- Acquisition of 48 percent of Alon
USA expected to close as early as May 12
- Tyler turnaround and expansion
project completed bringing system wide crude throughput nameplate
capacity to 155,000 barrels per day
- Expansion and new FCC reactor
estimated to add $75 million of annual contribution margin at
current market conditions
Delek US Holdings, Inc. (NYSE: DK) (“Delek US”) today announced
financial results for its first quarter ended March 31, 2015.
Delek US reported a first quarter net loss of $(16.1) million, or
$(0.28) per basic share, versus net income of $33.7 million, or
$0.56 per diluted share, in the quarter ended March 31,
2014.
On April 14, 2015, Delek US entered into a definitive stock
purchase agreement with Alon Israel Oil Company Ltd. (“Alon
Israel”) to acquire approximately 33.7 million shares, or
approximately 48 percent of the outstanding shares, of Alon USA
Energy, Inc. (NYSE: ALJ) (“Alon USA”) common stock owned by Alon
Israel. This transaction, which has received Hart-Scott-Rodino
clearance, is expected to close as early as May 12, 2015.
On a year-over-year basis, the change in first quarter 2015
results was mainly attributable to the refining segment. The Tyler,
Texas refinery contribution margin declined by $79.1 million
year-over-year due to downtime associated with the scheduled
turnaround and expansion project. Under current market conditions,
the projects at Tyler are expected to generate approximately $75.0
million of incremental annual contribution margin. Performance in
the logistics and retail segments improved on a year-over-year
basis.
Included in the reported operating income for the first quarter
2015 was $8.3 million of net hedging gains, which included $12.5
million of unrealized losses. Those gains were offset by $20.8
million of higher cost related to inventory adjustments resulting
from the changes in crude oil and product prices during the
quarter. Also, results included approximately $4.0 million of
additional expenses associated with professional fees that were
primarily related to acquisition activity during the quarter.
Excluding the impact of higher costs associated with net unrealized
hedging losses, inventory costs and professional fees, first
quarter 2015 after-tax earnings would have been higher by
approximately $24.0 million.
Uzi Yemin, Chairman, President and Chief Executive Officer of
Delek US stated, "During the first quarter, we completed the
turnaround and expansion at our Tyler refinery. While the downtime
related to these projects affected our overall performance in the
first quarter, we entered the second quarter with both refineries
operating near their respective crude throughput capacities."
Yemin concluded, "With the completion of the work at Tyler, we
have finished a large capital investment program in our refining
segment that included two refinery turnarounds and projects to
improve flexibility and increase throughput at both refineries. We
continue to take steps to provide growth and create value in our
business and we are excited about our agreement to acquire 48
percent of the outstanding common stock of Alon USA. This
transaction is an important strategic step in our growth and
broadens our geographic diversity. We remain in a strong financial
position, and with new opportunities ahead of us, we will continue
to focus on growth initiatives, while remaining committed to
returning cash to our shareholders."
Tyler Turnaround and Expansion
Update
The turnaround, which began on January 23, was completed and the
restart process began in late March. During the turnaround, the
fluid catalytic cracking reactor was replaced and work related to
the expansion of the crude nameplate capacity was completed. This
expansion increased the crude throughput capacity by 15,000 barrels
per day to 75,000 barrels per day. This expansion project is
expected to cost approximately $70.0 million, and through March 31,
2015 total spending on this project was approximately $58.4
million. After the restart, each unit involved in this project has
achieved its design throughput rates.
Based on current market conditions, and assuming 15,000 barrels
per day of incremental crude throughput, this expansion is expected
to generate an annual contribution margin of approximately $65
million. In addition, improved yields from the new fluid catalytic
cracking reactor is expected to increase contribution margin by
approximately $10 million on an annual basis.
Regular Quarterly
Dividend
Delek US announced today that its Board of Directors declared
its regular quarterly cash dividend of $0.15 per share.
Shareholders of record on May 26, 2015 will receive this cash
dividend payable on June 16, 2015.
