Delek Logistics Partners, LP - 10-Q Summary (Q2 2026)
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2026. Delek Logistics Partners, LP (DKL) is a Delaware limited partnership providing gathering, pipeline, transportation, storage, wholesale marketing, terminalling, and water disposal services, primarily in the Permian Basin and Gulf Coast region. The Partnership maintains significant commercial agreements with its sponsor, Delek US Holdings, Inc. ("Delek Holdings"), while continuing to expand third-party revenue streams.
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Net Revenues | $384.8 million | $246.4 million | $682.2 million | $496.3 million |
| Net Income | $28.9 million | $44.6 million | $61.2 million | $83.6 million |
| EBITDA (Non-GAAP) | $120.0 million | $96.6 million | $214.9 million | $188.7 million |
| Distributable Cash Flow | $80.4 million | $70.0 million | $158.6 million | $141.7 million |
| Net Income Per Unit (Diluted) | $0.54 | $0.83 | $1.15 | $1.56 |
| Operating Cash Flow | $71.2 million | $107.4 million | $241.6 million | $139.0 million |
| Total Debt (Principal) | $2,398.1 million (as of June 30, 2026) | |||
| Liquidity |
Liquidity Position: As of June 30, 2026, total liquidity was $1,065.6 million, consisting of $13.7 million in cash and $1,051.9 million in unused commitments under the revolving credit facility.
Material Changes vs. Prior Period
- Revenue Growth: Net revenues increased 56.2% in Q2 2026 compared to Q2 2025. This was driven by a $65.9 million increase in West Texas marketing (higher gasoline/diesel prices and volumes) and a $77.4 million increase in Gathering and Processing (DPG Dropdown and Delaware operations). These gains were partially offset by a $6.7 million decrease due to the termination of the East Texas Marketing Agreement with Delek Holdings.
- Net Income Decline: Despite revenue growth, Net Income decreased 35.4% in Q2 2026. This was primarily due to a $28.4 million increase in interest expense, driven by a $21.4 million loss on extinguishment of debt (redemption of 2028 Notes and partial redemption of 2029 Notes) and higher interest costs from new debt issuances.
- EBITDA Expansion: Consolidated EBITDA increased 24.3% in Q2 2026, reflecting strong operational performance in Gathering and Processing and Marketing segments, despite the termination of the East Texas agreement.
- Debt Restructuring: The Partnership issued $800 million in 6.875% Senior Notes due 2034 and refinanced its revolving credit facility to $1.3 billion. Proceeds were used to redeem the 2028 Notes and partially redeem the 2029 Notes.
Guidance, Outlook, and Risks
- Outlook: Management expects continued cash flow growth in 2026 driven by the ramp-up at the Libby gas processing plant and completion of sour gas gathering capabilities. The Partnership aims to maintain an attractive distribution growth profile.
- Distribution: A quarterly cash distribution of $1.135 per unit was declared on July 22, 2026, payable August 10, 2026. This represents a 1.8% increase over the Q2 2025 distribution.
- Strategic Initiatives: Focus areas include achieving strong cash flow growth, pursuing expansion opportunities (specifically in gas processing), and engaging in mutually beneficial transactions with Delek Holdings to increase economic separation.
- Risks:
- Geopolitical Instability: Ongoing conflicts (U.S.-Iran, Russia-Ukraine, Israel-Hamas) are causing commodity price volatility and supply chain disruptions, which could impact refinery utilization and demand for logistics services.
- Concentration Risk: Significant dependence on Delek Holdings for revenue and commercial agreements.
- Cybersecurity: A non-material cybersecurity incident occurred in July 2026 involving unauthorized access to a single employee account; no operational or financial impact was determined.
- Interest Rate Risk: Exposure to floating rate debt on the revolving facility ($248.1 million outstanding).
Key Facts for Investor Verification
- Debt Extinguishment Costs: Verify the impact of the $23.0 million loss on extinguishment of debt recognized in the first half of 2026 on future interest expense and leverage ratios.
- East Texas Marketing Termination: Confirm the long-term revenue impact of the terminated marketing agreement with Delek Holdings (effective Jan 1, 2026) and the success of replacing these volumes with third-party business.
- DPG Dropdown Integration: Assess the sustained contribution of the Delek Permian Gathering (DPG) assets to the Gathering and Processing segment's EBITDA growth.
- Libby Plant Expansion: Monitor the timeline and capital requirements for the completion of the sour gas gathering equipment (estimated $60 million project) and its impact on future cash flows.
- Related Party Transactions: Review the terms of the new asset purchase agreements with Delek Holdings (Tyler Tank and El Dorado Terminal sales) and the waiver of $4.0 million in Omnibus fees for the first half of 2026.