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DATE
Friday, Feb. 27, 2026 at 12:30 p.m. ET
CALL PARTICIPANTS
- Chief Executive Officer — Avigal Soreq
- Chief Financial Officer — Reuven Spiegel
- President — Robert Wright
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TAKEAWAYS
- Record Adjusted EBITDA -- $536,000,000 for the year, attributed to execution across natural gas, crude, and water businesses, and the addition of H2O and Gravity.
- Libbey Complex Capacity -- Increased to approximately 160,000,000 scf per day following commissioning of the new Libbey II processing plant.
- 2026 EBITDA Guidance -- Initiated in a range of $520,000,000 to $560,000, reflecting anticipated growth and continued operational leverage management.
- Distribution Growth -- Board approved a 52nd consecutive quarterly distribution increase to $1.125 per unit, representing 13 years of growth.
- Crude Gathering Fourth Quarter Record -- Crude gathering volumes set a new high in the quarter, backed by expanding crude infrastructure.
- Adjusted EBITDA Breakdown, Q4 -- Gathering and Processing: $71,000,000; Wholesale Marketing and Terminalling: $21,000,000; Storage and Transportation: $35,000,000; Investments in Pipeline Joint Ventures: $26,000,000 (component figures do not sum to total due to segment overlap and rounding).
- Q4 Total Adjusted EBITDA -- $142,000,000, up from $114,000,000 a year prior, and $6,000,000 above the previous quarterly record.
- Distributable Cash Flow (DCF) Coverage Ratio -- 1.22x as adjusted for the quarter, supporting payout levels.
- Third-party EBITDA Contribution -- Expected to reach approximately 80% of run-rate EBITDA in 2026, highlighting increased business independence.
- Liquidity -- Year-end available liquidity of approximately $940,000,000 under credit facilities, supporting future investments.
- Q4 Capital Expenditures -- Totaled $32,000,000; $26,000,000 classified as growth capital, primarily for sour gas capabilities at Libbey.
SUMMARY
Delek Logistics Partners (DKL 0.19%) completed the integration of H2O and Gravity Water Midstream assets, expanding its Permian Basin footprint and establishing a platform for future growth. Management stated, "You will see in our slides that Delek Logistics Partners, LP now has 82% of their EBITDA from third-party businesses," indicating a significant shift away from dependence on its sponsor. The deployment pace for sour gas infrastructure experienced delays, but leadership expects a step change in utilization once AGI and sour gas gathering infrastructure are fully complete. Ongoing investments in the Libbey complex are intended to support further processing expansion, with a $15,000,000 spend allocated for future capacity addition. Management described returns on recent capital investment as typically one to three times on the investment, characterizing these as favorable for leverage and coverage. The sale of "inside-the-fence" assets to Delek US Holdings (NYSE: DK) is now described as materially complete, with no significant further impact expected on segment EBITDA or corporate structure.
- Avigal Soreq said, "the intrinsic value of assets warrants a seven handle on our unit price," suggesting potential valuation upside from current price levels.
- Management maintains acquisition discipline, stating all future deals need to be accretive to free cash flow, leverage ratio, and coverage ratio.
- The company anticipates further need for additional gas processing capacity as sour gas business utilization ramps, with timing dependent on customer production trends.
INDUSTRY GLOSSARY
- AGI Well: Acid Gas Injection well, used to safely dispose of sour gas contaminants by injecting them into underground formations.
- DCF Coverage Ratio: The ratio of distributable cash flow to cash distributions paid, indicating the safety margin for distribution sustainability.
- “Inside-the-fence” assets: Assets located within or directly supporting a refinery or primary sponsor, often sold to third parties or affiliates for strategic realignment.
Full Conference Call Transcript
Avigal Soreq: Thank you, Robert. 2025 was an exceptional year for Delek Logistics Partners, LP highlighted by the achievement of a record adjusted EBITDA of $536,000,000. These results are a reflection of strong execution across our businesses and the addition of high-quality businesses such as H2O and Gravity, but most importantly, because of the hard work of our great employees. During the year, we continued to advance our key initiatives across our natural gas, crude, water businesses, increasing our position as a premier full-service provider in the Permian Basin. Now let me talk about each one of those businesses in detail. Starting with natural gas.
