in a decrease in the prior period general and administrative expenses and an  increase in the prior period operating expenses of approximately $5.1 million and $11.1 million for the three and six months ended June 30, 2021, respectively.

 

Condensed Cash Flow Data (Unaudited)

(In millions)

Three Months Ended June 30,


Six Months Ended June 30,


2022


2021

As Adjusted(1)


2022


2021

As Adjusted(1)

Cash flows from operating activities:








Net cash provided by operating activities

$                 559.1


$                 169.2


$                 585.9


$                 134.9

Cash flows from investing activities:








Net cash used in investing activities

(690.7)


(72.6)


(720.9)


(118.7)

Cash flows from financing activities:








Net cash provided by (used in) financing activities

522.1


(57.1)


523.1


29.3

Net  increase in cash and cash equivalents

390.5


39.5


388.1


45.5

Cash and cash equivalents at the beginning of the period

854.1


793.5


856.5


787.5

Cash and cash equivalents at the end of the period

$               1,244.6


$                 833.0


$               1,244.6


$                 833.0



(1)

Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories.

 

6 |

 

Delek US Holdings, Inc.











Segment Data (Unaudited)











(In millions)


Three Months Ended June 30, 2022



Refining


Logistics


Retail


Corporate,

Other and
Eliminations


Consolidated

Net revenues (excluding intercompany fees and sales)


$           4,498.0


$             142.4


$             277.1


$           1,065.1


$           5,982.6

Inter-segment fees and revenues


312.5


124.3


?


(436.8)


?

Operating costs and expenses:











Cost of materials and other


4,027.2


176.4


233.8


645.2


5,082.6

Operating expenses (excluding depreciation and amortization presented below)


165.0


21.0


25.1


11.4


222.5

Segment contribution margin


618.3


69.3


18.2


(28.3)


677.5

Income from equity method investments


0.2


7.1


?


8.4



Segment contribution margin and income (loss) from equity method investments


$             618.5


$               76.4


$               18.2


$              (19.9)



Depreciation and amortization


$               49.9


$               13.3


$                3.2


$                1.6


68.0

General and administrative expenses










126.5

Other operating income, net










(10.3)

Operating income










$             493.3

Capital spending (excluding business combinations)


$               19.0


$               26.7


$                6.0


$                8.7


$               60.4

 



Three Months Ended June 30, 2021, As Adjusted (1)



Refining (1)


Logistics


Retail


Corporate,

Other and
Eliminations (3)


Consolidated (1)(3)

Net revenues (excluding inter-segment fees and revenues)


$           2,226.9


$               66.1


$             209.0


$            (310.5)


$           2,191.5

Inter-segment fees and revenues 


188.8


102.4


?


(291.2)


?

Operating costs and expenses:











Cost of materials and other


2,286.6


88.8


164.7


(579.5)


1,960.6

Operating expenses (excluding depreciation and amortization presented below) (2)


115.0


15.5


22.4


13.3


166.2

Segment contribution margin (2)


14.1


64.2


21.9


(35.5)


64.7

Income from equity method investments


0.1


6.7


?


?



Segment contribution margin and income (loss) from equity method investments


$               14.2


$               70.9


$               21.9


$              (35.5)



Depreciation and amortization


$               51.0


$               10.0


$                 3.4


$                 1.9


66.3

General and administrative expenses (2)










53.5

Other operating income, net










(4.9)

Operating loss










$              (50.2)

Capital spending (excluding business combinations)


$               60.7


$                 2.6


$                 0.5


$                 1.9


$               65.7

 

 



Six Months Ended June 30, 2022



Refining


Logistics


Retail


Corporate,

Other and
Eliminations


Consolidated

Net revenues (excluding inter-segment fees and revenues)


$           7,766.1


$              225.2


$              486.6


$           1,963.8


$          10,441.7

Inter-segment fees and revenues 


538.1


248.1


?


(786.2)


?

Operating costs and expenses:











Cost of materials and other


7,304.1


302.6


406.8


1,221.6


9,235.1

Operating expenses (excluding depreciation and amortization presented below)


284.9


39.1


47.8


17.6


389.4

Segment contribution margin


715.2


131.6


32.0


(61.6)


817.2

Income from equity method investments


0.4


14.1


?


12.1



Segment contribution margin and income (loss) from equity method investments


$              715.6


$              145.7


$               32.0


$              (49.5)



Depreciation and amortization


$              102.7


$               23.7


$                 6.7


$                 3.2


136.3

General and administrative expenses










179.6

Other operating income, net










(38.7)

Operating income










$              540.0

Capital spending (excluding business combinations)


$               33.3


$               35.8


$                 9.0


$               15.2


$               93.3

 

7 |

 



Six Months Ended June 30, 2021, As Adjusted (1)



Refining


Logistics


Retail


Corporate,

Other and
Eliminations


Consolidated

Net revenues (excluding inter-segment fees and revenues)


$           3,811.4


$              122.8


$              383.8


$              265.7


$           4,583.7

Inter-segment fees and revenues 


344.4


198.6


?


(543.0)


?

Operating costs and expenses:











Cost of materials and other


3,901.6


169.9


301.2


(239.3)


4,133.4

Operating expenses (excluding depreciation and amortization presented below) (2)


229.7


30.4


44.0


17.4


321.5

Segment contribution margin (2)


24.5


121.1


38.6


(55.4)


128.8

Income from equity method investments


0.3


10.7


?


