Delek Logistics Aims for $480M-$520M EBITDA as Libby Plant Grows and Distributions Increase

Key Highlights from Delek Logistics Partners' Q2 2025 Earnings Call

During the recent earnings call, Delek Logistics Partners, LP (DKL) provided a detailed overview of its second-quarter performance and future outlook. The company reported another record quarter, with approximately $120 million in adjusted EBITDA. This strong result reaffirmed the company’s full-year EBITDA guidance of $480 million to $520 million. The leadership team emphasized continued progress and confidence in their strategic direction.

Operational Success and Strategic Growth

Avigal Soreq, President and CEO, highlighted the successful commissioning of the new Libby plant, which is expected to reach full capacity in the second half of 2025. He also noted that VPG and DTG crude gathering operations started the second half of the year strongly, with significant volume increases. The company plans to grow its competitive position in both Midland and the Delaware basis. Additionally, Soreq announced the 50th consecutive increase in quarterly distributions, raising the payout to $1.11 per unit.

Reuven Avraham Spiegel, Executive Vice President, added that the Libby plant is performing as expected and is on track to be fully operational by the end of the year. His team is focused on expanding sour gas treating, gathering, and acid gas injection capabilities at the complex.

CFO Robert Wright shared financial highlights, including a $700 million increase in availability due to the high-yield notes offering completed earlier this summer. Adjusted EBITDA for the quarter reached $120 million, up from $102 million in the same period last year. Distributable cash flow was $73 million, with a DCF coverage ratio of approximately 1.22x.

Segment Performance and Capital Expenditures

The Gathering and Processing segment generated $78 million in adjusted EBITDA, primarily driven by the H2O and Gravity acquisitions. The Wholesale Marketing and Terminalling segment reported $23 million in adjusted EBITDA, with a decline attributed to last summer's amend and extend agreements. The Storage and Transportation segment remained flat at $17 million, unchanged from the same period last year.

Investments in pipeline joint ventures contributed $11 million, influenced by the Wink to Webster dropdown. Capital expenditures for the quarter totaled $119 million, including $48 million allocated to the Libby 2 gas processing plant.

Q&A Insights and Analyst Focus

During the Q&A session, analysts raised several key questions. Douglas Baker Irwin from Citigroup asked about volume trends at the new processing plant and potential expansion timelines. Spiegel responded that the plant is currently flowing gas gradually and expects to operate at full capacity by year-end. He also confirmed that ongoing sour gas projects are on track.

Soreq addressed the Northwind transaction, calling it a “great reaffirmation of our strategy” and emphasizing DKL’s broader natural gas strategy, including sour gas gathering, treating, and processing. Mohit Bhardwaj, SVP Strategy & Growth, added that Northwind lacks processing capacity, while DKL has a more comprehensive approach.

Gabriel Philip Moreen from Mizuho Securities inquired about M&A strategy and market opportunities. Soreq stated that the company prioritizes value creation for investors, evaluating deals based on cash flow accretion and leverage impacts. He also confirmed confidence in the full-year guidance of $485 million to $520 million, citing strong volume upticks and customer relationships.

Sentiment and Market Position

Analysts maintained a neutral to constructive tone, focusing on plant ramp-up timing, competitive advantages, and M&A strategies. Management remained confident, repeatedly reaffirming guidance and strategic direction. Soreq noted that the company is one of the few in the sector to reiterate guidance.

Compared to the previous quarter, management’s tone was equally confident but highlighted more visible progress with the Libby plant and improved financial position. Analysts shifted focus from contract mix and customer activity to plant ramp-up, capacity, and future M&A opportunities.

Risks and Competitive Dynamics

Management acknowledged sector-wide commodity price volatility but reaffirmed the company’s strong positioning in the low-breakeven Permian Basin. Ongoing capital projects, including sour gas treating and AGI wells, were discussed, with the company reporting adherence to schedules and budgets. Analysts probed for potential risks tied to expansion timing and competitive dynamics, but management did not signal any material new risks.

Final Takeaway

Delek Logistics Partners delivered another record quarter, driven by the successful commissioning of the Libby plant, robust adjusted EBITDA, and a 50th consecutive distribution increase. Management reaffirmed full-year EBITDA guidance and expressed confidence in their operational strategy, competitive positioning, and growth initiatives in the Permian Basin. The company remains focused on maintaining financial discipline and exploring value-creating opportunities for investors moving forward.