What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-09 compared with 2022-11-08 · 496 added, 654 removed, 410 unchanged (74% of the section changed)

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Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is management’s analysis of our financial performance and of significant trends that may affect our future performance.

The MD&A should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and in the Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on February 25, 2022 (the "Annual Report on Form 10-K").

Those statements in the MD&A that are not historical in nature should be deemed forward-looking statements that are inherently uncertain.

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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 that refer to the acquisition of 3 Bear Delaware Holding – NM, LLC (the “3 Bear Acquisition”), including any statements regarding the expected benefits, synergies, growth opportunities, impact on liquidity and prospects, and other financial and operating benefits thereof, statements regarding the effect, impact, potential duration or other implications of, or expectations expressed with respect to, the outbreak of COVID-19 and its development into a pandemic in early 2020 (the "COVID-19 Pandemic" or the "Pandemic") and its impact on oil production and pricing, and statements regarding our efforts and plans in response to such events, the information concerning possible future results of operations, business and growth strategies, including as the same may be impacted by the attack on Ukraine by Russia in February 2022 (the "Russia-Ukraine War"), 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 that refer to the acquisition of 3 Bear Delaware Holding – NM, LLC ("3 Bear") (subsequently renamed to Delek Delaware Gathering ("Delaware Gathering")) (the "Delaware Gathering Acquisition"), including any statements regarding the expected benefits, synergies, growth opportunities, impact on liquidity and prospects, and other financial and operating benefits thereof, statements regarding the effect, impact, potential duration or other implications of, or expectations expressed with respect to, the outbreak of COVID-19 and its development into a pandemic in early 2020 (the "COVID-19 Pandemic" or the "Pandemic") and its impact on oil production and pricing, and statements regarding our efforts and plans in response to such events, the information concerning possible future results of operations, business and growth strategies, including as the same may be impacted by the attack on Ukraine by Russia in February 2022 ("the Russia-Ukraine War"), 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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Important factors that, individually or in the aggregate, could cause such differences include, but are not limited to:

• volatility in our refining margins or fuel gross profit as a result of changes in the prices of crude oil, other feedstocks and refined petroleum products and the impact of the COVID-19 Pandemic on such demand;

• volatility in our refining margins or fuel gross profit as a result of changes in the prices of crude oil, other feedstocks and refined petroleum products;

• reliability of our operating assets;

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• 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 or future pandemics;

• our ability to execute our strategy of growth through acquisitions, such as the 3 Bear Acquisition, 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;

• our ability to execute our strategy of growth through acquisitions such as the Delaware Gathering Acquisition, 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 ("U.S.") due to the COVID-19 Pandemic;

• 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 ("U.S").

due to 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;

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• deterioration of creditworthiness or overall financial condition of a material counterparty (or counterparties);

Management's Discussion and Analysis

• unanticipated increases in cost or scope of, or significant delays in the completion of, our capital improvement and periodic turnaround projects;

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• increases in our debt levels or costs;

• possibility of accelerated repayment on a portion of the J.

Aron supply and offtake liability if the purchase price adjustment feature triggers a change on the re-pricing dates;

• possibility of accelerated repayment on a portion of our Inventory Intermediation Obligation if the purchase price adjustment feature triggers a change on the re-pricing dates;

• changes in our ability to continue to access the credit markets;

• compliance, or failure to comply, with restrictive and financial covenants in our various debt agreements;

Management's Discussion and Analysis

• changes in our ability to pay dividends;

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• earthquakes, hurricanes, tornadoes, and other weather events, which can unforeseeably affect the price or availability of electricity, natural gas, crude oil, and other feedstocks, critical supplies, refined petroleum products and ethanol;

• increased costs of compliance with, or liability for violation of, existing or future laws, regulations and other requirements;

• increases in costs of compliance with, or liability for violation of, existing or future laws, regulations and other requirements;

• legislative and regulatory measures to address climate change and greenhouse gases emissions;

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• changes in the cost or availability of transportation for feedstocks and refined products;

• other factors discussed under the headings "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" and in our other filings with the SEC.

• other factors discussed under Item 1A.

Risk Factors and Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations and in our other filings with the SEC.

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.

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

Management's Discussion and Analysis

Executive Summary:

Business Overview

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.

Our operating segments consist of refining, logistics, and retail, and are discussed in the sections that follow.

During the fourth quarter 2022, we realigned our reportable segments for financial reporting purposes to reflect changes in the manner in which our chief operating decision maker, or CODM, assesses financial information for decision-making purposes.

