Delek US Q2 2026 Earnings Report

Delek US EPS Results

• Actual EPS: $5.48
• Consensus EPS: $2.67
• Beat/Miss: Beat by +$2.81
• One Year Ago EPS: -$0.56

Delek US Revenue Results

• Actual Revenue: $4.09 billion
• Expected Revenue: $3.44 billion
• Beat/Miss: Beat by +$646.05 million
• YoY Revenue Growth: +47.90%

Delek US Announcement Details

• Quarter: Q2 2026
• Date: 8/5/2026
• Time: Before Market Opens
• Conference Call Date: Wednesday, August 5, 2026
• Conference Call Time: 11:00AM ET

Delek US (NYSE:DK) is an independent downstream energy company headquartered in Brentwood, Tennessee. The company operates petroleum refineries and related logistics assets, producing transportation fuels and other refined petroleum products for commercial and wholesale customers.

Delek’s refining operations have included facilities in the U.S. Gulf Coast and Mid-Continent regions, with assets in Texas, Arkansas and Louisiana. Its products may include gasoline, diesel, jet fuel, asphalt and other refined products. Through its logistics operations, the company also owns and manages pipelines, terminals, storage facilities and other infrastructure used to transport and handle crude oil and refined products.

Delek US was established in 2001 and became a publicly traded company in 2006. Its logistics business is conducted in part through Delek Logistics Partners, an affiliated master limited partnership. The company serves customers primarily across the central and southern United States. Avigal Soreq serves as Delek US Holdings’ president and chief executive officer.

Delek US Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Strong second-quarter results: Delek reported adjusted net income of approximately $344 million, or $5.48 per share, and adjusted EBITDA of $639 million. Excluding the 50% RVO adjustment, adjusted EBITDA was about $490 million, driven by stronger refining margins, higher throughput, and improved supply and marketing results.
• Positive Sentiment: Record logistics performance and growth: Delek Logistics delivered approximately $144 million in quarterly adjusted EBITDA, its best result in company history, with momentum across crude, gas, and water operations. Management said the nearly completed sour-gas gathering, compression, processing, and AGI solution should support a step-up in gas volumes and future Delaware Basin growth.
• Positive Sentiment: The Enterprise Optimization Plan contributed approximately $60 million to second-quarter P&L, while management said it is pursuing another meaningful improvement in free cash flow. The company expressed increasing confidence in mid-cycle free cash flow of roughly $650 million to $700 million, including DKL distributions.
• Positive Sentiment: Delek returned capital through approximately $16 million of dividends and $20 million of buybacks during the quarter, while reducing standalone net debt by $72 million through a term-loan refinancing and paydown. Management reiterated its strategy of maintaining dividends, balancing debt reduction with repurchases, and avoiding excess cash accumulation.
• Negative Sentiment: Third-quarter refining margins may face pressure as the steep backwardation seen in the second quarter has largely flattened; management indicated that the change could reduce refining margin capture. The company also remains dependent on pending Small Refinery Exemption decisions for 2025 and beyond to mitigate elevated RVO costs, with the timing and value of potential relief still uncertain.

Presentation

[Operator]

Hello, everyone. Thank you for joining us, and welcome to the Delek US second quarter 2026 earnings call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Robert Wright, EVP and CFO. Robert, go ahead.

[Robert Wright, EVP and CFO at Delek US]

Good morning, welcome to the Delek US second quarter earnings conference call. Participants joining me on today's call will include Avigal Soreq, President and CEO, Mohit Bhardwaj, EVP New Energy, Strategy, and Investor Relations, as well as other members of our management team. Today's presentation material can be found on the Investor Relations section of the Delek US website. Slide two contains our safe harbor statement regarding Forward-Looking information. As a reminder, this conference call will contain Forward-Looking information as defined under the federal securities laws, including statements regarding guidance and future business outlook. Any Forward-Looking statements made during today's call involve risks and uncertainties that may cause actual results to differ materially from today's comments. Factors that could cause actual results to differ are included in our SEC filings. The company assumes no obligation to update any Forward-Looking statements.

[Robert Wright, EVP and CFO at Delek US]

I will now turn the call over to Avigal for opening remarks. Avigal?