0.6



Segment contribution margin and income (loss) from equity method investments


$               24.8


$              131.8


$               38.6


$              (54.8)



Depreciation and amortization


$              103.1


$               20.7


$                 6.6


$                 4.4


134.8

Impairment of goodwill










?

General and administrative expenses (2)










94.6

Other operating income, net










(3.0)

Operating loss










$              (97.6)

Capital spending (excluding business combinations)


$              118.5


$               10.4


$                 1.3


$                 2.5


$              132.7



(1)

Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories.

(2)

In the current period, we reassessed the classification of certain expenses and made certain reclassification adjustments to better represent the nature of those expenses. Accordingly, we have made reclassifications to the prior period in order to conform to this revised current period classification, which resulted in a decrease in the prior period general and administrative expenses and an increase in the prior period operating expenses of approximately $5.1 million and $11.1 million for the three and six months ended June 30, 2021, respectively.

(3)

Reflects an adjustment to net down year-to-date net revenues and cost of materials and other of approximately $362 million related to certain crude wholesale net settled transactions included in corporate, other and eliminations that occurred during the three months ended March 31, 2021, which was not reflected in the unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2021, as filed on our March 31, 2021 Quarterly Report on Form 10-Q on May 6, 2021. Such uncorrected adjustment, as well as the subsequent out-of-period correction reflected above, did not relate to any of our reportable segments, had no impact on segment contribution margin, consolidated contribution margin or consolidated operating loss, and are not considered material to the condensed consolidated financial statements in either period.



Significant Transactions During the Quarter Impacting Results:

Dividends

On June 21, 2022, Delek announced that its Board of Directors declared a special cash dividend on its common stock of $0.20 per share payable to all shareholders of record of the Company's common stock as of the close of business on July 12, 2022.  The payment date for the special dividend was July 20, 2022.

Membership Interest Purchase Agreement

On June 1, 2022, DKL Delaware Gathering, LLC, a subsidiary of Delek Logistics, completed the acquisition of 100% of the limited liability company interests in 3 Bear Delaware Holding ? NM, LLC from 3 Bear Energy ? New Mexico LLC (the "Seller"), related to Seller's crude oil and natural gas gathering, processing and transportation businesses, as well as water disposal and recycling operations, located in the Delaware Basin in New Mexico (the "3 Bear Acquisition"). The purchase price was $624.7 million, subject to final working capital closing adjustments. We incurred $6.2 million of transaction related expenses In connection with the 3 Bear Acquisition during the three months ended June 30, 2022.

Insurance Recoveries

During the second quarter 2022, we received insurance recoveries related to the fire and freeze events that occurred during the first quarter 2021, which unfavorably impacted our results during the first two quarters of 2021. For the three months ended June 30, 2022, we have recognized an additional $8.6 million ($6.7 million after-tax) of business interruption insurance recoveries, which were recorded in other operating income on the consolidated statement of income. We have additional business interruption claims that are outstanding and still pending which are expected to be recognized in future quarters. Because business interruption losses are economic in nature rather than recognized, the related insurance recoveries are included as an Adjusting item in Adjusted net income and Adjusted EBITDA.

8 |

 

Reconciliation of Net Income (Loss) Attributable to Delek to Adjusted Net Income (Loss)








Three Months Ended June 30,


Six Months Ended June 30,

$ in millions (unaudited)


2022


2021

As Adjusted(1)


2022


2021

As Adjusted(1)



(Unaudited)


(Unaudited)

Reported net income (loss) attributable to Delek


$                361.8


$                 (56.7)


$                368.4


$               (126.7)

 Adjusting items (2)









Inventory LCM valuation (benefit) loss


7.3


(0.8)


(1.2)


0.1

Tax effect


(1.7)


0.2


0.3


?

Inventory LCM valuation loss (benefit), net


5.6


(0.6)


(0.9)


0.1

Business interruption insurance recoveries


(8.6)


?


(18.6)


?

Tax effect


1.9


?


4.2


?

Business interruption insurance recoveries, net (3)


(6.7)


?


(14.4)


?

Total El Dorado refinery fire net  losses (recoveries)


?


?


?


4.8

Tax effect


?


?


?


(1.1)

El Dorado refinery fire losses, net of related recoveries, net


?


?


?


3.7

Total unrealized  hedging (gain) loss where the hedged item is not yet recognized in the financial statements


(67.1)


24.3


(0.3)


11.8

Tax effect


16.2


(5.8)


0.1


(2.8)

Unrealized hedging (gain) loss where the hedged item is not yet recognized in the financial statements, net


(50.9)


18.5


(0.2)


9.0

Non-cash change in fair value of Supply and Offtake ("S&O") Obligation associated with hedging activities


?


?


?


(6.9)

Tax effect


?


?


?


1.5

Non-cash change in fair value of S&O Obligation associated with hedging activities, net


?


?


?


(5.4)

Non-operating litigation accrual related to pre-Delek/Alon Merger shareholder action


?


6.5


?


6.5

Tax effect


?


(1.6)


?


(1.6)

Non-operating litigation accrual related to pre-Delek/Alon Merger shareholder action, net


?


4.9


?


4.9

Transaction related expenses


6.2


?


6.4


?

Tax effect


(1.5)


?


(1.5)


?

Transaction related expenses, net (3)


4.7


?


4.9


?