Liquidity
As of March 31, 2015, Delek US had a cash balance of $376.4
million and total debt of $674.2 million, resulting in net debt of
$297.8 million. This compares to $145.6 million of net debt at
December 31, 2014. As of March 31, 2015, Delek US' subsidiary,
Delek Logistics Partners, LP (NYSE: DKL) ("Delek Logistics"), had
$316.4 million of debt, which is included in the consolidated
amounts on Delek US' balance sheet. Excluding Delek Logistics,
Delek US had approximately $376.4 million in cash and $357.8
million of debt, or an $18.6 million net cash position.
Refining Segment
Three Months EndedMarch 31,
Contribution Margin 2015 2014 ($ in millions)
Refining Segment $ 21.9 $ 100.5 Tyler Refinery ($3.0 ) $ 76.1 El
Dorado Refinery $ 29.2 $ 21.8
Refining contribution margin decreased to $21.9 million from
$100.5 million in the first quarter 2014. This decline in
year-over-year performance can be attributed to several factors.
First, the Tyler, Texas refinery underwent a scheduled turnaround
and expansion project that lowered performance on a year-over-year
basis and had a larger effect on results as compared to a
turnaround at the El Dorado refinery in the prior year period.
Second, as discussed earlier, results were reduced by higher costs
associated with inventory adjustments related to changes in crude
oil and product prices during the quarter. Third, a net hedging
gain of $8.0 million in the first quarter 2015 was lower than $32.8
million in the prior year period.
The WTI Midland crude discount to WTI Cushing declined on a
year-over-year basis, averaging $1.98 per barrel in first quarter
2015 compared to an average of $3.54 per barrel in the prior-year
period. This decline in the Midland differential was partially
offset by a crude oil futures market that was in contango of $0.68
per barrel in the first quarter 2015 compared to backwardation of
$0.16 per barrel in the first quarter 2014. The Gulf Coast 5-3-2
crack spread averaged $14.99 per barrel during the first quarter
2015, which was in line with $15.01 per barrel during first quarter
2014.
Tyler, Texas Refinery
Operating Highlights
Three Months EndedMarch 31,
2015 2014 Crude Throughput, bpd 18,574 58,276 Total
Throughput, bpd 20,044 66,746 Total Sales Volume, bpd 23,200 66,033
Refining Margin, $/bbl sold $8.32 $17.46 Direct
Operating Expense, $ in millions $20.4 $27.7 Direct Operating
Expense, $/bbl sold $9.76 $4.65
During the first quarter 2015, the Tyler refinery underwent a
scheduled turnaround which lowered performance on a year-over-year
basis. Direct operating expense decreased primarily due to downtime
related to the turnaround, as well as lower utility and natural gas
costs.
El Dorado, Arkansas Refinery
Operating Highlights
Three Months EndedMarch 31,
2015 2014 Crude Throughput, bpd 76,695 37,459 Total
Throughput, bpd 80,075 44,841 Total Sales Volume, bpd 79,140 58,875
Refining Margin, $/bbl sold $7.81 $9.59 Direct
Operating Expense, $ in millions $26.5 $29.1 Direct Operating
Expense, $/bbl sold $3.72 $5.49
Total throughput increased year-over-year at the El Dorado
refinery as it was able to process additional barrels of light
crude compared to the first quarter 2014 when the refinery
underwent a scheduled turnaround. This translated into increased
sales volume during the period on a year-over-year basis. In the
first quarter 2015, refining margin was reduced by higher costs
associated with inventory adjustments and higher renewable fuel
costs due to contract prices that were above the market during the
period. Direct operating expense decreased year-over-year due to
lower chemicals/catalysts and outside services expenses as the
refinery operated more efficiently compared to the first quarter
2014.
Logistics Segment
Delek US and its affiliates beneficially own approximately 62
percent (including the 2 percent general partner interest) of all
outstanding Delek Logistics units. The logistics segment's results
include 100 percent of the performance of Delek Logistics and
adjustments for the minority interests are made on a consolidated
basis.
