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Item 7. Management’s Discussion and Analysis

2022-02-25 compared with 2021-03-01 · 769 added, 574 removed, 614 unchanged (69% of the section changed)

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These forward-looking statements reflect our current estimates, expectations and projections about our future results, performance, prospects and opportunities.

Forward-looking statements include, among other things, statements regarding the effect, impact, potential duration or other implications of, or expectations expressed with respect to, the outbreak of COVID-19 and the actions of members of the OPEC and Russia with respect to oil production and pricing, and statements regarding our efforts and plans in response to such events, the information concerning our planned capital expenditures by segment for 2021, possible future results of operations, business and growth strategies, financing plans, expectations that regulatory developments or other matters will or will not have a material adverse effect on our business or financial condition, our competitive position and the effects of competition, the projected growth of the industry in which we operate, and the benefits and synergies to be obtained from our completed and any future acquisitions, statements of management’s goals and objectives, and other similar expressions concerning matters that are not historical facts.

Forward-looking statements include, among other things, statements regarding the effect, impact, potential duration or other implications of, or expectations expressed with respect to, the outbreak of COVID-19 and the related Pandemic with respect to oil production and pricing, and statements regarding our efforts and plans in response to such events, the information concerning our planned capital expenditures, possible future results of operations, business and growth strategies, financing plans, expectations that regulatory developments or other matters will or will not have a material adverse effect on our business or financial condition, our competitive position and the effects of competition, the projected growth of the industry in which we operate, and the benefits and synergies to be obtained from our completed and any future acquisitions, statements of management’s goals and objectives, and other similar expressions concerning matters that are not historical facts.

Words such as "may," "will," "should," "could," "would," "predicts," "potential," "continue," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "appears," "projects" and similar expressions, as well as statements in future tense, identify forward-looking statements.

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• actions of our competitors and customers;

• changes in, or the failure to comply with, the extensive government regulations applicable to our industry segments, including current and future restrictions on commercial and economic activities in response to the COVID-19 Pandemic;

• our ability to execute our strategy of growth through acquisitions and capital projects and changes in the expected value of and benefits derived therefrom, including any inability to successfully integrate acquisitions, realize expected synergies or achieve operational efficiency and effectiveness;

• our ability to execute our strategy of growth through acquisitions and capital projects and changes in the expected value of and benefits derived therefrom, including any ability to successfully integrate acquisitions, realize expected synergies or achieve operational efficiency and effectiveness;

• diminishment in value of long-lived assets may result in an impairment in the carrying value of the assets on our balance sheet and a resultant loss recognized in the statement of operations;

• the unprecedented market environment and economic effects of the COVID-19 Pandemic, including uncertainty regarding the timing, pace and extent of economic recovery in the United States due to the COVID-19 Pandemic;

• general economic and business conditions affecting the southern, southwestern and western United States, particularly levels of spending related to travel and tourism and the ongoing and future impacts of the COVID-19 Pandemic;

• general economic and business conditions affecting the southern, southwestern and western U.S., particularly levels of spending related to travel and tourism and the ongoing and future impacts of the COVID-19 Pandemic;

• volatility under our derivative instruments;

2 unchanged sentences

• risks and uncertainties with respect to the quantities and costs of refined petroleum products supplied to our pipelines and/or held in our terminals;

• operating hazards, natural disasters, casualty losses and other matters beyond our control;

• operating hazards, natural disasters, weather related disruptions, casualty losses and other matters beyond our control;

• increases in our debt levels or costs;

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• seasonality;

• We operate in a highly regulated industry and increased costs of compliance with, or liability for violation of, existing or future laws, regulations and other requirements could significantly increase our costs of doing business, thereby adversely affecting our profitability;

• Legislative and regulatory measures to address climate change and greenhouse gases emissions could increase our operating costs or decrease demand for our refined products;

• acts of terrorism (including cyber-terrorism) aimed at either our facilities or other facilities that could impair our ability to produce or transport refined products or receive feedstocks;

• future decisions by OPEC+ members regarding production and pricing and disputes between OPEC+ members regarding such;

• future decisions by OPEC+ members regarding production and pricing and disputes between OPEC+ members regarding the same;

• disruption, failure, or cybersecurity breaches affecting or targeting our IT systems and controls, our infrastructure, or the infrastructure of our cloud-based IT service providers;

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In light of these risks, uncertainties and assumptions, our actual results of operations and execution of our business strategy could differ materially from those expressed in, or implied by, the forward-looking statements, and you should not place undue reliance upon them.

In addition, past financial and/or operating performance is not necessarily a reliable indicator of future performance, and you should not use our

Management's Discussion and Analysis

historical performance to anticipate future results or period trends.

In addition, past financial and/or operating performance is not necessarily a reliable indicator of future performance, and you should not use our historical performance to anticipate future results or period trends.

We can give no assurances that any of the events anticipated by any forward-looking statements will occur or, if any of them do, what impact they will have on our results of operations and financial condition.

1 unchanged sentence

We undertake no obligation to revise or update any forward-looking statements as a result of new information, future events or otherwise.

Executive Summary and Strategic Overview

Business Overview

Management's Discussion and Analysis

Executive Summary:

Management's View of Our Business and Strategic Overview

Management's View of Our Business

We are an integrated downstream energy business focused on petroleum refining, the transportation, storage and wholesale distribution of crude oil, intermediate and refined products and convenience store retailing.

Business and Economic Environment

Business and Economic Environment Overview

As we reflect on the macro environment in 2021, the economy continued to recover from the impact of the COVID-19 Pandemic, both globally and domestically.

However, despite improved consumer demand resulting from stabilization in cases of COVID-19 and decreasing mortality rates during much of the period and across much of the country, and corresponding to the availability of vaccines, improvements in domestic refining margins have been slow to materialize.

This was largely attributable to limited demand from international markets where consumer demand improvement has lagged behind the U.S.

resulting in the closing of much of the U.S.

export arbitrage.

In February 2021, the operations of many U.S.

refineries, including ours, were temporarily disrupted due to the negative effects arising out of Winter Storm Uri.

This contributed to a significant depletion of transportation fuel inventories throughout much of the country.

Additionally, in May 2021, there was a cybersecurity incident with the Colonial Pipeline which resulted in pipeline shutdowns that interrupted supply to much of the eastern U.S.

for six days, and which caused disruption for Delek primarily at our Krotz Springs refinery.

As a result of both of these events, the U.S.

market attracted higher levels of supply from international markets, which diluted price increases and associated refining margins for much of the year.

That said, the fourth quarter of 2021 finished strong for the downstream oil and gas sector, with higher oil prices, widening crack spreads and improving demand for refined product.

While there have been improving crack spreads during 2021, driven largely by the improvement in domestic consumer demand and the modest economic improvement and outlook associated with stabilizing Pandemic uncertainties, the ability of U.S.

refiners to capture those improvements were impacted by the following macro factors:

• Rising RIN Prices :

For the first half of the year, the RINs market was impacted by 2020's judicial rulings imposing limitations on smaller refineries' abilities to qualify for the EPA's SREs under the RFS, which was exacerbated by worsening environmental regulatory sentiment coming out of Washington, D.C.

Following the June 2021 U.S.

Supreme Court reversal of the lower court's ruling, however, there was a notable improvement in market optimism that existing SRE applications from 2019, as well as new applications for 2020, may be granted.

As a result, we saw some improvement in RIN prices during the third quarter 2021, in anticipation of possible EPA relief.

This expectation was dampened by the release of a proposed rule by the EPA in December 2021 which recommended revised volumetric rates for 2020 and, for the first time, introduced proposed rates for 2021 and 2022, with no final ruling on the likelihood of small refinery exemptions.

Also of note, movements in crack spreads behave independently from movements in RFS regulatory requirements and RINs prices and thus can disproportionately impact small refiners.

For example, in periods of low crack spreads and high RIN costs (which are a function of both regulatory volumetric requirements and market RINs prices), small refineries may experience negative operating results where other, larger refineries with better economies of scale and other competitive advantages may fare better.

Even when increases in crack spreads coincide with the independent increases in RIN prices, small refiners may continue to see a larger burden of such costs on crack spread capture in contribution margin than many larger refineries experience.

• Rising Energy Costs:

Crack spread capture was further impacted by rising energy (natural gas and electricity) costs.

Throughout most of 2021, domestic natural gas demand outpaced growth in supply and contributed to sustained increases in natural gas prices.

Additional factors, including increased exports triggered by unusually high international gas prices, as well as critical pipeline outages and the prices and availability of substitute fuels for power generation, put additional upward pressure on domestic natural gas prices.

The spike in natural gas prices in the first quarter of 2021 relating to Winter Storm Uri had a significant impact on our refining contribution margin, and despite mitigating commercial efforts, the high natural gas prices continued to impact our crack spread capture for the remainder 2021.

• Unfavorable Location Differentials:

Most midstream and downstream oil and gas entities have competitive advantages or disadvantages that relate to their geographic positioning.

We have a significant presence in the Permian Basin, with one of our best performing refineries and much of our gathering assets located there.

For these reasons, our refining operations are heavily dependent on Midland WTI crude, and our refining margins are likewise impacted by the Midland-Cushing differential.

While an unfavorable Midland differential compared to Cushing on WTI crude oil will have a negative impact on our results, a favorable differential (or discount compared to Cushing barrels) will significantly increase our refining margin.

Such conditions are highly dependent on domestic and global demand and supply, which can be impacted by geopolitical conditions as well as unexpected outages or disruptions and can shift quickly.

See further discussion on macroeconomic factors and market trends, including the impact on 2021 and the outlook for 2022, in the ‘Market Trends’ section below.

Overall, our Refining results are much improved in 2021 compared to 2020, largely attributable to improvements in oil prices and crack spreads combined with cost control efforts we implemented, while Pandemic-related pressure on demand combined with high RIN costs and energy costs continued to strain our crack spread capture in contribution margin.

On the positive side, while increasing RINs prices weighed negatively on Refining margins;

year-over-year we experienced improvement in crack spread net of incremental RINs cost, driven primarily by steadily improving crack spreads during most of 2021 combined with a fourth quarter 2021 stabilization of RIN costs to first quarter 2021 quarter levels.

Furthermore, while RINs costs will impact our capture rate in a more pronounced manner than many larger refineries, if RINs costs stabilize, we are poised to take advantage of possible widening crack spreads and increased demand in 2022.

If we receive SREs, the benefit will be even more significant, and will allow us to maintain a more consistent capture rate, which will align more closely to some of the larger refiners.

Logistics results continued to be strong in 2021 and benefited from MVCs during periods that may otherwise have been constrained, such as

Management's Discussion and Analysis

the first quarter when much of our market was impacted by the winter storm.

Logistics also continues to benefit from strong performance amongst our pipeline joint venture investments.

Retail stores continue to perform well and we are beginning to realize the benefit of store optimization activities we conducted during the past two years, and we expect to begin seeing growth from new stores and successful re-branding.

Looking forward to 2022, besides the expected favorable benefit of market improvements described above, we have many strategic initiatives that align with our new long-term sustainability view, as discussed in the ‘Strategic Overview’ section below.

Additionally, in 2022, we expect to begin realizing returns from our indirect investment in the WWP pipeline, as the majority of the segments are now fully online and supported by existing throughput MVCs, and we also look forward to evaluating the potential for exercising our call option for a 33 1/3% limited member interest in a clean energy facility in California.

Refining Overview

The refining segment (or "Refining") processes crude oil and other feedstocks for the manufacture of transportation motor fuels, including various grades of gasoline, diesel fuel, aviation fuel, asphalt and other petroleum-based products that are distributed through owned and third-party product terminals.

The refining segment has a combined nameplate capacity of 302,000 bpd as of December 31, 2021.

A high-level summary of the refinery activities is presented below:

Tyler Refinery El Dorado Refinery Big Spring Refinery Krotz Springs Refinery

Total Nameplate Capacity (bpd) 75,000 80,000 (1)

73,000 74,000

Primary Products Gasoline, jet fuel, ultra-low-sulfur diesel, liquefied petroleum gases, propylene, petroleum coke and sulfur Gasoline, ultra-low-sulfur diesel, liquefied petroleum gases, propylene, asphalt and sulfur Gasoline, jet fuel, ultra-low-sulfur diesel, liquefied petroleum gases, propylene, aromatics and sulfur Gasoline, jet fuel, high-sulfur diesel, light cycle oil, liquefied petroleum gases, propylene and ammonium thiosulfate

Relevant Crack Spread Benchmark Gulf Coast 5-3-2

Gulf Coast 5-3-2 (2)

Gulf Coast 3-2-1 (3)

Gulf Coast 2-1-1 (4)

Marketing and Distribution The refining segment's petroleum-based products are marketed primarily in the south central and southwestern regions of the United States, and the refining segment also ships and sells gasoline into wholesale markets in the southern and eastern United States.

Motor fuels are sold under the Alon or Delek brand through various terminals to supply Alon or Delek branded retail sites.

In addition, we sell motor fuels through our wholesale distribution network on an unbranded basis.

(1) While the El Dorado refinery has a total nameplate capacity of 80,000 bpd, in order to qualify for the small refinery exemption under the EPA’s Renewable Fuel Standards regulations total output cannot exceed 75,000 bpd.

We currently expect that the El Dorado refinery’s output will remain under the 75,000 bpd threshold in the current economic environment .

(2) While there is variability in the crude slate and the product output at the El Dorado refinery, we compare our per barrel refined product margin to the U.S.

Gulf Coast 5-3-2 crack spread because we believe it to be the most closely aligned benchmark.

(3) Our Big Spring refinery is capable of processing substantial volumes of sour crude oil, which has historically cost less than intermediate, and/or substantial volumes of sweet crude oil, and therefore the WTI Cushing/WTS price differential, taking into account differences in production yield, is an important measure for helping us make strategic, market-respondent production decisions.

(4) The Krotz Springs refinery has the capability to process substantial volumes of light sweet crude oil to produce a high percentage of refined light products.

Our refining segment also owns and operates three biodiesel facilities involved in the production of biodiesel fuels and related activities, located in Crossett, Arkansas, Cleburne, Texas, and New Albany, Mississippi.

Logistics Overview

Our logistics segment (or "Logistics") gathers, transports and stores crude oil and markets, distributes, transports and stores refined products in select regions of the southeastern United States and West Texas for our refining segment and third parties.

It is comprised of the consolidated balance sheet and results of operations of Delek Logistics (NYSE:

DKL), where we owned a 79.8% interest at December 31, 2021.

Delek Logistics was formed by Delek in 2012 to own, operate, acquire and construct crude oil and refined products logistics and marketing assets.

A substantial majority of Delek Logistics' assets are currently integral to our refining and marketing operations.

The logistics segment's pipelines and transportation business owns or leases capacity on approximately 400 miles of crude oil transportation pipelines, approximately 450 miles of refined product pipelines, and an approximately 900-mile crude oil gathering system and associated crude oil storage tanks with an aggregate of approximately 10.2 million barrels of active shell capacity.

It also owns and operates ten light product terminals and markets light products using third-party terminals.

Logistics has strategic investments in pipeline joint ventures that provide access to pipeline capacity as well as the potential for earnings from joint venture operations.

The logistics segment owns or leases approximately 264 tractors and 353 trailers used to haul primarily crude oil and other products for related and third parties.

Retail Overview

Our retail segment (or "Retail") at December 31, 2021 includes the operations of 248 owned and leased convenience store sites located primarily in West Texas and New Mexico.

Our convenience stores typically offer various grades of gasoline and diesel under the DK or Alon brand name and food products, food service, tobacco products, non-alcoholic and alcoholic beverages, general merchandise as well as money orders to the public, primarily under the 7-Eleven and DK or Alon brand names pursuant to a license agreement with 7-Eleven, Inc.

Management's Discussion and Analysis

November 2018, we terminated the license agreement with 7-Eleven, Inc.

and the terms of such termination and subsequent amendments require the removal of all 7-Eleven branding on a store-by-store basis by December 31, 2023.

Merchandise at our convenience store sites will continue to be sold under the 7-Eleven brand name until 7-Eleven branding is removed pursuant to the termination.

As of December 31, 2021, we have removed the 7-Eleven brand name at 55 of our store locations.

Substantially all of the motor fuel sold through our retail segment is supplied by our Big Spring refinery, which is transferred to the retail segment at prices substantially determined by reference to published commodity pricing information.

In connection with our Retail strategic initiatives, we closed or sold 51 under-performing or non-strategic store locations since the fourth quarter of 2018.

Corporate and Other Overview

Our corporate activities, results of certain immaterial operating segments, discontinued operations, our asphalt terminal operations, our wholesale crude operations, and intercompany eliminations are reported in 'corporate, other and eliminations' in our segment disclosures.

Additionally, our corporate activities include certain of our commodity and other hedging activities.

Strategic Overview

The Road So Far:

In recent years, the Company's overall strategy has been to take a disciplined approach that looks to balance returning cash to our shareholders and prudently investing in the business to support safe and reliable operations, while exploring opportunities for growth.

Our goal has been to balance the different aspects of this program based on evaluations of each opportunity and how it matches our strategic goals for the Company, while factoring in market conditions and expected cash flows.

To that end, in 2019, Delek’s leadership team built a Five-Year Strategic Framework to facilitate development of the Company’s strategies and initiatives.

This framework lays out the Company’s overarching objectives for a five-year period and provides the foundation for our Core Strategic Focus Areas, our Strategic Initiatives, and ultimately our Annual Strategic Priorities, as follows:

Previous Core Strategic Focus Areas

During much of the first half of 2021, our principal focus was on managing the operational and financial risks related to the COVID-19 Pandemic while also maintaining our attention on these Core Strategic Areas of Focus, which in turn continued to guide our objectives and initiatives:

Safety and wellness.

Reliability and integrity.

Systems and processes.

Risk-based decision making.

Positioning for growth.

We have consistently reevaluated our initiatives and immediate strategic priorities in light of the significant economic and operational impact of the COVID-19 Pandemic.

We also have continued to actively review our targeted Pandemic strategies and related operational objectives and consider the need for changes in order to address the evolving industry and market, while ensuring that we continue to appropriately consider

Management's Discussion and Analysis

and capitalize on our operational strengths and strategic positioning in the near term.

As the impact of the Pandemic began to stabilize in the latter half of 2021, we began to shift our attention to the post-Pandemic horizon in earnest, now that there's a clearer picture of what that may look like.

Capitalizing on our unwavering commitment to strategic thinking in a rapidly changing environment, we have embraced a seismic shift in perspective around our long-term strategic direction and outlook, which now is guiding changes to our strategic framework and objectives.

The critical principle underlying this evolving perspective is sustainability , and is discussed in more detail below.

Evolving Focus:

A Sustainability Strategy

It is vitally important that our strategic process, especially in view of the evolutionary direction of our macroeconomic and geopolitical environment, involves a continuous evaluation of our business model in terms of long-term economic and operational sustainability.

We are operating in a mature industry (the production, logistics and marketing of hydrocarbons and hydrocarbon-based refined products), with increasingly difficult operational and regulatory challenges and, likewise, pressure on operating costs/gross margins as well as the availability and cost of capital.

More consolidation in our industry is expected as the regulatory environment continues to move towards reducing carbon emissions and transitions to renewable energy in the long-term.

Additionally, evolving consumer and capital markets sentiment, regulations, talent availability, supply chain constraints and customer demand are expected to cause disruption and increasing pressure in the intermediate term.

In order to compete under historic environmental and regulatory changes, companies in our industry will need to be adaptive, forward-thinking and strategic in their approach to long-term sustainability.

What this picture looks like, as we come to understand it, is what we refer to as our "Sustainability View."

A New Framework:

Long-Term Sustainability

The emphasis on environmental responsibility and long-term economic and environmental sustainability is accelerating, with increased demand for transparency evolving out of the ESG movement.

As we evaluate our current ESG positioning in the market, we also must integrate a broader sustainability view to all of our activities, both operational and strategic.

For these reasons, we have developed a Long-Term Sustainability Framework , which will help us to formulate our strategic objectives and initiatives.

Long-Term Sustainability Framework:

Overarching Objectives

Certain fundamental principles are foundational to our Long-Term Sustainability Framework, and direct us as we develop our guiding objectives.

With that in mind, we have initially identified the following overarching objectives :

Redirect Corporate Culture towards Innovation, Excellence, and Operating Discipline.

Focus on Operational Optimization and Improved Margin Capture.

Implement Digital Transformation Strategy.

Identify ESG-Conscious Investments with Clear Value Propositions and Sustainable Returns.

Evaluate Strategic Priorities and Redefine Long-term Sustainable Business Model.

Long-Term Sustainability Framework:

Key Initiatives

Additionally, integral to our Long-Term Sustainability Framework and the achievement of the initial overarching objectives are the following key initiatives :

■ Transform our corporate and operating culture into "One Delek" through unification of purpose, vision and strategy with an emphasis on cultural sustainability.

■ Transform our refining operations into the "Refinery of the Future" founded on digitization and automation, innovation and synergistic discipline.

■ Develop a "New Energy" mentality focused on understanding the future of energy on a global scale and how Delek can be a leader and facilitator of positive, sustainable change in the energy industry.

Long-Term Sustainability Strategy:

The Overarching Objectives and Key Initiatives are integrated and interdependent, representative of the synergistic approach we are employing, and together comprise our Long-term Sustainability Strategy.