The change primarily represents reporting the operating results of wholesale crude operations within the refining segment.

Prior to this change, wholesale crude operations were reported as part of corporate, other and eliminations.

In addition, during the fourth quarter 2022, the CODM determined that EBITDA is the key performance measure for planning and forecasting purposes and discontinued the use of contribution margin as a measure of performance.

We define EBITDA for any period as net income (loss) to add back interest expense, income tax expense (benefit), depreciation and amortization.

While these reporting changes did not change our consolidated results, segment data for previous years has been restated and is consistent with the current year presentation throughout the financial statements and the accompanying notes.

Business and Economic Environment Overview

Through the first nine months of 2022, the recovery of demand to pre-pandemic levels for petroleum-based transportation fuels and constrained supply of those products, resulted in an increase in feedstock costs as well as a widening of market crack spreads.

Geopolitical events including the Russia-Ukraine War and new governmental policies have contributed to the ongoing volatility and unpredictability of global energy markets.

We believe that safety, reliability and environmental responsibility are critical for our success.

Through the first nine months of 2022, we have successfully taken advantage of the favorable economic environment by operating our refineries at record utilization rates.

Our continued investment in Delek Logistics has resulted in realized synergies and increased flexibility through our entire supply chain.

The integration of 3 Bear has expanded our existing crude oil gathering throughput capacity in the Permian while also extending our product offering to include natural gas gathering and processing as well as wastewater processing and disposal.

The 3 Bear assets have complimented our existing Permian gathering assets which has seen a significant increase in throughput during 2022.

Our retail operations have benefited from continued strong demand from U.S.

Our focus on safe and reliable operations is a pillar which underlines all of our business activities.

We continue to identify opportunities to mitigate market risk and focus on efforts that improve our overall cost structure while not compromising operational excellence.

During the first quarter of 2023, Delek executed a successful turnaround at the Tyler refinery substantially on time and on budget with zero process or safety incidents.

With no other significant planned downtime until late 2024, we expect a return to near full utilization rates during the rest of the year.

Refining margins have been strong and demand for refined products has been robust driven by constrained supply in the markets we serve.

The favorable domestic crack spreads and increased U.S.

export demand has encouraged expansion in domestic refining capacity.

We have also benefited from the more favorable crude differentials including the WTI Midland - WTI Cushing differential, as well as favorable calendar month average differentials.

Additionally, our integration of Delek Delaware Gathering (formally 3 Bear) has expanded our existing crude oil gathering throughput capacity in the Permian while also extending our product offering to include natural gas gathering and processing as well as wastewater recycling and disposal.

Our retail operations have benefited from stable demand from U.S.

drivers and present several high-growth opportunities for future investment which will complement our existing operations and build brand equity.

While refining margins have reached historical levels during the year, rising natural gas prices, supply constraints, and increased labor costs have been a headwind.

A sharp increase in inflation and increases in interest rates intended to combat inflation have resulted in an expectation of a global economic downturn and an increasingly competitive capital market environment.

In addition, a global reduction of investment in carbon intensive activities driven by climate change initiatives, has resulted in higher costs of capital for most companies in our industry.

We are continuously evaluating forward markets and have actively engaged cost and risk mitigation strategies to proactively take advantage of opportunities through disciplined capital allocation.

We are committed to lowering costs and improving the efficiency of our cost structure in all aspects of our business and are challenging ourselves to continue to focus on operational excellence.

We are continuously looking to improve our operating and general and administrative cost structure and are exploring a zero-based budgeting process for 2023.

Although the near term economic outlook appears favorable, we are positioning the Company for potential economic headwinds that coincide with a potential global downturn in the economy.

The expectation of reduction in the reliance of liquid fuels, a tightening of capital markets, increased regulatory pressures, and volatility in the commodity markets, are considerations as Delek moves forward with our strategic initiatives.

The energy-related legislation passed with the Inflation Reduction Act ("IRA") encompasses clean energy financial incentives that are expected to increase capital investment opportunities that focus on the development of production capacity for liquid fuels with lower greenhouse gas emissions ("GHG").

Gulf coast industries should be well positioned for growth, particularly if global trade becomes tied to environmental attributes.

Our focus on reduction of greenhouse gas emissions is a key objective as we strive to be a leader in the transition to a carbon neutral future.