 Total adjusting items (2)


(47.3)


22.8


(10.6)


12.3

 Adjusted net income (loss)


$                314.5


$                 (33.9)


$                357.8


$               (114.4)



(1)

Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories.

(2)

All adjustments have been tax effected using the estimated marginal income tax rate, as applicable.

(3)

 See further discussion in the "Significant Transactions During the Quarter Impacting Results" section on page 8.

 

9 |

 

Reconciliation of U.S. GAAP Income (Loss) per share to Adjusted Net Income (Loss) per share:












Three Months Ended June 30,


Six Months Ended June 30,

$ in millions (unaudited)


2022


2021

As Adjusted(1)


2022


2021

As Adjusted(1)



(Unaudited)


(Unaudited)

Reported diluted income (loss) per share


$               5.05


$                 (0.77)


$               5.07


$                 (1.72)

Adjusting items, after tax (per share) (2) (3)









Net inventory LCM valuation loss (benefit)


0.08


(0.01)


(0.01)


?

COVID-related severance costs


?


?


?


?

El Dorado refinery fire net  losses (recoveries)


?


?


?


0.05

Business interruption insurance recoveries  (4)


(0.09)


?


(0.20)


?

Total unrealized  hedging (gain) loss where the hedged item is not yet recognized in the financial statements


(0.71)


0.25


?


0.12

Non-cash change in fair value of S&O Obligation associated with hedging activities


?


?


?


(0.07)

Non-operating litigation accrual related to pre-Delek/Alon Merger shareholder action


?


0.07


?


0.07

Transaction related expenses (4)


0.07


?


0.07


?

 Total adjusting items (2)


(0.65)


0.31


(0.14)


0.17

 Adjusted net income (loss) per share


$               4.40


$                 (0.46)


$               4.93


$                 (1.55)



(1)

Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories.

(2)

The adjustments have been tax effected using the estimated marginal tax rate, as applicable.

(3)

For periods of Adjusted net loss, Adjustments (Adjusting Items) and Adjusted net loss per share are presented using basic weighted average shares outstanding.

(4)

See further discussion in the "Significant Transactions During the Quarter Impacting Results" section on page 8.

 

Reconciliation of Net Income (Loss) attributable to Delek to Adjusted EBITDA



Three Months Ended June 30,


Six Months Ended June 30,

$ in millions (unaudited)


2022


2021

As Adjusted(1)


2022


2021

As Adjusted(1)

Reported net (loss) income attributable to Delek


$             361.8


$                 (56.7)


$             368.4


$               (126.7)

Interest expense, net


43.6


33.1


82.0


62.5

Income tax expense (benefit)


100.4


(35.2)


103.5


(43.5)

Depreciation and amortization


68.0


66.3


136.3


134.8

EBITDA attributable to Delek


573.8


7.5


690.2


27.1

Adjusting items









Net inventory LCM valuation loss (benefit)


7.3


(0.8)


(1.2)


0.1

Business Interruption insurance recoveries (2)


(8.6)


?


(18.6)


?

El Dorado refinery fire losses, net of related insurance recoveries


?


?


?


3.8

Unrealized hedging (gain) loss where the hedged item is not yet recognized in the financial statements


(67.1)


24.3


(0.3)


11.8

Non-cash change in fair value of S&O Obligation associated with hedging activities


?


?


?


(6.9)

Non-operating litigation accrual related to pre-Delek/Alon Merger shareholder action


?


6.5


?


6.5

Transaction related expenses (2)


6.2


?


6.4


?

Net income attributable to non-controlling interest


6.8


8.6


15.0


15.9

 Total Adjusting items


(55.4)


38.6


1.3


31.2

 Adjusted EBITDA


$             518.4


$                  46.1


$             691.5


$                  58.3



(1)

Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories.

(2)

 See further discussion in the "Significant Transactions During the Quarter Impacting Results" section on page 8.

 

10 |

 

Reconciliation of U.S. GAAP Segment Contribution Margin to Adjusted Segment Contribution Margin:



Three Months Ended June 30, 2022

$ in millions (unaudited)


Refining


Logistics


Retail


Corporate, Other
and Eliminations


Consolidated

Reported segment contribution margin


$             618.3


$               69.3


$               18.2


$              (28.3)


$             677.5

Adjusting items











Net inventory LCM valuation (benefit) loss


6.4


?


?


0.9


7.3

Unrealized inventory/commodity hedging (gain) loss where the hedged item is not yet recognized in the financial statements


(68.5)


0.2


?


?


(68.3)

Unrealized RINs and other hedging (gain) loss where the hedged item is not yet recognized in the financial statements


1.2


?


?


?


1.2

Total unrealized  hedging (gain) loss where the hedged item is not yet recognized in the financial statements


(67.3)


0.2


?


?


(67.1)

     Total Adjusting items


(60.9)


0.2


?


0.9


(59.8)

Adjusted segment contribution margin


$             557.4


$               69.5


$               18.2


$              (27.4)


$             617.7

 



Three Months Ended June 30, 2021, As Adjusted (1)

$ in millions (unaudited)


Refining (1)


Logistics


Retail


Corporate, Other
and Eliminations


Consolidated(1)

Reported segment contribution margin (2)


$               14.1


$               64.2


$               21.9


$              (35.5)


64.7

Adjusting items











Net inventory LCM valuation (benefit) loss


(0.7)


?


0.1


(0.2)


(0.8)

Unrealized inventory/commodity hedging (gain) loss where the hedged item is not yet recognized in the financial statements


24.9


(0.2)


?