The logistics segment's contribution margin in the first quarter
2015 was $24.3 million compared to $21.8 million in the first
quarter 2014. On a year-over-year basis, this increase was due to
several factors. First, Delek Logistics’ acquisition of the product
terminal and substantially all of the storage tank assets at the El
Dorado refinery in February 2014 from a subsidiary of Delek US and
the purchase of the assets of Frank Thompson Transport in December
2014 improved performance in the first quarter 2015. Second, new
agreements in place on January 1, 2015 increased contribution from
the Paline Pipeline. Third, higher volumes on the Lion Pipeline
System compared to the first quarter 2014 improved results on a
year-over-year basis. These factors more than offset a lower gross
margin per barrel in the west Texas wholesale business and lower
volumes under the marketing agreement and product terminal
supporting the Tyler, Texas refinery that underwent a scheduled
turnaround and expansion in the first quarter 2015.
Retail Segment
Three Months EndedMarch 31,
Retail Operating Highlights 2015 2014 Contribution
margin, $ in millions $12.3 $5.9 Operating expenses, $ in millions
$32.5 $32.2 Merchandise margin 28.1% 28.4% Fuel margin, per
gallon $0.163 $0.124 Store count (end of period) 360 361
Retail segment contribution margin increased year-over-year
primarily due to higher fuel margins and gallons sold. Fuel gallons
sold increased to 108.7 million from 97.8 million in the prior-year
period and merchandise sales increased to $94.5 million compared to
$89.4 million. On a same store sales basis, fuel gallons sold
increased 6.0% and merchandise sales increased 3.5% from first
quarter 2014. The increase in same store fuel gallons was primarily
driven by improved performance from the large-format store category
on a year-over-year basis. At the end of the first quarter 2015,
there were a total of 64 large-format stores in the portfolio.
First Quarter 2015 Results | Conference
Call Information
Delek US will hold a conference call to discuss its first
quarter 2015 results on Wednesday, May 6, 2015 at 8:30 a.m. Central
Time. Investors will have the opportunity to listen to the
conference call live by going to www.DelekUS.com and clicking on
the Investor Relations tab. Participants are encouraged to register
at least 15 minutes early to download and install any necessary
software. For those who cannot listen to the live broadcast, a
telephonic replay will be available through August 4, 2015 by
dialing (855) 859-2056, passcode 29419413. An archived version of
the replay will also be available at www.DelekUS.com for 90
days.
Investors may also wish to listen to Delek Logistics’ (NYSE:
DKL) first quarter earnings conference call that will be held on
May 6, 2015 at 7:30 a.m. Central Time and review Delek Logistics’
earnings press release. Market trends and information disclosed by
Delek Logistics may be relevant to the logistics segment reported
by Delek US. Both a replay of the conference call and press release
for Delek Logistics are available online at
www.deleklogistics.com.
About Delek US Holdings,
Inc.
Delek US Holdings, Inc. is a diversified downstream energy
company with assets in petroleum refining, logistics and
convenience store retailing. The refining segment consists of
refineries operated in Tyler, Texas and El Dorado, Arkansas with a
combined nameplate production capacity of 155,000 barrels per day.
Delek US Holdings, Inc. and its affiliates also own approximately
62 percent (including the 2 percent general partner interest) of
Delek Logistics Partners, LP. Delek Logistics Partners, LP (NYSE:
DKL) is a growth-oriented master limited partnership focused on
owning and operating midstream energy infrastructure assets. The
retail segment markets motor fuel and convenience merchandise
through a network of approximately 360 company-operated convenience
store locations operated under the MAPCO Express®, MAPCO Mart®,
East Coast®, Fast Food and Fuel™, Favorite Markets®, Delta Express®
and Discount Food Mart™ brand names.
Safe Harbor Provisions Regarding
Forward-Looking Statements
This press release contains forward-looking statements that are
based upon current expectations and involve a number of risks and
uncertainties. Statements concerning current estimates,
expectations and projections about future results, performance,
prospects and opportunities and other statements, concerns, or
matters that are not historical facts are “forward-looking
statements,” as that term is defined under the federal securities
laws.