Delek formed the New Energy Task Force in 2021, and the group has been studying and internally reporting our current emissions status, pinpointing potential means of achieving emissions reductions, providing updates on carbon capture opportunities and regulatory

Management's Discussion and Analysis

issues facing the industry and Delek specifically, and identifying transformational opportunities consistent with the Intergovernmental Panel on Climate Change’s 2°scenarios.

Delek formed the Sustainable Operations Team ("SOT") in 2022 which is led by our EVP, Operations.

The SOT will coordinate execution of our sustainability improvement plans (beginning with GHG reduction targets) ensuring enterprise strategies, business unit operations, capital spending plans, supply chain and personnel pipeline are in alignment and operating as needed to meet established goals.

Delek prioritizes stewardship of the environment, and we focus on how to positively impact our shareholders, employees, customers, and the communities where we operate.

We believe shareholder value is strengthened through, among other things, a stable dividend complemented by share repurchases.

We also want to reward our shareholders with a competitive long-term capital allocation framework.

In the second quarter 2022, we reinstated a regular cash dividend of $0.20 per share which lays a foundation that we believe can be supported throughout the business cycle.

Through September 30, 2022, we have paid a special dividend and reinstated the quarterly dividend for a total return of $28.3 million.

On October 31, 2022, we increased the quarterly cash dividend by $0.1 per share to $0.21.

In August 2022, we announced an expansion of the share repurchase authorization to $400 million, which reflects our desire to deliver increased cash returns during periods of strong free cash flow generation.

During the three months ended September 30, 2022, we made repurchases of $40.0 million.

In addition, we are evaluating opportunities to reduce our long term debt which will reward our shareholders with a competitive long-term capital allocation framework and demonstrates our commitment to our balance sheet strength.

Our near-term focus is centered around unlocking the "sum of the parts" value of our existing business while identifying growth opportunities to enhance the Company's scale and diversify revenue streams, including in the alternative energy markets.

As part of our plan, we have hired Mark Hobbs who is an experienced investment banker with over 28 years of energy experience to fill the role of EVP, Corporate Development and who will work closely with the rest of our management team to unlock the “sum of parts” value.

In addition, we have also hired third party advisors to work alongside our management team to identify strategic options.

We believe this process will maximize the value of our shareholders while optimizing our asset portfolio and balance sheet.

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.

See also the ‘Results of Operations’ section below for further discussion.

Our near-term focus is centered around safe and reliable operations, shareholder returns including debt reductions and unlocking the "sum of the parts" value of our existing business while identifying growth opportunities to enhance the Company's scale and diversify revenue streams, including in the alternative energy markets and creating a long-term sustainable business model.

We believe these strategic priorities will maximize the value of our shareholders while optimizing our asset portfolio and balance sheet.

See further discussion on macroeconomic factors and market trends, including the impact on 2023 and the outlook for the rest of the year, in the ‘Market Trends’ section below.

Management's Discussion and Analysis

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 and 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 barrels per day as of September 30, 2022.

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 March 31, 2023.

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

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(the "Krotz Springs refinery")

Total Nameplate Capacity (barrels per day ("bpd")) 75,000 80,000 (1)

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

Crack Spread Benchmark Gulf Coast 5-3-2

Relevant Crack Spread Benchmark Gulf Coast 5-3-2

Gulf Coast 5-3-2 (2)

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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 barrels per day ("bpd"), El Dorado refinery’s output generally does not exceed 75,000, which is the maximum output for the small refinery exemption under the Environmental Protection Agency's ("EPA") Renewable Fuel Standards..

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

(1) While the El Dorado refinery has a total nameplate capacity of 80,000 barrels per day ("bpd"), in order to qualify for the small refinery exemption under the Environmental Protection Agency's ("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 ("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 and/or substantial volumes of sweet crude oil, and therefore the West Texas Intermediate ("WTI") Cushing/ West Texas Sour ("WTS") price differential, taking into account differences in production yield, is an important measure for helping us make strategic, market-respondent production decisions.

(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 West Texas Intermediate ("WTI") Cushing/ West Texas Sour ("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.

Management's Discussion and Analysis

In addition, the refining segment includes our wholesale crude operations.

Logistics Overview

Our logistics segment (or "Logistics") gathers, transports and stores crude oil and natural gas, markets, distributes, transports and stores refined products and disposes and recycles water in select regions of the southeastern United States, the Delaware Basin in New Mexico 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 Partners, LP ("Delek Logistics", NYSE:DKL), where we owned an 78.9% interest in Delek Logistics at September 30, 2022.