[Avigal Soreq, President and CEO at Delek US]

Thank you, Robert. Good morning, thank you for joining us today. I am extremely pleased with our strong execution in the second quarter. The quarter further demonstrate our enhanced execution capabilities. First, we successfully navigate the volatility in crude end-product markets caused by the event in the Middle East. Second, we made further progress in increasing our free cash flow profile and reducing our overall cost structure. This quarter reinforced the importance of discipline in maintaining safe and reliable operation and making thoughtful capital allocation decisions. This is especially important during period of strong margins. We'll continue to apply the same prudent approach across our business, capital deployment, and corporate culture as we are creating sustainable long-term shareholder value. As I mentioned during the last earning call, the event in the Middle East and East Europe have created many ripple effects in the markets.

[Avigal Soreq, President and CEO at Delek US]

We continue to see steep backwardation, swing in crude differentials, and shortage of transportation fuels. In the current environment, we continue to believe that access to crude, high distillate yield, and most importantly, the ability to respond quickly to changing in the market condition are critical to maintaining operational flexibility and delivering strong performance. We plan to continue navigating this environment with measured approach by, first, mitigating risk, and second, capturing the opportunities offered by the market. I will cover some of our second quarter highlights and strategic initiatives in detail. Starting with refining. Our refining system operated well, demonstrated by all four refineries. Big Spring has been running to our expectation since its turnaround. Post-turnaround, we are seeing improved reliability, higher crude slate flexibility, improvement in overall product yields, and higher octane and blending capabilities.

[Avigal Soreq, President and CEO at Delek US]

We are very pleased with this improvement and are looking at finding additional opportunities to further improve this important asset in our portfolio. With no planned turnaround for the rest of the year, our refining system is well-positioned to capture the strength in the market. Moving to EOP. Enterprise Optimization Plan continue to drive significant value. As a reminder, our Enterprise Optimization Plan target to increase our cash flow by at least $220 million on an annual run rate basis. During the second quarter of 2026, we estimate approximately $60 million of EOP contribution to our P&L. We are currently working on further advancing EOP to create an additional meaningful step change to our free cash flow profile. We'll provide more details on this in the near future. Our sum of the part initiative also continue to progress with raising strength of our midstream business.

[Avigal Soreq, President and CEO at Delek US]

DKL today reaffirmed its 2026 EBITDA guidance of $520 million-$560 million. The tailwind we have been seeing in DKL business continue to rise, and we are working hard to capture these opportunities. DKL is close to completing its comprehensive gathering, treatment, processing, and AGI solution. This sour gas solution will provide DKL the ability to fully capitalize on its growth opportunities in the Delaware Basin and maintain its best-in-class EBITDA growth and yield. In 2026, on a pro forma basis, we continue to expect DKL third-party EBITDA to exceed 80%. This level of economic separation is a cornerstone of our sum of the parts strategy and continue to bring us closer to our deconsolidation goal. DKL is on the right path, and we continue to work hard to write the next chapter in its growth story.

[Avigal Soreq, President and CEO at Delek US]

As mentioned last quarter, we are pursuing a proactive strategy to manage our obligation under the RFS. The SRE provision in the RFS served the important purpose of mitigating the impact felt on small refineries from the RFS burden. RVO costs remain elevated, and the absence of SREs created a significant burden on small refineries like us. We expect the EPA to continue to provide relief to small refineries for the year of 2025 and beyond. Finally, we believe that the current administration, Senate, Congress, and EPA realize the importance of Small Refinery Exemptions, not only for the refineries which qualify under the program, but also for the local communities they serve. The final piece of our strategy is being shareholder-friendly and having a strong balance sheet. During the quarter, we paid approximately $16 million in dividends and $20 million in buybacks.

[Avigal Soreq, President and CEO at Delek US]

Our strong balance sheet, improved reliability, EOP, and confidence in our outlook continue to support a disciplined approach to capital allocation through continued dividends and buybacks. We remain committed to a balanced and disciplined capital allocation strategy and look forward to continuing to reward our shareholders. In closing, thank you to our team for their hard work and dedication. I'm immensely proud of the progress Delek has made, and I look forward to building on the momentum for the remainder of the year and beyond. I will turn the call over to Robert, who will provide additional color on the quarter.