Investors are cautioned that the following important factors,
among others, may affect these forward-looking statements. These
factors include but are not limited to: changes in the scope,
costs, and/or timing of capital and maintenance projects;
management's ability to execute its strategy of growth through
acquisitions and the transactional risks associated with
acquisitions; gains and losses from derivative instruments; risks
and uncertainties with respect to the quantities and costs of crude
oil we are able to obtain and the price of the refined petroleum
products we ultimately sell; operating hazards inherent in
transporting, storing and processing crude oil and intermediate and
finished petroleum products; our competitive position and the
effects of competition; the projected growth of the industries in
which we operate; general economic and business conditions,
particularly levels of spending relating to travel and tourism or
conditions affecting the southeastern United States; and other
risks contained in our filings with the United States Securities
and Exchange Commission.
Forward-looking statements should not be read
as a guarantee of future performance or results and will not be
accurate indications of the times at, or by which such performance
or results will be achieved. Forward-looking information is based
on information available at the time and/or management's good faith
belief with respect to future events, and is subject to risks and
uncertainties that could cause actual performance or results to
differ materially from those expressed in the statements. Delek US
undertakes no obligation to update or revise any such
forward-looking statements.
Delek US Holdings, Inc.
Consolidated Balance Sheets
(Unaudited)
March 31, 2015
December 31, 2014
(In millions, except share and per share data) ASSETS
Current assets: Cash and cash equivalents $ 376.4 $ 444.1 Accounts
receivable 191.0 197.0 Inventory 484.6 469.6 Other current assets
114.7 136.7 Total current assets 1,166.7
1,247.4 Property, plant and equipment: Property, plant and
equipment 1,990.4 1,953.2 Less: accumulated depreciation (489.1 )
(509.6 ) Property, plant and equipment, net 1,501.3 1,443.6
Goodwill 73.9 73.9 Other intangibles, net 28.2 21.4 Equity
method investments 6.0 — Other non-current assets 120.1
105.1 Total assets $ 2,896.2 $ 2,891.4
LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities:
Accounts payable $ 412.6 $ 477.0 Current portion of long-term debt
and capital lease obligations 56.4 56.4 Obligation under Supply and
Offtake Agreement 186.9 200.9 Accrued expenses and other current
liabilities 146.6 122.9 Total current liabilities
802.5 857.2 Non-current liabilities: Long-term debt
and capital lease obligations, net of current portion 617.8 533.3
Environmental liabilities, net of current portion 8.4 8.5 Asset
retirement obligations 9.2 9.2 Deferred tax liabilities 256.4 266.3
Other non-current liabilities 40.7 18.5 Total
non-current liabilities 932.5 835.8 Stockholders’
equity: Preferred stock, $0.01 par value, 10,000,000 shares
authorized, no shares issued and outstanding — — Common stock,
$0.01 par value, 110,000,000 shares authorized, 60,716,957 shares
and 60,637,525 shares issued at March 31, 2015 and December 31,
2014, respectively 0.6 0.6 Additional paid-in capital 398.4 395.1
Accumulated other comprehensive loss (29.2 ) (12.6 ) Treasury
stock, 3,365,561 shares, at cost, as of both March 31, 2015 and
December 31, 2014 (112.6 ) (112.6 ) Retained earnings 706.9 731.2
Non-controlling interest in subsidiaries 197.1 196.7
Total stockholders’ equity 1,161.2 1,198.4 Total
liabilities and stockholders’ equity $ 2,896.2 $ 2,891.4
Delek US Holdings, Inc.
Consolidated Statements of
Income
Three Months EndedMarch
31,
2015 2014 (Unaudited) (In
millions, except share and per share data) Net sales $ 1,150.6
$ 1,865.7 Operating costs and expenses: Cost of goods sold 1,006.1
1,643.3 Operating expenses 91.4 98.5 General and administrative
expenses 32.7 31.6 Depreciation and amortization 28.3 24.6
Total operating costs and expenses 1,158.5 1,798.0
Operating (loss) income (7.9 ) 67.7 Interest expense 10.1
9.6 Interest income (0.4 ) (0.4 ) Other income, net (0.9 ) (0.1 )
Total non-operating expenses, net 8.8 9.1 (Loss)
income from continuing operations before income taxes (16.7 ) 58.6
Income tax (benefit) expense (6.0 ) 19.3 Net (loss) income
(10.7 ) 39.3 Net income attributed to non-controlling interest 5.4
5.6 Net (loss) income attributable to Delek $ (16.1 )
$ 33.7 Basic (loss) earnings per share $ (0.28 ) $ 0.57
Diluted (loss) earnings per share $ (0.28 ) $ 0.56
Weighted average common shares outstanding: Basic 57,289,925
59,248,855 Diluted 57,289,925 59,878,013
Dividends declared per common share outstanding $ 0.15 $
0.25
Delek US Holdings, Inc.