?


24.7

Unrealized RINs and other hedging (gain) loss where the hedged item is not yet recognized in the financial statements


(0.4)


?


?


?


(0.4)

Total unrealized hedging gain where the hedged item is not yet recognized in the financial statements


24.5


(0.2)


?


?


24.3

     Total Adjusting items


23.8


(0.2)


0.1


(0.2)


23.5

Adjusted segment contribution margin


$               37.9


$               64.0


$               22.0


$              (35.7)


$               88.2

 



Six Months Ended June 30, 2022

$ in millions (unaudited)


Refining


Logistics


Retail


Corporate, Other
and Eliminations


Consolidated

Reported segment contribution margin


$             715.2


$             131.6


$               32.0


$              (61.6)


$             817.2

Adjusting items











Net inventory LCM valuation (benefit) loss


(2.0)


?


?


0.8


(1.2)

Unrealized inventory/commodity hedging (gain) loss where the hedged item is not yet recognized in the financial statements


(3.7)


?


?


?


(3.7)

Unrealized RINs and other hedging (gain) loss where the hedged item is not yet recognized in the financial statements


3.4


?


?


?


3.4

Total unrealized  hedging (gain) loss where the hedged item is not yet recognized in the financial statements


(0.3)


?


?


?


(0.3)

     Total Adjusting items


(2.3)


?


?


0.8


(1.5)

Adjusted segment contribution margin


$             712.9


$             131.6


$               32.0


$              (60.8)


$             815.7

 



Six Months Ended June 30, 2021, As Adjusted (1)

$ in millions (unaudited)


Refining (1)


Logistics


Retail


Corporate, Other
and Eliminations


Consolidated(1)

Reported segment contribution margin (2)


$               24.5


$             121.1


$               38.6


$              (55.4)


$             128.8

Adjusting items











Net inventory LCM valuation (benefit) loss


0.1


?


?


?


0.1

Unrealized inventory/commodity hedging (gain) loss where the hedged item is not yet recognized in the financial statements


14.2


(0.4)


?


(0.2)


13.6

Unrealized RINs and other hedging (gain) loss where the hedged item is not yet recognized in the financial statements


(1.8)


?


?


?


(1.8)

Total unrealized  hedging (gain) loss where the hedged item is not yet recognized in the financial statements


12.4


(0.4)


?


(0.2)


11.8

El Dorado refinery fire losses


3.8








3.8

Non-cash change in fair value of S&O Obligation associated with hedging activities


(6.9)


?


?


?


(6.9)

     Total Adjusting items


9.4


(0.4)


?


(0.2)


8.8

Adjusted segment contribution margin


$               33.9


$             120.7


$               38.6


$              (55.6)


$             137.6



(1)

Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories.

(2)

Reflects the prior period conforming reclassification adjustment  between operating expenses and general and administrative expenses.

 

11 |

 

Refining Segment Selected Financial Information


Three Months Ended June 30,


Six Months Ended June 30,


2022


2021

As Adjusted(3)


2022


2021

As Adjusted(3)

Tyler, TX Refinery


(Unaudited)


(Unaudited)

Days in period


91


91


181


181

Total sales volume - refined product (average barrels per day)(1)


72,283


77,529


72,922


75,389

Products manufactured (average barrels per day):









Gasoline


32,645


37,495


34,924


38,522

Diesel/Jet


30,271


30,449


29,644


29,102

Petrochemicals, LPG, NGLs


1,983


2,079


2,116


1,903

Other


1,824


1,633


1,748


1,552

Total production


66,723


71,656


68,432


71,079

Throughput (average barrels per day):









   Crude oil


66,681


72,639


66,559


68,718

Other feedstocks


552


(384)


2,128


2,779

Total throughput


67,233


72,255


68,687


71,497

Total refining revenue ( $ in millions)


$             1,039.9


$               625.0


$             1,809.8


$             1,115.0

Cost of materials and other ($ in millions) (3)


834.2


553.1


1,523.8


961.6

Total refining margin ($ in millions) (2) (3)


$               205.7


$                71.9


$               286.0


$               153.4

Per barrel of refined product sales:









Tyler refining margin (2) (3)


$               31.27


$               10.18


$               21.67


$               11.24

Tyler adjusted refining margin (2) (3)


$               31.37


$               10.18


$               21.68


$               11.24

Operating expenses (4)


$                 5.61


$                3.51


$                 4.95


$                 3.54

Crude Slate: (% based on amount received in period)









WTI crude oil


83.8 %


86.7 %


85.4 %


90.6 %

East Texas crude oil


16.2 %


13.3 %


14.6 %


9.0 %

Other


? %


? %


? %


0.4 %

Capture Rate (5)


71.2 %


60.9 %


64.2 %


73.9 %

El Dorado, AR Refinery









Days in period


91


91


181


181

Total sales volume - refined product (average barrels per day)(1)


84,299


55,381


82,825


52,561

Products manufactured (average barrels per day):









Gasoline


39,347


26,143


38,118


21,872

Diesel


32,855


20,534


31,027


17,271

Petrochemicals, LPG, NGLs


1,549


808


1,285


780

Asphalt


8,181


5,997


7,655


4,840

Other


805


603


795


521

Total production


82,737


54,085


78,880


45,284

Throughput (average barrels per day):