Our logistics segment (or "Logistics") gathers, transports and stores crude oil and natural gas;

markets, distributes, transports and stores refined products;

and disposes and recycles water in select regions of the southeastern United States, West Texas and New Mexico 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 78.7% interest at March 31, 2023.

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.

The logistics segment's gathering and processing business owns or leases capacity on approximately 400 miles of crude oil transportation pipelines, approximately 450 miles of refined product pipelines, and an approximately 1,120-mile crude oil gathering system.

The storage and transportation business owns or leases associated crude oil storage tanks with an aggregate of approximately 10.3 million barrels of active shell capacity.

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

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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.

In addition, effective with the 3 Bear Acquisition, June 1, 2022, Delek's logistics segment now includes 3 Bear's operations of crude oil and natural gas gathering, processing and transportation businesses, as well as water disposal and recycling operations, in the Delaware Basin in New Mexico.

The asset base includes approximately 485 miles of pipelines, 88 million cubic feet ("MMCf") per day ("MMCf/d") of cryogenic natural gas processing capacity, 140 thousand barrels ("MBbl") per day ("MBbl/d") of crude gathering capacity, 120 MBbl of crude storage capacity and 200 MBbl/d of water disposal capacity.

(See further discussion in Note 2 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q).

Retail Overview

Our retail segment (or "Retail") at September 30, 2022 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 grams to the public, primarily under the 7-Eleven and DK or Alon brand names pursuant to a license agreement with 7-Eleven, Inc.

Our retail segment (or "Retail") at March 31, 2023 includes the operations of 249 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.

In 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 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 September 30, 2022, we have removed the 7-Eleven brand name at 55 of our store locations.

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 March 31, 2023, we have removed the 7-Eleven brand name at 132 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.

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.

Management's Discussion and Analysis

Corporate and Other Overview

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

Our corporate activities, results of certain immaterial operating segments, 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.

Management's Discussion and Analysis

Strategic Update

Our Framework:

Strategic Overview

A New Framework:

Long-Term Sustainability

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

Management's Discussion and Analysis

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, as illustrated below (see further discussion in our 2021 Annual Report on Form 10-K):

Safe and Reliable Operations

We are committed to maintaining safe, reliable, and environmentally responsible operations.

We are continuously looking to reduce costs, increase reliability and safety, improve efficiency, and pursue operational improvements.

Delek prioritizes stewardship of the environment, and we focus on how to positively impact our shareholders, employees, customers, and the communities where we operate.

For 2023, we will be focused on the following:

• Focus on operational excellence by implementing and sustaining a low operating cost model through spending discipline, supply chain management, and innovative solutions.

• Improve discipline around outage spend and optimizing downtimes.

• Continue our progression of 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.

Automate processes and shift operational roles to higher value-added activities.

Shareholder Returns

We believe shareholder value is strengthened through, among other things, a stable dividend complemented by share repurchases and debt reductions.

We also want to reward our shareholders with a competitive long-term capital allocation framework.

One of our near-term initiatives is centered around unlocking the "sum of the parts" value of our existing business while identifying growth opportunities to enhance the Company's scale and diversify revenue streams, including in the alternative energy markets.

We are also committed to lowering costs and improving the efficiency of our cost structure in all aspects of our business and will continue to focus on operational excellence.

We are continuously looking to improve our operating and general and administrative cost structure.

For 2023, we will be focused on the following:

• Explore 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.

• Reward our shareholders with a competitive long-term capital allocation framework including share repurchases and an evaluation of debt reductions which will continue to strengthen our balance sheet.

• Monitor performance of our first phase of a zero-based budget for 2023 by setting clear mechanisms for tracking costs, including how to address variances and reallocate funds.

Long-Term Sustainable Business Model

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, 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, 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.

For 2023, we will be focused on the following:

• Continue our retail rebranding efforts and retail growth plans with additional new-to-industry locations in the planning phase.

In addition, invest in industry leading digital technology which will improve brand image and customer experience.

• Identify and evaluate investment opportunities that fit our sustainability view, including strategic investments or joint ventures in renewables, incubator investments in new technologies, and other core-business investments that could improve our scalability and agility.

• Deploy integrated solutions to simplify architecture, data management, and cybersecurity.

• Pursuit of strategic investments and acquisitions with a focus on diversifying revenue streams.

Management's Discussion and Analysis

2023 Strategic Developments

In our 2021 Annual Report on Form 10-K, we further defined our 2022 strategy by identifying certain key Focused Objectives and Priorities, as they relate to our Key Initiatives.