Consolidated Statements of Cash Flows (In millions)
Three Months EndedMarch
31,
2015 2014 Cash Flow Data (Unaudited)
Net cash (used in) provided by operating activities $ (39.2 ) $
63.7 Net cash used in investing activities (98.9 ) (125.4 ) Net
cash provided by financing activities 70.4 54.6 Net
decrease in cash and cash equivalents $ (67.7 ) $ (7.1 )
Delek US Holdings, Inc. Segment Data (Unaudited) (In
millions)
Three Months Ended March 31,
2015 Refining Retail
Logistics
Corporate,Other
andEliminations
Consolidated Net sales (excluding intercompany
fees and sales) $ 700.7 $ 338.0 $ 111.2 $ 0.7 $ 1,150.6
Intercompany fees and sales 126.3 — 32.3 (158.6 ) — Operating costs
and expenses: Cost of goods sold 756.9 293.2 108.4 (152.4 ) 1,006.1
Operating expenses 48.2 32.5 10.8 (0.1 ) 91.4
Segment contribution margin $ 21.9 $ 12.3 $
24.3 $ (5.4 ) 53.1 General and administrative expenses 32.7
Depreciation and amortization 28.3 Operating income $ (7.9 )
Total assets $ 1,935.2 $ 450.2 $ 332.6 $ 178.2
$ 2,896.2 Capital spending (excluding business
combinations) $ 85.0 $ 1.3 $ 3.8 $ 0.6
$ 90.7
Three Months Ended March 31,
2014 Refining Retail
Logistics
Corporate,Other
andEliminations
Consolidated Net sales (excluding intercompany
fees and sales) $ 1,255.6 $ 431.6 $ 178.2 $ 0.3 $ 1,865.7
Intercompany fees and sales 107.2 — 25.3 (132.5 ) — Operating costs
and expenses: Cost of goods sold 1,204.5 393.5 172.2 (126.9 )
1,643.3 Operating expenses 57.8 32.2 9.5 (1.0
) 98.5 Segment contribution margin $ 100.5 $ 5.9 $
21.8 $ (4.3 ) 123.9 General and administrative expenses 31.6
Depreciation and amortization 24.6 Operating income $ 67.7 Total
assets $ 1,958.1 $ 449.7 $ 320.7 $ 207.5
$ 2,936.0 Capital spending (excluding business combinations)
$ 101.9 $ 6.6 $ 2.3 $ 3.5 $ 114.3
Refining
Segment
Three MonthsEnded March
31,
2015 2014
Tyler
Refinery
(Unaudited) Days operated in period 90 90 Total sales volume
(average barrels per day)(1) 23,200 66,033 Products manufactured
(average barrels per day): Gasoline 11,514 37,030 Diesel/Jet 7,359
25,107 Petrochemicals, LPG, NGLs 410 1,947 Other 346 1,770
Total production 19,629 65,854 Throughput (average barrels
per day): Crude oil 18,574 58,276 Other feedstocks 1,470
8,470 Total throughput 20,044 66,746 Per barrel of sales:
Tyler refining margin $ 8.32 $ 17.46 Direct operating expenses $
9.76 $ 4.65
Three Months EndedMarch
31,
2015 2014
El Dorado
Refinery
(Unaudited) Days in period 90 90 Total sales volume (average
barrels per day)(2) 79,140 58,875 Products manufactured (average
barrels per day): Gasoline 40,006 22,572 Diesel 28,440 16,698
Petrochemicals, LPG, NGLs 665 602 Asphalt 8,082 3,029 Other 1,757
529 Total production 78,950 43,430 Throughput
(average barrels per day): Crude oil 76,695 37,459 Other feedstocks
3,380 7,382 Total throughput 80,075 44,841 Per barrel
of sales: El Dorado refining margin $ 7.81 $ 9.59 Direct operating
expenses $ 3.72 $ 5.49
Pricing
statistics (average for the period presented):
WTI — Cushing crude oil (per barrel) $ 48.80 $ 98.60 WTI — Midland
crude oil (per barrel) $ 47.18 $ 92.65 US Gulf Coast 5-3-2 crack