Crude oil


81,510


54,086


76,827


44,479

Other feedstocks


2,221


1,451


3,079


1,558

Total throughput


83,731


55,537


79,906


46,037

Total refining revenue ( $ in millions)


$             1,130.1


$               489.5


$             1,942.2


$               926.2

Cost of materials and other ($ in millions)


939.2


479.1


$             1,711.8


930.0

Total refining margin ($ in millions) (2)


$               190.9


$                10.4


$               230.4


$                 (3.8)

Per barrel of refined product sales:









El Dorado refining margin (2)


$               24.88


$                2.06


$               15.37


$                (0.39)

El Dorado adjusted refining margin (2)


$               24.91


$                2.03


$               15.34


$                (0.39)

Operating expenses (4)


$                 4.88


$                5.14


$                 4.34


$                 5.71

Crude Slate: (% based on amount received in period)









WTI crude oil


53.1 %


48.9 %


43.2 %


46.9 %

Local Arkansas crude oil


15.6 %


20.4 %


16.4 %


25.1 %

Other


31.3 %


30.7 %


40.4 %


28.0 %

Capture Rate (5)


56.6 %


12.1 %


45.4 %


(2.6) %

 

12 |

 

Refining Segment Selected Financial Information (continued)


Three Months Ended June 30,


Six Months Ended June 30,


2022


2021

As Adjusted(3)


2022


2021

As Adjusted(3)

Big Spring, TX Refinery


(Unaudited)

(Unaudited)

Days in period - based on date acquired


91


91


181


181

Total sales volume - refined product (average barrels per day) (1)


72,928


69,191


71,039


68,947

Products manufactured (average barrels per day):









Gasoline


34,918


33,501


33,912


33,159

Diesel/Jet


27,043


25,492


24,877


23,226

Petrochemicals, LPG, NGLs


3,537


4,335


3,436


3,745

Asphalt


1,406


1,012


1,642


1,400

Other


1,410


1,491


1,345


1,448

Total production


68,314


65,831


65,212


62,978

Throughput (average barrels per day):









Crude oil


70,662


69,731


65,675


64,772

Other feedstocks


(1,093)


(1,704)


315


(395)

Total throughput


69,569


68,027


65,990


64,377

Total refining revenue ( $ in millions)


$             1,116.4


$               615.1


$             1,941.9


$             1,117.1

Cost of materials and other ($ in millions)


922.9


572.0


1,650.5


1,033.2

Total refining margin ($ in millions) (2)


$               193.5


$                 43.1


$               291.4


$                 83.9

Per barrel of refined product sales:









Big Spring refining margin (2)


$               29.16


$                 6.84


$               22.66


$                 6.72

Big Spring adjusted refining margin (2)


$               29.27


$                 6.81


$               22.61


$                 6.68

Operating expenses (4)


$                 7.06


$                 5.34


$                 6.24


$                 5.88

Crude Slate: (% based on amount received in period)









WTI crude oil


68.2 %


66.4 %


67.5 %


64.7 %

WTS crude oil


31.8 %


33.6 %


32.5 %


35.3 %

Capture Rate (5)


69.0 %


40.5 %


69.4 %


43.8 %

Krotz Springs, LA Refinery









Days in period - based on date acquired


91


91


181


181

Total sales volume - refined product (average barrels per day) (1)


75,791


77,318


77,800


51,286

Products manufactured (average barrels per day):









Gasoline


31,298


33,056


31,979


19,661

Diesel/Jet


32,419


26,611


31,711


15,370

Heavy oils


845


868


1,690


527

Petrochemicals, LPG, NGLs


7,152


6,601


7,040


3,948

Other


5,970


6,705


5,840


8,948

Total production


77,684


73,841


78,260


48,454

Throughput (average barrels per day):









Crude oil


75,849


70,883


74,430


42,377

Other feedstocks


922


2,240


3,181


6,786

Total throughput


76,771


73,123


77,611


49,163

Total refining revenue ( $ in millions)


$             1,514.0


$               687.4


$             2,604.1


$             1,007.1

Cost of materials and other ($ in millions)


1,271.3


668.4


2,319.1


974.0

Total refining margin ($ in millions) (2)


$               242.7


$                 19.0


$               285.0


$                 33.1

Per barrel of refined product sales:









Krotz Springs refining margin (2)


$               35.20


$                 2.71


$               20.24


$                 3.56

Krotz Springs adjusted refining margin (2)


$               35.74


$                 2.64


$               20.31


$                 3.61

Operating expenses (4)


$                 6.05


$                 3.96


$                 5.05


$                 5.19

Crude Slate: (% based on amount received in period)









WTI Crude


49.4 %


65.0 %


56.6 %


67.9 %

Gulf Coast Sweet Crude


40.6 %


33.5 %


38.2 %


30.9 %

Other


10.0 %


1.5 %


5.2 %


1.2 %

Capture Rate (5)


110.1 %


30.4 %


84.2 %


45.6 %



(1)

Includes inter-refinery sales and sales to other segments which are eliminated in consolidation.

(2)

See the calculations of Adjusted refining margin on the following page as well as Other Items Impacting Refining Margin discussed on page 17.

(3)

Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories.

(4)

Reflects the prior period conforming reclassification adjustment between operating expenses and general and administrative expenses.

(5)

Defined as Adjusted refining margin divided by the respective crack spread.  See page 16 for crack spread information.