[Robert Wright, EVP and CFO at Delek US]

Thank you, Avigal. For the second quarter, Delek reported net income of approximately $170 million, or $2.71 per share. On an adjusted basis, net income came in at approximately $344 million, or $5.48 per share, with adjusted EBITDA of approximately $639 million. Turning to slide four, we provide the breakout of adjusted EBITDA and adjusted EPS for the quarter. When we exclude the 50% RVO adjustment, adjusted EBITDA was approximately $490 million, and adjusted EPS was approximately $3.64 per share. Slide five walks through the bridge in adjusted EBITDA, excluding the 50% RVO adjustment from the first quarter to the second quarter. The breakdown shows that there were three main drivers for the increase in EBITDA. Quarter-over-quarter performance was led by stronger refining margins, helped by our robust distillate yields, along with higher throughput following the successful completion of the turnaround at Big Spring.

[Robert Wright, EVP and CFO at Delek US]

In supply and marketing, we saw a $60 million increase versus the prior quarter. This improvement was driven primarily by wholesale marketing, which contributed $25 million to the improved results, partially offset by a $3 million reduction in asphalt contribution, with the remainder of the change coming from supply. Our logistics segment posted its best quarterly results in our history, delivering approximately $144 million in adjusted EBITDA as momentum continued across all three of our Permian Basin offerings, crude, gas, and water. Let's move to slide 15 for a review of cash flow. Cash flow from operations was $263 million for the quarter. This reflects net income for the period, adjusted for non-cash items, along with $138 million net outflow from changes in working capital. Investing activities was a use of $176 million, reflecting our continued investment in growth.

[Robert Wright, EVP and CFO at Delek US]

This includes second quarter capital purchases of $61 million at Delek Logistics, primarily for growth projects, and $55 million of purchases in refining, along with a quarter-over-quarter reduction of capital accruals, primarily related to the payments on the final expenditures of the Big Spring turnaround, which we completed safely, on schedule, and on budget. Financing activities was an outflow of $82 million, which reflects the paydown associated with the successful refinancing of our term loan from $920 million down to $850 million. It also includes approximately $16 million in dividend payments and approximately $22 million in DKL distribution payments to public unitholders. Slide 16 breaks out our net debt position between Delek and Delek Logistics. On a standalone basis, excluding Delek Logistics, Delek's net debt declined by $72 million, driven primarily by the term loan paydown completed as part of the successful refinancing of that facility.

[Robert Wright, EVP and CFO at Delek US]

Now turning to slide 17 on our outlook for the third quarter, our throughput guidance is as follows. Tyler, 72,000-77,000 barrels per day. El Dorado, 78,000-83,000 barrels per day. Big Spring, 68,000-73,000 barrels per day. Krotz Springs, 78,000-83,000 barrels per day. Taken together, this implies a system throughput target of 296,000-316,000 barrels per day for the third quarter. In addition to the throughput guidance, for the third quarter of 2026, we expect operating expenses to be between $220 million and $230 million, G&A between $50 million and $55 million, and D&A to be between $110 million and $120 million. Additionally, beginning this quarter, we will provide interest expense guidance at both the DKL and standalone DK levels. This added disclosure reflects our continued focus on economic separation and capital discipline and underscores the progress we have made on both fronts.

[Robert Wright, EVP and CFO at Delek US]

We expect net interest expense between $75 million and $85 million, with DK contributing between $28 million and $33 million and DKL contributing between $47 million and $52 million. With that, we will now open the call for questions.

[Operator]

We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand, and to withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you're muted locally, please remember to unmute your device. Your first question comes from the line of Doug Leggate with Wolfe Research. Your line is open. Please go ahead.

[Aayush Gupta, Analyst at Wolfe Research]

Hi, team. Thanks for taking my question. This is Aayush Gupta on behalf of Doug Leggate at Wolfe Research. He sends his apologies for not making the call today. Congrats on a great quarter. I have a few questions. I'll start off with the SREs. Can you offer any update on the current timing of 2025? Specifically, can you clarify, if SREs are awarded, what are the restrictions on value? Can you sell 2025 credits at 2026 prices? Related, you recently were awarded Krotz Springs, having previously being denied. Can you share the process that led to the change in decision and implications for what it might mean across the portfolio for 2026 point forward? Thanks.