To illustrate these overlapping components and their interdependence, see the illustrative snapshot of our Long-Term Sustainability Strategy below:

Management's Discussion and Analysis

Our Key Initiatives , which are integrated with our Overarching Objectives, also provide clear, actionable paths toward long-term sustainability, as shown below:

Long-Term Sustainability Strategy:

Developing Actionable Key Initiatives, Focused Objectives and Specific Priorities

Developing a strategy focused on long-term economic and operational sustainability in a challenging and rapidly changing environment is a larger and more ambitious objective than a strategy that is simply centered on growth and return on shareholder investment in the near-term.

For these reasons, it is important to understand the scalability of our strategy and what are the appropriate stages and priorities, recognizing that the inherent complexity of achieving long-term sustainability is a long game requiring both a measured, disciplined approach as well agility and flexibility to changing conditions.

As a result, we are implementing our new strategic framework in intentional stages.

Stage 1 - Second Half of 2021

While this Framework is in its early phase, we have already been hard at work executing on our Stage 1 Priorities in the context of our Overarching Objectives and Key Initiatives.

This progress is, in part, due to some overlap with our previous strategic objectives (thus also validating that our previous objectives were, in many ways, the right areas of focus), but also the result of the energy and commitment that our sustainability framework is generating in our organization.

We selected these Stage 1 Priorities because they are all foundational to a continued progression toward achieving our overarching strategic objectives under the Long-Term Sustainability Framework.

As we continue to develop future Stage Priorities, they will be designed to further advance the realization of our Key Initiatives.

Furthermore, we fully expect

Management's Discussion and Analysis

overlap with previous stages and that our priorities will evolve over time to align with changing circumstances and to reflect obstacles we encounter as well as our continued progress.

This is an evolution, not a "one-and-done" exercise.

Stage 2 - 2022

We developed our Stage 2 activities more intentionally, in the context of the new Framework.

First, we identified our Stage 2 Key Initiatives , which are a targeted subset of the Key Initiatives discussed above.

We then developed Stage 2 Focused Objectives which reflect the strategic objectives we want to achieve specifically in 2022.

Finally, we developed Stage 2 Specific Priorities , which represent those priorities that we believe will help us accomplish our Stage 2 Focused Objectives, and will likewise advance achievement on our overall Key Initiatives.

As our approach becomes more integrated, you will see that our Focused Objectives serve cross-purposes across our Key Initiatives, and that our Specific Priorities serve cross-purposes across our Focused Objectives.

Action Plan and Timeline

The following graphic shows the overall timeline and structure of our Key Initiatives, which guide our Focused Objectives, and ultimately our Specific Priorities, for Stage 1 and Stage 2, based on our planned timeline:

Management's Discussion and Analysis

Long-Term Sustainability Strategy:

Stage 2 Activities Planned for 2022

We have preliminarily identified our Stage 2 Priorities , in the context of our Stage 2 Focused Objectives and Stage 2 Key Initiatives , as follows:

Key Initiative:

Implementing One Delek Culture Transformation Key Initiative:

Planning for Refinery of the Future Operational Transformation Key Initiative:

Preparing for the New Energy Transition

Focused Objective:

Safety & Wellness Leadership

We strive to be nationally recognized as an industry leader for our commitment to sustaining safe work environments that help every employee feel and do their best.

We want every Delek employee to come to work every day knowing they are valued and protected.

Continuing to incorporate the qualities of the "Delek Leader" and the "Employee of the Future" into our human capital programs, incentives and rewards Create an operating model with an empowered, highly effective workforce ready for any challenge by removing barriers and streamlining processes and procedures

Focused Objective:

Operating with Reliability and Integrity

By focusing on reliability and integrity, we maximize the return on our investments.

Our employees, customers and shareholders can count on us to operate every aspect of our business responsibly, reflecting that the work we do every day is recognized across our industry as reputable and essential.

Continued progress on new system implementations that will improve our ability to understand all aspects of our business as well as our ability to make real-time and forward-looking operational decisions Sustain low operating cost model through spending discipline, supply chain management, and innovation solutions

Focused Objective:

Improving Efficiency in Systems and Processes

We are committed to becoming even more efficient by focusing on our systems and processes.

We know there is always room for improvement, and those improvements can make every employee more effective and valued.

Continued progress on new system implementations that will improve our ability to understand all aspects of our business as well as our ability to make real-time and forward-looking operational decisions Develop and cross-develop internal capabilities - "taught by Delek, supported by Delek, empowered by Delek" Continuing to redefine our framework for evaluating, tracking and understanding the value creation propositions for proposed capital and strategic investments under the context of our evolving Long-Term Sustainability Objectives and our Sustainability View

Develop a Post-Pandemic Talent Retention Task Force to identify the risks around retaining talent and to develop strategies for retaining talent given the changing workforce expectations and tight market for talent Improve discipline around outage spend and optimizing downtimes Continue to develop process for identifying and evaluating the types of investment opportunities that fit our Sustainability View, including consideration of strategic investments or joint ventures in renewables, incubator investments in innovative new technologies, and other core-business investments that could improve our scalability and agility

Continued enterprise-wide cost and waste reduction initiatives as well as initiatives focused on eliminating lost revenue and value leakage

Focused Objective:

Balancing Risk and Reward

As we continue to grow, we want to cultivate a healthy appetite for risk.

That means, when we make decisions, we plan to identify those risks that come with the greatest potential for success, and pursue them with care.

Continue to develop process for identifying and evaluating the types of investment opportunities that fit our Sustainability View, including consideration of strategic investments or joint ventures in renewables, incubator investments in innovative new technologies, and other core-business investments that could improve our scalability and agility Continue to develop process for identifying and evaluating the types of investment opportunities that fit our Sustainability View, including consideration of strategic investments or joint ventures in renewables, incubator investments in innovative new technologies, and other core-business investments that could improve our scalability and agility

Continue exploring opportunities to monetize some of our investment in Delek Logistics, which will help us to better capture tangible value in the Delek valuation, while also improving liquidity in the market for DKL units without dilution of overall DKL market capitalization

Focused Objective:

Driving EBITDA Improvements

Increasing our profitability will allow us to become a more sustainable business that is equipped for steady growth.

It also means that we can achieve both our short-term and long-term goals.

Through cross-functional collaboration, identify operational improvements to reduce the cost of crude and transportation costs Sustain low operating cost model through spending discipline, supply chain management, and innovation solutions

Through cross-functional collaboration, identify operational improvements to reduce yield loss inside and outside of the fence Improve discipline around outage spend and optimizing downtimes

Management's Discussion and Analysis

2021 Strategic Activities - A Look Back

In addition to the Phase 1 Strategic Priorities that were identified in connection with the development of the Long-Term Sustainability Framework in the latter part of 2021, our 2021 strategic activities were also driven by the following strategic initiatives which were identified under our previous Five-Year Strategic Framework and which were aligned to our previous Core Strategic Focus Areas:

• Maintain and Continue to Enhance Our Safe Operations.

Our commitment to safety has been reflected in our continuous improvement in DART (days away, restricted or transferred) and TRIR (total recordable incident rate) metrics since 2016.

• Drive Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") and Cash Flow Improvement.

In 2021, the company continued to deliver cost savings and implement initiatives for margin improvements through optimization.

• Develop and Utilize Systems, Processes and Technology to Improve Operations.

We have increased our focus on upgrading our technologies and implement advanced systems and processes to achieve further, more structural cost reductions, operational improvements and asset optimization over the medium to longer term.

• Ongoing Commitment to ESG.

We are still relatively early in our ESG journey, and we are striving for progressive improvements over time in terms of underlying performance metrics and disclosure in all ESG categories.

We recently announced our first greenhouse gas emissions reductions target as we seek to align our business with the Paris Climate Accords, as well as a diversity goal for our Board of Directors composition.

• Laying the Foundation for Future Growth .

After focusing mainly on improving our cash flow break-even profile through reduced discretionary capital expenditures and operating costs in 2021, we are emerging from this downturn with an improved cost structure, a healthy balance sheet and opportunities to pursue future growth.

We are constantly evaluating the optimal investment options available in our various business units and comparing the potential returns of both organic and inorganic opportunities.

2021 Significant Strategic Developments/Areas of Focus

The following table highlights our 2021 Strategic Developments/Areas of Focus, with linkages to our new Long-Term Sustainability Strategy Overarching Objectives and Key Initiatives:

Under our new

Long-Term Sustainability Strategy

2021 Significant Developments/Areas of Focus Linkage to Overarching Objectives Linkage to Key Initiatives

Significant Developments:

Initiated a program to monetize a portion of our ownership in Delek Logistics under a Rule 10b5-1 program to sell up to 434,590 common limited partner units, which helped us to not only capture $2.1 million (pre-tax) to date of tangible value in the Delek valuation but also serves to improve the liquidity of the Delek Logistics units without diluting the overall market capitalization of Delek Logistics.

Long-term Sustainable Business Model One Delek

Negotiated an accretive buy-out of a financing commitment agreement with WWP which allowed us to recoup capital expenditures we may not have incurred had it not been for the financing commitment and recognize an incremental gain of approximately $10.2 million.

Operational Optimization and Improved Margin Capture One Delek

Successfully completed a $400.0 million senior note debt issuance at Delek Logistics (the “Delek Logistic 2028 Notes”) which the net proceeds were used to pay down borrowings under the Delek Logistics Credit Facility and likewise enhance liquidity.

Long-term Sustainable Business Model One Delek

Other Areas of Focus:

Continued expansion in our crude gathering business in the Permian Basin.

Long-term Sustainable Business Model One Delek

Executed an exclusive supply and strategic relationship agreement for the supply of certain chemicals exclusively which Delek Logistics can then use, through blending competencies utilizing proprietary intellectual property, to clarify slurry which can then be used in International Maritime Organization ("IMO")-compliant products.

ESG-Conscious Investments with Clear Value Propositions and Sustainable Returns One Delek

Executed opportunistic turnaround and maintenance activities to minimize impact of disruption from Winter Storm Uri and the El Dorado refinery fire.

Culture of Innovation, Excellence and Operating Discipline Refinery of the Future

Implemented enterprise-wide cost and waste reduction initiatives as well as initiatives focused on eliminating lost revenue and value leakage.

Operational Optimization and Improved Margin Capture Refinery of the Future

Continued our retail rebranding efforts, and resumed retail growth plans with four new-to-industry locations in the planning phase.

Long-term Sustainable Business Model One Delek

Progressed on digital system implementations that will improve our ability to understand all aspects of our business as well as our ability to make real-time and forward-looking operational decisions.

Digital Transformation One Delek

Refinery of the Future

Identified the qualities of a "Delek Leader" and the "Employee of the Future" to help incorporate those qualities into our human capital programs, incentives and rewards.

Culture of Innovation, Excellence and Operating Discipline One Delek

Began to develop a process for identifying and evaluating the types of investment opportunities that fit our Sustainability View, including consideration of strategic investments or joint ventures in renewables, incubator investments in innovative new technologies, and other core-business investments that could improve our scalability and agility.

ESG-Conscious Investments with Clear Value Propositions and Sustainable Returns One Delek

Redefined our framework for evaluating, tracking and understanding the value creation propositions for proposed capital and strategic investments under the context of our evolving Long-Term Sustainability Objectives and our Sustainability View.

Long-term Sustainable Business Model One Delek

Refinery of the Future

(1) For further discussion of these items, see Notes 5, 6 and 10, respectively, in our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Management's Discussion and Analysis

Significant Known Uncertainties Impacting Delek

Aside from the market trends and the uncertainties inherent to those market drivers many of which are referenced in the 'Executive Summary' above and which are discussed at length in the 'Market Trends' section below, we have also identified certain uncertainties that we believe to be sufficiently significant to our financial results in the near term as to warrant additional discussion.

We have included supplemental discussion of those uncertainties, and our efforts for mitigating them, below.

However, note that this discussion is to bring additional attention to areas that have been of particular interest to management but should not be considered comprehensive of all known trends and uncertainties which may be relevant.

Instead, in the context of all known trends or uncertainties that have had, or that are reasonably likely to have, a material favorable or unfavorable effect on financial results, they should be considered part of the larger discussion on market trends and uncertainties throughout our management's discussion and analysis.

COVID-19 Pandemic

The outbreak of the COVID-19 Pandemic has resulted in significant economic disruption globally, including in the U.S.

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to many parts of the world.

Additionally, the COVID-19 Pandemic has had a significant negative impact on motor vehicle use.

As a result, there has also been a decline in the demand for, and thus also the market prices of, crude oil and certain of our products, particularly our refined petroleum products and most notably gasoline and jet fuel.

In April and June 2020, agreements were reached to cut oil production between the members of OPEC+ as part of the efforts to resolve the oil production disputes that significantly affected crude oil prices beginning in the first quarter of 2020 (the "OPEC Production Disputes"), and to provide stability in the oil markets.

While OPEC+ have reached an agreement to cut oil production, the uncertainty about the duration of the COVID-19 Pandemic has caused storage constraints in the U.S.

Additionally, the COVID-19 Pandemic has had a significant negative impact on motor vehicle activity.

As a result, and particularly during 2020, we experienced a decline in the demand for, and thus also the market prices of, crude oil and certain of our products, particularly our refined petroleum products and most notably gasoline and jet fuel.

Uncertainty about the duration of the COVID-19 Pandemic has caused periodic storage constraints in the U.S.

resulting from over-supply of produced oil.

Based on these conditions and events, downward pressure on commodity prices, crack spreads and demand remains a significant risk and could continue for the foreseeable future.

During the latter part of 2020, governmental authorities in various states across the U.S., particularly those in our Permian Basin and U.S.

Gulf Coast regions, began to lift many of the restrictions created by actions taken to slow down the spread of COVID-19.

Additionally, during the fourth quarter 2020, the availability of multiple viable vaccines was announced and since have begun distribution.

These actions have resulted in an increase in the level of individual movement and travel and, in turn, an increase in the demand for some of our products relative to earlier in the year, as well as an improvement in the forward curve and pricing outlooks for crude oil prices and crack spreads.

These improvements have likewise led to improvement in the equity market capitalization of public companies in the midstream and downstream oil and gas sectors.

However, many of the states where such restrictions were lifted also experienced a marked increase in the spread of COVID-19 and many governmental authorities in such areas have responded by reimposing certain restrictions they had previously lifted.

This response, as well as the increased infection rates, impacts regions that we serve and could significantly impact demand in ways that we cannot predict.

Additionally, increased infection rates could impact our refining, logistics and retail operations, particularly in high-infection states, if our employees are personally affected by the illness, both through direct infection and quarantine procedures.

Identified Uncertainties Impacting Delek

During the year ended December 31, 2020, Delek experienced the impact on demand and pricing of these unprecedented conditions, most notably in our refining segment.

Our business and our 2020 results reflect the impact of decreased demand combined with decreased crack spreads.

We also experienced operational constraints, including COVID-19 infections at certain of our company locations that resulted in re-imposed or expanded remote work policies and quarantine protocols.

And we continue to face risk from our suppliers and customers who are being affected by similar challenges.

Additionally, significant environmental events, such as extreme weather conditions or natural disasters can impact pipeline accessibility and utilization, other supply sources, as well as demand.

While in the last several months, the availability of the COVID-19 vaccine across the U.S.

has led to some improved stability in the capital markets as well as improved pricing in crude oil, refined products, and related forward curves, there continues to be general economic uncertainty, and, accordingly, demand for refined product and for our logistics assets has not yet returned to normal levels.

Such uncertainty has been further aggravated by the mutation of the COVID-19 virus into new variants and plateauing demand for currently available vaccines.

Based on these conditions and events, downward pressure on commodity prices, crack spreads and demand remains a significant risk and could continue for the near term.

While the risk surrounding the uncertainties of the COVID-19 Pandemic appears to be lessening, they still represent risks that could impact our operations, financial condition and results of operations.

We have identified the following known uncertainties resulting from the ongoing COVID-19 Pandemic:

• Significant declines and/or volatility in prices of refined products we sell and the feedstocks we purchase as well as in crack spreads resulting from the COVID-19 Pandemic could have a significant impact on our revenues, cost of sales, operating income and liquidity;

• A decline in the market prices of refined products and feedstocks below the carrying value in our inventory may result in the adjustment of the value of our inventories to the lower market price and a corresponding loss on the value of our inventories;

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for additional discussion of specific statement risks);

• The decline in demand for refined product could significantly impact the demand for throughput at our refineries, unfavorably impacting operating results at our refineries, and could impact the demand for storage, which could impact our logistics segment;

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Financial Statements and Supplementary Data, of this Annual Report on Form 10-K);

Management's Discussion and Analysis

• A significant reduction or suspension in U.S.

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• Access to capital markets may be significantly impacted by the volatility and uncertainty in the oil and gas market specifically which could restrict our ability to raise funds;

Management's Discussion and Analysis

• While our current liquidity needs are managed by existing facilities, sources of future liquidity needs may be impacted by the volatility in the debt market and the availability and pricing of such funds as a result of the COVID-19 Pandemic;

Federal Government has enacted certain stimulus and relief measures, including the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") passed on March 27, 2020, and is continuing to consider additional relief legislation.

Beyond the direct impact of existing legislation on Delek in the current period, the extent to which the provisions of the existing or any future legislation will achieve its intention to stimulate or provide relief to the greater U.S.

Federal Government has enacted certain stimulus and relief measures and may consider additional relief legislation.

Beyond the direct impact of existing legislation on Delek in the current or prior periods (as applicable), the extent to which the provisions of the existing or any future legislation will achieve its intention to stimulate or provide relief to the greater U.S.

economy and/or consumer, as well as the impact and success of such efforts, remains unknown.

Other uncertainties related to the impact of the COVID-19 Pandemic as well as global geopolitical factors may exist that have not been identified or that are not specifically listed above, and could impact our future results of operations and financial position, the nature of which and the extent to which are currently unknown.

Actions taken by OPEC+ in April and June 2020, including the agreement for management of crude oil supply in the hopes of contributing to market stabilization (the "Oil Production Cuts"), as well as the U.S.

Federal Government's passage and/or enactment of additional stimulus and relief measures, as well as their future actions may impact the extent to which the risk underlying these uncertainties are realized.

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Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Delek's Response to the Continuing Impact of the Pandemic and the Identified Uncertainties

In addition, management continues to actively respond to the continuing impact of the COVID-19 Pandemic on our business.

Delek's Response to Significant Uncertainties Associated with the COVID-19 Pandemic

Management has actively responded to the continuing impact of the COVID-19 Pandemic on our business.

Additionally, to the extent warranted, we continue to monitor the impact and implement measures to mitigate the risk.

Such efforts include (but are not limited to) the following:

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• Finding additional suppliers for key or specialty items or securing inventory or priority status with existing vendors;

• Reducing planned capital expenditures as compared to pre-Pandemic levels;

• Reducing discretionary capital expenditures;

• Suspending the share repurchase program and dividend distributions until our internal parameters are met for resuming such activities;

• Taking advantage of the income and payroll tax relief afforded to us by the CARES Act or other Pandemic relief legislation;

• Taking advantage of the income and payroll tax relief afforded to us by the Coronavirus Aid, Relief, and Economic Security Act ("CARES") or other Pandemic relief legislation;

• Implementing regular site cleaning and disinfecting procedures;

• Adopting remote working where possible, and mandating masks and social distancing protocols where on-site operations are required;

• Identifying alternative financing solutions to enhance our access to sources of liquidity;

• Enacting cost reduction measures across the organization, including reducing contract services, reducing overtime and other employee related costs, workforce reduction and reducing or eliminating non-critical travel.

• Adopting remote working where possible, and when immediate exposure risk warrants, and where on-site operations are required, taking appropriate safety precautions;

• Identifying alternative financing solutions as needed to enhance our access to sources of liquidity;

• Enacting temporary cost reduction measures across the organization, including reducing contract services, reducing overtime and other employee related costs, and reducing or eliminating non-critical travel.

The most significant of these efforts to date as well as specifically identified measures that are anticipated in the near term, in terms of realized or anticipated impact on our financial results, include the following:

Management's Discussion and Analysis

• For the year ended December 31, 2020 pursuant to the provisions of the CARES Act, we recognized $16.8 million of current federal income tax benefit attributable to anticipated tax refunds from net operating loss carryback to prior 35% tax rate years, and deferred $10.9 million of payroll tax payments which will be payable in equal installments in December 2021 and December 2022.

Additionally, we recorded an income tax receivable totaling $156.2 million as of December 31, 2020 related to the net operating loss carryback, which we expect to collect $135.6 million in the first half of 2021 and the remaining balance within eighteen months.

• Beginning in the second quarter 2020, we made significant efforts to reduce our capital spending, particularly on growth and non-critical sustaining maintenance projects.

As a result, we spent $239.6 million in capital expenditures (as discussed further in the "Capital Spending" section of the "Liquidity and Capital Resources" section of Item 7.

Management's Discussion and Analysis) during the year ended December 31, 2020 compared to our initial full-year forecast included in our December 31, 2019 Annual Report on Form 10-K of $325.7 million.

• For the year ended December 31, 2020 pursuant to the provisions of the CARES Act, we recognized $16.8 million of current federal income tax benefit attributable to anticipated tax refunds from net operating loss carryback to prior 35% tax rate years, and deferred $10.9 million of payroll tax payments which was and will be payable in equal installments in December 2021 and December 2022.

Additionally, we recorded a current income tax receivable totaling $135.6 million and a non-current tax receivable of $20.6 million as of December 31, 2020, related to the net operating loss carryback, all of which we received in the third quarter of 2021.