 

13 |

 

Reconciliation of Refining margin per barrel to Adjusted Refining margin per barrel (1)












Three Months Ended June 30,


Six Months Ended June 30,



2022


2021

As Adjusted (6)


2022


2021

As Adjusted (6)



(Unaudited)


(Unaudited)

Tyler (2)









Reported refining margin, $ per barrel


$                  31.27


$                  10.18


$                  21.67


$                 11.24

Adjusting items:









Net inventory LCM valuation loss (benefit)


0.10


?


0.01


?

Adjusted refining margin $/bbl


$                  31.37


$                  10.18


$                  21.68


$                 11.24

El Dorado (3)









Reported refining margin, $ per barrel


$                  24.88


$                   2.06


$                  15.37


$                  (0.39)

Adjusting items:









Net inventory LCM valuation loss (benefit)


0.03


(0.03)


(0.03)


?

Adjusted refining margin $/bbl


$                  24.91


$                   2.03


$                  15.34


$                  (0.39)

Big Spring (4)









Reported refining margin, $ per barrel


$                  29.16


$                   6.84


$                  22.66


$                   6.72

Adjusting items:









Net inventory LCM valuation loss (benefit)


0.11


(0.03)


(0.05)


(0.04)

Adjusted refining margin $/bbl


$                  29.27


$                   6.81


$                  22.61


$                   6.68

Krotz Springs (5)









Reported refining margin, $ per barrel


$                  35.20


$                   2.71


$                  20.24


$                   3.56

Adjusting items:









Net inventory LCM valuation loss (benefit)


0.54


(0.07)


0.07


0.05

Adjusted refining margin $/bbl


$                  35.74


$                   2.64


$                  20.31


$                   3.61



(1)

Adjusted refining margin per barrel is presented to provide a measure to evaluate performance excluding inventory valuation adjustments and other items at the individual refinery level. Delek US believes that the presentation of adjusted measures provides useful information to investors in assessing its results of operations at each refinery. Because adjusted refining margin per barrel may be defined differently by other companies in its industry, Delek US' definition may not be comparable to similarly titled measures of other companies. Additionally, management evaluates other impacts to refining margin by refinery which may not represent adjustments, but which provide information useful for evaluating the results compared to current crack spreads and peers. See the 'Other Items Impacting Refining Margin' for further discussion.

(2)

Tyler adjusted refining margins exclude the following items:



Net inventory LCM valuation loss/benefit - There was approximately $0.7 million and a nominal net valuation loss in the second quarter 2022 and 2021, respectively. There was approximately $0.2 million and a nominal net valuation loss for the six months ended June 30, 2022 and 2021, respectively.


Tyler's refining margin per barrel and the adjusted refining margin per barrel have been adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories.

(3)

El Dorado Adjusted refining margins exclude the following items:



Net inventory LCM valuation loss/benefit - There was approximately $0.2 million of net valuation loss and $0.2 million of net valuation benefit in the second quarter 2022 and 2021, respectively. There was approximately a $0.5 of net valuation benefit  and a nominal net valuation loss for the six months ended June 30, 2022 and 2021, respectively.



Note also that El Dorado's refining margin per barrel and the adjusted refining margin per barrel for the three and six months ended June 30, 2021 reflect a RINs inventory true-up resulting from our annual compliance review totaling $(12.3) million which negatively impacted the related per barrel amount by $(2.44)and $(1.29), respectively. See further discussion in the section "Other Items Impacting Refining Margin" on page 17.

(4)

Big Spring Adjusted refining margins exclude the following items:



Net inventory LCM valuation loss/benefit - There was approximately $0.7 million  of net valuation loss and $0.2 million of net valuation benefit in the second quarter 2022 and 2021, respectively. There was approximately $0.7 million and $0.6 million of net valuation benefit for the six months ended June 30, 2022 and 2021, respectively.

(5)

Krotz Springs Adjusted refining margins exclude the following items:



Net inventory LCM valuation loss/benefit - There was approximately $3.7 million of net valuation loss and $0.5 million of net valuation benefit in the second quarter 2022 and 2021, respectively. There was approximately $1.0 million and  $0.4 amount of net valuation loss for the six months ended June 30, 2022 and 2021, respectively.

(6)

Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories.

 

14 |

 

Logistics Segment Selected Information


Three Months Ended June 30,


Six Months Ended June 30,



2022


2021


2022


2021



(Unaudited)


(Unaudited)

Pipelines & Transportation: (average bpd)









Lion Pipeline System:









Crude pipelines (non-gathered)


84,699


53,316


78,818


48,743

Refined products pipelines


64,821


39,193


62,186


32,806

SALA Gathering System


17,961


17,430


17,064


14,670

East Texas Crude Logistics System


19,942


27,497


18,010


26,790

Permian Gathering Assets (3)


101,236


79,589


100,783


76,672

Plains Connection System


154,086


122,529


158,025


115,484

Trucking Assets


15,679


10,314


12,510


10,251










Wholesale Marketing & Terminalling:









East Texas - Tyler Refinery sales volumes (average bpd) (1)


63,502


74,565


67,021


73,271

West Texas wholesale marketing throughputs (average bpd)


10,073


9,395


9,994


9,765

West Texas wholesale marketing margin per barrel


$                  2.67


$                  4.24


$                  2.85


$                  3.81

Big Spring wholesale marketing throughputs (average bpd)


78,634


75,136


77,100


74,038

Terminalling throughputs (average bpd) (2)


130,002


139,987


136,808


142,250



(1)

Excludes jet fuel and petroleum coke.