[Avigal Soreq, President and CEO at Delek US]

Yeah. First of all, thank you for joining us, and please send our regards to Doug. Let's start with a bigger discussion about Small Refinery Exemptions. First, Small Refinery Exemption in related to 2025, it's not a Delek situation. It's a industry. It's probably impact, I would guess, around 40 refineries across the nation, and probably impact half of the industry. It's well beyond us. The issue of Small Refinery Exemptions, and I want you to remember one line here, is disproportionate economic harm. The idea is to maintain high-paying job, local communities, and affordable fuels. It support the administration energy dominance. The administration understand it very well. Senate, Congress, and EPA, and all understand that it need to be resolved in a timely manner that allow us to comply as needed. Mohit, I would like you to chime in to give more color around it.

[Mohit Bhardwaj, EVP of New Energy, Strategy, and Investor Relations at Delek US]

Yeah. Thanks, Avigal, and thanks, Aayush, for joining the call. Avigal is absolutely right. The SRE issue is about disproportionate economic harm. You rightly pointed out in your question, the grant for KSR reflects that. Our petition was strong, EPA and the DOE, they both agree that we have disproportionate economic harm because of RFS, and that's why our petition was overturned. As far as we are concerned, we are very excited about our 2025 petitions as well in terms of the strength of them. We are looking forward to that announcement.

[Aayush Gupta, Analyst at Wolfe Research]

Perfect. Thank you. Now I have a follow-up. Your refining profitability is generally higher cost versus peers, and the cost allocated to DKL. Can DK hedge margin strength, and what could that really look like?

[Avigal Soreq, President and CEO at Delek US]

Yeah. Thank you for that question. Generally speaking, some of our investors sees us in getting into the refinery industry, and for DK shares specifically, is to get exposure to crack spread. We going ahead and hedging that is taking some of the thesis investment. We are not doing it in any meaningful way, and we want to make sure that our investors are well rewarded and awarded for investing in our share, both on what we do on the capital allocation and not blocking the thesis around it. I hope it makes sense to you.

[Aayush Gupta, Analyst at Wolfe Research]

Thanks, Avigal. Thank you.

[Operator]

Your next question comes from Alexa Petrick with Goldman Sachs. Your line is open. Please go ahead.

[Alexa Petrick, Analyst at Goldman Sachs]

Hey, good morning, team, thanks for taking our question. We wanted to ask first, can you just talk a little bit more about your capital allocation strategy? You've got a good amount of tailwinds coming in from a cash perspective. How should we think about that, whether that be buybacks, a dividend, or any other M&A consideration, or any other allocation considerations?

[Avigal Soreq, President and CEO at Delek US]

Yeah, absolutely. Alexa, first of all, thank you for joining this call, thank you for your support. I will be very crisp around it, right? We had a very clear capital allocation strategy that working very well for us. We maintain dividend through the cycle very well towards that. Then we have a balanced approach between taking care of our balance sheet and buyback. We need to put things in perspective. We put around 10% of our company since the beginning of 2025, we are one of the leading companies among our peers around returning capital to our investors. We believe that being friendly to our investor and giving a good return to their investment is cornerstone in our strategy, we'll keep doing that going forward.

[Alexa Petrick, Analyst at Goldman Sachs]

That's helpful. Just on a follow-up, can you talk a little bit more about EOP? Any places that it's surprising to the upside, and as you think about, you always talk about it being ongoing in the next leg, like where are areas for further improvements?

[Avigal Soreq, President and CEO at Delek US]

Yeah, absolutely. EOP, it's a big deal, very big deal in our shop. We spoke about it many times, you and I, how proud we are about the fact that the entire organization is behind it, and they're showing a very good results. EOP, it's not a project, it's a lifestyle. That's something we do. We push it to the entire organization, and the organization love it and come up with more and more idea initiative as we speak. You need to remember, and I'm sure you know that the whole point of EOP is to create a free cash flow at all market condition in DK. We helped you during the presentation, put a slide that show what happened in terms of EBITDA and free cash flow in a similar market condition and how well it position us going forward.

[Avigal Soreq, President and CEO at Delek US]

Obviously, we started the program with around $100 million. We more than doubled it as we stand now. I mentioned that in my prepared remark, I'm going to reiterate it. We are not stopping here, not even closely. We are working more about the more exciting things around EOP, and you need to stay attuned and expect some more good news to come after that. Mohit, why don't you chime in?