During the year, we successfully commissioned the new Libbey II processing plant, increasing the capacity of the complex to around 160,000,000 scf per day. The expansion in the processing capacity is being enhanced by the comprehensive acid gas injection and sour gas handling solution we are building. We are very excited about providing this comprehensive capability to our customers, further supporting long-term oil and gas production goals in the Delaware Basin. Moving to crude, both DPG and DDG crude gathering operations delivered strong performance during the year. We have increased our overall gathering capacity and look forward to further optimizing and growing the business in 2026. Our water business is also doing very well.
We have largely completed the integration of H2O and Gravity into our operation. The combined gas, crude, water offering in the Permian Basin has increased our competitive position and built a strong platform for growth. With strategic foundation, strong operations, and record results in 2025, we are well positioned for 2026. Today, we announced a 2026 EBITDA guidance range of $520,000,000 to $560,000,000. This reflects the growth opportunity we have while managing leverage and coverage. We also intend to remain good stewards of our stakeholders’ capital. Our board of directors has approved our 52nd consecutive quarterly distribution increase, raising the distribution to $1.125 per unit, marking 13 consecutive years of distribution growth.
This is an extraordinary achievement and we are extremely proud of our team and financial prudence that brought us here. As we close the books on 2025 and begin 2026, the Delek Logistics Partners, LP family is positioned as a strong, independent, full-suite midstream service provider. With the foundation we have built and the opportunities ahead, we are confident in our ability to continue delivering sustainable growth and long-term value for our unitholders. I will now hand it over to Reuven, who will provide more details on our operations.
Reuven Spiegel: Thank you, Avigal. As Avigal mentioned, we are very excited about Delek Logistics Partners, LP’s future and are working to increase our advantaged Permian position. Most significantly, I am very pleased with the rising economic separation we have with our sponsor, DK. In 2026, we expect approximately 80% of our run-rate EBITDA will come from third parties. This is an extraordinary achievement for the partnership and its increased independence will allow us to be more nimble in advancing the strong growth path we have been navigating. Turning to our business. We continue to work hard to bring an industry-leading sour gas solution in the Delaware Basin. The first step in the process was to complete our processing capacity expansion.
Currently, we are working on completing the first AGI well and building the sour gas gathering infrastructure to fully optimize our capacity. As we have mentioned in the past, while our ramp-up has been slower versus our initial expectations, the need for sour gas solutions is urgent, and we expect to see a step change in our utilization once our AGI and sour gas gathering infrastructure is fully complete. We also believe that the step change in utilization is likely to bring forward the need for additional processing capacity. We are looking at our options and have made selected investments that will support future expansions of the Libbey complex.
We continue to believe that our expanded gas processing and sour gas handling capabilities provide a unique offering to our customers and provide us with a long runway for growth in the Delaware Basin. Our crude gathering volumes had a record fourth quarter. We are growing our crude infrastructure to provide our customers a more comprehensive solution. Our crude gathering business is in a very strong place, and our combined crude and water offering is yielding great results. Moving to our water business. Integration of two water gathering systems from H2O and Gravity has gone well. We are very excited about the opportunities our larger water footprint is bringing to us.
We believe produced water gathering and disposal will require more innovation and different approaches as producer water cuts increase throughout the basin. We look forward to updating the market as we bring forward these solutions. With that, I will pass it on to Robert. Thank you, Reuven.
Robert Wright: Avigal and Reuven highlighted we continue to make strong progress advancing the Delek Logistics Partners, LP growth story. While we are driving meaningful financial and operational growth across the partnership, we remain equally focused on achieving our long-term leverage and coverage objectives. 2025 was a significant year for the partnership. We successfully closed the acquisition of Gravity Water Midstream, which together with the 2024 acquisition of H2O Midstream, were well timed from a purchase multiple perspective. In addition, we completed construction of the Libbey II gas plant and are now in the process of converting operations to support sour gas treating, handling, and processing capabilities.