• We made significant efforts to temporarily reduce our capital spending, particularly on growth and non-critical sustaining maintenance projects, and by deferring non-critical turnaround activities (for example, we are conducting "surgical strike" turnaround activities at our Tyler refinery, which allows us to defer the full turnaround until 2023).

See the "Liquidity and Capital Resources" section of Item 7.

Management's Discussion and Analysis, for further information.

• In light of the weak macro-economic environment, we elected to pull forward turnaround work into the fourth quarter of 2020 on certain units at the Krotz Springs refinery that is being conducted on a straight-time basis.

• In light of the weak macro-economic environment, we elected to pull forward turnaround work into the fourth quarter of 2020 on certain units at the Krotz Springs refinery that was conducted on a straight-time basis.

This allowed us to continue running the more profitable units of the refinery and should help improve economics toward a break-even level.

After this work is complete in the first quarter of 2021 and depending on market conditions, we have the flexibility to optimize operations at Krotz Springs by operating only the units that are producing favorable margins, thereby reducing unnecessary operating expenses, or moving back to full utilization at the facility, should the macro-economic environment and margins improve.

• Additionally, we have developed a cost savings plan for 2021 designed to significantly reduce operating expenses and general and administrative expenses.

The majority of the expected operating expenses reduction is attributable to the temporary unit optimization at the Krotz Spring refinery, while other efforts such as targeted budgeting around outside contractor expenses and deferral of certain non-critical, non-capitalizable maintenance activities are also expected to have a favorable impact.

Furthermore, both operating and general and administrative expenses have been and will continue to be favorably impacted by a cumulative reduction in workforce, the first of which began in the second quarter 2020 and was completed in the fourth quarter.

Reductions in workforce are made possible in large part by significant efforts to improve process efficiency and leverage technology where cost-effective.

For the year ended December 31, 2020, we have incurred incremental severance costs of $8.5 million related to these workforce reductions.

We completed this turnaround work late in the first quarter 2021 and have since returned to normalized production.

• Additionally, we implemented a temporary cost reduction plan for 2021 designed to significantly reduce operating expenses and general and administrative expenses.

The majority of the operating expenses reduction was attributable to the temporary unit optimization at the Krotz Spring refinery, with additional reductions arising from other efforts such as targeted budgeting around outside contractor expenses and deferral of certain non-critical, non-capitalizable maintenance activities.

Furthermore, both operating and general and administrative expenses were favorably impacted by a cumulative reduction in workforce, some of which were temporary.

• Finally, we elected to suspend dividends beginning in the fourth quarter 2020 in order to conserve capital.

We expect this will help us maintain our liquidity and manage our cost of capital during periods impacted by the Pandemic, and we also believe it will provide us with flexibility to pursue opportunities to provide value to investors with respect to our stock price, which we believe is undervalued.

The combination of these efforts are expected to have a favorable impact on cash flows in 2021 as well as our operations process effectiveness, which will improve our liquidity positioning and operational flexibility and response in anticipation of the continued economic impacts of the COVID-19 Pandemic.

This has helped us maintain our liquidity and manage our cost of capital impacted by the Pandemic, as well as provided additional flexibility to pursue opportunities to provide value to investors with respect to our stock price, which we believe is undervalued.

Management's Discussion and Analysis

The combination of these efforts had a mitigating impact on cash flows as well as our operations, which we believe has improved our liquidity positioning and operational flexibility and response in anticipation of the continued economic impacts of the COVID-19 Pandemic.

See the "Liquidity and Capital Resources" section of Item 7.

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The COVID-19 Pandemic may also materially adversely affect our results in a manner that is either not currently known or that we do not currently consider to be a significant risk to our business.

Significant Subsequent Events

During February 2021, the Company experienced a severe weather event at the Tyler, El Dorado and Krotz Springs refineries, resulting in units being temporarily shut down and damages to parts of the facilities due to extreme freezing conditions.

The Company is currently determining the financial impact of the event and expects to incur certain recovery costs and repair costs.

Additionally, the severe weather conditions and the resultant industry downtime have caused energy prices to rise in certain regions where we operate, which are expected to result in additional operating expenses for the refineries impacted until such time that supply is restored and energy prices stabilize.

As a result of this event and the related outages at our El Dorado refinery, we expect to accelerate certain of our planned turnaround activities to coincide with repairs of any damaged units, therefore optimizing and limiting our downtime.

On February 27, 2021, our El Dorado refinery experienced a fire in its Penex unit, in which six Delek employees were injured.

Our on-site emergency response team, with the assistance of the El Dorado Fire Department, extinguished the fire, and we immediately began to monitor the air quality within the refinery and the community and have detected no adverse impacts as of the date of this Annual Report on Form 10-K.

Our most critical focus, however, is on the safety of our employees, contractors and neighbors.

While all of our facilities have rigorous, well-documented safety controls, a full investigation will be launched as soon as possible, consistent with our dedication to Safety as a Core Value.

The facility was in the process of undergoing turnaround activity, so there are no operational disruptions as a result of the fire.

Although we are in the preliminary stages of assessing the extent of damages, we do not believe that this incident will have a material adverse effect on our results of operations.

Management's Discussion and Analysis

Refining Overview

The refining segment has a combined nameplate capacity of 302,000 bpd as of December 31, 2020.

A high-level summary of the refinery activities is presented below:

Tyler Refinery El Dorado Refinery Big Spring Refinery Krotz Springs Refinery

Total Nameplate Capacity (barrels per day ("bpd")) 75,000 80,000 73,000 74,000

Relevant Crack Spread Benchmark Gulf Coast 5-3-2

Gulf Coast 5-3-2 (1)

Gulf Coast 3-2-1 (2)

Gulf Coast 2-1-1 (3)

Marketing and Distribution The refining segment's petroleum-based products are marketed primarily in the south central, southwestern and western regions of the United States, and the refining segment also ships and sells gasoline into wholesale markets in the southern and eastern United States.

Motor fuels are sold under the Alon or Delek brand through various terminals to supply Alon or Delek branded retail sites.

In addition, we sell motor fuels through our wholesale distribution network on an unbranded basis.

(1) While there is variability in the crude slate and the product output at the El Dorado refinery, we compare our per barrel refined product margin to the U.S.

Gulf Coast 5-3-2 crack spread because we believe it to be the most closely aligned benchmark.

(2) Our Big Spring refinery is capable of processing substantial volumes of sour crude oil, which has historically cost less than intermediate, and/or substantial volumes of sweet crude oil, and therefore the WTI Cushing/WTS price differential, taking into account differences in production yield, is an important measure for helping us make strategic, market-respondent production decisions.

(3) The Krotz Springs refinery has the capability to process substantial volumes of light sweet crude oil to produce a high percentage of refined light products.

Logistics Overview

It is comprised of the consolidated balance sheet and results of operations of Delek Logistics (NYSE:

DKL), where we owned an 80.0% interest at December 31, 2020.

Delek Logistics was formed by Delek in 2012 to own, operate, acquire and construct crude oil and refined products logistics and marketing assets, and a substantial majority of its assets are currently integral to our refining and marketing operations.

Logistics' pipelines and transportation business owns or leases capacity on approximately 400 miles of crude oil transportation pipelines, approximately 450 miles of refined product pipelines, and approximately 900-mile crude oil gathering system and associated crude oil storage tanks with an aggregate of approximately 10.2 million barrels of active shell capacity.

It also owns and operates nine light product terminals and markets light products using third-party terminals.

Logistics has strategic investments in pipeline joint ventures that provide access to pipeline capacity as well as the potential for earnings from joint venture operations.

On March 31, 2020, Logistics acquired from another of our segments approximately 200 miles of gathering and ancillary assets located in Howard, Borden and Martin Counties, Texas.

In May 2020, Logistics acquired from another of our segments certain leased and owned tractors and trailers and related assets, and subsequently owns or leases approximately 264 tractors and 353 trailers used to haul primarily crude oil and other products for related and third parties.

Retail Overview

Our retail segment (or "Retail") at December 31, 2020 includes the operations of 253 owned and leased convenience store sites located primarily in Central and West Texas and New Mexico.

In November 2018, we terminated the license agreement with 7-Eleven, Inc.

and the terms of such termination and subsequent amendment require the removal of all 7-Eleven branding on a store-by-store basis by December 31, 2023.

Merchandise sales at our convenience store sites will continue to be sold under the 7-Eleven brand name until 7-Eleven branding is removed pursuant to the termination.

As of December 31, 2020, we have removed the 7-Eleven brand name at 57 of our store locations.

In connection with our Retail strategic initiatives, we closed or sold 46 under-performing or non-strategic store locations since the fourth quarter of 2018.

Corporate and Other Overview

Our corporate activities, results of certain immaterial operating segments, discontinued operations, our recently commenced wholesale crude operations, and intercompany eliminations are reported in 'corporate, other and eliminations' in our segment disclosures.

Management's Discussion and Analysis

Strategic Overview

The Company's overall strategy is to take a disciplined approach that looks to balance returning cash to our shareholders and prudently investing in the business to support safe and reliable operations, while exploring opportunities for growth.

Our goal has been to balance the different aspects of this program based on evaluations of each opportunity and how it matches our strategic priorities for the company, while factoring in market conditions and expected cash flows.

In 2019, Delek’s leadership team built a Five-Year Strategic Framework to facilitate development of the Company’s strategies and initiatives.

Five-Year Strategic Framework

Our Five-Year Strategic Framework consisted of the following overarching objectives:

Become nationally recognized for safety and wellness leadership.

Maximize return on assets through best-in-industry reliability and integrity.

Improve efficiency and execution through development of systems and processes.

Identify and manage risks to improve decision-making and increase profitability.

Significantly increase overall earnings.

These overarching objectives are supported by strategic focus areas, which inform the priorities of each segment’s initiatives, while our overall strategy has been and continues to be to take a disciplined approach that looks to balance returning cash to our shareholders and prudently investing in the business to support safe and reliable operations, while exploring opportunities for growth.

Core Strategic Focus Areas

Our strategic focus areas and plans must balance the different aspects of our Five-Year Strategic Framework based on evaluations of each opportunity and how it matches our strategic goals for the company, while factoring in market conditions and expected cash generation.

Recognizing the significance of the economic impact of the COVID-19 Pandemic (and, earlier in the year, the OPEC Production Disputes), we re-calibrated our 2020 strategy to ensure we were identifying the significant uncertainties arising from and related to the Pandemic in order to be responsive and proactive regarding the risks that those uncertainties created (as discussed above).

That said, our modified 2020 strategy as well as our 2021 strategy are still centered around the following strategic focus areas:

Safety and wellness.

Reliability and integrity.

Systems and processes.

Risk-based decision making.

Positioning for growth.

Management's Discussion and Analysis

We believe that these Core Strategic Focus Areas are just as relevant in the Pandemic environment as they are in more stable economic conditions, and are representative of our desire to maximize the opportunities both within and external to the organization in a way that is innovative and forward-thinking while simultaneously managing risk and incorporating some of the strategies that have been essential to our story so far and are part of who we are as a company.

Strategic Initiatives

Building on the Five-Year Strategic Framework and the Core Strategic Focus Areas, we developed the following Strategic Initiatives:

2020 Strategic Priorities - A Look Back

All of the elements above are a critical evolution to how we determine our strategic priorities for a particular year, under normal conditions.

There were many unforeseen external factors impacting our operations and the economic environment during 2020, but we took that as a challenge rather than a derailment, and we used it as an opportunity to evaluate the fundamentals of our strategy.

What we found is that the unforeseen events and conditions arising as a result of the Pandemic reinforced the importance of our Framework and our Focus Areas, and validated the relevancy of not only our Initiatives, but also of our previously identified 2020 Strategic Priorities.

These Strategic Priorities are outlined below.

2020 Strategic Priorities

• Maintain and continue to enhance our safe operations and commitment to responsible corporate citizenship.

A central focus is to enhance the safety across our organization.

It is a core value at Delek and we work day-to-day to ingrain this into our culture.

The organization is focused on Environment/Health/Safety, Employee Engagement, Community Commitment and Ethics/Governance in an effort to have safe and compliant operations for the benefit of our employees, communities, customers and shareholders.

◦ Our successes in this area included continued focus on safety across our organization, as well as the completion of our first ever Sustainability Report, and improving our performance and executing on our plans for environmental, social and governance responsibility (or "ESG") continues to be a priority for us.

• Broaden our winning culture.

As a growing organization, we want to develop a culture that can support its success.

Our core values:

Safety, Integrity, Maximize Value, Passion for Winning & Excellence, Growth Oriented and Commitment are guiding factors in the way we do business.

We are committed to investing in our people to expand our knowledge base through training, systems and processes with a goal to retain the ability to act quickly as we grow.

◦ We had significant constraints on costs and investment during 2020 as a result of the Pandemic, and even a workforce reduction.

But that is when we really saw the returns from our investments in getting the right people, who in turn have been creating and improving our processes and helping us lay the groundwork for system upgrades that will be key to our continued growth and success.

The success of these efforts to date was particularly evident this year in terms of how we have managed our business and our risk in the COVID-19 Pandemic economic environment.

• Enhance our integrated platform.

Our integrated platform allows us to purchase a barrel of crude oil at the wellhead, transport crude oil to our refineries to produce finished products then transport it to our retail network or third parties.

Enhancing this platform we believe will maximize our return on investments and opportunities for growth.

Management's Discussion and Analysis

◦ In 2020, projects such as the dropdown of gathering and trucking assets to Logistics, our involvement and investment in the expansion of Logistics and other pipeline joint venture systems, and the development of wholesale crude sales channels for excess gathered barrels, are all examples of the continuous effort to enhance our existing platform.

• Diversify our business model through growth in our midstream operations.

We executed initiatives in 2019 to develop our midstream operations through construction of the Big Spring Gathering System, entering into joint ventures for the Red River and Wink to Webster pipelines, with the intention to use our cash flow and strong balance sheet to diversify our earnings mix by increasing the size of our more stable midstream business.

◦ We saw continued growth in our midstream operations with strategic dropdowns of the Big Spring Gathering System and trucking assets to Delek Logistics and expansions of the pipeline capacity under Logistics' Red River joint venture investment, both of which provided immediate accretive value when we executed the IDR Simplification, as well as long term accretive value through our investment in Delek Logistics.

• Maximize operational efficiencies.

This extends to all aspects of the organization.

From back office processes and systems to the operating assets in refining, logistics and retail.

By safely maximizing our efficiencies, reliability and asset integrity, we should enhance our competitiveness and free cash flow generation potential.

In a commodity based environment that changes quickly, we are consistently focused on executing on factors that are within our control.

◦ In light of the Pandemic and the resulting decline in commodity prices and crack spreads, we quickly shifted our focus away from capital growth projects in the early part of 2020.

This provided us with the opportunity to focus our team's considerable efforts and talent on process improvement initiatives, cost control measures, and opportunities for innovation.

As a result, we have implemented new technologies, processes and other changes that are already having a positive effect on safety (e.g., we now have more structured safety protocols), our costs (e.g., operating expenses significantly declined in 2020 compared to the prior year), and our operational effectiveness (e.g., our cost and contractor management process and system improvements are positively impacting our ability to monitor and manage our capital spend).

• Create organizational scalability to support growth.

A challenge of a growing company is that sometimes it comes in large steps, which can stretch an organization.

We are focused on developing our systems and processes, improving efficiencies and retaining knowledge within the organization to create a structure that is scalable as we grow in the future.

◦ As referenced above, we have implemented new technologies, processes and other changes that we believe are already having a positive effect on safety, our costs, and our operational effectiveness.

These represent fundamental cultural changes that we expect will position us well to implement other planned process and system improvements in the near term, and better position us for scalable growth.

• Use our financial flexibility and cash flow to create shareholder value.

Delek is focused on managing the cash flow of our business to support a capital allocation program that includes:

1) returning cash to shareholders through dividends and share repurchases, 2) applying a disciplined approach to investing in our business and 3) growing through acquisitions all of which combine to serve our overarching goal of increasing long-term value for our shareholders, while also actively managing cash flow and financial risk during periods of negative economic pressure.

◦ Even during this unprecedented year, we have achieved successes in this area, both in terms of strategic transactions that enhance shareholder value and in terms of managing our cash flow and financial risk so that we are protecting our shareholders' investments in Delek as best we can.

See the section below, as well as the "Liquidity and Capital Resources" section of Item 7.

Management's Discussion and Analysis of this Annual Report on Form 10-K for further information.

The following section highlights some of the specific significant developments and successes realized during 2020.

2020 Significant Developments

With these objectives and priorities serving as our guiding principles, and applying the short-term measures to mitigate the impact of the COVID-19 Pandemic and the OPEC Production Disputes described in the 'Business Overview' above, we are pleased to report that we have achieved the following successes during 2020:

Transactions designed to maximize return on assets and shareholder value

Investment in Midstream Ventures

In July 2019, we acquired a 15% ownership interest in Wink to Webster Pipeline LLC (the "WWP Joint Venture"), which we subsequently contributed to a non-recourse financing joint venture with MPLX (who likewise contributed their 15% interest in the WWP Joint Venture) as collateral for and in service of the related project financing (the "WWP Project Financing JV") effective February 21, 2020, in exchange for a 50% interest in the WWP Project Financing JV.

The WWP Joint Venture is constructing and will operate a crude oil pipeline system from Wink, Texas to Webster, Texas along with certain pipelines from Webster, Texas to other destinations in the Texas Gulf Coast area that are expected to span approximately 650 miles at completion.

Construction of the crude oil pipeline system remains on schedule, and the main segment of the pipeline system commenced operations in the fourth quarter of 2020, with additional segments expected to be placed in service throughout 2021.

It is anticipated that capital contributions required of the 15% ownership interest we contributed to the WWP Project

Management's Discussion and Analysis

Financing JV will total approximately $340 million to $380 million over the course of construction, the majority of which will be financed under the nonrecourse financing facility of the WWP Project Financing JV.

Distributions received from the WWP Joint Venture through the WWP Project Financing JV will first be applied in service of the related project financing debt, with excess distributions being made to the members of the WWP Project Financing JV.

The obligations of the members under the WWP Project Financing JV HoldCo LLC Agreement are guaranteed by the parents of the members of the WWP Project Financing JV.

See further discussion in Note 7 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Transactions with Delek Logistics

Effective August 13, 2020, Delek Logistics completed a restructuring transaction to eliminate the incentive distribution rights held by us and convert the 2.0% economic general partner interest into a non-economic general partner interest, in exchange for total consideration consisting of $45.0 million in cash and 14.0 million newly issued common limited partner units (as previously defined, the "IDR Simplification").

Contemporaneously, we repurchased a 5.2% ownership interest in Delek Logistics GP, LLC, the general partner of Delek Logistics from certain of our affiliates, who are also members of the general partner's management and board of directors, for $23.1 million in cash.

Subsequent to these transactions, we owned 34,745,868 common limited partner units, increasing our ownership to 80.0% of the outstanding common units, and 100% of the outstanding interest in the general partner.

Effective May 1, 2020, Delek through its wholly owned subsidiaries Lion Oil Company (“Lion Oil”) and Delek Refining, Ltd.

(“Delek Refining”) contributed certain leased and owned tractors and trailers and related assets used in the provision of trucking and transportation services for crude oil, petroleum and certain other products throughout Arkansas, Oklahoma and Texas to Delek Trucking, LLC (“Delek Trucking”), a direct wholly owned subsidiary of Lion Oil.

Following this contribution, Lion Oil sold all of the issued and outstanding membership interests in Delek Trucking (the “Acquisition”) to DKL Transportation, LLC (“DKL Transportation”), a wholly owned subsidiary of Delek Logistics.

Promptly following the consummation of the Acquisition, Delek Trucking merged with and into DKL Transportation, with DKL Transportation continuing as the surviving entity.

Total consideration for the Acquisition was approximately $48.0 million in cash, subject to certain post-closing adjustments, primarily financed with borrowings under Delek Logistics’ revolving credit facility.

Effective March 31, 2020, Delek Logistics, through its wholly-owned subsidiary DKL Permian Gathering, LLC, acquired the Big Spring Gathering System, located in Howard, Borden and Martin Counties, Texas, from Delek.

Delek Logistics will operate and maintain the Big Spring Gathering System connecting our interests in and to certain crude oil production with the Delek Logistics' Big Spring, Texas terminal and provide gathering, transportation and other related services.

The total consideration was comprised of $100.0 million in cash and 5.0 million common limited partner units in Delek Logistics.

The cash component of this dropdown was financed with borrowings on the Delek Logistics Credit Facility (as defined in Note 8 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Finally, in March 2020, we purchased 451,822 common limited partner units in Delek Logistics from a public investor for approximately $5.0 million.

See further discussion in Note 6 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Sale of Bakersfield Non-Operating Refinery

On May 7, 2020, we sold our equity interests in Alon Bakersfield Property, Inc., an indirect wholly-owned subsidiary that owns our non-operating refinery located in Bakersfield, California, to a subsidiary of Global Clean Energy Holdings, Inc.

(“GCE”) for total cash consideration of $40.0 million.

GCE intends to repurpose the refinery into a renewable diesel plant.

As part of the transaction, GCE granted a call option to Delek to acquire up to a 33 1/3% limited member interest in the acquiring subsidiary of GCE for $400 per unit (up to $13.3 million), subject to certain adjustments.

Such option is exercisable by Delek through the 90th day after GCE demonstrates commercial operations, as contractually defined.

See further discussion in Note 4 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Transactions designed to minimize the cost of capital/manage financial risk exposures

Amendment and Restated Supply and Offtake Agreements

In April 2020, we amended and restated our three Supply and Offtake Agreements to amend and extend the terms to December 30, 2022, with J.

