Delek Logistics Partners NYSE: DKL reported first-quarter adjusted EBITDA of $132 million and said it remains “very confident” in achieving its full-year 2026 adjusted EBITDA guidance range of $520 million to $560 million, citing strong execution across its gas, crude, and water businesses in the Permian Basin.
Quarterly performance and distribution increase
On the call, Executive Vice President and Chief Financial Officer Robert Wright said the partnership delivered “our best first quarter results to date,” despite what he described as approximately $10 million of headwinds tied to Winter Storm Fern.
Adjusted EBITDA of about $132 million compared with $123 million in the same period last year, Wright said. Distributable cash flow (as adjusted) was $72 million, and the distributable cash flow coverage ratio was “stable at approximately 1.2x,” according to Wright.
Management also announced its 53rd consecutive quarterly distribution increase. President and Chairman Avigal Soreq said the board approved raising the distribution to $1.13 per unit, calling the streak “an extraordinary achievement.”
Segment results show strength in gathering, storage, and joint ventures
Wright provided segment-level results and year-over-year comparisons:
- Gathering and processing: Adjusted EBITDA of $83 million, up from $81 million in the first quarter of 2025, which Wright attributed primarily to “increased margins recognized within the segment.”
- Wholesale marketing and terminalling: Adjusted EBITDA of $14 million, down from $18 million a year earlier, primarily due to the impacts of a “2024 amended extend agreement with Delek,” Wright said.
- Storage and transportation: Adjusted EBITDA of $25 million, up from $14 million in the first quarter of 2025, reflecting the impacts of a “January 2026 related party transaction,” according to Wright.
- Pipeline joint venture investments: Adjusted EBITDA contribution of $18 million versus $17 million in the prior-year period, driven by “strong performance from the Wink to Webster joint venture,” Wright said.
Permian strategy: combined gas, crude, and water platform
Soreq said the quarter’s results reflected strength “in all segments,” and described the partnership’s positioning as “a premier full-service provider of crude, gas, and water in the Permian Basin.” He highlighted progress in the gas business, including the completion of drilling on the partnership’s “first AGI well,” which he said represented another step toward “our industry-leading comprehensive sour gas solution.”
Reuven Spiegel, executive vice president, expanded on the sour gas strategy in the Delaware Basin. He said the company has completed its processing capacity expansion and is now building out sour gas gathering infrastructure such as compressor stations before transferring the system to operations. Spiegel added that while the ramp-up has been “slower versus our initial expectation,” the company expects a “step change in our utilization” after the build-out, which “is likely to bring forward the need for additional processing capacity.” He said the company is evaluating options and “innovative ways to add capacity,” including selected investments to support future expansion of the Libby Complex.
In crude, Spiegel said Delaware crude gathering volumes were impacted by well shut-ins due to Winter Storm Fern and colder-than-normal temperatures, but that volumes have recovered in the second quarter and are expected to increase over the rest of the year.
On water, Spiegel said he was “very pleased” with the start in produced water gathering and pointed to the partnership’s expanded footprint following acquisitions of Gravity and H2O Midstream. He said the company believes produced water gathering and disposal will require “a platform approach” as permitting for new saltwater disposal wells remains limited and producer activity shifts across the basin.
Capital spending, balance sheet, and growth outlook
Wright said Delek Logistics is continuing to execute on planned 2026 growth capital spending of $180 million to $190 million, which management expects “will yield approximately $75 million in incremental EBITDA on a run rate basis.” First-quarter total capital spending was approximately $50 million, including $42 million of growth capital primarily tied to drilling the first AGI well and building sour gas gathering infrastructure. He added that remaining spending supported other growth projects, including new connections across crude gathering systems.
On liquidity, Wright said the partnership upsized and extended its revolving credit facilities to $1.3 billion with a 2031 maturity, increasing available liquidity to approximately $1.1 billion. He said Delek Logistics ended the quarter with an adjusted leverage ratio of 4.05x.
Q&A: guidance confidence, gas ramp timing, water opportunities, and Waha
In response to a question from Citi analyst Doug Irwin about the guidance range and the macro environment, Soreq said management’s optimism was driven by both macro conditions and the partnership’s execution. He discussed changes in risk premiums between Brent and WTI compared with last year and said management believes global developments could increase emphasis on U.S. shale as a “safe harbor for a crude supply around the globe.”
Spiegel told Irwin that water is “performing above our expectations,” crude is “solid,” and gas is expected to ramp in the second half of the year. On timing, Spiegel said Delek Logistics expects gas utilization to “reach capacity in the next three to six month,” while the company completes associated infrastructure such as compressor stations.
Mizuho analyst Gabe Moreen asked about potential water growth opportunities. Soreq said the company would not be specific about deals and size, but described a “tailwind” from the combined crude, water, and gas offering in areas where the partnership operates. Spiegel added that increasing water production and permitting complexity are driving the need for “effective treatment” and “a more comprehensive approach for gathering, treatment, and disposal,” with more updates to come “when we are ready in the near future.”
Moreen also asked about potential Waha-related natural gas impacts. Mohit Bhardwaj, executive vice president of strategy, business development, and investor relations, said residue gas pipeline capacity is expected to come online in the second half of the year, which he said should relieve takeaway constraints facing producers. He characterized the combination of incremental gas takeaway capacity and what he called a higher “call on shale crude” as “a very positive development for DKL,” adding that increased production would benefit all three of the partnership’s businesses: gas, water, and crude.
Closing the call, Soreq thanked investors, the board, and employees, emphasizing the partnership’s focus on disciplined growth while managing leverage and coverage.
About Delek Logistics Partners NYSE: DKL
Delek Logistics Partners L.P. NYSE: DKL is a master limited partnership formed in 2011 through contributions of pipeline, terminal and crude oil gathering assets by its sponsor, Delek US Holdings, Inc Headquartered in Brentwood, Tennessee, the partnership is managed by Delek Logistics GP, LLC, an affiliate of Delek US. Delek Logistics Partners owns and operates an integrated network of petroleum pipelines and terminals that support the movement, storage and throughput of crude oil and refined products.
The partnership's core operations include crude oil gathering and processing systems, long-haul pipeline transportation and storage terminal services.
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