The following table presents some of our most significant 2022 developments to date towards the achievement of our Focused Objectives:

Key Initiative:

Implementing One Delek Culture Transformation Key Initiative:

Planning for Refinery of the Future Operational Transformation

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.

Improving Efficiency and Processes to Drive Enhanced Analytics by implementing a New Enterprise Resource Planning System:

In October 2022, we implemented a new enterprise resource planning system, designed to improve the efficiency of our internal operational and administrative activities.

This system implementation is part of our ongoing business transformation initiatives and we expect these system infrastructure investments will result in more efficient and scalable operational processes and provide enhanced analytics to drive business performance.

Improving Consistency and Transparency by Conforming Refining Inventory Accounting Methodology:

As of January 1, 2022, we changed our method for accounting for inventory held at the Tyler Refinery to the first-in, first-out ("FIFO") cost method from the last-in, first-out ("LIFO") cost method.

This change in accounting method will conform the Company’s refining inventory to a single method of accounting, and will eliminate the inherent volatility in the LIFO valuation of inventory attributable to increments and decrements in historical LIFO layers, which can impact comparability between periods as well as to market conditions and crack spreads.

For these reasons, we expect that the newly adopted accounting principle will improve financial reporting by providing better consistency, better transparency, and recognition that better reflects the physical flow of inventory and more accurately reflects the current value of inventory.

The effects of this change have been retrospectively applied to all periods presented with a cumulative effect adjustment reflected in the January 1, 2021 beginning retained earnings.

(See further discussion in Note 7 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q).

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.

Increasing Shareholder Value through Payment of Dividends:

On October 31, 2022, our Board of Directors voted to declare a quarterly cash dividend of $0.21 per share of our common stock, which is payable on December 2, 2022 to shareholders of record on November 18, 2022.

In addition, a special cash dividend of $0.20 per share of our common stock was paid on July 20, 2022 to shareholders of record on July 12, 2022 and a quarterly cash dividend of $0.20 per share of our common stock was paid on September 6, 2022 to shareholders of record on August 22, 2022.

Increasing Shareholder Value through Increase of Share Repurchase Program:

On August 1, 2022, our Board of Directors approved an approximately $170.3 million increase in its share repurchase authorization, bringing the total amount available for repurchases under current authorizations to $400.0 million.

During both the three and nine months ended September 30, 2022, Delek repurchased 1,435,602 shares for an aggregate purchase price of $40.0 million.

As of September 30, 2022, there was $360.0 million of authorization remaining for repurchases.

Increasing Flexibility through Debt Amendments:

On May 26, 2022, Delek Logistics entered into a Third Amendment to the Delek Logistics Credit Facility which, among other things, provides for certain changes to the Delek Logistics Credit Facility in connection with the 3 Bear Acquisition in respect of pro forma calculations and certain other requirements.

Further, on May 26, 2022, Delek Logistics entered into a Fourth Amendment (the “Fourth Amendment”) to the Delek Logistics Credit Facility.

Among other things, the Fourth Amendment:

(i) increased the U.S.

Revolving Credit Commitments (as defined in the Delek Logistics Credit Facility) by an amount equal to $150.0 million, for an aggregate amount of $1.0 billion, (ii) increased the U.S.

L/C Sublimit (as defined in the Delek Logistics Credit Facility) to an aggregate amount equal to $90.0 million and (iii) increased the U.S.

Swing Line Sublimit (as defined in the Delek Logistics Credit) to an aggregate amount equal to $18.0 million.

The exercise of the accordion feature gave Delek Logistics the flexibility to utilize borrowings under the Delek Logistics Credit Facility to help fund the acquisition of 3 Bear while continuing to maintain sufficient availability to continue to effectively manage working capital needs and liquidity risk, and to evaluate longer term capitalization strategies.

On October 13, 2022, Delek Logistics entered into a fourth amended and restated senior secured revolving credit agreement with Fifth Third, as administrative agent and a syndicate of lenders (the "Amended and Restated Delek Logistics Credit Facility").

The Amended and Restated Delek Logistics Credit Facility, among other things, (i) increased total aggregate commitments to $1.2 billion, comprised of (A) senior secured revolving commitments of $900.0 million in aggregate (eliminating the Canadian dollar tranche), with sublimit of up to $115.0 million for letters of credit and $25.0 million for swing line loans (the “Delek Logistics Revolving Facility”) with an extend maturity date of October 13, 2027, and (B) a new senior secured term loan facility for a term loan in the original principal amount of $300.0 million (the “Delek Logistics Term Facility”), (ii) reset the accordion feature under the Delek Logistics Revolving Facility, such that aggregate revolving commitments can be increased to up to $1.15 billion upon the agreement of Delek Logistics and one or more existing or new lenders and (ii) provided for the Delek Logistics Term Facility be drawn in full on October 13, 2022, with a maturity date of October 13, 2024 and with a prepayment requirement for the proceeds obtained from certain senior unsecured notes issuances.