(2)

Consists of terminalling throughputs at our Tyler, Big Spring, Big Sandy and Mount Pleasant, Texas terminals, El Dorado and North Little Rock, Arkansas terminals and Memphis and Nashville, Tennessee terminals.

(3)

Formerly known as the Big Spring Gathering System. Excludes volumes that are being temporarily transported via trucks while connectors are under construction.

 

Retail Segment Selected Information


Three Months Ended June 30,


Six Months Ended June 30,



2022


2021


2022


2021



(Unaudited)


(Unaudited)

Number of stores (end of period)


248


252


248


252

Average number of stores


248


252


248


252

Average number of fuel stores


243


247


243


247

Retail fuel sales (thousands of gallons)


44,911


42,978


84,416


82,744

Average retail gallons sold per average number of fuel stores (in thousands)


185


174


348


336

Average retail sales price per gallon sold


$              4.31


$               2.90


$               3.95


$               2.71

Retail fuel margin ($ per gallon) (1)


$              0.33


$               0.39


$               0.32


$               0.37

Merchandise sales (in millions)


$              83.4


$               84.5


$             153.1


$             159.2

Merchandise sales per average number of stores (in millions)


$                0.3


$                 0.3


$                 0.6


$                 0.6

Merchandise margin %


34.0 %


32.7 %


34.3 %


32.7 %

 



Three Months Ended June 30,


Six Months Ended June 30,



2022


2021


2022


2021

Same-Store Comparison (2)


(Unaudited)


(Unaudited)










Change in same-store fuel gallons sold


5.8 %


1.3 %


3.4 %


(10.7) %

Change in same-store merchandise sales


0.1 %


(5.4) %


(2.4) %


(1.9) %



(1)

Retail fuel margin represents gross margin on fuel sales in the retail segment, and is calculated as retail fuel sales revenue less retail fuel cost of sales. The retail fuel margin per gallon calculation is derived by dividing retail fuel margin by the total retail fuel gallons sold for the period.

(2)

Same-store comparisons include period-over-period changes in specified metrics for stores that were in service at both the beginning of the earliest period and the end of the most recent period used in the comparison.

 

15 |

 

Supplemental Information









Schedule of Inter-refinery Sales, Refinery Sales to Other Segments, and Pricing Statistics Impacting our Refining Segment Selected Financial Information









$ in millions (unaudited)


















Inter-refinery Sales


Three Months Ended June 30,


Six Months Ended June 30,

(in barrels per day)


2022


2021


2022


2021

Tyler refined product sales to other Delek refineries


2,378


1,797


1,746


1,945

El Dorado refined product sales to other Delek refineries


1,531


961


1,201


704

Big Spring refined product sales to other Delek refineries


470


874


554


801

Krotz Springs refined product sales to other Delek refineries


1,061


590


783


297

 

Refinery Sales to Other Segments


Three Months Ended June 30,


Six Months Ended June 30,

(in barrels per day)


2022


2021


2022


2021










Tyler refined product sales to other Delek segments


?


897


?


909

El Dorado refined product sales to other Delek segments


9


11


8


9

Big Spring refined product sales to other Delek segments


22,647


22,179


22,209


22,145

Krotz Springs refined product sales to other Delek segments


?


2,069


?


2,038

 

Pricing Statistics


Three Months Ended June 30,


Six Months Ended June 30,

(average for the period presented)


2022


2021


2022


2021










WTI ? Cushing crude oil (per barrel)


$                108.74


$                  66.19


$                102.02


$                 62.21

WTI ? Midland crude oil (per barrel)


$                108.50


$                  66.41


$                101.81


$                 62.74

WTS -- Midland crude oil (per barrel)


$                109.06


$                  66.57


$                101.92


$                 62.73

LLS (per barrel)


$                110.25


$                  68.04


$                103.92


$                 64.21

Brent crude oil (per barrel)


$                111.84


$                  69.08


$                104.93


$                 65.22










U.S. Gulf Coast 5-3-2 crack spread (per barrel) (1)


$                  44.03


$                  16.72


$                  33.77


$                 15.20

U.S. Gulf Coast 3-2-1 crack spread (per barrel) (1)


$                  42.44


$                  16.82


$                  32.56


$                 15.26

U.S. Gulf Coast 2-1-1 crack spread (per barrel) (1)


$                  32.47


$                   8.68


$                  24.12


$                   7.91










U.S. Gulf Coast Unleaded Gasoline (per gallon)


$                   3.40


$                   1.99


$                   3.05


$                   1.85

Gulf Coast Ultra low sulfur diesel (per gallon)


$                   3.98


$                   1.95


$                   3.50


$                   1.83

U.S. Gulf Coast high sulfur diesel (per gallon)


$                   3.39


$                   1.67


$                   3.04


$                   1.58

Natural gas (per MMBTU)


$                   7.50


$                   2.98


$                   6.05


$                   2.85



(1)

For our Tyler and El Dorado refineries, we compare our per barrel refining product margin to the Gulf Coast 5-3-2 crack spread consisting of WTI Cushing crude, U.S. Gulf Coast CBOB gasoline and U.S, Gulf Coast Pipeline No. 2 heating oil (ultra low sulfur diesel).  For our Big Spring refinery, we compare our per barrel refined product margin to the Gulf Coast 3-2-1 crack spread consisting of WTI Cushing crude, Gulf Coast CBOB gasoline and Gulf Coast ultra-low sulfur diesel, and for our Krotz Springs refinery, we compare our per barrel refined product margin to the Gulf Coast 2-1-1 crack spread consisting of LLS crude oil, Gulf Coast CBOB gasoline and U.S, Gulf Coast Pipeline No. 2 heating oil (high sulfur diesel). The Tyler refinery's crude oil input is primarily WTI Midland and East Texas, while the El Dorado refinery's crude input is primarily a combination of WTI Midland, local Arkansas and other domestic inland crude oil. The Big Spring refinery's crude oil input is primarily comprised of WTS and WTI Midland. The Krotz Springs refinery's crude oil input is primarily comprised of LLS and WTI Midland.



