Delek US (DK) 6 Aug 24 2024 Q2 Earnings call transcript
1min read In the latest earnings call, Delek US Holdings, a leading integrated energy company, reported a strong second quarter, with adjusted EBITDA reaching $108 million, despite a challenging market environment. The company's President and CEO, Avigal Soreq, highlighted the company's strategic priorities, focusing on safe and reliable operations, unlocking the value of its parts, and being shareholder-friendly.
Operations Excellence and Strategic Priorities
Delek US is making significant progress in its operational excellence initiatives, with record high throughput of 316,000 barrels per day and a favorable cost structure of $5.02 per barrel. The company has also achieved its highest throughput ever in piping, which is on track to meet previously communicated throughput and OpEx guidance.
Unlocking the Value of Parts
Delek US has made strategic moves to unlock the value of its parts, including the sale of its retail business to FEMSA for around $385 million. This transaction is expected to improve the company's balance sheet and return cash to stakeholders. Additionally, Delek and Delek Logistics (DKL) have executed an agreement to drop DK's interest in Wink to Webster into DKL. This transaction is a win-win for both companies, with DK acquiring high-quality assets from DKL and DKL becoming a largely independent third-party Midstream service provider.
Cost Reduction Efforts
Delek US has made considerable progress in its cost reduction efforts, surpassing its initial target of reducing costs by around $100 million. The company is not only focusing on cost reduction but also on making its deals structurally leaner and more profitable.
Financial Performance and Outlook
In the second quarter, Delek US reported a net loss of $37 million, with adjusted EBITDA of $108 million. The company's cash flow from operations was negative $48 million, primarily due to the inventory intermediation agreement and net loss for the period. Looking ahead, Delek US expects operating expenses to be between $205 million and $215 million in the third quarter, with G&A between $60 million and $65 million.
Future Growth and Challenges
Delek US faces challenges in its supply and marketing division, particularly in the Asphalt sector. However, the company is optimistic about the third quarter, with improved market conditions and strategic initiatives aimed at enhancing its market access and product offerings.
Conclusion
Delek US Holdings' strong operational performance and strategic initiatives highlight its commitment to maintaining a shareholder-friendly balance sheet and unlocking the value of its parts. With a focus on cost reduction and operational excellence, the company is well-positioned to navigate the challenges of the energy sector and capitalize on growth opportunities.