[Mohit Bhardwaj, EVP of New Energy, Strategy, and Investor Relations at Delek US]

Yeah. Alexa, I think Avigal is absolutely right. From an upside standpoint, our confidence in our free cash flow profile on a mid-cycle basis is increasing. We show in our slide deck around $650 million-$700 million in free cash flow, including DKL distributions. I think our confidence in that free cash flow, which is close to a 15%-20% free cash flow yield at current prices, is increasing. We are very happy about EOP. As Avigal pointed out, we are very happy about the next phase of it, and we are very excited about the free cash flow distribution that we have coming along for us post EOP environment.

[Alexa Petrick, Analyst at Goldman Sachs]

Thanks for the color. We'll turn it back.

[Operator]

Your next question comes from Manav Gupta with UBS. Your line is open. Please go ahead.

[Manav Gupta, Analyst at UBS]

Morning, guys. I'll pivot a little bit to midstream. You have a very strong sour gas presence. Can you give us an update on, in terms of completion of the Libby Gas Complex, when do you expect to get completed? Then should we expect a ramp into the fourth quarter and year-end? How that further increases your position in the Permian sour gas opportunity.

[Avigal Soreq, President and CEO at Delek US]

Manav, good morning. Thank you for joining us. It's a great question. We are very excited about the progress we are doing at DKL. DKL today on a pro forma basis is 80% third party. We have a clear, clean strategy of being a premier provider of crude water and gas in the most prolific area of the Permian Basin. We have a very good growing engine, which is the gas that you just mentioned. We are very close to completing it. We see increase quarter-over-quarter on the gas we're processing. Lately, Mark took himself that responsibility of leading DKL together with Chris, as I mentioned on my prepared remarks. That's a very good story for us, and we are very excited about the generation. It's both showing on the DK and the DKL unit and share. Mark, why don't you take it from here?

[Mark Hobbs, EVP of Delek Logistics Partners at Delek US]

Yeah. Thanks, Avigal. Manav, thanks for the question. Look, what I'll start with is both our plants are running well, both Libby I and Libby II. As you know, we've discussed in the past, we are seeing increasingly more sour gas production from our customers versus sweet, this trend does continue. As you know, we've added not only the Libby II processing capacity, we've completed our AGI well and are now nearing completion of our sour gas gathering and compression offering. Providing us with a much needed and unique sour gas solution in the Northern Delaware, which will help our customers continue to grow their production because we're capable of handling that. Look, we do see this driving a step change in our gas volumes as we move through the rest of the year, it positions us very well for future growth in the region.

[Manav Gupta, Analyst at UBS]

Perfect. My quick follow-up is a little bit on the refining macro. Given the amount of global capacity that's down, do you expect the product markets to remain tight? If you could provide some commentary on how, given your high diesel yield, it really benefits you guys. Thank you.

[Avigal Soreq, President and CEO at Delek US]

Yeah, absolutely. That topic, Manav, as you well know, was very well discussed over many calls. The high level comment I will provide is we have 5 million barrels that are off capacity all in. Obviously, we believe that once the event ends, it's going to take a few quarters probably to everything to normalize. It's not going to end very quickly in terms of the fact that we are short of a refined product across the world actually. We obviously see a steep liquidation versus historical standard. We have wide swing in crude differentials, we believe that the structural shortage of product is going to last a little bit longer. Obviously, a larger E&P are more disciplined than smaller. Smaller, we show an increase in terms of production.

[Avigal Soreq, President and CEO at Delek US]

We saw the rigs count increase by around 20 since the event started, which is also another tool in our toolbox. We obviously saw a Brent-WTI widening in lieu of the different country risk we see now versus beginning of the year. What does it mean for us? Let's bring it back home, Manav. We have a very good access to product, both Gulf Coast and the Midcontinent, which is a positive. We have a highest among our peers. We provide you a slide, distillate and jet yield, that's very good for us to be outside of turnaround cycle and be able to capture that. We have obviously excess of domestic crude, which doesn't put us in a working capital issues or in any other supply problems.

[Avigal Soreq, President and CEO at Delek US]

We have a very good midstream Permian exposure that allow the holder of a DK share to enjoy both. We are very well positioned around it, and we are very happy about where we are. Mohit, you want to chime in?