Our focus now shifts to fully capturing the value of these investments by optimizing synergies and executing our strategic priorities. At the Libbey complex, this includes completing the sour gas conversion and realizing the associated EBITDA uplift over time. From a balance sheet perspective, we ended 2025 in a strong financial position with approximately $940,000,000 available liquidity under our credit facilities. This provides us with significant flexibility to continue executing our growth agenda while maintaining financial discipline. Turning to our fourth quarter results, adjusted EBITDA for the quarter was a record at approximately $142,000,000, up from $114,000,000 in the same period last year and $6,000,000 higher than the previous record set in the third quarter of this year.
Distributable cash flow as adjusted totaled $73,000,000; our DCF coverage ratio as adjusted was approximately 1.22x. In the Gathering and Processing segment, adjusted EBITDA for the quarter was $71,000,000 compared to $66,000,000 in 2024. The increase was primarily due to the acquisitions of H2O and Gravity. Wholesale marketing and terminalling adjusted EBITDA was $21,000,000 compared to $21,000,000 in the prior year. Storage and transportation adjusted EBITDA in the quarter was $35,000,000 compared with $18,000,000 in 2024. The increase primarily reflects the impacts of the sale of certain assets to DK, agreed to under the May 2025 intercompany transaction.
Finally, the investments in pipeline joint venture segment contributed $26,000,000 this quarter compared with $18,000,000 in 2024, driven by strong performance from the Wink to Webster joint venture. Turning to capital expenditures, total capital spending for the fourth quarter was approximately $32,000,000. Of this amount, $26,000,000 was growth capital primarily relating to initiating sour gas capabilities at the Libbey complex. The remainder of the spend was directed towards other growth projects including advancing new connections across our Midland and Delaware gathering systems. Looking ahead to 2026, as Avigal mentioned, we remain confident in our earnings trajectory and are initiating our full-year 2026 EBITDA guidance in a range of $520,000,000 to $560,000,000. With that, we will open the call for questions.
Operator: Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star one. If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. And, again, to ask a question, it is star one. Your first question comes from the line of Douglas Baker Irwin of Citi. Your line is open.
Douglas Baker Irwin: Hey, team. Thanks for the question. I just wanted to start on guidance and maybe more specifically on growth expectations for the G&P segment. Could you maybe just help quantify how much of the variance within the high and low end of the guidance range is dependent on G&P performance and your ability to ramp up sour gas later this year? Then just with regard to the multiyear growth benchmark you put out there, how should we be thinking about the ramps to that $70,000,000 incremental EBITDA over the next couple of years?
Avigal Soreq: Hey. Hey, Doug. Thank you for the question. I think it is a great question. I want to touch exactly what you asked, but I would like to start from a big-picture standpoint. We defined a very clear, concise strategy of crude, gas, and water in the most prolific area of the Permian Basin. And if I want to highlight one number in the guidance we gave, it is the return on the investment that we see with the capital we invest now. You see around one to three times on the investment we see, which is very good. It is good to our coverage ratio. It is good to leverage ratio and accretive to EBITDA.
You see that over the course of more than one year, on a run-rate basis, it is a very accretive number. And the main outcome of that is the results of our strategy. Second point I want to highlight is the growth and yield combination that we are seeing that is probably best in class, if not best in class, probably among others that think best in class, but very, very good and on a very, very good trajectory and pattern, so we are very happy about that.
The last point I want to make sure is coming across, and then I will hand it to Reuven who will be more specific around the sour gas, is the fact that if you are taking the intrinsic value of each asset that we either built or bought, we need to get a seven handle on our unit price. So there is way much more room to go. We are very consistent with rewarding our investors. We have a very clear target for leverage ratio and coverage ratio. And we are prudently moving to those targets. Reuven, you want to talk about sour gas just a little bit?