spread (per barrel) $ 14.99 $ 15.01 US Gulf Coast Unleaded Gasoline
(per gallon) $ 1.50 $ 2.62 Ultra low sulfur diesel (per gallon) $
1.69 $ 2.93 Natural gas (per MMBTU) $ 2.87 $ 5.18
Logistics
Segment
Three MonthsEnded March
31,
2015 2014 (Unaudited)
Pipelines
& Transportation: (average bpd) Lion Pipeline System: Crude
pipelines (non-gathered) 56,687 26,644 Refined products pipelines
to Enterprise Systems 55,929 31,773 SALA Gathering System 21,538
23,113 East Texas Crude Logistics System 19,054 11,031
Wholesale Marketing & Terminalling: East Texas - Tyler
Refinery sales volumes (average bpd)(3) 26,956 62,432 West Texas
marketing throughputs (average bpd)(4) 16,645 15,999 West Texas
marketing margin per barrel $ 1.40 $ 3.57 Terminalling throughputs
(average bpd)(5) 66,828 86,600
Retail
Segment
Three Months EndedMarch
31,
2015 2014 (Unaudited) Number of stores
(end of period) 360 361 Average number of stores 362 362
Retail fuel sales (thousands of gallons) 108,657 97,807 Retail fuel
margin ($ per gallon) $ 0.163 $ 0.124 Merchandise sales (in
thousands) $ 94,547 $ 89,399 Merchandise margin % 28.1 % 28.4
%
Change in same-store fuel gallons sold 6.0 % (1.7
)%
Change in same-store merchandise sales 3.5 % 5.3 %
(1) Sales volume includes 478 bpd and 736 bpd sold to the logistics
segment during the three months ended March 31, 2015 and March 31,
2014, respectively. Sales volume also includes sales of 1,340 bpd
and 7,026 bpd of intermediate and finished products to the El
Dorado refinery during the three months ended March 31, 2015 and
March 31, 2014, respectively. Sales volume excludes 6,091 bpd of
wholesale activity during the three months ended March 31, 2015.
There was no wholesale activity during the three months ended March
31, 2014. (2) Sales volume includes 4,472 bpd and 3,896 bpd
of produced finished product sold to the retail segment during the
three months ended March 31, 2015 and March 31, 2014, respectively.
Sales volume also includes 139 and 2,198 bpd of produced finished
product sold to the Tyler refinery during the three months ended
March 31, 2015 and March 31, 2014. Sales volume excludes 23,494 bpd
and 11,521 bpd of wholesale activity during the three months ended
March 31, 2015 and March 31, 2014, respectively. (3)
Excludes jet fuel and petroleum coke (4) Excludes bulk
ethanol and biodiesel (5) Consists of terminalling
throughputs at our Tyler, Big Sandy and Mount Pleasant, Texas North
Little Rock and El Dorado, Arkansas, and Memphis and Nashville,
Tennessee terminals. Throughputs at the El Dorado, Arkansas
terminal are for the period from February 10, 2014 through March
31, 2015. Prior to February 10, 2014, the logistics segment did not
record revenue for throughput at the El Dorado, Arkansas terminal.
Throughputs for the Mount Pleasant Terminal are following its
acquisition on October 1, 2014. Barrels per day are calculated for
only the days we operated each terminal.
Delek US Holdings, Inc.Keith Johnson, 615-435-1366Vice President
of Investor RelationsorAlpha IR GroupChris Hodges,
312-445-2870Founder & CEO
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