[Mohit Bhardwaj, EVP of New Energy, Strategy, and Investor Relations at Delek US]

Yeah. Avigal, I think you covered a lot of ground there. I just want to emphasize some of the points that you talked about specifically to us. You're absolutely right. With this macro environment that we have seen, we have seen that our producers have started at least completing their wells, and production outlook has increased both in the Midland And in the Delaware Basin. Mark talked about that, which is beneficial for our midstream business, and this is obviously very beneficial for our refining business as well because they have access to these barrels. Flexibility is the name of the game that Avigal talked about. Having high distillate yield, high jet yield, having different sourcing patterns, that really helps us. Last thing I really want to talk about is that there are a lot of product pipelines being talked about, which is going to clear our markets.

[Mohit Bhardwaj, EVP of New Energy, Strategy, and Investor Relations at Delek US]

That's also going to have a very positive impact, which has nothing to do with the crisis, but that is some of the macro trends that we are seeing in our markets. Hopefully that answers your question.

[Manav Gupta, Analyst at UBS]

Thank you so much.

[Operator]

Your next question comes from Jason Gabelman from TD Cowen. Your line is open. Please go ahead.

[Jason Gabelman, Analyst at TD Cowen]

Yeah. Hey, thanks for taking my questions. I wanted to go back to the SREs, and specifically on Krotz Springs and the recent award. How should we think about monetizing that award and the magnitude of cash you'll think you could get from that, and where is the priority in terms of where that cash goes?

[Avigal Soreq, President and CEO at Delek US]

Yeah. First of all, Jason, thank you for joining our call. We're going to stick to our very strict capital guidance we provided about the dividend to maintain it all cycle and the balanced approach between taking care of the balance sheet and buy back our shares. As Mohit alluded earlier, even in a mid-cycle basis, we are showing $600 million-$700 million free cash flow, which is 15%-20% yield. There is a lot of room in our share price to go up. We don't have any plan to have excess cash on our balance sheet. I want to make it very clear on that. We are not going to hold excess cash just for the sake of holding it. All of that coming together, it's pretty clear where it's going to come from this point on.

[Avigal Soreq, President and CEO at Delek US]

Our strategy is to stay always with compliance, I will let Mohit finish it.

[Mohit Bhardwaj, EVP of New Energy, Strategy, and Investor Relations at Delek US]

Yeah. Jason, as Avigal just pointed out, we don't have a strategy of holding excess cash on our balance sheet. You've seen our history. We've done a lot of return of capital to shareholders, and that's something that will continue. As far as KSR and the petition is concerned, we are very happy with the outcomes. This shows the point around disproportionate economic harm that I was making earlier. As far as we are concerned, that reflects well as far as our petitions for 2025 are concerned, and we are excited to see what EPA says. It's important to understand, for people like us who stay in compliance, we buy RINs, and this is a return of those RINs back to us. It is important that it's not like somebody's giving us cash.

[Mohit Bhardwaj, EVP of New Energy, Strategy, and Investor Relations at Delek US]

It's the cash that we have already invested and is being returned to us.

[Jason Gabelman, Analyst at TD Cowen]

Okay. I guess I'm wondering, is there any friction time in terms of receiving those RINs and then monetizing them, or is that a pretty immediate event?

[Mohit Bhardwaj, EVP of New Energy, Strategy, and Investor Relations at Delek US]

Yeah. Jason, I think we've gone through this rodeo based upon how this plays out last time. We have a very good strategy around this. We have a very good team who manages our RIN purchases and disposals, if any required. We have a very good strategy around it. We are not concerned about it, but as I said, SRE is an issue around disproportionate economic harm, and we are glad that EPA took the right decision.

[Jason Gabelman, Analyst at TD Cowen]

Okay. My follow-up is just on near-term refining margin capture dynamics. Obviously, 2Q, you had a pretty steep backwardation. It seemed like the curve has eased here in 3Q. Should we expect that to be a one-to-one benefit in terms of the backwardation in 2Q going to easing in 3Q flowing to your refining margin? Thanks.

[Avigal Soreq, President and CEO at Delek US]

Yeah, that's pretty much it. You got it right. A dollar in the backwardation is a dollar that doesn't reflect itself into the crack and vice versa. You are absolutely right. We see a pretty flat curve now. Maybe on the front we see around $1.50 or something like that. That's pretty flat versus the $6, $7, even more we have seen in Q2, and that's obviously reflecting in the crack spot. You're absolutely right.