Management's Discussion and Analysis

On October 26, 2022, Delek entered into a third amended and restated credit agreement with Wells Fargo Bank, as administrative agent, Delek, as borrower, certain subsidiaries of Delek, as guarantors, and the other lenders party thereto, providing for a senior secured asset-based revolving credit facility with total credit commitment of $1.1 billion with an extended maturity date of October 26, 2027 (the “Amended and Restated Revolving Credit Facility”).

Increasing Shareholder Value and Reducing Outsider Risk through Stock Purchase and Cooperation Agreement:

On March 7, 2022, Delek entered into a stock purchase and cooperation agreement (the “Icahn Group Agreement”) with IEP Energy Holding LLC, a Delaware limited liability company, American Entertainment Properties Corp., a Delaware corporation, Icahn Enterprises Holdings L.P., a Delaware limited partnership, Icahn Enterprises G.P.

Inc., a Delaware corporation, Beckton Corp., a Delaware corporation, and Carl C.

Icahn (collectively, the “Icahn Group”), pursuant to which the Company agreed to purchase an aggregate of 3,497,268 shares of common stock of the Company, at a price per share of $18.30, the closing price of a share of Company common stock on the New York Stock Exchange on March 4, 2022, the last trading day prior to the execution of the Ichan Group Agreement, which equals an aggregate purchase price of $64.0 million.

Focus on Leadership Succession Planning:

On June 9, 2022, Avigal Soreq was appointed the President and Chief Executive Officer ("CEO") and as a member of the Board of Directors (the "Board") under a previously announced CEO succession plan.

Ezra Uzi Yemin, the Company’s previous President and CEO, was appointed as the Executive Chairman of the Board.

Soreq was previously the Chief Executive Officer of El Al Israel Airlines, the national airline of Israel, since January 2021.

Prior to that, he served as a member of the Company’s executive management team, including as the Chief Operating Officer from March 2020 until January 2021, its Chief Commercial Officer from November 2016 until March 2020, an Executive Vice President from August 2015 until January 2021, and a Vice President from 2012 until 2015.

In addition, Mr.

Soreq served as an Executive Vice President of Delek Logistics GP, LLC from 2015 until 2021, and as its Vice President from 2012 until 2015.

Delek also announced on March 27, 2022, that Leonardo Moreno, a highly experienced executive in the global renewable energy and technology sector, has been appointed director to the Board.

With these appointments of Messrs.

Soreq and Moreno, the Board has been expanded to comprise nine directors, seven of whom are independent and three of whom are diverse, fulfilling the Company’s objective of at least 30% of the Board comprising diverse members by 2022.

Key Initiative:

Implementing One Delek Culture Transformation Key Initiative:

Planning for Refinery of the Future Operational Transformation

Focused Objective:

Balancing Risk and Reward / Driving EBITDA Improvements

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.

Completed Strategic Midstream Acquisition:

On June 1, 2022, DKL Delaware Gathering, LLC, a subsidiary of Delek Logistics, completed the acquisition of 100% of the limited liability company interests in 3 Bear Delaware Holding – NM, LLC (“3 Bear”) from 3 Bear Energy – New Mexico LLC (the “Seller”), related to Seller’s crude oil and gas gathering, processing and transportation businesses, as well as water disposal and recycling operations, in the Delaware Basin in New Mexico.

The purchase price for 3 Bear was $628.1 million and was financed through a combination of cash on hand and borrowings under Delek Logistics' existing credit agreement.

(See further discussion in Note 2 and Note 8 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q).

This acquisition provides us the opportunity to significantly expand our third-party midstream contribution margin within our logistics segment.

Management's Discussion and Analysis

The following table highlights our 2023 Strategic Developments:

2023 Key Initiatives

2023 Strategic Developments

Safe & Reliable Operations Shareholder Returns Long Term Sustainable Business Model

Improving Discipline Around Outage Spend and Optimizing Downtime:

Successfully completed the Tyler refinery turnaround in the first quarter of 2023 with zero process or safety incidents.

The turnaround was completed substantially on time and on budget and positions us to capture market opportunities.