Reuven Spiegel: Yes. Thank you, Avigal. We are actually very excited about the growth opportunity that gas will provide us. We mentioned in previous calls that gas in the region is turning to be more sour than originally anticipated, which made us accelerate our sour project timeline. Presently, we are drilling the AGI well and constructing our associated sour gas gathering and compression system. As we mentioned in the prepared remarks, we expect to see increased utilization as these projects are completed throughout the year. Even with the completion of this project, we still anticipate incremental processing capacity needed in our area. This is a long answer, but the short answer is we expect to be completed over the next few months.
The Delaware gas business will be one of our growth engines for years to come.
Douglas Baker Irwin: Got it. Thanks for that detail. Maybe as a follow-up on an item from the DK release, it called out a transaction with DK for some assets that goes to Tyler and other auto facilities. Just curious if you could talk about the EBITDA impacts to Delek Logistics Partners, LP from those transactions and the use of proceeds, and then just looking forward, are there more opportunities like this that you could potentially do between the two companies?
Avigal Soreq: Yes. Absolutely. I will let Robert take that question.
Robert Wright: Yes. Thanks, Avigal. These transactions really just helped us further the economic separation of the two entities. You will see in our slides that Delek Logistics Partners, LP now has 82% of their EBITDA from third-party businesses as a result of this transaction. With this, our view is that we are materially complete with the inside-the-fence assets being sold to DK. We kind of have the right assets under the right roof now. And from an EBITDA perspective, it is really not material to either entity.
Douglas Baker Irwin: Got it. Thanks for the time.
Avigal Soreq: Thank you, Doug. Appreciate you.
Operator: Your next question comes from the line of Gabriel Philip Moreen of Mizuho. Your line is open.
Gabriel Philip Moreen: Good morning, Avigal.
Avigal Soreq: Hey. How are you?
Gabriel Philip Moreen: I am well. You? Good. Thanks. I am just going to ask in terms of maybe just pressing you guys a little bit on what the next steps would be on the Libbey processing expansion. How big you would think the next chunk of processing addition would be? And what would need to happen and when to make that come to fruition.
Avigal Soreq: Yes. So I will tell you two things. First, you probably remember that we said a few quarters ago about the investment we already put for future expansion for Libbey. You remember, $15,000,000. So we will try to take advantage around that. That is the first nugget I am going to give you. The other one that I am going to tell you is that we are looking very, very carefully, and it is all public information, at what our customers and producers are doing in the area. And in our area, it looks very good, which means two things, which mean more sour and which mean more volume both on the crude and gas.
So I am not going to commit to a timeline like you asked, but do not expect me to fall into distress. But I am going to tell you that things are looking very good in all the macro that we are seeing and also the micro from our customers. So stay tuned.
Gabriel Philip Moreen: Will do. Thank you, Avigal. And, of course, I have to ask you, there has been a lot of, I would say, sour gas midstream M&A over the last couple of months. So I am just curious what your thoughts are on that, what you are seeing potentially out there in terms of packages on gas or water that may or may not be out there?
Avigal Soreq: Yes. So the cheapest company in the area is called Delek Logistics Partners, LP. We still do not see we are still not close to the valuation versus our peers. Obviously, you were probably very happy about the two mid acquisitions that we did, both H2O and Gravity. We did it both on the right timing, on the right valuation. We are not shy of doing that, but we are not going to force ourselves into a deal that is too expensive. So more to come. Everything that we do needs to be accretive to free cash flow, leverage ratio, coverage ratio. We are not going to shy from those principles in the future.
And I will leave you to that.
Gabriel Philip Moreen: Right. Great.
Operator: With no further questions, I would like to pass it back to Avigal for closing remarks.
Avigal Soreq: Thank you. Thank you. I just want to thank the great team in this room. Thank you to a great board of directors with their great support for the Delek Logistics Partners, LP journey. To the investors and to mostly the great employees we have. I am really proud of the progress we are doing and more to come.
Operator: Thank you. This concludes today's conference call. You may now disconnect.