Aron having the sole discretion to further extend to May 30, 2025 by providing at least six months notice prior to the current maturity date.

As part of this amendment, there were changes to the underlying market index, annual fee, the crude purchase fee, crude roll fees and timing of cash settlements related to periodic price adjustments on the fixed differential component of the Baseline Volume Step-Out Liabilities.

The amendments provide us dedicated financing for the inventory covered through at least December 2022, and certain specific market-indexed provisions improve our ability to manage our exposure to commodity price volatility during the term of the agreements.

See further discussion in Note 10 of our consolidated financial statements included in Item 8.

Regulatory Volatility

Our RINs cost and RINs Obligation (as defined in Note 11 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K) have been negatively impacted by increasing RINs prices during much of 2021 which resulted from the 2020 unfavorable ruling against companies previously granted the EPA's SREs under the RFS which governs RINs volume obligations for U.S.

hydrocarbon refining companies, importers and blenders.

Additionally, increased environmental regulatory activity in Washington, D.C.

following the change in the presidential administration in January 2021 continued to put upward pressure on RIN prices.

The 10th Circuit Court of Appeals ruling, which was subsequently appealed and (for the first half of the year) was waiting to be heard by the U.S.

Supreme Court, stalled the approval of 2019 SRE applications already submitted (inclusive of 2019 SRE applications for each of our four refineries) and led to the postponement of 2020 SRE applications.

Additionally, because of these delays and uncertainties, the EPA issued, by Final Rule, extensions on the compliance deadline under the RFS as well as the deadline for submission of the obligated party attestation reports as of December 31, 2020 that delayed the deadlines until future periods.

In late June 2021, the U.S.

Supreme Court overturned the 10th Circuit's previous ruling regarding RINs, resulting in market optimism that the stalled SRE applications from 2019, as well as new applications for 2020, might be granted, based on the published criteria.

Market expectations that at least some SRE applications may be approved and/or that the EPA may reduce certain outstanding compliance requirements, resulted in an improvement in RINs prices during the third quarter of 2021.

However, this expectation was dampened by the release of a proposed rule by the EPA in December 2021 which recommended revised volumetric rates for 2020 and, for the first time, introduced proposed rates for 2021 and 2022, and proposed denial of pending SRE petitions, noting that the proposed volumetric rate changes may be sufficient to render the granting of small refinery exemptions unnecessary based on the arguably inaccurate presumption that small refineries are not unduly burdened by the cost of RINs.

The December 2021 Proposed Rule is still under comment and review and has not yet been finalized.

Because of the delays and uncertainties, the EPA Issued, by Final Rule in February 2022, compliance and attestation reporting deadline extensions based on a formula that begins with the first reporting deadline that is at least 60 days after the 2019 RINs Obligation compliance requirements are made effective via Final Rule, with the 2020, 2021 and 2022 deadlines to occur at each successive quarterly reporting deadline.

So if the 2019 compliance requirement is finalized in June 2022, it's reporting and attestation compliance deadline would be September 1, 2022, followed by the following deadlines for subsequent RINs Obligation years:

2020 - December 1, 2022;

2021 - March 31, 2023;

2022 - June 1, 2023.

Uncertainty remains regarding the likelihood of SREs being granted as well as the potential for EPA relief from certain compliance requirements.

Additionally, uncertainty remains regarding the impact that proposed EPA rules, or future revisions to proposed rules, may have on RINs prices, which impact the determination of the fair value of our Net RINs Obligation, as well as the fair value of forward RIN commitment contracts.

While we cannot know the outcome of our SRE applications, Delek has a history of being granted the waivers with most grants to the Krotz Springs and El Dorado refineries.

As an example, in 2018, we were granted SREs for our Tyler, Krotz Springs and El Dorado refineries.

Additionally, while our current Net RINs Obligation reflects current RINs market prices as of December 31, 2021, the financial statement impact, including both the income statement and net cash impact, of any future receipt of SRE(s) or future changes to enacted Renewable Volume Obligation rates, is not determinable because of the complexity of the Net RINs Obligation and related transactions, where such financial statement impact is dependent upon the following:

(1) which refineries receive exemptions and/or the extent of enacted volumetric requirement changes;

(2) the composition of the specific Net RINs Obligation (in terms of the vintages of RINs we currently own versus the waived RINs Obligation) and the related market prices at the date each exemption is granted or volumetric requirement change is enacted;

(3) the composition of our RINs forward commitment contracts that may be settled or positions closed as a result of any exemption or enacted change and the related gains or losses;

(4) the settlement requirements of related RINs product financing arrangements;

and (5) the quantity of and dates at which excess RINs can be sold and the sales price (see also Note 11, Note 12 and Note 19 as well as our related accounting policies related to RINs included in Note 2 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K).

2020 Amendment to the Term Loan Credit Facility

On May 19, 2020, we amended the Term Loan Credit Facility agreement (as defined in Note 11 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K) and borrowed $200.0 million in aggregate principal amount of incremental term loans (the “Third Incremental Term Loan”) at an original issue discount of 7.00%, requiring

We note that our total gross RINs Obligation for 2020 (which is the most recent period for which volumetric requirements have been enacted), for all four refineries, was approximately 340 million RINs, across all RIN categories.

While receipt of any SREs could result in significant benefit, both in terms of income statement effect and cash flows, other enacted regulatory changes could impact our financial results in ways that we cannot currently anticipate.

Management's Discussion and Analysis

quarterly principal amortization payments of $0.5 million commencing on June 30, 2020.

There are no restrictions on the Company's use of the proceeds of the Third Incremental Term Loan, and the proceeds may be used (i) for general corporate purposes and (ii) to pay transaction fees and expenses associated with the Third Incremental Term Loan.

See further discussion in Note 11 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Dividend Suspension

On November 5, 2020, we announced that we have elected to suspend dividends beginning in the fourth quarter of 2020 in order to conserve capital.

Our previous quarterly cash dividend amounts ranged between $0.27 to $0.30 per share for dividends paid throughout 2019 and was $0.31 per share for the dividends paid during each of the previous three quarterly periods of 2020.

The declaration, amount and payment of any future dividends on our common stock will be at the sole discretion of our Board of Directors.

Share Repurchases

During the year ended December 31, 2020, Delek repurchased 58,713 shares for an aggregate purchase price of $1.9 million under the most recent share repurchase plan which provided for repurchases up to $500.0 million and was approved by the Board of Directors on November 6, 2018.

As of December 31, 2020, there remained $229.7 million available for repurchases under the most recent repurchase plan.

In our efforts to conserve capital, for the time being, we have temporarily suspended the repurchase of shares.

See further discussion in Note 22 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

A Look to the Future:

Our 2021 Strategic Priorities

As we move forward, we are increasingly optimistic about our outlook, and we have identified five strategic priorities for 2021 that continue to be rooted in our Five-Year Strategic Framework, linked to our Core Strategic Focus Areas, and driven by our Strategic Initiatives discussed above.

Our 2021 Strategic Priorities are presented below.

2021 Strategic Priorities

Building on the continuation of our Five-Year Strategic Framework and the Core Strategic Focus Areas, we have developed and are optimistic about the following 2021 Strategic Initiatives:

• Maintain and Continue to Enhance Our Safe Operations.

We are proud of our commitment to safety as a core value of the company, and this commitment is reflected in our continuous improvement in DART (days away, restricted or transferred) and TRIR (total recordable incident rate) metrics since 2016.

According to the American Fuel & Petrochemical Manufacturers trade association, Delek ranks second overall in these safety metrics among companies operating multiple refineries.

The retail business unit’s TRIR is half the industry average.

• Drive EBITDA and Cash Flow Improvement.

In 2020, the company acted decisively by adapting to the challenging macro environment and delivering significant cost savings.

We plan to maintain and enhance our cost containment efforts in 2021.

Simultaneously, initiatives for margin improvements through optimization are underway.

The combination of these improvements along with a diverse asset base should lead to a lower cash flow break-even profile in the future.

• Develop and Utilize Systems, Processes and Technology to Improve Operations.

Recognizing that the energy industry remains behind the curve in terms of technological advancements, and that Delek has a long history of being nimble, we have added innovation to our core values.

Our vision is to use select technologies and implement advanced systems and processes to achieve further, more structural cost reductions, operational improvements and asset optimization over the medium to longer term.

Through our focus on innovation, we expect to enhance the competitiveness of the portfolio within the industry.

• Ongoing Commitment to ESG.

At Delek, we understand the importance of ESG and the growing role it plays with all stakeholders, as well as within an investment management framework.

Therefore, we were pleased that the sustainability report we published in 2020 was well-received, yielding improved scoring from multiple rating agencies.

However, we are still relatively early in our ESG journey, and we are striving for progressive improvements over time in terms of underlying performance metrics and disclosure in all ESG categories.

We are taking a holistic approach to addressing the evolving and challenging requirements of ESG by gleaning fresh ideas and feedback from business leaders and employees throughout the organization.

One example is our de-carbonization steering committee that involves members of each business unit and attempts to generate leading-edge solutions to improve our carbon footprint while maximizing long-term returns on our capital investments.

• Laying the Foundation for Future Growth .

Delek was built through a history of strategic acquisitions, with a strong track record of seamless integration.

We understand that difficult macro environments often create acquisition opportunities or prospects to pivot strategically.

After focusing mainly on improving our cash flow break-even profile through reduced capital expenditures and operating costs in 2020, we are emerging from this downturn with an improved cost structure, a healthy balance sheet and opportunities to pursue future growth.

We are constantly evaluating the optimal investment options available in our various business units and comparing the potential returns of both organic and inorganic opportunities.

In the constantly evolving energy landscape, Delek remains strong, nimble and well-positioned to capture opportunities.

Delek's Response to Significant Uncertainties Associated with Regulatory Volatility

As discussed above, RFS activities and Renewable Volume Obligation requirements, and their impact on RIN prices, represent a significant risk which has, and could continue to, materially impact our financial results in ways that are currently uncertain.

Our efforts to mitigate this risk include the following:

• Aggressively pursuing small refinery exemptions for all four of our refineries;

◦ Immediately following the favorable U.S.

Supreme Court ruling in June 2021, we undertook efforts to prepare 2020 SRE applications for our refineries and we submitted them in August 2021.

We believe that RINs do significantly impact the crack spread capture at our refineries and therefore the original intent of SREs is still applicable and, likewise, that SREs should be granted to us.

Furthermore, Delek has a history of being granted the waivers.

Because EPA failed to decide Delek’s pending 2019 SRE petitions within the statutorily prescribed 90-day period, Delek filed suit against the Agency in federal district court in the District of Columbia.

That case remains pending before the court.

• Actively monitoring EPA rule-making and RFS actions regarding volumetric requirements, remittance due dates, and deferral opportunities in order to make decisions about RINs inventory;

• Proactively monitoring our Net RINs Obligation position (inclusive of our RINs inventory portfolio), by vintage and RIN category, in order to make decisions about the purchase and sale of RINs, based on both a current and forward basis, and considering the risk of floating versus fixed pricing;

• Incorporating into our strategic priorities activities designed to enhance incremental crack spread capture so that the impact of high RIN prices or RINs price volatility is diminished.

While there continues to be risk around the fair value of RINs Obligation that we incur and the RINs cost we recognize in our results of operations, we believe that our risk management activities around RINs are comprehensive.

That said, because the RINs market is subject to factors outside of our control, there will continue to be risk that RINs cost could adversely affect our financial results.

See additional discussion of the effect of RINs prices and volatility on our refining margins in the "Market Trends" section below.

Climate Change

Increasingly unstable environmental conditions and spontaneous extreme weather events are making it costlier and more difficult for oil and gas companies to operate in certain environments.

Consequently, climate-change, and related current and proposed regulations, are directly and indirectly impacting industry bottom lines globally and in specific geographic areas where we operate.

Current and proposed climate-change and environmental regulations, laws and government policies affect where and how companies invest, conduct their operations and formulate their products and, in some cases, limit their profits directly.

There continues to be significant uncertainty around coming regulatory requirements, not just from an operational perspective, but also around what reporting requirements may be, as well as the associated cost.

The SEC is currently considering its requirements for ESG reporting in the near term, which may include requirements that independent assurance be obtained and reported for ESG disclosures, similar to financial statement audit reports.

Delek's Response to Significant Uncertainties Associated with Climate Change

We remain committed to complying with all regulations, laws and government policies designed to curb the growing climate-change crisis.

In 2021, the Company announced goals to reduce Scope 1 & 2 emissions by 34% through emission reductions and carbon offsets.

This goal is aligned with both the IEA’s SDS and the Paris Accord’s goal of limiting warming to less than 2°C above pre-industrial levels.

Using 2012 as our baseline, we plan to pursue the reductions via a combination of steps including, but not limited to:

energy-efficient operational improvements;

transitioning some refinery production away from transportation fuels and towards chemicals;

renewable power purchases, when feasible, and offsets, when necessary;

and previously executed facility shutdowns that were later divested Our pledge is the first step towards a long-term roadmap which we are seeking to align with the SBTI, to move Delek firmly in the direction of the carbon-neutral operating environment as envisioned by the Paris Accords.

We also continue to monitor the activities of the SEC as it works towards issuing reporting compliance rules around ESG and climate change, which includes consideration of framework and/or standards introduced by the Task Force on Climate-related Financial Disclosures ("TCFD") Sustainability Accounting Standards Board ("SASB"), so that we may ensure timely compliance with requirements as well as meaningful disclosure for our investors and stakeholders.

Talent Retention

It is widely reported that post-Pandemic talent retention has become a very real risk for companies that are looking forward to emerging from Pandemic conditions.

According to a 2021 report by Achievers Workforce Institute, 52% of employees in North America will look for a new job in the near future, leading many to refer to the phenomenon as a “turnover tsunami” or the "Great Resignation." The Pandemic has caused changes in consumer behavior, in travel and also in the way we work.

It has triggered a fundamental shift in the way many people view their lives and their relationships with employers, in a time when concern for the health and well-being of loved ones has been paramount.

Additionally, the job market has changed.

COVID-19-related fatalities have taken a toll on the talent pool, and the remaining workforce have shifted their views of what's important.

Encouraged/forced retirement and workforce reductions during the height of the Pandemic pushed workers into different roles, while health concerns, flexibility needs and the success of remote working optionality have changed the way employees view work.

Additionally, changing consumer behavior and demands during the Pandemic have fueled certain industries and decimated others, creating new demand for certain jobs and changing the market compensation for many.

As we look to 2022, we have identified certain key contributors to post-Pandemic talent retention risk which include the following:

Management's Discussion and Analysis

• Highly Competitive Labor Markets — in many of the markets where we operate, we recognize that there turnover rates are at historic highs, combined with low unemployment rates;

• Voluntary Underemployment or Unemployment — many workers have been forced into under- or unemployment during the Pandemic, and either have successfully adjusted to it or continue to have concerns about health and safety and/or caring for family members;

• Evolving Employee Value Proposition Expectations — Rising wages and new expectations for working flexibility favor employers who are culturally responsive.

We have also identified the following potential consequences of failing to adequately to address the risk around retaining talent:

• Strategic Transformation Failure — failure to recruit and retain employees for roles necessary for specific organizational transformation objectives can contribute to delay or failure of the transformation;

• Cultural Disruption/Erosion — failure to retain team builders and talent with institutional knowledge can cause cultural disruption/erosion, leading to employees that feel less invested in the success of their teams and the company, and contributing to the risk of escalating turnover;

• Loss of Agility Required for Sustainability — in a rapidly evolving economic landscape, agility is often dependent upon the talent and institutional knowledge of your employee force, and loss of that talent and knowledge can impact a company's ability to remain competitive and to achieve or maintain long-term sustainability.

Because of the pervasiveness of the risk, and that it is not specific to Delek, there remains significant uncertainty about the extent to which we may experience post-Pandemic talent attrition, and how workforce demands and expectations may continue to evolve on both a macro and micro level.

Furthermore, there is significant uncertainty as to the impact of post-Pandemic talent attrition, in terms of the specific talent and institutional knowledge that may be lost and how that could impact our strategic transformation activities, our culture and our ability to remain agile.

Failure to appropriately mitigate this risk, ultimately, could impair our long-term sustainability.

Delek's Response to Significant Uncertainties Associated with Post-Pandemic Talent Retention

We recognize that talent retention is a significant risk to the Company post-Pandemic, for all the reasons discussed above.

Our efforts to mitigate this risk include the following:

• We have engaged consultants to benchmark our overall Enterprise Risk Management framework , and as a result, we have:

◦ Identified Post-Pandemic Talent Retention ("PPTR") as one of the most critical emerging risks facing the Company;

◦ Identified the key drivers or post-Pandemic talent retention risk and potential consequences

• We have recently established a PPTR Task Force which has been charged with the following:

◦ Drilling down on the potential consequences of failing to appropriately manage PPTR identified above and identify underlying drivers and risks specific to Delek;

◦ Ranking each identified driver/risk to determine priority for mitigation activities;

◦ Identifying action plans for the mitigation activities, based on priorities

These efforts are incremental to our existing human capital programs, and are specifically designed to address the risks presented by the changing environment.

Additionally, the PPTR Task Force is recently established, and its function and responsibilities will continue to evolve over time.

That said, because the PPTR risk is subject to certain factors outside of our control, there will continue to be risk that our PPTR will not be sufficiently successful and that resulting turnover could indirectly result in an adverse effect on our financial results.

Other Significant Events

During February 2021, the Company experienced a severe weather event ("Winter Storm Uri"), at all the refineries, resulting in units being temporarily shut down and damages being incurred to parts of the facilities due to extreme freezing conditions.

Due to the extreme freezing conditions, and despite the acceleration of planned and ongoing turnaround work at the El Dorado and Krotz Spring refineries (which provided some mitigation), we experienced reduced throughputs at our refineries as there was a disruption in the crude supply, increases in natural gas costs, as well as damages to various units at our refineries requiring additional operating and capital expenditures.

Additionally, on February 27, 2021, our El Dorado refinery experienced a fire in its Penex unit, in which six Delek employees were injured.

The incident was investigated by the OSHA and Chemical Safety Board and resulted in operational disruptions as well as property and casualty damages.

For the year ended December 31, 2021, we have recognized approximately $30.9 million ($23.9 million after-tax) of insurance recoveries related to property and casualty claims relating to the winter storm and the fire, $13.4 million of which related to replacement cost coverage on property losses and which helps offset corresponding capital expenditures, and the remaining $17.5 million of which relates to repairs and other operating expenses incurred in connection with our property and casualty damages.

Additionally, during the first half of 2021, the fire and freeze events caused us to experience operational disruptions that significantly affected our results.

While we cannot know what our EBITDA would have been, we submitted business interruption insurance claims for covered economic losses based on our insurance policies.

For the three months and year ended December 31, 2021, we have recognized $9.9 million ($7.7 million after-tax) of business interruption insurance recoveries, which were recorded in other operating income on the consolidated statement of income.

There are additional property and casualty claims, as well as business interruption claims, that are outstanding and still pending which are expected to be recognized in future quarters.

Management's Discussion and Analysis

Market Trends

Commodity Prices

Our results of operations are significantly affected by fluctuations in the prices of certain commodities, including, but not limited to, crude oil, gasoline, distillate fuel, biofuels and natural gas and electricity, among others.

Historically, our profitability has been affected by commodity price volatility, specifically as it relates to the price of crude oil and refined products.

We have significant sources of WTI Midland crude because of our gathering system, and so accordingly favorable pricing of WTI Midland crude compared to other WTI crude can favorably impact our cost of materials and other and therefore our margins compared to other refiners.

The table below reflects the quarterly average prices of WTI Midland and WTI Cushing crude oil for each of the quarterly periods over the past three years.

As shown in the historical graph, over the past three years WTI Midland crude prices have generally been favorable as compared to WTI Cushing, though that trend reversed slightly in the fourth quarter 2019 and third quarter of 2020.

Crack Spreads

Crack spreads are used as benchmarks for predicting and evaluating a refinery's product margins by measuring the difference between the market price of feedstocks and crude oil and refined products.

Generally, crack spreads represent the approximate refining margin resulting from processing one barrel of crude oil into its outputs, generally gasoline and diesel fuel.

The table below reflects the quarterly average Gulf Coast 5-3-2 ULSD, 3-2-1 and 2-1-1 crack spreads for each of the quarterly periods over the past three years.

As the chart illustrates, the 3-2-1 crack spread has outperformed the 5-3-2 and the 2-1-1 crack spreads in certain periods.

In such conditions, things being equal (i.e., near-capacity throughputs and no significant outages), our Big Spring refinery, whose benchmark is the 3-2-1 crack spread, should outperform our other refineries in terms of refining margin.

Historically, the impact of commodity price volatility on our refining margins (as defined in our "Non-GAAP Measures" in MD&A Item 7.), specifically as it relates to the price of crude oil as compared to the price of refined products and timing differences in the movements of those prices (subject to our inventory costing methodology), as well as location differentials, may be favorable or unfavorable compared to peers.

Additionally, our refining margin profitability is impacted by regulatory factors, including the cost of RINs.

As we reflect on the macro environment in 2021,the economy continued to recover from the impact of the COVID-19 Pandemic, both globally and domestically.

While the effects of recurrent COVID-19 variant mutations caused fluctuating travel restrictions, global chip shortages, supply chain challenges, and inflationary pressures in multiple parts of the world, these effects were generally less pronounced than in 2020, which was characterized by economic lockdowns and pervasive uncertainty about the viability and availability of vaccines.