 

16 |


Other Items Impacting Adjusted Refining Margin:

In addition to the items that were reflected as adjustments for deriving our Adjusted refining margin, which then was used to calculate Adjusted refining margin per barrel presented on page 14, there were other items that were recognized during the periods that impacted our Refining margins at the refineries. The primary items are as follows:

Other Inventory Impact: "Other inventory impact" is primarily calculated by multiplying the number of barrels sold during the period by the difference between current period weighted average purchase cost per barrel and per barrel cost of materials and other for the period recognized on a FIFO basis. It assumes no beginning or ending inventory, so that the current period average purchase cost per barrel is a reasonable estimate of our market purchase cost for the current period, without giving effect to any build or draw on beginning inventory. These amounts are based on management estimates using a methodology including these assumptions. However, this analysis provides management with a means to compare hypothetical refining margins to current period average crack spreads, as well as provides a means to better compare our results to peers.

Realized Inventory/Commodity Hedging Gains (Losses): We enter into fixed price financial hedges to manage price risk on forward (including prompt month) physical inventory contracts as well as forecasted crack spreads. Such hedging activities are based on our determination of tolerable price risk as well as our specific position and location/optimization strategy objectives. Because of inventory builds and draws and volatility in the market compared to initial forward curve and other pricing expectations, such hedging activities are inherently subject to a certain degree of unanticipated favorability or unfavorability compared to the estimated other inventory impact.

Summary of Other Favorable (Unfavorable) Items Impacting Refining Margin:



$ in millions (unaudited)


Three Months Ended June 30,


Six Months Ended June 30,



2022


2021

As Adjusted(1)


2022


2021

As Adjusted(1)

Tyler









Other inventory impact


$                    (9.5)


$                   63.2


$                   28.8


$                   87.0



$                    (9.5)


$                   63.2


$                      ?


$                      ?

El Dorado









Other inventory impact


$                   33.1


$                   41.0


$                   54.3


$                   41.0

Impact of RINs inventory true-up (3)


?


(12.3)


?


(12.3)



$                   33.1


$                   28.7


$                   54.3


$                   28.7

Big Spring









Other inventory impact


$                   21.5


$                     6.9


$                   58.7


$                   21.0



$                   21.5


$                     6.9


$                   58.7


$                   21.0

Krotz Springs









Other inventory impact


$                    (4.7)


$                    (0.9)


$                    (2.9)


$                  (10.9)



$                    (4.7)


$                    (0.9)


$                    (2.9)


$                  (10.9)

Total Refining









Other inventory impact


$                   40.4


$                  110.2


$                  138.9


$                  138.1










Realized inventory/commodity gains (losses)


$                (113.5)


$                    (1.7)


$                 (104.2)


$                  (19.1)



(1)

Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories.

(2)

Represents a RINs inventory true-up resulting from our annual compliance review.

 

17 |

 

Other Reconciliation of Amounts Reported Under U.S. GAAP

$ in millions (unaudited)











Three Months Ended June 30,


Six Months Ended June 30,

Reconciliation of Refining Segment Gross Margin (Loss) to Refining Margin


2022


2021

As Adjusted(1)


2022


2021

As Adjusted(1)

Net revenues


$                     4,810.5


$                     2,415.7


$               8,304.2


$               4,155.8

Cost of sales


4,242.1


2,452.6


7,691.7


4,234.4

Gross margin


568.4


(36.9)


612.5


(78.6)

Add back (items included in cost of sales):









Operating expenses (excluding depreciation and amortization) (2)


165.0


115.0


284.9


229.7

Depreciation and amortization


49.9


51.0


102.7


103.1

Refining margin


$                       783.3


$                       129.1


$               1,000.1


$                  254.2



(1)

Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories.

(2)

Reflects the prior period conforming reclassification adjustment  between operating expenses and general and administrative expenses.

 

Calculation of Net Debt


June 30, 2022


December 31, 2021

Long-term debt - current portion


$                         72.0


$                         92.2

Long-term debt - non-current portion


2,745.7


2,125.8

Total long-term debt


2,817.7


2,218.0

Less: Cash and cash equivalents


1,244.6


856.5

Net debt - consolidated


1,573.1


1,361.5

Less: DKL net debt


1,508.4


894.7

Net debt, excluding DKL


$                         64.7


$                        466.8

 

Information about Delek US Holdings, Inc. can be found on its website (www.delekus.com), investor relations webpage (ir.delekus.com), news webpage (www.delekus.com/news) and its Twitter account (@DelekUSHoldings).

18 |

 

Delek US Logo (PRNewsfoto/Delek US Holdings, Inc.)

 

SOURCE Delek US Holdings, Inc.


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