Implementing Phase 1 of Our Zero-Based Budget:

We have taken steps to improve the efficiency of our cost structure and to align with our strategic priorities to drive cost efficiencies, which include cost reductions in general and administrative expenses.

Reducing Debt to Provide Shareholder Value:

During the three months ended March 31, 2023, we reduced our long-term obligations by approximately $281.0 million.

Focus on Leadership:

In March 2023, Joseph Israel was named Executive Vice President, Operations and will be responsible for refining operations at Delek and for logistics operations at Delek Logistics.

Israel has 25 years of energy experience and a proven track record of driving operational excellence.

Also in March 2023, Patrick Reilly was appointed Executive Vice President and Chief Commercial Officer.

Reilly will work closely with Delek's management team to lead the Company's strategies to achieve its short and long-term objectives.

Reilly has over 20-years of energy oil refining and trading experience.

In April 2023, Tommy Chavez was named Senior Vice President, Refining Operations.

Chavez brings over three decades of refining experience.

Improving Safety Through a Safety Action Plan:

As part of an ongoing review of safety practices across our refining system, we have developed a Safety Action Plan which will require previously un-budgeted capital expenditures and additional labor resources and subject matter experts.

The execution of the Safety Action Plan will address a broad range of items, some of which were delayed in implementation due to the pandemic, or for other reasons.

Market Trends

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, natural gas and electricity, among others.

Historically, the impact of commodity price volatility on our refining margins (as defined under the heading "Non-GAAP Measures" in MD&A Item 2.), 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.

Historically, the impact of commodity price volatility on our refining margins (as defined in our "Non-GAAP Measures" in MD&A Item 2.), 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 renewable identification numbers ("RINs").

Market Outlook for the Remainder of 2023

During the third quarter of 2022, the domestic oil and gas industry witnessed a contraction of domestic market crack spreads compared to the unprecedented favorable market conditions that existed during the second quarter of 2022.

We expect the volatility in the global energy markets will continue until supply can meet the current demand and fears of an economic downturn subside.

Although the possibility of an economic downturn exists, Delek is witnessing a strong demand environment for refined products which is being driven by a rebound in domestic on road fuel demand.

To capture the macro environment, we have positioned the Company to continue to run safely, reliably and environmentally responsibly at near nameplate capacity while leveraging our new 3 Bear logistics lines of business with an eye towards the One Delek vision.

We will continue to balance the cost of debt and cost of equity while continuing to exercise a longer-term sustainable view of capital allocation.

See the following pages for further discussion on how certain key market trends impact our refining margins.

We have positioned the Company to continue to run safely, reliably and environmentally responsibly at near nameplate capacity while leveraging our new Delek Delaware Gathering lines of business with an eye towards the One Delek vision.

Many uncertainties remain with respect to the global supply and demand of the crude oil and refined products markets and it is difficult to predict the ultimate economic impacts this may have on our operations.

We expect gasoline and diesel demand to follow typical seasonal patterns resulting from the summer driving season.

Crude oil and refined product supply continues to be restricted and should support the continued increased utilization of refining capacity.

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

Management's Discussion and Analysis

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.

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

The table below reflects the quarterly average prices of WTI Midland and WTI Cushing crude oil for each of the quarterly periods in 2021 and for the three quarterly periods in 2022.

The table below reflects the quarterly average prices of WTI Midland and WTI Cushing crude oil for each of the quarterly periods in 2022 and for the first quarterly period in 2023.

Management's Discussion and Analysis

Crude Pricing Differentials

Historically, domestic refiners have benefited from the discount for WTI Cushing compared to Brent.

Historically, 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.

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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 Louisiana Light Sweet crude oil ("LLS") to WTI Cushing for each of the quarterly periods in 2021 and for the three quarterly periods in 2022.

Management's Discussion and Analysis

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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The charts below illustrate the quarterly average prices of CBOB, U.S.

Management's Discussion and Analysis

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

High Sulfur Diesel ("HSD") and U.S.

Ultra Low Sulfur Diesel ("ULSD") for each of the quarterly periods in 2021 and for the three quarterly periods in 2022.

Ultra Low Sulfur Diesel ("ULSD") for each of the quarterly periods in 2022 and for the first quarterly period in 2023.

Crack Spreads

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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 in 2021 and for the three quarterly periods in 2022.

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.

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 in 2022 and for the first quarterly period in 2023.

Management's Discussion and Analysis

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

We enter into future commitments to purchase or sell RINs at fixed prices and quantities, which are used to manage our RINs Obligation.