[Jason Gabelman, Analyst at TD Cowen]

All right. Thanks.

[Avigal Soreq, President and CEO at Delek US]

Thank you.

[Operator]

Your next question comes from Joe Laetsch with Morgan Stanley. Your line is open. Please go ahead.

[Joe Laetsch, Analyst at Morgan Stanley]

Hey, good morning, Avigal and team, and thanks for taking my questions.

[Avigal Soreq, President and CEO at Delek US]

Good morning, Joe.

[Joe Laetsch, Analyst at Morgan Stanley]

I wanted to start on the some of the parts side. Could you just talk through how you're thinking about the current deconsolidation and value unlock options here? You've done a good job with bolt-ons and organic growth in the past at DKL. The currency at DKL has certainly strengthened this year, so curious about the M&A landscape as well. Thank you.

[Avigal Soreq, President and CEO at Delek US]

Absolutely. I will start by saying the journey of some of the part. We need to remember the objective is to make sure that the value that we are creating in DKL show both in the share price and unit price. We obviously made progress with that, and there is more steps that we are doing as we speak. What we need to remember here that today we are standing with around 80% third-party income on the DKL side. On a pro forma basis, we are standing in a very, very good location, both on the Delaware side and in the Midland side, and Mark gave his remark about the gas plant, which is a very good, unique opportunity. We obviously have very good asset quality as we stand now.

[Avigal Soreq, President and CEO at Delek US]

On all aspects, DPG on the crude side, Libby on the gas side, and also the former H2O and Gravity that we bought them around five to six times. Probably the valuation now is around 10, I would guess. Another dynamic in the market, Joe, that you're probably aware of, that we have seen the recent transaction are low to mid-teens, that if you're doing the intrinsic value, there is very high upside about where we are. As I said in the past, all options are on the table, and we are promoting one or more of them, either the DKL sales, asset sale, obviously continue doing a bolt-on acquisition or do a buyback like between DK and DKL, like we did in the past, which is, to remind you, a free tax exercise.

[Avigal Soreq, President and CEO at Delek US]

In terms of the M&A itself, the market is very good for sellers today, and you can take that comment wherever you believe to. On the top of that, we are not going to do acquisition if it's not accretive to leverage coverage ratio, and it's going to be strategic. We are looking at all options, and we are staying very tuned.

[Joe Laetsch, Analyst at Morgan Stanley]

Thank you. That's helpful. Then shifting to refining, just on the utilization side. It looked like the system ran well overall across all of the refineries. You've had some initiatives and turnarounds in recent years to improve the competitiveness of the assets. As we think about the path forward, is there more work to conduct across this system, or is it in a place now where it's more about just operational execution?

[Avigal Soreq, President and CEO at Delek US]

I will tie two answers together. The one answer, we are obviously happy about where we are in terms of reliability and the progress we have done. We have completed the third successful turnaround on budget, on time, and most importantly, safely. We are happy about that. Now I'm going to take the other portion of the answer is Enterprise Optimization Plan is well tie into that. Joe, you know that we are never going to be happy about where we are with EOP. We made progress to $120 million, $60 million this quarter. The entire organization, and it's coming from all levels, are fully committed to write the next chapter of EOP.

[Avigal Soreq, President and CEO at Delek US]

Don't be surprised if we'll come back to you quickly with another level of improvement that we see, either in the gross margin, in the product we make, in the location we are selling them, in the more area of the business. Stay tuned.

[Joe Laetsch, Analyst at Morgan Stanley]

Great. That's helpful. Thank you.

[Avigal Soreq, President and CEO at Delek US]

Thank you.

[Operator]

Your next question comes from Matthew Blair with TPH. Your line is open. Please go ahead.

[Matthew Blair, Analyst at TPH]

Great. Thanks, and good morning, everyone.

[Avigal Soreq, President and CEO at Delek US]

Thanks, Matt. Thanks for coming.

[Matthew Blair, Analyst at TPH]

For marketing and supply in the second quarter, apologies if I missed this, but do you have the breakout that includes the details on wholesale marketing, asphalt, and your supply activities? For the third quarter, do you have any general commentary on the trends that you're seeing, for example, with crude prices moving back up? Would that be a headwind to asphalt so far in Q3?

