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Delek Logistics Partners (DKL) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Energy· Aug 5, 2026

Source: earnings call transcript

Executive summary

Delek Logistics Partners Q2 FY26 — Record Crude Volumes and Reaffirmed EBITDA Guidance

Delek Logistics Partners delivered a record second quarter, driven by strong performance across its crude, gas, and water segments in the Permian Basin. The company reaffirmed its full-year adjusted EBITDA guidance, anticipating a step change in gas volumes as its sour gas solution comes online. Management remains focused on disciplined capital deployment and maintaining leverage and coverage targets while exploring future growth opportunities.

Highlights

5

  • Adjusted EBITDA reached a quarterly record of approximately $144 million, up from $127 million in Q2 2025.

  • Delaware crude gathering business achieved record volumes at over 157,000 barrels per day in Q2, up from 129,000 bbl/d in Q1.

  • Produced water volumes increased to over 687,000 barrels a day in Q2, up from 557,000 bbl/d in Q1.

  • Gas volumes increased to over 80 million cubic feet a day in Q2, up from 64 million cubic feet in Q1.

  • Approved 54th consecutive quarterly distribution increase, raising it to $1.135 per unit.

Concerns

3

  • Wholesale Marketing and Terminalling adjusted EBITDA declined to $13 million from $23 million a year ago due to the 2024 amended extend agreement with Delek.

  • Storage & Transportation adjusted EBITDA modestly decreased to $16 million from $17 million in the prior period due to a January 2026 related party transaction.

  • Leverage ratio increased modestly to 4.23x from Q1, reflecting capital investments.

Guidance & targets

CategoryTargetConfidence
Full-year 2026 Adjusted EBITDA
$520 million to $560 million
high materiality
High
Run rate EBITDA from capital investments
up to $75 million
medium materiality
High
Growth capital program for 2026
$180 million to $190 million
medium materiality
High
Run rate EBITDA from $185M growth CapEx
$75 million
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Gathering and Processing
Adjusted EBITDA increased primarily due to higher utilization at the Libby gas complex and stronger realized margins in the Permian Basin crude business.
Adjusted EBITDA: $104 million (Q2 2026)Adjusted EBITDA: $78 million (Q2 2025)
———$104 million
Wholesale Marketing and Terminalling
Adjusted EBITDA declined largely attributable to the effects of the 2024 amended extend agreement with Delek.
Adjusted EBITDA: $13 million (Q2 2026)Adjusted EBITDA: $23 million (Q2 2025)
———$13 million
Storage & Transportation
Modest decrease primarily reflects the January 2026 related party transaction.
Adjusted EBITDA: $16 million (Q2 2026)Adjusted EBITDA: $17 million (Q2 2025)
———$16 million
Investments in Pipeline Joint Venture
Contribution increased, led by continued strong results from the Wingo Webster joint venture.
Adjusted EBITDA: $21 million (Q2 2026)Adjusted EBITDA: $17 million (Q2 2025)
———$21 million

Deals & partnerships

H2O Acquisition of water assets

Successfully integrated in late 2024.

Gravity Acquisition of water assets

Successfully integrated in early 2025.

Delek Amended extend agreement

Agreement from 2024, impacting Q2 2026 results.

Wingo Webster Pipeline joint venture

Continued strong results from this joint venture.

Capital programs

Sour Gas Gathering Infrastructure Build-out underway
Period spend: $51 million

Benefit:Increased sour gas processing and gathering capabilities

Growth capital spending primarily directed towards the drilling of the first AGI well and continued build-out of sour gas gathering infrastructure, including compressor stations. Expected to unlock future growth for producers in the region.

Risks & headwinds

Impact of 2024 amended extend agreement with Delek Q2 FY26

Wholesale Marketing and Terminalling adjusted EBITDA declined to $13 million from $23 million YoY

Mitigation:Not explicitly stated, but the agreement is already in effect.

Impact of January 2026 related party transaction Q2 FY26

Storage & Transportation adjusted EBITDA decreased modestly to $16 million from $17 million YoY

Mitigation:Not explicitly stated, but the transaction is already in effect.

What to watch in Q3 FY26

Full-year Adjusted EBITDA Guidance

Q3 FY26 earnings call
Current $520 million to $560 million
Target Potential upgrade

Why it matters

Management indicated they would follow last year's sequence of potentially upgrading guidance on the Q3 call, which could signal stronger performance than currently projected.

We're going to follow the same sequence that we had in the last year that Q4 -- on Q4 call, we are submitting the guidance. And if we see a way to upgrade the guidance, we're going to do -- we did it last year in Q3. So stay tight and more news to come.

Find out whether DKL delivers this. Inve re-checks your case every morning.

Q&A highlights

What drove the strength in the gathering and processing segment, particularly regarding commodity environment ties and durability?

Management highlighted strong performance across all segments, with record crude volumes in Delaware and increasing gas and water volumes. They emphasized their strategically positioned infrastructure and high activity in the Northern Delaware, attributing strength to operational execution and customer activity rather than solely commodity prices.

“Like across the board, we're performing well in the second quarter and continue to do so. We have great infrastructure which, as you know, is strategically positioned in the right location, and we continue to see a lot of activity amongst our customers in the Northern Delaware with close proximity to our assets.”

asked by Douglas Irwin · answered by Mark Hobbs

2 min read 5 chapters

Detailed narrative

Sour Gas Solution Progress

Delek Logistics is nearing completion of its integrated sour gas processing, treating, and in-handling solution at the Libby Gas Complex. This comprehensive system, including increased capacity at Libby and the first AGI well, is designed to support long-term oil and gas production growth in the Delaware Basin. Management expects a 'step change' in gas utilization later this year as the sour gas solution comes online, positioning the company for future growth in the region.

Record Crude Gathering Volumes

The Delaware crude gathering business achieved record volumes in the second quarter, exceeding 157,000 barrels per day, a significant increase from 129,000 bbl/d in Q1. Both the Delaware and Midland crude gathering businesses are performing strongly. This performance is attributed to the company's strategically positioned infrastructure and heightened activity by producers in the Northern Delaware, Lea and Eddy Counties.

Water Business Performance

The water business continued its strong operating performance, driven by the successful integration of the H2O and Gravity acquisitions in late 2024 and early 2025, respectively. Produced water handling and disposal remains a critical and increasing need for customers. Delek Logistics is exploring growth opportunities in this space, leveraging its scale and capabilities across the Delaware and Midland basins.

Financial Discipline and Leverage

The company reported a leverage ratio of 4.23x at quarter-end, a modest increase from Q1, reflecting capital investments. Management is comfortable with its long-term leverage target of 3.5x and expects to manage around 4x during growth periods. Liquidity remains robust at approximately $1.1 billion, providing flexibility for continued growth. The company also proactively refinanced its high-yield capital structure, issuing $800 million in new senior notes due 2034, reducing annual interest costs and extending its maturity profile.

Strategic Positioning and Growth Potential

Delek Logistics is uniquely positioned as a '3-stream' service platform (crude, gas, water) in the Permian Basin, particularly in Lea County. The company's strong and growing third-party business is expected to contribute approximately 80% of run-rate EBITDA in 2026 on a pro forma basis, increasing economic separation from its sponsor, DK. Higher crude prices and strengthening Waha prices are anticipated to drive increased demand for its services, supporting future growth.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.