Operator: Good day, and welcome to the Delek Logistics Partners Fourth Quarter 2022 Earnings Call. Please note, this event is being recorded. I would now like to turn the conference over to Rosy Zuklic, Vice President of Investor Relations. Please go ahead.

Rosy Zuklic: Good afternoon, and welcome to the Delek Logistics Partners Fourth Quarter Earnings Conference Call. Participants on today’s call will include Avigal Soreq, President; Todd O’Malley, EVP and Chief Operating Officer; Reuven Spiegel, EVP and Chief Financial Officer; as well as other management team members. As a reminder, this conference call will contain forward-looking statements as defined under the federal securities laws, including without limitation, statements regarding guidance and future business outlook. These statements involve risks and uncertainties that may cause actual results to differ from our forecast. For more information, please refer to the risk factors discussed in the company’s most recently filed annual report on Form 10-K and quarterly report on Form 10-Q filed with the SEC, along with the press release associated with this call.

The company assumes no obligation to update any forward-looking statements or information, which speak as of their prospective date. I’ll now turn the call over to Avigal for opening remarks.

Avigal Soreq: Thanks, Rosy. Delek Logistics Partners ended the year with a record growth. Our logistics system end extremely well this quarter, contributing to a record EBITDA of $92.5 million, 33% higher than a record. A big driver for the increase was the successful integration of the 3 Bear asset. We are very pleased with the integration of 3 Bear and consider the integration phase complete. Their logistics had a safe and reliable operation all year long. This was a direct result of dedicated employees and contractors. We achieved 3 million man hours worked without a lost time injury, a great milestone we aim to continue. Our Board approved an increase in the quarterly distribution to $1.02 per unit for the fourth quarter.

This marks 40 consecutive quarterly distribution increases. We successfully achieved our goal to deliver a 5% distribution increase in 2022 and expect to continue this trend into 2023. From a macro perspective, we are optimistic on the outlook for the midstream business. Delek Logistics is well positioned to continue its strong track record to grow and to be long-term significant midstream player. I will now hand it over to Todd.

Todd O’Malley: Thanks, Avigal. Starting this quarter, we changed our reporting segments to better align our financial reporting with how we manage the business. Change primarily centered around reporting the results from our Delek Permian gathering system and 3 Bear assets in 1 new segment called Gathering and Processing. Total EBITDA per DKL was $92.5 million for the fourth quarter of ’22 compared with $70 million for the same period of 2021. The fourth quarter of 2022, distributable cash flow was $51 million and the DCF coverage ratio was 1.16x. For the Gathering and Processing segment, EBITDA this quarter was $48 million compared with $34 million in the fourth quarter of ’21. The increase was primarily driven from strong contributions by the Delek Permian Gathering System as well as the 3 Bear assets.

Wholesale Marketing and Terminalling segment contributed $23 million of EBITDA this fourth quarter compared with $19 million in the same period last year. The main driver for the increase year-over-year was due to our West Texas Wholesale business. The Storage and Transportation segment had EBITDA of $16 million this fourth quarter, in line with the fourth quarter of ’21. And lastly, the investments in Pipeline Joint Venture segment contributed $9 million towards the fourth quarter of ’22 compared with $7 million in the fourth quarter of ’21, primarily due to increased volumes at the Red River and Caddo joint ventures. Moving to capital expenditures. For the full year of ’22, we spent $131 million, excluding the 3 Bear acquisition, of which $120 million was earmarked for growth.

For 2023, we have a capital budget of $81 million, of which $66 million is earmarked for growth. With that, operator, we can open the call for questions.

Operator: . Our first question comes from Doug Irwin from Citi.

Douglas Irwin: Just wanted to start with the ’23 outlook and the Permian G&P segment. As you’ve already achieved the prior target of doubling the legacy Permian volumes, I’m just curious what your expectations are around volume growth moving forward from here. And then on 3 Bear, curious if you’re able to provide an update around where those assets are trending relative to the $100 million EBITDA that was implied by the initial valuation multiple.

Avigal Soreq: Yes, Doug, it’s Avigal. Good afternoon, thank you for joining us today. So the DPG is extremely a good asset. We are very pleased versus what we are seeing. I’m not going to give you a specific number for 2023, but I’m going to give you some highlights around the assets. We do have 325,000 acreage with — and a line in sight for more. But just organically, we see an increase, just talking to producer in a very nice percentage, well exceed what the rest of the Permian see. We have 25 rigs on that acreage, which is very nice and a prolific number versus the rest of the basin. And we expect it to be very nice growth, well exceed the average of the market during the year, during the rest of the year. Probably in the first quarter, we’ll try to give you more specific numbers around the growth.

But that asset and that rock is extremely well, and we are very fortunate with that asset and that investment. Around 3 Bear, on the script it was very clear. We have — we see the integration phase complete. We actually changed the name to Delaware Gathering System to reflect that completion of the integration. And we are well positioned to continue the trend to hit our target. So that this is as simple as it could be.

Douglas Irwin: Great. That’s helpful detail. Then as my second question, I was just wondering if you could talk about how you’re thinking about the general partner, kind of in the context of the sum of the parts review at the DK level. So the GP structure is something that you view as an obstacle to potentially being able to deconsolidate the detailed debt on the balance sheet. And if so, could you maybe talk about some of the different options that are out there to potentially address that?

Avigal Soreq: Yes. So let’s be clear, first, every deal that we might put together is, first and foremost, to the benefit of the unitholders. We are very proud of having 40 quarters that we increase distribution time after time, after time. And we are taking a lot of pride in our ability to serve our unitholder. So we will start with that consideration first, what’s the right thing to do for the investment community. And then we’ll understand what is the right thing to do for the business. I’m sure when there is a — we’ll lead the way and we’ll structure the right deal and the right corporate government to allow us to do the right deal for the investors and for the company.

Douglas Irwin: Got it.

Avigal Soreq: Thank you for joining us today.

Operator: There are no more questions in the queue. And This concludes our question-and-answer session. I would like to turn the conference back over to Avigal Soreq for any closing remarks.

Avigal Soreq: Yes. So first of all, I want to thank the management team around the table of working hard to make the partnership as good as it can be and to thank the Board of Directors of starting in as the investor community of sticking with us and trusting in our performance. And first and foremost, to our dedicated employees that are working days, nights, rain and sunny days, Thank you so much.

Operator: Conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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Q4 2022

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