In the last several months, the availability of the COVID-19 vaccine across the U.S., as well as stabilizing trade relations with global partners, has led to improved stability in the U.S.

capital markets and certain industry sectors.

Crude oil markets experienced increasing levels of demand, which combined with intermittent constraints on supply, translated into a strong oil price recovery.

We saw this in the recovery of WTI, which is the largest component of our crude slate, with an average price per barrel of $77.33 in the fourth quarter of 2021 (for Cushing barrels) compared to an average price of $42.63 in the fourth quarter of 2020.

This translated into improved crack spreads and increases in CBOB gasoline prices, where the average 5-3-2 crack spread increased from $7.83 to $17.51 and where CBOB gasoline prices increased from an average of $1.17 to $2.22 in the fourth quarter of 2020 versus the fourth quarter of 2021, respectively.

These increases reflect recoveries of prices to pre-Pandemic levels.

That said, our refining operations are heavily dependent on Midland crude, because of our geographic footprint and gathering activities in Midland and surrounding Permian area.

Thus, an unfavorable Midland differential compared to Cushing on WTI crude oil will have a negative impact on our results.

The Midland differential was at an unfavorable premium for the latter half of 2020 through the third quarter 2021, and has just now flattened to near zero in the fourth quarter of 2021.

Other conditions impacting the macro-economic environment during 2021 included several events of unexpected severe weather.

Violent storms, wildfires and extreme temperatures across the U.S.

impacted travel, disrupted supply chain infrastructure and resulted in consumer losses of property and, in some cases, lives, which put pressure on the economy.

Winter Storm Uri, which crippled much of Texas in February of 2021, impacted much of our network in the Permian Basin and Gulf Coast region, causing pipeline disruptions, power outages and constrained consumer travel.

Additionally, 2021 ushered in both improvements in COVID-19 testing and vaccine distribution, but also a shift in regulatory sentiment.

The changing regulatory landscape has renewed industry focus on climate change concerns and resulted in an acceleration of ESG efforts.

While it has inspired expansion of technological investment in lower carbon-emission technologies such as renewables, green and blue hydrogen energy, as well as carbon capture, utilization and storage (“CCUS”) projects, it has also translated into delays in the EPA’s RFS activities with respect to proposing and finalizing volumetric requirements for Renewable Volume Obligations and granting small refinery exemptions, which in turn has had a significant impact on the prices of RINs.

Unfavorable RINs prices can impact the capture of crack spreads, and can be especially impactful to small refineries, and we felt the squeeze of high RINs prices in our refining segment, particularly with respect to our Krotz Springs and El Dorado refineries.

The cost of energy also affects our macro-economic environment.

During 2021, U.S.

natural gas prices saw a brief spike in February during Winter Storm Uri, which strained natural gas supply and distribution and, likewise, the electricity markets in Texas and Oklahoma.

Throughout most of the remainder of 2021, domestic natural gas demand outpaced growth in supply and contributed to sustained increases in natural gas prices.

Domestically, U.S.

Henry Hub natural gas prices rose dramatically to an average $3.86 per million British thermal units on a quarterly basis in 2021, up from $1.86 in 2020.

International natural gas pricing was volatile despite following the traditional seasonal pattern, swinging from Pandemic-driven lows in 2020 to record highs around the world.

The spike in natural gas prices in the first quarter of 2021 relating to Winter Storm Uri had a significant impact on our refining contribution margin, and the high natural gas prices continued to impact our crack spread capture for the remainder 2021.

That said, we successfully employed commercial strategies to help mitigate the risk of extreme volatility in energy costs during much of the year, following that initial spike.

Looking Ahead to 2022

As we look ahead to 2022, we expect the global economic environment to continue to support growth, though both growth and stability may be constrained by building inflationary pressures.

In February 2022, oil prices have surged toward $100 a barrel for the first time since 2014 which has the effect of both hampering growth and driving inflation.

There is an expectation that the U.S.

Federal Reserve and fellow central banks may make rate changes to combat the rising inflation.

At the same time, inflation hits companies and consumers with higher costs for essentials like food, transportation and heat.

In fact, the International Monetary Fund recently raised its forecast for global consumer price increases to an average 3.9% in advanced economies this year, up from 2.3%, and 5.9% in emerging and developing nations.

Additionally, military actions by Russia towards the Ukraine are causing significant consternation among NATO countries and across the global landscape, and could result in sanctions on Russia that could disrupt the global markets in ways that cannot yet be anticipated, but that could reduce Russian supply and create demand for domestic crude and refined product, and could also impact natural gas exports and domestic prices.

The uncertainties surrounding future oil supply are compounded by conflicts in the Middle East, which resulted in damaged fuel storage

Management's Discussion and Analysis

Crack spreads are impacted by the price of refined products as compared to the price of crude oil and therefore may narrow or widen based on different trends in those market prices, or lags in one commodity pricing change versus the other.

For example, the average Gulf Coast 5-3-2 ULSD crack spread per barrel remained relatively steady at $8.18 in 2020 compared to $15.77 in 2019, despite Gulf Coast price of gasoline (CBOB) decreasing 33.1%, from an average of $1.63 per gallon in 2019 to $1.09 per gallon in 2020, which indicates that decreases in feedstocks trended similarly.

As a result, while, in such circumstances, total revenues for gasoline and corresponding cost of materials and other will be lower (assuming consistent volumes), refining margins would remain relatively flat year-over-year.

Thus, while fluctuations in refined product prices will significantly impact our top line revenue (assuming consistent volumes), crack spread has greater direct impact on our margins.

facilities in Abu Dhabi and increases in oil production in countries such as Libya and Kazakhstan in response to blockades and other disruptions.

Concerns about low oil inventories and potential supply disruptions have outweighed downward price pressure from China’s announcement that it will release crude oil from its national strategic stockpiles.

All of these contributing factors, combined with upward price pressures on natural gas, liquified natural gas ("LNG"), and coal energy are expected to increase the demand for hydrocarbon-based energy in 2022.

Likewise, we expect continued improvements in crack spreads, driven by increased demand.

Absent government intervention, industry analysts expect the Brent-WTI differential to be favorable for domestic exports in 2022, including the U.S.

Gulf Coast region.

However, the Midland-Cushing differential is not expected to improve significantly in 2022, due to overbuilt pipeline capacity despite an expectation for depleted Cushing inventory.

However, significant export developments and other factors could quickly shift differentials to be more favorable to our Permian-heavy positioning.

Meanwhile, in December 2021, the EPA proposed a rule to revise 2021 Renewable Volume Requirements and to suggest rates for 2022 and 2023.

Additionally, the EPA has proposed views that such changes may be sufficient to render the granting of small refinery exemptions unnecessary, based on the arguably inaccurate presumption that small refineries are not unduly burdened by the cost of RINs.

In any case, we will continue to pursue the small refinery exemptions.

Furthermore, the establishment of volumes for two years may stabilize RIN prices, though they may continue to be higher than historical averages.

See below for further discussion on how certain key market trends impact our operating results.

WTI crude oil represents the largest component of our crude slate at all of our refineries, and can be sourced through our gathering channels or optimization efforts from Midland, Texas or Cushing, Oklahoma or other locations.The table below reflects the quarterly average prices of WTI Midland and WTI Cushing crude oil for each of the quarterly periods over the past three years.

As shown in the historical graph, WTI Midland crude prices can be favorable or unfavorable as compared to WTI Cushing.

We manage our supply chain risk to ensure that we have the barrels to meet our crude slate consumption plan for each month through gathering supply contracts and throughput agreements on various strategic pipelines, some of which include those where we hold equity method investments.

We manage market price risk on crude oil through financial derivative hedges, in accordance with our risk management strategies.

The chart below illustrates the average quarterly price of WTI Midland and WTI Cushing over the past three years.

Management's Discussion and Analysis

Crude Pricing Differentials

crude oil production has increased over recent years, domestic refiners have benefited from the discount for WTI Cushing compared to Brent, a global benchmark crude.

This generally leads to higher margins in our refineries, as refined product prices are influenced by Brent crude prices and the majority of our crude supply is WTI-linked.

Because of our positioning in the Permian basin, including our access to significant sources of WTI Midland crude through our gathering system, we are even further benefited by discounts for WTI Midland/WTI Cushing differentials.

When these discounts shrink or become premiums, our reliance on WTI-linked crude pricing, and specifically WTI Midland crude, can negatively impact our refining margins.

Conversely, as these price discounts widen, so does our competitive advantage, created specifically by our access to WTI Midland crude sourced through our gathering systems.

The chart below illustrates the key differentials impacting our refining operations, including WTI Cushing to Brent, WTI Midland to WTI Cushing, and LLS to WTI Cushing over the past three years.

Refined Product Prices

We are impacted by refined product prices in two ways:

(1) in terms of the prices we are able to sell our refined product for in our refining segment, and (2) in terms of the cost to acquire the refined products to meet Refining production shortfalls (e.g., when we have outages), or to acquire refined fuel products we sell to our wholesale customers in our logistics segment and at our convenience stores in our retail segment.

These prices largely depends on numerous factors beyond our control, including the supply of, and demand for, crude oil, gasoline and other refined petroleum products which, in turn, depend on, among other factors, changes in domestic and foreign economies, weather conditions, domestic and foreign political affairs, production levels, the availability of imports, the marketing of competitive fuels and government regulation.

Our refineries produce the following products:

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In addition to decreases in the price of CBOB gasoline, the Gulf Coast price of High Sulfur Diesel decreased 40.2%, from an average of $1.76 per gallon in 2019 to $1.06 per gallon in 2020.

The Gulf Coast price of Ultra Low Sulfur Diesel decreased 36.6% from an average of $1.88 per gallon in 2019 to $1.19 per gallon in 2020.

The charts below illustrate the quarterly average prices of Gulf Coast Gasoline, U.S.

High Sulfur Diesel and U.S.

Ultra Low Sulfur Diesel over the past three years.

Crude Pricing Differentials

crude oil production has increased over recent years, domestic producers have benefited from the discount for WTI Cushing compared to Brent, a global benchmark crude.

This generally leads to higher margins in our refineries as refined product prices are influenced by Brent crude prices and the majority of our crude supply is WTI-linked.

The average discount for WTI Cushing compared to Brent increased to $3.54 during 2020 from $7.13 during 2019.

We note similar historical trends when reviewing the discount for LLS compared to WTI Cushing, where the average discount decreased to $1.67 during 2020 from $5.66 during 2019.

Additionally, our refineries continue to have relatively greater access to WTI Midland and WTI Midland-linked crude feedstocks compared to certain of our competitors.

The average discount for WTI Midland compared to WTI Cushing decreased to $(0.13) during 2020 from $0.68 during 2019.

As these discounts shrink or become premiums, our reliance on WTI-linked crude pricing, and specifically WTI Midland crude can negatively impact our results.

Conversely, as these price discounts increase, so does our competitive advantage, created by our access to WTI-linked crude oil pricing, and specifically WTI Midland crude sources through our gathering systems.

Management's Discussion and Analysis

The chart below illustrates the differentials of both Brent crude oil and WTI Midland crude oil as compared to WTI Cushing crude oil as well as WTI Cushing as compared to LLS over the past three years.

The charts below illustrate the quarterly average prices of Gulf Coast Gasoline (CBOB), HSD and ULSD over the past three years.

Crack Spreads

Crack spreads are used as benchmarks for predicting and evaluating a refinery's product margins by measuring the difference between the market price of feedstocks/crude oil and the resultant refined products.

Generally, a crack spread represents the approximate refining margin resulting from processing one barrel of crude oil into its outputs, generally gasoline and diesel fuel.

The table below reflects the quarterly average Gulf Coast 5-3-2 ULSD, 3-2-1 ULSD and 2-1-1 HSD/LLS crack spreads for each of the quarterly periods over the past three years.

As the chart illustrates, the 3-2-1 crack spread has consistently outperformed the 5-3-2 and the 2-1-1 crack spreads.

When market conditions consist of near-capacity throughputs and no significant outages, our Big Spring refinery, whose benchmark is the 3-2-1 crack spread, should outperform our other refineries in terms of refining margin, which are benchmarked against either the 5-3-2 or the 2-1-1 crack spreads.

Management's Discussion and Analysis

RIN Volatility

Environmental regulations continue to affect our margins in the form of volatility in the costs of RINs .

On a consolidated basis, we work to balance our RINs obligations in order to minimize the effect of RINs on our results.

While we generate RINs in both of our refining and logistics segments through our ethanol blending and biodiesel production, our refining segment needs to purchase additional RINs to satisfy its obligations.

As a result, increases in the price of RINs generally adversely affect our results of operations.

It is not possible at this time to predict with certainty what future volumes or costs may be, but given the volatile price of RINs, the cost of purchasing sufficient RINs could have an adverse impact on our results of operations if we are unable to recover those costs in the price of our refined products.

The chart below illustrates the volatile nature of the price for RINs over the past three years.

Environmental regulations and the political environment continue to affect our refining margins in the form of volatility in the price of RINs .

On a consolidated basis, we work to balance our RINs Obligation in order to minimize the effect of RINs prices on our results.

While we obtain RINs in our refining and logistics segments through our ethanol and biodiesel blending and generate RINs through biodiesel production, our refining segment still must purchase additional RINs to satisfy its obligations.

Additionally, our ability to obtain RINs through blending is limited by our refined product slate, blending capabilities and market constraints.

The cost to purchase these additional RINs is a significant cash outflow for our business.

Additionally, increases in the market prices of RINs generally adversely affect our results of operations through changes in fair value to our existing RINs Obligation, to the extent we do not have offsetting RINs inventory on hand or effective economic hedges through net forward purchase commitments.

RINs prices are highly sensitive to regulatory and political influence and conditions, and therefore often do not correlate to movements in crude oil prices, refined product prices or crack spreads.

Furthermore, RINs prices are impacted by market expectations regarding whether the EPA may grant SREs.

The unfavorable 2020 SRE judicial rulings, as well as the changes in regulatory sentiment following the presidential administration change, have caused significant increases in RINs prices to all-time highs in 2021.

Because of the volatility in RINs prices, it is not possible to predict future RINs cost with certainty, and movements in RINs prices can have significant and unanticipated adverse effects on our refining margins that are outside of our control.

The chart below illustrates the volatility in RINs over the past three years.

Management's Discussion and Analysis

Energy costs are a significant element of our Refining contribution margin and can significantly impact our ability to capture crack spreads, with natural gas representing the largest component.

Natural gas prices are driven by supply-side factors such as amount of natural gas production, level of natural gas in storage and import and export activity, while demand-side factors include variability of weather, economic growth and the availability and price of other fuels.

Refiners and other large-volume fuel consumers may be more or less susceptible to volatility in natural gas prices depending on their consumption levels as well as their capabilities to switch to more economical sources of fuel/energy.

Additionally, geographic location of facilities make consumers vulnerable to price differentials of natural gas available at different supply hubs.

Within Delek’s geographic footprint, we source the majority of our natural gas from the Gulf Coast, and secondarily from the Permian, coinciding with the physical locations of our refineries.

We manage our risk around natural gas prices by entering into variable and fixed-price supply contracts in both the Gulf and Permian Basin or by entering into derivative hedges based on forecasted consumption and forward curve prices, as appropriate, in accordance with our risk policy.

The charts below illustrate the quarterly average prices of Waha (Permian Basin) and Henry Hub (Gulf Coast) over the past three years.

Summary Financial and Other Information

The following table provides summary financial data for Delek (in millions):

Summary Statement of Operations Data Year Ended December 31,

Summary Statement of Operations Data (1)

Year Ended December 31,

Net revenues $ 10,648.2 $ 7,301.8

Total operating costs and expenses (2)

Operating (loss) income (728.0) 492.3

10,778.6 8,029.8

Operating loss (2)

(130.4) (728.0)

Total non-operating expenses, net 102.6 35.1

(Loss) income before income tax (benefit) expense (763.1) 402.7

Income tax (benefit) expense (192.7) 71.7

(Loss) income from continuing operations, net of tax (570.4) 331.0

Income from discontinued operations, net of tax — 5.2

Net (loss) income (570.4) 336.2

Loss before income tax benefit (233.0) (763.1)

Income tax benefit (62.5) (192.7)

Net loss (170.5) (570.4)

Net income attributed to non-controlling interests 33.0 37.6

Net (loss) income attributable to Delek $ (608.0) $ 310.6

Net loss attributable to Delek $ (203.5) $ (608.0)

(1) This information is presented at a summary level for your reference.

See the Consolidated Statements of Income included in Item 8.Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for more detail regarding our results of operations and net loss per share.

(2 ) For the year ended December 31, 2021, we recorded an immaterial cumulative correction relating to prior periods to capitalize manufacturing overhead costs that should have been included in refining finished goods totaling $21.5 million.

The impact of the balance sheet error correction would not have been material to the prior periods presented and is not material to total inventory or to beginning retained earnings.

Of that amount, $14.0 million was recognized as a reduction of operating expenses and $7.5 million was recognized as a reduction of depreciation in the refining segment.

We report operating results in three reportable segments:

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Management measures the operating performance of each of its reportable segments based on the segment contribution margin.

Management's Discussion and Analysis

Results of Operations

Consolidated Results of Operations — Comparison of the Year Ended December 31, 2021 versus the Year Ended December 31, 2020

Consolidated net loss for the year ended December 31, 2020 was $570.4 million compared to net income of $336.2 million for the year ended December 31, 2019.

Consolidated net loss attributable to Delek for the year ended December 31, 2020 was $608.0 million, or $(8.26) per basic share, compared to net income of $310.6 million, or $4.10 per basic share, for the year ended December 31, 2019.

Explanations for significant drivers impacting net income as compared to the comparable period of the prior year are discussed in the sections below.

We generated net revenues of $7,301.8 million and $9,298.2 million during the years ended December 31, 2020 and 2019, respectively, a decrease of $1,996.4 million, or 21.5%.

The decrease in net revenues was primarily due to the following:

• in our refining segment, decreases in the average price of U.S.

Gulf Coast gasoline of 33.1%, ULSD of 36.6%, and High-Sulfur diesel ("HSD") of 40.2%;

• in our retail segment, decreases in fuel sales volumes due to demand slowdown as a result of the COVID-19 Pandemic and reduction in average number of stores, as well as a 17.5% decrease in average price charged per gallon;

partially offset by an increase in merchandise revenue;

• in our logistics segment, decreases in the average volume sold and sales prices per gallon of gasoline and diesel sold in our West Texas marketing operations, where the average sales prices per gallon of gasoline and diesel sold decreased $0.49 per gallon and $0.71 per gallon, respectively.

Such decrease was partially offset by increased revenue associated with agreements executed in connection with Big Spring Gathering System and Delek Trucking acquisitions.

Operating Costs and Expenses

Consolidated net loss for the year ended December 31, 2021 was $170.5 million compared to $570.4 million for the year ended December 31, 2020.

Consolidated net loss attributable to Delek for the year ended December 31, 2021 was $203.5 million, or $(2.75) per basic share, compared to $608.0 million, or $(8.26) per basic share, for the year ended December 31, 2020.

Explanations for significant drivers impacting net loss as compared to the comparable period of the prior year are discussed in the sections below.

We generated net revenues of $10,648.2 million and $7,301.8 million during the years ended December 31, 2021 and 2020, respectively, an increase of $3,346.4 million, or 45.8%.

The increase in net revenues was primarily due to the following:

• in our refining segment, increases in the average price of U.S.

Gulf Coast gasoline of 85.2%, ULSD of 69.5%, and HSD of 65.1%;

• in our logistics segment, increases in the average sales prices per gallon of gasoline and diesel sold in our West Texas marketing operations, as well increased revenues associated with agreements executed in the year 2020, partially offset by decreased throughputs primarily due to the impact of Winter Storm Uri;

• in our retail segment, increases in fuel sales primarily attributable to a 42.4% increase in average price charged per gallon sold.

Management's Discussion and Analysis

Total Operating Costs and Expenses

Cost of Materials and Other

Cost of materials and other was $6,841.2 million for the year ended December 31, 2020, compared to $7,657.2 million for 2019, a decrease of $816.0 million, or 10.7%.

The net decrease in cost of materials and other primarily related to the following:

• a decrease in the cost of crude oil feedstocks at the refineries including a decrease in the cost of WTI Cushing crude oil from an average of $56.99 per barrel to an average of $39.89, and a decrease in the cost of WTI Midland crude oil from an average of $56.31 per barrel to an average of $40.02 per barrel;

• a decrease in average volumes sold and the cost of refined products in the logistics segment where the average cost per gallon of gasoline and diesel purchased decreased $0.43 per gallon and $0.66 per gallon, respectively;

• a decrease in retail fuel cost of materials and other attributable to demand slowdown, a decrease in average cost per gallon of $0.50 and a reduction in average number of stores during the year.

Such decreases were partially offset by:

• a decrease in hedging gains to a loss of $83.4 million recognized during the year ended December 31, 2020 from a gain of $22.8 million recognized during the year ended December 31, 2019

• the (expense) benefit of $(29.2) million related to the change in pre-tax inventory valuation recognized during the year ended December 31, 2020 compared to $52.3 million recognized during the year ended December 31, 2019;

• a prior period benefit of approximately $77.6 million and $20.7 million related to the BTC and 2018 RINs waivers, respectively, recognized during 2019.

Cost of materials and other was $9,739.6 million for the year ended December 31, 2021, compared to $6,841.2 million for 2020, an increase of $2,898.4 million, or 42.4%.