[Avigal Soreq, President and CEO at Delek US]

Go ahead, Mohit.

[Mohit Bhardwaj, EVP of New Energy, Strategy, and Investor Relations at Delek US]

Yeah, Matt. Thanks for the question. As we've talked about multiple times, our supply and marketing line item, which we call internally the DKTS, is doing very well. We have new leadership in place. As we have talked about multiple times, we have tried to improve our wholesale business, our asphalt business, trying to create more value out of it. You saw the results in the second quarter there versus where we were in the first quarter. Results improved markedly despite all the volatility that we are seeing, which is you're also referring to as far as your ask for the three Q forecast is concerned. Wholesale is doing very well. We are very optimistic about the improvements that we've been making, and they should continue in the third quarter as well. Asphalt, we'll still have to see as to how prices settle.

[Mohit Bhardwaj, EVP of New Energy, Strategy, and Investor Relations at Delek US]

Prices have seen a lot of volatility. As far as even asphalt is concerned, you should have some catch-up based upon the time that has passed since the start of the conflict, but it's all going to depend upon the volatility. Overall, we are very happy with how the business is performing, both in wholesale and asphalt, and we expect improvements all along. Just cannot talk about the volatility around it.

[Matthew Blair, Analyst at TPH]

Okay. Sounds good. On the SRE proceeds, could you just clarify? For 2025, I think we're estimating that if you receive partial waivers at all four refineries, it's just about $600 million. If you receive full waivers, it would be double, like $1.2 billion. Is there a tax that you would have to pay on that just because you bought RINs at a lower price and then theoretically be selling them at a higher price? Do you have any estimates on what a potential tax impact might look like?

[Avigal Soreq, President and CEO at Delek US]

Yeah. Obviously, we are not going to give a specific guidance on that. We still need to make sure 2025 come as we expected, we're going to follow the capital allocation strategy that we have, let's stay tuned on that, we are very optimistic about those positions. Mohit, why don't you finish?

[Mohit Bhardwaj, EVP of New Energy, Strategy, and Investor Relations at Delek US]

Yeah. Avigal, thanks for that. Robert will answer the exact strategy around tax management which is not just tied to SREs. As far as your comments were concerned, we have given the number out for total RVO obligation in 2025 was $468.4 million, that was around a RIN price of $1 a gallon. You can make your own assumptions beyond that. That was the 2025 pricing in that number. As far as our overall tax allocation strategy is concerned, we're not going to discuss it on the call. Robert, do you have any comments to make on that?

[Robert Wright, EVP and CFO at Delek US]

No, I think Avigal addressed it right. I think we have a lot of model levers that we can play to minimize our tax expense on this, obviously the current economics and profitability that the business is seeing. Nothing to model or share right now, tax minimization is a key strategy of ours, we'll employ that on any SREs that we're granted.

[Mohit Bhardwaj, EVP of New Energy, Strategy, and Investor Relations at Delek US]

Yeah, it's just not tied to the SREs, overall, tax minimization is our strategy. For us, we are very happy about our cash flow situation and where we are in the cycle right now.

[Matthew Blair, Analyst at TPH]

Great. Thank you.

[Avigal Soreq, President and CEO at Delek US]

Thank you.

[Operator]

There are no further questions at this time. I will now turn the call back to Avigal Soreq, CEO, for closing remarks.

[Avigal Soreq, President and CEO at Delek US]

I want to thank my colleague here around the table for another great quarter, and I want to thank the board of directors trusting us, to thank you, the investors, of sticking to the story and supporting us, and most importantly, to our employees who make this company the great company we are privileged to manage. We'll talk again in the next quarter, and have a safe day.

[Operator]

This concludes today's call. Thank you for attending. You may now disconnect.

Participants

Executives

• Robert Wright, EVP and CFO
• Avigal Soreq, President and CEO
• Mohit Bhardwaj, EVP of New Energy, Strategy, and Investor Relations
• Mark Hobbs, EVP of Delek Logistics Partners

Analysts

• Aayush Gupta, Analyst at Wolfe Research
• Alexa Petrick, Analyst at Goldman Sachs
• Manav Gupta, Analyst at UBS
• Jason Gabelman, Analyst at TD Cowen
• Joe Laetsch, Analyst at Morgan Stanley
• Matthew Blair, Analyst at TPH