The net increase in cost of materials and other primarily related to the following:

• an increase in the cost of crude oil feedstocks at the refineries, including a 70.7% increase in the average cost of WTI Cushing crude oil and a 71.3% increase in the average cost of WTI Midland crude oil;

• increases in average RINs costs during the year ended December 31, 2021 compared to the year ended December 31, 2020;

• increases in the average cost per gallon of gasoline and diesel sold, partially offset by decreases in the average volumes of gasoline and diesel sold in our West Texas marketing operations;

• an increase in retail fuel cost of materials and other primarily attributable to a 51.6% increase in average cost per gallon sold.

Such increases were partially offset by the following:

• an increase in commodity hedging gains to a loss of $51.7 million recognized during the year ended December 31, 2021 from a loss of $87.5 million recognized during the year ended December 31, 2020;

• the benefit (expense) of $22.3 millions related to the change in pre-tax inventory valuation recognized during the year ended December 31, 2021 compared to $(29.2) millions recognized during the year ended December 31, 2020.

Operating Expenses

Operating expenses (included in both cost of sales and other operating expenses) were $559.8 million for the year ended December 31, 2020 compared to $682.2 million in 2019, a decrease of $122.4 million, or (17.9)%.

The decrease in operating expenses was primarily driven by the following:

• decrease in outside service costs across all segments due to cost reduction measures;

• decreases in the refining segment related to lower employee, utilities, catalysts and maintenance costs;

• decrease in retail operating expenses due to reduction in number of stores.

Management's Discussion and Analysis

Operating expenses (included in both cost of sales and other operating expenses) were $595.6 million for the year ended December 31, 2021 compared to $559.8 million in 2020, an increase of $35.8 million, or 6.4%.

The increase in operating expenses was primarily driven by the following:

• an increase in variable expenses primarily associated with higher natural gas costs during the February 2021 severe freezing conditions that affected most of the regions where we operate and higher natural gas pricing during the third quarter of 2021;

• increases in employee and outside services costs in our logistics segment due to terminating certain cost cutting measures previously implemented in response to the Pandemic.

Such increases were partially offset by the following:

• a one-time favorable adjustment of $14.0 million in the third quarter of 2021 to reflect the cumulative adjustment to capitalize manufacturing overhead in refining finished goods inventory.

General and Administrative Expenses

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The decrease was primarily driven by the following:

• decrease in contract services due to cost reduction measures;

• decrease in travel related expense due to travel restrictions in place as a result of the COVID-19 Pandemic;

• decrease in loss allowance on a note receivable;

• decrease in stock-based compensation due to workforce reductions in 2020.

These decreases were partially offset by increases in salaried labor, including severance, partially offset by a decrease in incentive accrual.

• a decrease in employee expenses partially due to additional severance costs incurred in prior year and suspension of matching contributions to our 401(k) plan for the first half of 2021 while the plan was still in place during the year ended December 31, 2020;

• a decrease in contract services due to additional legal and consulting services associated with the drop downs in prior year and cost reduction measures.

Depreciation and Amortization

Depreciation and amortization (included in both cost of sales and other operating expenses) was $267.6 million and $194.3 million for the years ended December 31, 2020 and 2019, respectively, an increase of $73.3 million, or 37.7%, primarily due to the following:

• depreciation associated with assets added during the Big Spring refinery turnaround in the first quarter of 2020, the El Dorado turnaround assets added in the second quarter of 2019 and the addition of the alkylation unit at our Krotz Springs refinery late in the second quarter of 2019;

• accelerated depreciation of approximately $19.0 million taken in the fourth quarter of 2020 primarily due to the decision to abandon certain property and equipment.

Depreciation and amortization (included in both cost of sales and other operating expenses) was $264.6 million and $267.6 million for the years ended December 31, 2021 and 2020, respectively, a decrease of $3.0 million, or 1.1%.

Other Operating Income, Net

Other operating income, net was $13.1 million and $2.5 million for the years ended December 31, 2020 and 2019, respectively, an increase of $10.6 million, primarily due to a gain of $10.8 million on the underlying commodity related to our contract to store crude oil barrels at one of the Strategic Petroleum Reserve locations.

Refer to Note 13 of the consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, for additional information.

Non-Operating Expenses

Other operating income, net was $50.6 million and $13.1 million for the years ended December 31, 2021 and 2020, respectively, an increase of $37.5 million, primarily due to following:

• a gain of $23.3 million from property and casualty and business interruption insurance recoveries associated with losses incurred from Winter Storm Uri and the El Dorado fire;

• a $21.8 million increase in gains from our trading derivatives

Such increase was partially offset by $10.8 million gain on the underlying commodity related tie the Strategic Petroleum Reserve financial asset during the prior year period.

Management's Discussion and Analysis

Non-Operating Expenses, Net

Interest Expense

Interest expense was $129.0 million in the year ended December 31, 2020, compared to $131.1 million for 2019, a decrease of $2.1 million, or 1.6%.

Interest expense was $137.2 million in the year ended December 31, 2021, compared to $129.0 million for 2020, an increase of $8.2 million, or 6.4% primarily due to the following:

• an increase in net average borrowings outstanding (including the obligations under the supply and offtake agreements which have an associated interest charge) of approximately $80.6 million during the year ended December 31, 2021 (calculated as a simple average of beginning borrowings/obligations and ending borrowings/obligations for the period) compared to the year ended December 31, 2020;

• an increase in the average effective interest rate of 0.16% during the year ended December 31, 2021 compared to the year ended December 31, 2020 (where effective interest rate is calculated as interest expense divided by the net average borrowings/obligations outstanding).

Results from Equity Method Investments

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This decrease was primarily driven by the following:

• an $8.5 million loss from WWP Project Financing Joint Venture primarily due to impairment taken by the underlying WWP Joint Venture.

This decrease was partially offset by an increase in income primarily related to our logistics joint ventures.

Other Non-Operating Expenses, Net

• decrease in income from our logistics' equity method investments due to lower volumes as the impact of the February 2021 Winter Storm Uri was pervasive across all of our equity method investments' pipeline systems;

• a decrease in income from our investment in W2W Holdings LLC to a loss of $17.7 million during the year ended December 31, 2021 from a loss of $8.5 million in the year ended December 31, 2020.

During the year ended December 31, 2021, we recognized a receivable of $27.5 million, $20.9 million of which is included as a gain in other income, related to payment to be received from a loan buy-out agreement between Wink to Webster Pipeline LLC and the Company.

Refer to Note 6 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for additional information.

During the year ended December 31, 2020, we recognized a gain of $56.8 million on the sale of our non-operating refinery located in Bakersfield, California.

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Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Other income increased $7.6 million, to $3.5 million during the year ended December 31, 2020, compared to expense of $4.1 million year ended December 31, 2019.

Income tax expense decreased $264.4 million during the years ended December 31, 2020 compared to the same period for 2019, primarily driven by the following:

• pre-tax loss of $763.1 million compared to pre-tax income of $402.7 million for the years ended December 31, 2020 and 2019, respectively;

Management's Discussion and Analysis

• an increase in our effective tax rate which was 25.3% compared to 17.8% for the years ended December 31, 2020 and 2019, respectively, primarily due to the following:

◦ projected 2020 federal net operating loss carryback to a prior 35% tax rate year creating a 14% tax rate arbitrage;

◦ reversal of a valuation allowance attributable to book-tax basis differences in partnership investments reported as a discrete benefit in the first quarter, offset by an increase in valuation allowance on certain state attributes;

◦ exclusion of goodwill impairment expense from taxable income.

Income tax benefit decreased $130.2 million resulting in net benefit of $62.5 million during the year ended December 31, 2021 compared to the same period for 2020, primarily driven by the following:

• pre-tax loss of $233.0 million compared to $763.1 million for the years ended December 31, 2021 and 2020, respectively;

• 2020 federal net operating loss carryback to a prior 35% tax rate year creating a 14% rate arbitrage and $16.8 million benefit in 2020;

• the reversal of a valuation allowance attributable to book-tax basis differences in partnership investments reported as a discrete benefit in the first quarter of 2020, versus a net increase in valuation allowance on certain state tax attributes in 2021;

• exclusion of impairment of goodwill expense in 2020 which reduced taxable benefit.

Refer to Note 14 of the consolidated financial statements included in Item 8.

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A detailed discussion of the fiscal year 2020 compared to year-over-year changes from fiscal year 2019 can be found in Part II, Item 7.

Management's Discussion and Analysis, "Results of Operations", of our 2019 Annual Report on Form 10-K, filed on February 28, 2020.

Management's Discussion and Analysis, "Results of Operations", of our 2020 Annual Report on Form 10-K, filed on March 1, 2021.

Management's Discussion and Analysis

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0.8 % (5.7) %

(1) As of December 31, 2021, we recorded an immaterial cumulative correction relating to prior periods to capitalize manufacturing overhead costs that should have been included in refining finished goods totaling $21.5 million .

The impact of the balance sheet error correction resulted in a reduction in operating expenses of $14.0 million during the year ended December 31, 2021, and would not have been material to the prior periods presented.

Factors Impacting Refining Profitability

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Alternatively, a narrowing of this differential will have an adverse effect on our operating margins.

Global product prices are influenced by the price of Brent crude which is a global benchmark crude.

Global product prices are influenced by the price of Brent which is a global benchmark crude.

Global product prices influence product prices in the U.S.

As a result, our refineries are influenced by the spread between Brent crude and WTI Midland.

As a result, our refineries are influenced by the spread between Brent and WTI Midland.

The Brent less WTI Midland spread represents the differential between the average per barrel price of Brent crude oil and the average per barrel price of WTI Midland crude oil.

A widening of the spread between Brent and WTI Midland will favorably influence our refineries' operating margins.

Also, the Krotz Springs refinery is influenced by the spread between Brent crude and LLS.

The Brent less LLS spread represents the differential between the average per barrel price of Brent crude oil and the average per barrel price of LLS crude oil.

Also, the Krotz Springs refinery is influenced by the spread between Brent and LLS.

The Brent less LLS spread represents the differential between the average per barrel price of Brent and the average per barrel price of LLS crude oil.

A discount in LLS relative to Brent will favorably influence the Krotz Springs refinery operating margin.

The cost to acquire the refined fuel products we sell to our wholesale customers in our logistics segment and at our convenience stores in our retail segment depends on numerous factors beyond our control, including the supply of, and demand for, crude oil, gasoline and other refined petroleum products which, in turn, depend on, among other factors, changes in domestic and foreign economies, weather conditions, domestic and foreign political affairs, production levels, the availability of imports, the marketing of competitive fuels and government regulation.

Our retail merchandise sales are driven by convenience, customer service, competitive pricing and branding.

Motor fuel margin is sales less the delivered cost of fuel and motor fuel taxes, measured on a cents per gallon basis.

Our motor fuel margins are impacted by local supply, demand, weather, competitor pricing and product brand.

Finally, Refining contribution margin is impacted by regulatory costs associated with the cost of RINs as well as energy costs, including the cost of natural gas.

In periods of unfavorable regulatory sentiment or uncertainty regarding the possibility of SREs, RINs prices can increase at higher rates than crack spreads, or even when crack spreads are declining.

This can be particularly impactful on smaller refineries, where the operating cost structure does not have as much scalability as larger refineries.

Additionally, volatility in energy costs, which are captured in our operating expenses and impact our Refining contribution margin, can significantly impact our ability to capture crack spreads, with natural gas representing the most significant component.

Within Delek’s geographic footprint, we source the majority of our natural gas from the Gulf Coast, and secondarily from the Permian, and we do not currently have the capability at our refineries to switch our energy consumption to utilize alternative sources of fuel.

For this reason, unfavorable Gulf Coast (Henry Hub) differentials can impact our crack spread capture.

Management's Discussion and Analysis

The cost to acquire the refined fuel products we sell to our wholesale customers in our logistics segment and at our convenience stores in our retail segment largely depends on numerous factors beyond our control, including the supply of, and demand for, crude oil, gasoline and other refined petroleum products which, in turn, depend on, among other factors, changes in domestic and foreign economies, weather conditions, domestic and foreign political affairs, production levels, the availability of imports, the marketing of competitive fuels and government regulation.

In addition to the above, it continues to be a strategic and operational objective to manage price and supply risk related to crude oil that is used in refinery production, and to develop strategic sourcing relationships.

For that purpose, from a pricing perspective, we enter into commodity derivative contracts to manage our price exposure to our inventory positions, future purchases of crude oil and ethanol, future sales of refined products or to fix margins on future production.

We also enter into future commitments to purchase or sell renewable identification numbers ("RINs") at fixed prices and quantities, which are used to manage the costs of our credits for commitments required by the U.S.

Environmental Protection Agency ("EPA") to blend biofuels into fuel products ("RINs Obligation").

Additionally, from a sourcing perspective, we often enter into purchase and sale contracts with vendors and customers or take physical or financial commodity positions for crude oil that may not be

Management's Discussion and Analysis

used immediately in production, but that may be used to manage the overall supply and availability of crude expected to ultimately be needed for production and/or to meet minimum requirements under strategic pipeline arrangements, and also to optimize and hedge availability risks associated with crude that we ultimately expect to use in production.

We also enter into future commitments to purchase or sell RINs at fixed prices and quantities, which are used to manage the costs of our credits for commitments required by the EPA to blend biofuels into fuel products ("RINs Obligation").

Additionally, from a sourcing perspective, we often enter into purchase and sale contracts with vendors and customers or take physical or financial commodity positions for crude oil that may not be used immediately in production, but that may be used to manage the overall supply and availability of crude expected to ultimately be needed for production and/or to meet minimum requirements under strategic pipeline arrangements, and also to optimize and hedge availability risks associated with crude that we ultimately expect to use in production.

Such transactions are inherently based on certain assumptions and judgments made about the current and possible future availability of crude.

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Such differences could have a material impact on the classification of resulting gains/losses, assets or liabilities, and could also significantly impact refining contribution margin.

Finally, as part of our overall business strategy, we regularly evaluate opportunities to expand our portfolio of businesses and may at any time be discussing or negotiating a transaction that, if consummated, could have a material effect on our business, financial condition, liquidity or results of operations.

Management's Discussion and Analysis

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East Texas crude oil 9.0 % 8.0 %

Other 0.2 % — %

El Dorado, AR Refinery

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34.3 % 29.1 %

Other 0.4 % 0.8 %

(1) Includes inter-refinery sales and sales to other segments which are eliminated in consolidation.

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LLS (per barrel) $ 69.60 $ 41.56

Brent crude oil (per barrel) $ 43.24 $ 64.14

Brent (per barrel) $ 70.96 $ 43.24

Gulf Coast 5-3-2 crack spread (per barrel) - utilizing HSD $ 12.14 $ 5.87

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Gulf Coast high sulfur diesel (per gallon) $ 1.75 $ 1.06

Natural gas (per MMBTU) (2)

$ 2.13 $ 2.53

Natural gas (per One Million British Thermal Units ("MMBTU") $ 3.73 $ 2.13

(1) For our Tyler and El Dorado refineries, we compare our per barrel refining product margin to the Gulf Coast 5-3-2 crack spread consisting of WTI Cushing crude, U.S.

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2 heating oil (ultra low sulfur diesel).

For our Big Spring refinery, we compare our $1.06 per barrel refined product margin to the Gulf Coast 3-2-1 crack spread consisting of WTI Cushing crude, Gulf Coast 87 Conventional gasoline and Gulf Coast ultra low sulfur diesel, and for our Krotz Springs refinery, we compare our per barrel refined product margin to the Gulf Coast 2-1-1 crack spread consisting of LLS crude oil, Gulf Coast 87 Conventional gasoline and U.S.

For our Big Spring refinery, we compare our refined product margin to the Gulf Coast 3-2-1 crack spread consisting of WTI Cushing crude, Gulf Coast 87 Conventional gasoline and Gulf Coast ultra low sulfur diesel, and for our Krotz Springs refinery, we compare our per barrel refined product margin to the Gulf Coast 2-1-1 crack spread consisting of LLS crude oil, Gulf Coast 87 Conventional gasoline and U.S.

Gulf Coast Pipeline No.

2 heating oil (high sulfur diesel).

The Tyler refinery's crude oil input is primarily WTI Midland and East Texas, while the El Dorado refinery's crude input is primarily combination of WTI Midland, local Arkansas and other domestic inland crude oil.

The Tyler refinery's crude oil input is primarily WTI Midland and East Texas, while the El Dorado refinery's crude input is primarily a combination of WTI Midland, local Arkansas and other domestic inland crude oil.

The Big Spring refinery’s crude oil input is primarily comprised of WTS and WTI Midland.

The Krotz Springs refinery’s crude oil input is primarily comprised of LLS and WTI Midland.

(2) One million British thermal units ("MMBTU").

Management's Discussion and Analysis

Refining Segment Operational Comparison of the Year Ended December 31, 2021 versus the Year Ended December 31, 2020

Net revenues for the refining segment decreased $2,980.8 million, or 33.9%, in the year ended December 31, 2020 compared to the year ended December 31, 2019.

The decrease was primarily driven by the following:

• decreases in the average price of U.S.

Net revenues for the refining segment increased $4,138.3 million, or 71.1%, in the year ended December 31, 2021 compared to the year ended December 31, 2020.

The increase was primarily driven by the following:

• increase in the average price of U.S.

Gulf Coast gasoline of 85.2%, ULSD of 69.5%, and HSD of 65.1%;

• decreases in sales volume of refined product totaling 0.8 million barrels partially due to scheduled turnaround activities at our Big Spring refinery, partially offset by increased sales volumes at our El Dorado refinery due to prior year scheduled turnaround activities and production issues, and a 3.9 million barrel decrease in purchased product sales due to decreased demand.

• increases in sales volumes of refined and purchased product of 0.7 million and 1.6 million barrels, respectively.

Net revenues included sales to our retail segment of $355.7 million and $220.0 million, sales to our logistics segment of $321.9 million and $203.8 million and sales to our other segment of $110.1 million and $30.8 million for the years ended December 31, 2021 and 2020, respectively.

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Cost of Materials and Other

Cost of materials and other decreased $1,782.7 million, or 23.7%, in the year ended December 31, 2020 compared to the year ended December 31, 2019.

This decrease was primarily driven by the following:

• a decrease in the cost of WTI Cushing crude oil from an average of $56.99 per barrel for 2019 to an average of $39.89 during 2020;

• a decrease in the cost of WTI Midland crude oil, from an average of $56.31 per barrel for 2019 to an average of $40.02 during 2020.

These decreases were partially offset by the following:

• a prior period benefit of $77.6 million due to the reenactment of the BTC in December 2019 for the 2018 and 2019 periods, of which $31.1 million related to the first three quarters of 2019 blending activities and $36.0 million related to 2018 blending activities;

• a prior period benefit of approximately $20.7 million related to the 2018 RIN Waivers recognized during the year ended December 31, 2019, whereas there was no benefit for the same period of 2020;

• the (expense) benefit of $(29.4) million related to the change in pre-tax inventory valuation recognized during the year ended December 31, 2020 compared to $52.2 million recognized during the twelve year ended December 31, 2019;

• a decrease in hedging gains to a loss of $68.2 million recognized during the year ended December 31, 2020 from a gain of $32.6 million recognized during the year ended December 31, 2019.

Cost of materials and other increased $3,694.0 million, or 64.3%, in the year ended December 31, 2021 compared to the year ended December 31, 2020.

This increase was primarily driven by the following:

• increases in the cost of WTI Cushing crude oil, from an average of $39.89 per barrel to an average of $68.11, or 70.7%;

• increases in the cost of WTI Midland crude oil, from an average of $40.02 per barrel to an average of $68.55, or 71.3%;

• increases in RINs costs from an average cost per RIN of $0.44 and $0.64 for ethanol and biodiesel RINs, respectively during the year ended December 31, 2020 to an average of $1.31 and $1.50 during the year ended December 31, 2021.

These increases were partially offset by the following:

• the benefit (expense) of $23.6 million related to the change in pre-tax inventory valuation recognized during the year ended December 31, 2021 compared to $(29.4) million recognized during the year ended December 31, 2020.

Management's Discussion and Analysis

Our refining segment purchases finished product from our logistics segment and has multiple service agreements with our logistics segment which, among other things, require the refining segment to pay terminalling and storage fees based on the throughput volume of crude and finished product in the logistics segment pipelines and the volume of crude and finished product stored in the logistics segment storage tanks, subject to minimum volume commitments.

These costs and fees were $367.9 million and $339.1 million during the years ended December 31, 2021 and 2020, respectively.

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Refining Margin

Refining margin decreased by $1,198.1 million, or 94.3%, for the year ended December 31, 2020 compared to the year ended December 31, 2019, with a refining margin percentage of 1.2% as compared to 14.4% for the years ended December 31, 2020 and 2019, respectively, primarily driven by the following:

• a narrowing of the discount between WTI Midland crude oil and Brent crude oil where, during the year ended December 31, 2020, the WTI Midland crude oil differential to Brent crude oil was an average discount of $3.22 per barrel compared to $7.83 per barrel during the same period of 2019;

• a narrowing of the average WTI Cushing crude oil and WTS crude oil to $(0.07) during the year ended December 31, 2020, compared to $0.72 during the same period of 2019;

• a narrowing of the discount between WTI Midland crude oil compared to WTI Cushing where, during the year ended December 31, 2020, the average WTI Midland crude oil differential to WTI Cushing crude oil was $(0.13) per barrel compared to $0.68 during the year ended December 31, 2019;

• a narrowing of the discount between WTI Cushing crude oil compared to Brent where, during the year ended December 31, 2020, the average WTI Cushing crude oil differential to Brent crude oil was $3.54 per barrel compared to $7.13 during the year ended December 31, 2019;

• a 48.1% decline in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery), a 47.9% decline in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery), and a 53.0% decline in the average Gulf Coast 2-1-1 crack spread (the primary measure for the Krotz Springs refinery);

• a decrease in hedging gains to a loss of $68.2 million recognized during the year ended December 31, 2020 from a gain of $32.6 million recognized during the year ended December 31, 2019;

• a decrease in reversal benefit of inventory valuation reserve during year ended December 31, 2020 compared to the prior year period.

Refining margin increased by $444.3 million, or 615.4%, for the year ended December 31, 2021 compared to the year ended December 31, 2020, with a refining margin percentage of 5.2% as compared to 1.2% for the years ended December 31, 2021 and 2020, respectively, primarily driven by the following:

• a 106.8% improvement in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery), a 104.5% improvement in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery), and a 123.9% improvement in the average Gulf Coast 2-1-1 crack spread (the primary measure for the Krotz Springs refinery);

• an increase in reversal benefit of inventory valuation reserve during the year 2021 compared to the prior year period.

These increases were partially offset by the following:

• increases in average RINs costs during the year ended December 31, 2021 compared to the year ended December 31, 2020.

Management's Discussion and Analysis

Operating Expenses

Operating expenses decreased $89.7 million, or 18.2%, in the year ended December 31, 2020, compared to year ended December 31, 2019.

The decrease in operating expenses was primarily driven by the following:

• decrease in contract services and inspection costs associated with cost reduction measures taken in 2020;

• decrease in maintenance costs due to deferral of projects amidst the COVID-19 Pandemic, and the incurrence of extraordinary maintenance costs at our Big Spring refinery in the comparable prior year period;

• decreases in utilities and catalyst costs, primarily at our Big Spring and Krotz Springs refineries related to reduced throughput due to turnaround and unit downtime, respectively;

• decrease in employee related expenses due to deferrals of projects and elimination of incentive bonus;

• reduced costs as a result of the sale of the Bakersfield refinery in May 2020.

Management's Discussion and Analysis

Operating expenses increased $31.4 million, or 7.8%, in the year ended December 31, 2021, compared to year ended December 31, 2020.

The increase in operating expenses was primarily driven by the following:

• an increase in utilities costs primarily associated with higher natural gas costs during the February 2021 related to Winter Storm Uri and pricing increases in the later half of 2021;

• an increase in catalyst costs due to increased production at the refineries.

Such increases were offset by the following:

• a one-time favorable adjustment of $14.0 million in the third quarter of 2021 to reflect the cumulative adjustment to capitalize manufacturing overhead in refining finished goods inventory.

Contribution Margin

Contribution margin decreased by $1,108.4 million, or a 14.5% decline in contribution margin percentage, for the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily driven by the following:

• the decline of the Midland WTI crude oil differential to Brent crude oil compared to the prior-year period;

• an overall decline in the average crack spreads;

• a decrease in reversal benefit related to inventory valuation reserves recognized during the year ended December 31, 2020 compared to the prior year period;

• a narrowing of the discount between WTI Cushing and WTI crude oil compared to the prior-year period.

These decreases were partially offset by decreases in operating expenses across all refineries.

Contribution margin increased by $412.9 million, or a 6.5% improvement in contribution margin percentage, for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the following:

• an increase in refining margin primarily driven by an overall increase in the average crack spreads, partially offset by higher percentage of purchased product sold and increase in average RINs cost.

Such increase was offset by the following:

• an increase in operating expenses of $31.4 million, or 7.8%.

Management's Discussion and Analysis

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22,647 15,960

Big Spring Gathering System (3)

Permian Gathering System (3)

80,285 82,817

Plains Connection System 124,025 104,770

(1) Excludes jet fuel and petroleum coke.

(2) Consists of terminalling throughputs at our Tyler, Big Spring, Big Sandy and Mount Pleasant, Texas, El Dorado and North Little Rock, Arkansas and Memphis and Nashville, Tennessee terminals.

(3) Throughputs for the Big Spring Gathering System and the Plains Connection System are for the approximately 275 days we owned the assets following the Big Spring Gathering Assets Acquisition effective March 31, 2020.

(2) Consists of terminalling throughputs at our Tyler, Big Spring, Big Sandy and Mount Pleasant, Texas terminals, El Dorado and North Little Rock, Arkansas terminals and Memphis and Nashville, Tennessee terminals.

(3) Throughputs for the Permian Gathering System and the Plains Connection System are for the approximately 275 days we owned the assets following the Big Spring Gathering Assets Acquisition effective March 31, 2020.

Logistics revenue is largely based on fixed-fee or tariff rates charged for throughput volumes running through our logistics network, where many of those volumes are contractually protected by MVCs.

To the extent that our logistics volumes are not subject to MVCs, our Logistics revenue may be negatively impacted in periods where are customers are experiencing economic pressures or reductions in demand for their products.

Additionally, certain of our throughput arrangements contain deficiency credit provisions that may require us to defer excess MVC fees collected over actual throughputs to apply toward MVC deficiencies in future periods.

With respect to our equity method investments in pipeline joint ventures, our earnings from those investments (which is based on our pro rata ownership percentage of the joint venture's recognized net income or loss) are directly impacted by the operations of those joint ventures.

Items impacting the joint venture net income (loss) may include (but is not limited to) the following:

long-term throughput contractual arrangements and related MVCs and, in some cases, deficiency credit provisions;

the demand for walk-up nominations;

applicable rates or tariffs;

long-lived asset or other impairments assessed at the joint venture level;

and pipeline releases or other contingent liabilities.

With respect to our West Texas marketing activities, our profitability is dependent upon the cost of landed product versus the rack price of refined product sold.

Our logistics segment is generally protected from commodity price risk because inventory is purchased and then immediately sold at the rack.

Management's Discussion and Analysis

Logistics Segment Operational Comparison of the Year Ended December 31, 2021 versus the Year Ended December 31, 2020

Net revenues decreased by $20.6 million, or 3.5%, in the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily driven by the following:

• decreases in the average sales prices per gallon of gasoline and diesel sold, partially offset by increase in the average sales volume of gasoline in our West Texas marketing operations:

◦ the average volumes of gasoline sold increased by 12.6 million gallons, offset by 8.1 million decrease of diesel gallons sold.

◦ the average sales prices per gallon of gasoline and diesel sold decreased by $0.49 per gallon and $0.71 per gallon, respectively.

Such decreases were partially offset by the following:

• increased revenues associated with agreements executed in connection with Big Spring Gathering System and Delek Trucking acquisitions, which were effective March 31, 2020 and May 1, 2020, respectively.

Net revenues increased by $137.5 million, or 24.4%, in the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily driven by the following:

• increased revenues associated with agreements executed in connection with Permian Gathering System and Delek Trucking acquisitions, which were effective March 31, 2020 and May 1, 2020, respectively.

Refer to Note 5 of the consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, for additional information.

• increased revenues at our Big Springs Refinery Crude Pipeline, as a result of new contracts executed in the second quarter of 2020;

• increases in the average sales prices per gallon of gasoline and diesel sold, partially offset by decreases in the average sales volume of gasoline and diesel sold in our West Texas marketing operations:

◦ the average sales prices per gallon of gasoline and diesel sold increased by $0.78 per gallon and $0.83 per gallon, respectively;

◦ the average volumes of gasoline sold decreased by 10.5 million gallons, offset by 8.8 million decrease of diesel gallons sold.

Such increases were partially offset by the following:

• decreases in throughputs due to the impact of the severe freezing conditions that affected most of the regions where we operate resulting in lower volumes outside of contractual MVCs during the year ended December 31, 2021 when compared to the year ended December 31, 2020;

• decreases in throughputs at the Paline pipeline due to scheduled pipeline maintenance.

Net revenues included sales to our refining segment of $417.0 million and $377.7 million for the years ended December 31, 2021 and 2020, respectively, and sales to our other segment of $1.8 million and $2.1 million for the years ended December 31, 2021 and 2020, respectively.

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Cost of Materials and Other

Cost of materials and other for the logistics segment decreased by $67.4 million, or 20.0%, in the year ended December 31, 2020 compared to the year ended December 31, 2019.

This decrease was primarily driven by the following:

• decreases in the average volumes of diesel sold and average cost per gallon of gasoline and diesel sold partially offset by increases in averages volumes of gasoline sold in our West Texas marketing operations:

◦ the average volumes of gasoline sold increased by 12.6 million gallons, partially offset by a 8.1 million decrease of diesel gallons sold.

◦ the average cost per gallon of gasoline and diesel sold decreased by $0.43 per gallon and $0.66 per gallon, respectively.

Cost of materials and other for the logistics segment increased by $115.3 million, or 42.8%, in the year ended December 31, 2021 compared to the year ended December 31, 2020.

This increase was primarily driven by the following related to our West Texas marketing operations:

• the average cost per gallon of gasoline and diesel sold increased by $0.83 per gallon and $0.80 per gallon, respectively;

• the average volumes of gasoline and diesel sold decreased by 10.5 million gallons and 8.8 million gallons, respectively.

Our logistics segment purchased product from our refining segment of $321.9 million and $203.8 million for the years ended December 31, 2021 and 2020, respectively.

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Operating Expenses

Operating expenses decreased by $17.9 million, or 24.2%, in the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily driven by the following:

• decrease in employee and outside services costs due to measures implemented to respond to the COVID-19 Pandemic including delaying non-essential projects;

• lower operating costs associated with allocated contract services pertaining to certain of our assets;

• decreases in variable expenses such as utilities, maintenance and materials costs due to lower production.

Operating expenses increased by $4.6 million, or 8.2%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the following:

• increases in employee and outside service costs after cost cutting measures implemented to respond to the COVID-19 Pandemic, including delaying non-essential projects, ended;

• increase in energy costs due to higher natural gas prices;

• increases in variable expenses such as maintenance and materials costs due to higher throughput;

• increases in utility costs as a result of significantly higher energy costs during the February 2021 severe freezing conditions that affected most of the regions where we operate.

Contribution Margin

Contribution margin increased by $17.6 million, or 7.4%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the following:

• increases in revenue associated with agreements executed in connection with Big Spring Gathering System and Delek Trucking acquisitions;

• decreases in operating expenses.

• an increase in gross margin of $1.35 per barrel in our West Texas marketing operations;

• increases in revenues associated with agreements executed in connection with the Permian Gathering System and Delek Trucking acquisitions.

Such increases were partially offset by the following:

• decreases in gross margin per barrel sold of $2.07 in our West Texas marketing operations.

• a decrease in gasoline and diesel volumes sold in our West Texas marketing operations;

• an increase in operating expenses.

Management's Discussion and Analysis

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(2) Same-store comparisons include year-over-year changes in specified metrics for stores that were in service at both the beginning of the year and the end of the most recent year used in the comparison.

Our retail merchandise sales are driven by convenience, customer service, competitive pricing and branding.

Motor fuel margin is sales less the delivered cost of fuel and motor fuel taxes, measured on a cents per gallon basis.

Our motor fuel margins are impacted by local supply, demand, weather, competitor pricing and product brand.

Management's Discussion and Analysis

Retail Segment Operational Comparison of the Year Ended December 31, 2021 versus the Year Ended December 31, 2020

Net revenues for the retail segment decreased by $156.3 million, or 18.7%, for the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily driven by the following:

• total fuel sales were $357.9 million for the year ended December 31, 2020 compared to $524.9 million for 2019, attributable to the following:

◦ a decrease in total retail fuel gallons sold of 176,924 thousand gallons during 2020 compared to 214,094 thousand gallons in 2019, primarily attributable to a same-store decline in fuel volumes of (17.3)%, primarily due to demand slowdown as a result of the COVID-19 Pandemic;

◦ a $0.43 decrease in average price charged per gallon;

◦ $9.8 million decrease related to reduction in number of stores period over period;

• merchandise sales were $323.8 million for the year ended December 31, 2020 compared to $313.1 million for 2019 primarily driven by the following:

◦ a same-store sales increase of 6.2% due to strong sales growth for key categories such as beer, cigarettes and packaged beverages, partially offset by a $10.8 million decrease related to reduction in number of stores period over period.

Net revenues for the retail segment increased by $115.7 million, or 17.0%, for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the following:

• an increase in total fuel sales which were $480.9 million for the year ended December 31, 2021 compared to $357.9 million for 2020, primarily attributable to a $0.86 increase in average price charged per gallon sold, slightly offset by a decrease in total retail fuel gallons sold;

• slightly offset by a decrease in merchandise sales to $316.4 million for the year ended December 31, 2021 compared to $323.8 million for 2020, primarily driven by the same-store sales decrease of (1.8)%.

Management's Discussion and Analysis

Cost of Materials and Other

Cost of materials and other for the retail segment decreased by $161.1 million, or 23.5%, for the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily driven by the following:

• a decrease in average cost per gallon of $0.50 or 23.0% applied to fuel sales volumes that decreased period over period;

• a $16.3 million decrease due to reduction in number of stores period over period.

Cost of materials and other for the retail segment increased by $112.0 million, or 21.4%, for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the following:

• an increase in average cost per gallon of $0.86 or 51.6% applied to fuel sales volumes that decreased period over period.

Our retail segment purchased finished product from our refining segment of $355.7 million and $220.0 million for the years ended December 31, 2021 and 2020, respectively.

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Operating expenses for the retail segment decreased by $0.7 million, or 0.8%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.

This decrease is primarily attributable to a decrease in operating costs associated with the reduction in the number of stores, in addition to the execution of various cost reduction initiatives implemented beginning in the second quarter of 2020.

Contribution Margin

Contribution margin for the retail segment increased by $9.1 million, a 15.6% increase in contribution margin percentage, for the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily driven by a $0.071 per gallon improvement in the retail fuel margin and a 0.2% increase in merchandise margin.

Contribution margin for the retail segment increased by $4.4 million, a 6.5% increase in contribution margin percentage, for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the following:

• an improvement in merchandise margin percentage of 2.2%, partially offset by 2.3% decrease in merchandise sales;

• an increase in fuel sales due to $0.86 increase in sales price, offset by a decrease in average fuel margin of $0.006 per gallon applied to lower fuel sales volumes.

Management's Discussion and Analysis

Liquidity and Capital Resources

Sources of Capital

Our primary sources of liquidity and capital resources are

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• potential issuances of additional equity and debt securities.

At December 31, 2020 our total liquidity amounted to $1.6 billion comprised of $746.8 million in unused credit commitments under the Delek Revolving Credit Facility, $103.4 million in unused credit commitments under the DKL Credit Facility and $787.5 million in cash and cash equivalents.

Historically, we have generated adequate cash from operations to fund ongoing working capital requirements, pay quarterly cash dividends and operational capital expenditures.

At December 31, 2021 our total liquidity amounted to $2.2 billion comprised primarily of $729.6 million in unused credit commitments under the Delek Revolving Credit Facility (as defined in Note 10 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K), $592.0 million in unused credit commitments under the DKL Credit Facility (as defined in Note 10 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K) and $856.5 million in cash and cash equivalents.

Historically, we have generated adequate cash from operations to fund ongoing working capital requirements, pay quarterly cash dividends and fund operational capital expenditures.

In response to the COVID-19 Pandemic and the decline in oil prices, on November 5, 2020, we announced that we elected to suspend dividends in order to conserve capital.

Other funding sources including borrowings under existing credit agreements and issuance of equity and debt securities have been utilized to meet our funding requirements and support our growth capital projects and acquisitions.

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Our debt limitation covenants in our existing financing documents are usual and customary for credit agreements of our type and reflective of market conditions at the time of their execution.

Additionally, our ability to satisfy working capital requirements, to service our debt obligations, to fund planned capital expenditures, or to pay dividends will depend upon future operating performance, which will be affected by prevailing economic conditions in the oil and gas industry and other financial and business factors, including the current COVID-19 Pandemic and the impact on demand and commodity prices as well as crack spreads, some of which are beyond our control.

Additionally, our ability to satisfy working capital requirements, to service our debt obligations, to fund planned capital expenditures, or to pay dividends will depend upon future operating performance, which will be affected by prevailing economic conditions in the oil industry and other financial and business factors, including the current COVID-19 Pandemic and oil prices, some of which are beyond our control.

During 2021 and through the date of this Annual Report, the COVID-19 Pandemic has had a significant negative impact on economic conditions in the U.S., and a particularly severe impact on the oil and gas industry because of the significant impact the Pandemic has had on motor and air travel.

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Here are some of our most significant areas of focus:

• In early 2020, as the economic impact of the Pandemic became evident, we reviewed our capital expenditure planning and forecast and suspended the majority of our non-critical growth capital projects during 2020 as well as made strategic decisions to abandon certain capital assets/projects that may no longer fit our objectives.

Instead, we focused on required maintenance and regulatory projects as well as strategically-timed turnaround activities.

• We have focused on required maintenance and regulatory projects as well as strategically-timed turnaround activities.

As a result, we were able to reduce our capital expenditures to $227.1 million during the year ended December 31, 2021, compared to our initial full-year forecast included in our December 31, 2020 Annual Report on Form 10-K of $239.6 million;

• The temporary suspension of growth and non-essential projects (particularly in Refining) provided us with the opportunity to shift our focus to process improvement initiatives, cost control measures, and opportunities for innovation, which has improved our ability to control costs in terms of operating expenses and the aforementioned critical capital projects, particularly during the fourth quarter of 2020 (and as evident in our results of operations and cash flows from investing activities as presented in our unaudited consolidated financial statements for the three months ended, December 31, 2020, which is presented in our earnings release included in Ex.

99.1 to our Form 8-K filed with the SEC on February 24, 2021), all of which also favorably impact our cash position and provide a longer term foundation for increased operational effectiveness;

• The temporary suspension of growth and non-essential projects (particularly in Refining) provided us with the opportunity to shift our focus to process improvement initiatives, cost control measures, and opportunities for innovation, which has improved our ability to control costs in terms of operating expenses and critical capital projects, all of which also favorably impact our cash position and provide a longer term foundation for increased operational effectiveness;

• Throughout 2021, we continued to monitor credit and liquidity of our key customers, which already go through a stringent and ongoing credit evaluation as part of our internal controls, and we have been able to successfully maintain our collection efforts without significant losses or write-offs.

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• We continued executing on our strategy of divesting of non-strategic or underperforming assets.

Where we made significant divestitures of underperforming stores in Retail during 2019, in 2020 we focused on executing a transaction to divest of our remaining non-operating refinery located in Bakersfield, California.

As a result, on May 7, 2020, we sold our equity interests in our non-operating refinery located in Bakersfield to a subsidiary of Global Clean Energy Holdings, Inc.

(“GCE”) for total cash consideration of $40.0 million (and resulting in a realized gain on the sale of $56.8 million) and which was incurring non-operating losses to maintain basic regulatory requirements.

As a result, not only did the sale produce significant cash proceeds, its elimination was immediately cash accretive.

We made significant divestitures of underperforming stores in Retail during 2019 and in 2020 we focused on executing a transaction to divest our remaining non-operating refinery located in Bakersfield, California.

See further discussion in Note 3 of our consolidated financial statements included in Item 8.

Management's Discussion and Analysis

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K;

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However, many of these activities also require margin deposits that can fluctuate significantly in a volatile market, much of which cannot be anticipated;

Management's Discussion and Analysis

• We continue to actively monitor our maintenance and incurrence covenants under our credit facilities and debt instruments, and have implemented enhancements in our cash forecasting and modeling that allow us to better anticipate potential issues, in many cases, before they occur.

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Both of these decisions have the immediate benefit of conserving capital.

Depending on market conditions, we may make the decision to resume share repurchases could which may take priority over future dividends or growth capital;

Depending on market conditions, we may make the decision to resume share repurchases which may take priority over future dividends or growth capital;

• Finally, we are always evaluating our existing sources of capital and considering the feasibility and potential advantages of strategic transactions and capital markets opportunities that could expand our sources of liquidity and strengthen our flexibility, while balancing the comparative cost of capital, the incremental leverage risk, as well as the potential transactional risk on our core business and infrastructure.

We are pleased that, despite the challenging environment, we have continued to successfully manage our liquidity and available sources of capital during 2021 through strategic transactions such as the following:

◦ The Delek Logistics IDR Simplification, which resulted in the receipt of newly issued registered common limited partner units that we may sell in the market, when we determine that such sale meets all of our criteria for pursuing such a divestiture, including (but not limited to):

▪ that we have evaluated the impact of a dilution of our ownership interest in Delek Logistics' common limited partner units in terms of the impact on distributions to Delek and on Delek's earnings per share and believe the liquidity, potential shareholder value and/or strategic benefits/considerations to be sufficient to warrant the transaction;

▪ that there is a market for the number of units we are considering divesting;

▪ that the cost of capital associated with the sale transaction (i.e., in terms of the fees and discounts) is reasonable and not unduly cost-prohibitive, given the other factors.

◦ By monetizing assets (including financial assets such as RINs inventories), where the cost of capital is not cost-prohibitive compared to the liquidity considerations, through product financing arrangements;

◦ By renegotiating and extending financing arrangements and taking advantage of expansion opportunities under our existing credit facilities, where appropriate.

The two most significant of these transactions executed during 2020 were as follows:

▪ In April 2020, we amended and restated our three Supply and Offtake Agreements with J.

Aron which extended our dedicated financing for the inventory covered through at least December 2022, and updated certain specific market-indexed provisions to improve our ability to manage our exposure to commodity price volatility during the term of the Agreements.

◦ By taking advantage of credit opportunities and favorable investment markets, where appropriate.

The most significant of these transactions executed during 2021 were as follows:

▪ On May 24, 2021, Delek Logistics and Finance Corp.

issued $400.0 million in aggregate principal amount 7.125% Senior Notes due 2028 (the "Delek Logistics 2028 Notes”) at par, requiring semi-annual interest payments in arrears on each June 1 and December 1, commencing on December 31, 2021.

See further discussion in Note 9 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

▪ On May 19, 2020, we amended the Term Loan Credit Facility agreement (as defined in Note 11 of our consolidated financial statements included in Item 8.

Management's Discussion and Analysis

▪ In December 2021, we initiated a program to monetize a portion of our ownership in Delek Logistics under a Rule 10b5-1 program to sell up to 434,590 common limited partner units, which helped us to not only capture $2.1 million (pre-tax) tangible value to date in the Delek valuation but also serves to improve the liquidity of the Delek Logistics units without diluting the overall market capitalization of Delek Logistics.

See further discussion in Note 5 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

As a result of these efforts, and despite the devastating economic effects of the Pandemic on our industry, we have maintained a strong cash position with capital resources flexibility that positions us well as we look forward to the expected economic recovery from the Pandemic, where crack spread forecasts and forward curves indicate the market's expectation for significant recovery in 2022 and stabilization by 2023.

We believe we have sufficient financial resources from the above sources to meet our funding requirements in the next 12 months, including working capital requirements, quarterly cash distributions for Delek Logistics public unitholders, and planned capital expenditures.

However, if market conditions were to change, for instance due to another significant decline in oil prices or crack spreads and/or significant worsening of conditions/uncertainty created by the COVID-19 Pandemic, and our revenue was reduced significantly or operating costs were to increase significantly, our cash flows and liquidity could be unfavorably impacted.

However, if market conditions were to change, for instance due to the significant decline in oil prices or uncertainty created by the COVID-19 Pandemic, and our revenue was reduced significantly or operating costs were to increase significantly, our cash flows and liquidity could be unfavorably impacted.

As of December 31, 2021, we believe we were in compliance with all of our debt maintenance covenants, where the most significant long-term obligation subject to such covenants was the Delek Logistics Credit Facility (see further discussion in Note 10 of our consolidated financial statements included in Item 8.

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as well as the possibility of obtaining other secured and unsecured debt, raising capital through equity issuance, or taking advantage of transactional financing opportunities such as sale-leasebacks or joint ventures, as otherwise contemplated and allowed under our incurrence covenants.

Management's Discussion and Analysis

The following table sets forth a summary of our consolidated cash flows (in millions):

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Financing activities (124.0) 306.4

Net decrease $ (167.8) $ (124.0)

Net increase (decrease) $ 69.0 $ (167.8)

Cash Flows from Operating Activities

Net cash used in operating activities was $282.9 million for the year ended December 31, 2020, compared to cash provided of $575.2 million for the comparable period of 2019.

Cash receipts from customers and cash payments to suppliers and for salaries decreased resulting in a net $960.5 million decrease in cash from operating activities mainly due to a decline in the prices and volume of refined product sold.

This decrease was partially offset by a $9.3 million increase in cash received for dividends, a $90.6 million decrease in cash paid for taxes and a $2.5 million decrease in cash paid for debt interest.

Net cash used in operating activities was $371.4 million for the year ended December 31, 2021, compared to cash used of $282.9 million for the comparable period of 2020.

Cash receipts from customers and cash payments to suppliers and for salaries increased resulting in a net $660.5 million increase in cash from operating activities.

Partially offsetting these increases in cash provided were an increase in cash paid for debt interest of $1.6 million, an increase in income taxes paid of $0.6 million and a decrease in dividends received of $4.0 million.

Cash Flows from Investing Activities

Net cash used in investing activities was $178.4 million for the year ended December 31, 2021, compared to $191.3 million in the comparable period of 2020.

Equity method investment contributions decreased $236.2 million primarily due to our initial investments in and contributions to the Red River Pipeline Joint Venture and WWP Joint Venture in 2019 for $128.6 million and $126.7 million, respectively.

During the year ended December 31, 2020, we contributed $12.2 million related to our Red River Pipeline Joint Venture and $18.9 million related to our interest in WWP and WWP Project Financing JV.

Additionally, we received distributions from our WWP Project Financing JV in the amount of $69.3 million for which there was no comparable activity in the prior year period.

We also received proceeds of $39.9 million from the sale of our Bakersfield refinery in the year ended December 31, 2020.

Also contributing to the decrease was cash purchases of property, plant and equipment which

Management's Discussion and Analysis

decreased from $413.0 million in 2019, to $269.4 million in 2020, partially attributable to delaying non-essential projects in light of the COVID-19 Pandemic.

The increase in cash flows used in investing activities was primarily due to distributions received in the prior year from our WWP Project Financing JV to return excess capital contributions made in the amount of $69.3 million and proceeds of $39.9 million from the sale of the Bakersfield refinery in the prior year for which there was no comparable activity in the current year period.

These increases in cash used in investing activities were partially offset by a decrease in cash purchases of property, plant and equipment which decreased from $269.4 million in 2020, to $222.2 million in 2021, partially attributable to delaying non-essential projects in light of the COVID-19 Pandemic.

Additionally, equity method investment contributions decreased $29.5 million primarily due to contributions made related to our Red River Pipeline Joint Venture and WWP Project Financing JV (each as defined in Note 6 of our accompanying consolidated financial statements in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K) for $12.2 million and $18.9 million, respectively, during the year ended December 31, 2020.

During the year ended December 31, 2021, we contributed $1.4 million related to our Red River Pipeline Joint Venture and $0.3 million related to our WWP Project Financing JV.

Cash Flows from Financing Activities

Net cash provided by financing activities was $306.4 million for the year ended December 31, 2020, compared to cash used of $7.9 million in the comparable 2019 period.

This increase in cash provided was predominantly due to net proceeds received from long-term revolvers of $128.2 million during the year ended December 31, 2020, compared to net payments of $118.3 million in the comparable 2019 period.

Additionally contributing to this increase were a decrease in repurchases of common stock to $1.9 million for the year ended December 31, 2020 compared to $178.1 million in the comparable 2019 period due to management suspending our share repurchase program, and an increase in net proceeds from inventory financing arrangements to $169.1 million for the year ended December 31, 2020 compared to $18.6 million in the comparable 2019 period.

Partially offsetting this increase was a decrease in net proceeds received from term debt to $147.1 million during the year ended December 31, 2020, compared to $399.7 million in the comparable 2019 period, and a $28.9 million increase in repurchase of non-controlling interests primarily associated with IDR simplification transactions.

Net cash used in financing activities was $124.0 million for the year ended December 31, 2021, compared to cash provided of $306.4 million in the comparable 2020 period.

This decrease in cash provided was predominantly due to net payments on long-term revolvers and term debt of $132.0 million during the year ended December 31, 2021, compared to net proceeds of $275.3 million in the comparable 2020 period.

Additionally, net proceeds from product financing arrangements decreased to $38.5 million for the year ended December 31, 2021 compared to $169.1 million in the comparable 2020 period.

Such decreases were partially offset by increases of $69.1 million due to suspension of dividends in the fourth quarter of 2020 and $28.9 million due to the repurchase of non-controlling interest in the prior year period with no comparable activity in the current year.

Cash Position and Indebtedness

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Total unused credit commitments or borrowing base availability, as applicable, under our revolving credit facilities was approximately $1,321.6 million.

The increase of $281.3 million compared to the balance at December 31, 2019 resulted primarily from the additional borrowings under the Term Loan Credit Facility and the Delek Logistics Credit Facility in 2020.

The decrease of $130.4 million in total long term indebtedness as of December 31, 2021 compared to the prior year resulted primarily from net repayments under the Delek Logistics Credit Facility and other term debt in 2021.

As of December 31, 2021, our total long-term indebtedness consisted of the following:

• no aggregate principal amount under the Revolving Credit Facility, due on March 30, 2023, with average borrowing rate of 3.50%;

• an aggregate principal amount of $1,260.0 million under the Term Loan Credit Facility, due on March 30, 2025, with effective interest of 3.53%;

• an aggregate principal amount of $39.6 million in outstanding borrowings under the BHI Term Loan, due on December 31, 2022, with effective interest of 3.58%;

• an aggregate principal amount of $29.2 million in outstanding borrowings under the Delek Hapoalim Term Loan, due on December 31, 2022, with effective interest of 3.67%;

• an aggregate principal amount of $258.0 million under the Delek Logistics Credit Facility, due on September 28, 2023, with average borrowing rate of 2.46%;

• an aggregate principal amount of $250.0 million under the Delek Logistics 2025 Notes, due in 2025, with effective interest rate of 7.20%;

• an aggregate principal amount of $400.0 million under the Delek Logistics 2028 Notes, due in 2028, with effective interest rate of 7.41%;

Management's Discussion and Analysis

• an aggregate principal amount of $50.0 million under the Reliant Bank Revolver, due on June 30, 2022, with fixed interest rate of 4.50%;

• an aggregate principal amount of $20.0 million under the Promissory Notes, due on January 04, 2021, with fixed interest rate of 5.50%.

• the Revolving Credit Facility, due on March 30, 2023, with borrowing rate of 3.50% for base rate loans, and no principal amount outstanding.

See Note 10 to our accompanying consolidated financial statements in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for additional information about our separate debt and credit facilities.

Additionally, our obligation under the supply and offtake inventory financing agreements with J.

Aron amounted to $347.7 million at December 31, 2020, $224.9 million of which is due on December 30, 2022, except that a portion (not to exceed $33.1 million) of this otherwise long-term component is subject to potential earlier payment under the Periodic Price Adjustment provision.

See Note 10 to our accompanying consolidated financial statements in Item 8.

Additionally, we also utilize other financing arrangements to finance operating assets and/or, from time to time, to monetize other assets that may not be needed in the near term, when internal cost of capital and other criteria are met.

Such arrangements include our supply and offtake arrangements, which finance a significant portion of our first-in, first-out inventory at the refineries and, from time to time, RINs or other non-inventory product financing liabilities.

Our supply and offtake obligation with J.

Aron amounted to $487.5 million at December 31, 2021, $330.4 million of which is due on December 30, 2022, except that a portion (not to exceed $28.6 million, net of the $(10.0) million settlement threshold) of this otherwise long-term component is subject to potential earlier payment under the Periodic Price Adjustment provision.

See Note 9 of the our accompanying consolidated financial statements in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for additional information about our supply and offtake facilities.

Our product financing liabilities consisted primarily of RIN financings as of December 31, 2021, and totaled $249.6 million, all of which is due in the next 12 months.

See further description of these types of arrangements in the Environmental Credits and Related Regulatory Obligations accounting policy disclosed in Note 2 to our accompanying consolidated financial statements included Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

For both arrangements and the related commitments, see also our "Contractual Obligations and Commitments" section included in Item 7.

Management's Discussion and Analysis.

We receive debt ratings from the major ratings agencies in the U.S.

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However, a downgrade could adversely impact our interest rate on any credit facility implementations and the ability to economically access debt markets in the future.

Additionally, any rating downgrades may result in additional letters of credit or cash collateral being posted under certain contractual arrangements.

Management's Discussion and Analysis

Our credit ratings as of December 31, 2020 and 2019 are presented below:

Year Ended December 31,

S&P BB/Negative BB/Stable

Moody's Ba3/Stable Ba3/Stable

Delek Logistics

S&P BB-/Negative BB-/Stable

Moody's B1/Stable B1/Stable

Additionally, any rating downgrades may increase the likelihood of us having to post additional letters of credit or cash collateral under certain contractual arrangements.

Capital Spending

A key component of our long-term strategy is our capital expenditure program.

Our capital expenditures for the year ended December 31, 2020 were $239.6 million, of which approximately $201.0 million was spent in our refining segment, $15.8 million in our logistics segment, $9.1 million in our retail segment and $13.7 million in corporate and other.

The following table summarizes our actual capital expenditures for 2020 and planned capital expenditures for 2021 by operating segment and major category (in millions):

The following table summarizes our actual capital expenditures for 2021, by segment, as well as planned capital expenditures for 2022 by operating segment and major category (in millions):

Year Ended December 31,

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Sustaining maintenance, including turnaround activities $ 83.1 $ 170.6

$ 92.2 $ 158.9

Regulatory 12.6 1.8

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Total capital spending $ 253.4 $ 227.1

(1) Excludes purchases of rights-of-way in the amount of $2.7 million in 2020.

Management's Discussion and Analysis

The amount of our capital expenditure budget is subject to change due to unanticipated increases in the cost, scope and completion time for our capital projects and subject to the changes and uncertainties discussed under the 'Forward-Looking Statements' section of Item 7.

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Risk Factors, of this Annual Report on Form 10-K.

Management's Discussion and Analysis

Contractual Obligations and Commitments

Information regarding our known contractual obligations of the types described below as of December 31, 2020, is set forth in the following table (in millions):

Cash Requirements

Long-Term Cash Requirements Under Contractual Obligations

Information regarding our known cash requirements under contractual obligations of the types described below as of December 31, 2021, is set forth in the following table (in millions):

Payments Due by Period

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(2) Amounts reflect future estimated lease payments under operating leases having remaining non-cancelable terms in excess of one year as of December 31, 2021.

(3) We have supply agreements to secure certain quantities of crude oil, finished product and other resources used in production at both fixed and market prices.

(3) We have purchase commitments to secure certain quantities of crude oil, finished product and other resources used in production at both fixed and market prices.

We have estimated future payments under the market-based agreements using current market rates.

Excludes purchase commitments in buy-sell transactions which have matching notional amounts with the same counterparty and are generally net settled.

Excludes purchase commitments in buy-sell transactions which have matching notional amounts with the same counterparty and are generally net settled in exchanges.

(4) Balances consist of obligations under RINs product financing arrangements, as described in the 'Environmental Credits and Related Regulatory Obligations' accounting policy included in Note 2 to the consolidated financial statements in Item 8.

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Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements through the date of this Annual Report on Form 10-K.

Other Cash Requirements

Our material short-term cash requirements under contractual obligations are presented above, and we e xpect to fund the majority of those requirements with cash flows from operations, with the exception of the supply and offtake obligations, which are expected to be refinanced.

Our other cash requirements consisted of operating activities and capital expenditures.

Operating activities include cash outflows related to payments to suppliers for crude and other inventories (which are largely reflected in our contractual purchase commitments in the table above) and payments for salaries and other employee related costs.

Cash outlays in the first quarter of 2022 are planned to include incentive compensation payments that were earned and accrued in 2021.

In line with our Long-term Sustainable strategy, future cash requirements will include initiatives to build on our long term sustainable business model, ESG initiatives and digital transformation.

Refer to the cash flow section for our operating activities spend in 2021.

While many of the expenses related to the operating activities are variable in nature, some of the expenditures can be somewhat fixed in the short-term due to forward planning on our level of activity.

Refer to the 'Capital Spending' section for our capital expenditures for 2021 and our anticipated cash requirements for planned capital expenditures for 2022.

Management's Discussion and Analysis

Accounting Standards

Critical Accounting Policies and Estimates

Critical Accounting Estimates

The fundamental objective of financial reporting is to provide useful information that allows a reader to comprehend our business activities.

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Actual results may differ based on the accuracy of the information utilized and subsequent events, some over which we may have little or no control.

Evaluation of Variable Interest Entities ("VIEs")

Our consolidated financial statements include the financial statements of our subsidiaries and VIEs, of which we are the primary beneficiary.

We evaluate all legal entities in which we hold an ownership or other pecuniary interest to determine if the entity is a VIE.

Variable interests can be contractual, ownership or other pecuniary interests in an entity that change with changes in the fair value of the VIE’s assets.

If we are not the primary beneficiary, the general partner or another limited partner may consolidate the VIE, and we record the investment as an equity method investment.

Significant judgment is exercised in determining that a legal entity is a VIE and in evaluating whether we are the primary beneficiary in a VIE.

Generally, the primary beneficiary is the party that has both the power to direct the activities that most significantly impact the VIE’s economic performance and the right to receive benefits or obligation to absorb losses that could be potentially significant to the VIE.

We evaluate the entity’s need for continuing financial support;

the equity holder’s lack of a controlling financial interest;

and/or if an equity holder’s voting interests are disproportionate to its obligation to absorb expected losses or receive residual returns.

We evaluate our interests in a VIE to determine whether we are the primary beneficiary.

We use a primarily qualitative analysis to determine if we are deemed to have a controlling financial interest in the VIE, either on a standalone basis or as part of a related party group.

We continually monitor our interests in legal entities for changes in the design or activities of an entity and changes in our interests, including our status as the primary beneficiary to determine if the changes require us to revise our previous conclusions.

LIFO Inventory

The Tyler refinery's inventory consists of crude oil, refined petroleum products and blendstocks which are stated at the lower of cost or market.

Cost is determined under the last-in, first-out ("LIFO") valuation method.

The LIFO method requires management to make estimates on an interim basis of the anticipated year-end inventory quantities, which could differ from actual quantities.

We believe the accounting estimate related to the establishment of anticipated year-end LIFO inventory is a critical accounting estimate, because it requires management to make assumptions about future production rates in the Tyler refinery, the future buying patterns of our customers, as well as numerous other factors beyond our control, including the economic viability of the general economy, weather conditions, the availability of imports, the marketing of competitive fuels and government regulation.

The impact of changes in actual performance versus these estimates could be material to the inventories reported on our quarterly balance sheets, and the impact on the results reported in our quarterly statements of income could be material.

In selecting assumed inventory levels, we use historical trending of production and sales, recognition of current market indicators of future pricing and value and new regulatory requirements which might impact inventory levels.

Management's assumptions require significant judgment because actual year-end inventory levels have fluctuated in the past and may continue to do so.

At each year-end, actual physical inventory levels are used to calculate both ending inventory balances and final cost of materials and other for the year.

Property, Plant and Equipment and Other Intangibles Impairment

Property, plant and equipment and other intangibles are evaluated for impairment whenever indicators of impairment exist.

Accounting standards require that if an impairment indicator is present, we must assess whether the carrying amount of the asset is unrecoverable by estimating the sum of the future cash flows expected to result from the asset, undiscounted and without interest charges.

We derive the required undiscounted cash flow estimates from our historical experience and our internal business plans.

We use quoted market prices when available and our internal cash flow estimates discounted at an appropriate interest rate to determine fair value, as appropriate.

If the carrying amount is more than the recoverable amount, an impairment charge must be recognized based on the fair value of the asset.

Our assessment did not result in impairment during the years ended December 31, 2020, 2019 or 2018.

Management's Discussion and Analysis

Goodwill in an acquisition represents the excess of the aggregate purchase price over the fair value of the identifiable net assets.

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The crack spread is often unpredictable and may negatively impact our results of operations in ways that cannot be anticipated and that are beyond management's control.

Additionally, rising interest rates (which often occur in under inflationary conditions) may also adversely impact our WACC.

A higher WACC, all other things being equal, will result in a lower valuation using a discounted cash flow model, which is an income approach.

Therefore, rising interest rates can cause a reporting unit to become impaired when, in a lower interest rate environment, it may not be.

We may also elect to perform a qualitative impairment assessment of goodwill balances.

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We performed a qualitative assessment on the reporting units in our logistics segment for the years ended December 31, 2021, 2020 and 2019, which did not result in an impairment charge nor did our analysis reflect any reporting units at risk.

Our quantitative assessment of goodwill performed on the reporting units in our refining and retail segments during the fourth quarter of 2020, resulted in an impairment of $126.0 million during the year ended December 31, 2020, related to our Big Spring refinery and Krotz Springs refinery reporting units.

The impairment was predominantly the result of the continued uncertainty regarding the impact of the COVID-19 Pandemic, which impacted various components of our assessment, including the WACC.

The Pandemic has resulted in government-imposed temporary business closures and shelter-at-home directives.

This has had the secondary effect of impacting prices of crude oil and refined products as well as supply and demand for crude oil and refined products, and triggered several identified uncertainties, as discussed in the 'Business Overview' section of Management's Discussion and Analysis.

Our quantitative assessment of goodwill performed on the reporting units in our refining and retail segments during the fourth quarter of 2021, resulted in no impairment during the year ended December 31, 2021.

There was $126.0 million impairment during the year ended December 31, 2020 and no impairment in 2019.

As part of our assessment, the aggregate fair value of all reporting units have been reconciled to our market capitalization for reasonableness.

Each of the remaining reporting units have a fair value that is substantially in excess of its carrying value.

There was no impairment during the years ended December 31, 2019 and 2018.

Each of the reporting units have a fair value that is substantially in excess of its carrying value, with the exception of the Krotz Springs refinery ("KSR") reporting unit.

Given the relatively small cushion for the KSR reporting unit, we performed a sensitivity analysis on our impairment test noting the following:

(in millions) Sensitivity

Goodwill Balance at 2021 Annual Assessment Date % Estimated Fair Value exceeds Carrying Value Increase in WACC that could cause impairment (1)

KSR $ 212.2 <10% 1.5%-2.0%

(1) Assumes no other changes in any of the key assumptions.

Management's Discussion and Analysis

Details of remaining goodwill balances by segment are included in Note 17 to the consolidated financial statements in Item 8.