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

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

We 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").

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.

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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, RIN prices are impacted by market expectations regarding whether the EPA may grant certain SREs.

Because of the volatility in RINs prices, it is not possible to predict future RINs cost with certainty, and movements in RIN 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 beginning with the first quarter of 2021 through the third quarter of 2022.

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.

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 for each of the quarterly periods in 2022 and for the first quarterly period in 2023.

Management's Discussion and Analysis

Energy costs are a significant element of our Refining EBITDA 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.

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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

Management's Discussion and Analysis

from the Permian, coinciding with the physical locations of our refineries.

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 chart below illustrates the quarterly average prices of Waha (Permian Basin) and Henry Hub (Gulf Coast) beginning with the first quarter of 2021 through the third quarter of 2022.

Critical Accounting Estimates

The preparation of our condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities.

The SEC has defined critical accounting policies as those that are both most important to the portrayal of our financial condition and results of operations, and require our most difficult, subjective or complex judgments or estimates.

Based on this definition and as further described in our 2021 Annual Report on Form 10-K, we believe our critical accounting policies include the following:

(i) evaluating impairment for property, plant and equipment and definite life intangibles, (ii) evaluating potential impairment of goodwill, (iii) estimating environmental expenditures, and (iv) estimating asset retirement obligations.

Additionally, we have identified the following critical accounting policy that impacts the nine months ended September 30, 2022:

Under Accounting Standards Codification ("ASC") 740, Income Taxes (“ASC 740”), we use an estimated annual effective tax rate ("AETR") to record income taxes.

The development of the estimated AETR involves significant judgment, particularly early in the year and in times of economic uncertainty.

As of and during the nine months ended September 30, 2022, our estimates of the expected AETR reflected inputs which are subject to judgment including (but not necessarily limited to) the following:

• Forecasted pre-tax U.S.

generally accepted accounting principles ("GAAP") income or loss for the year

• Estimates of expected permanent differences in GAAP income or loss and taxable income or loss for the year

• Forecasted capital expenditures for the year and future years (where such activities can be impacted by unanticipated events)

• Expected applicable jurisdictional tax rates

• Estimated impact of possible deduction and tax credit limitations

• Estimates regarding net operating losses, carryback and carryforward provisions (and limitations) and valuation allowances

All of these inputs are subject to significant judgment and assumptions about future events impacting 2022, some of which are based on historical trends and results, operational plans, and projections regarding future pricing and profitability (where we utilize third party forward curves and pricing sources, where possible, but where expectations regarding capture rates and other factors involve judgment).

We also note that, while economic conditions affecting our industry and industry outlooks related to COVID-19 are stabilizing and improving, there remains a level of uncertainty related to COVID-19 and the expectations for recovery that increases the level of judgment involved with some of these assumptions.

Accordingly, where appropriate, we may consider the probability of certain components in determining what we believe to be a reasonable estimate based on conditions and events that were in existence as of our reporting date, which may also involve the use of significant management judgment.

Furthermore, many of our assumptions are inter-relational, where changing one assumption can impact other assumptions (e.g., in terms of the applicability of or limitations under various tax code provisions).

The nature of the AETR estimation approach for recording income taxes requires continuous review and adjustment during the year based on actual results, and as better information regarding forecasted results and assumptions becomes available.

Significant changes in any of these assumptions or in actual results compared to our forecasts and assumptions could cause material changes in our AETR, which could result in cumulative adjustments to reflect the new estimates in future periods.

Management's Discussion and Analysis

We have developed and utilized methodologies and rationales for the development of our assumptions, subject to internal controls and sensitivity or probability assessments, as appropriate, and we believe our process provides a reasonable basis for our estimated AETR as well as the income taxes as of and for the nine months ended September 30, 2022.

Business Combinations

We recognize and measure the assets acquired and liabilities assumed in a business combination based on their estimated fair values at the acquisition date.

Any excess or surplus of the purchase consideration when compared to the fair value of the net tangible assets acquired, if any, is recorded as goodwill or gain from a bargain purchase.

The fair value of assets and liabilities as of the acquisition date are often estimated using a combination of approaches, including the income approach, which requires us to project future cash flows and apply an appropriate discount rate;

the cost approach, which requires estimates of replacement costs and depreciation and obsolescence estimates;

and the market approach which uses market data and adjusts for entity-specific differences.

We use all available information to make these fair value determinations and engage third-party consultants for valuation assistance.

The estimates used in determining fair values are based on assumptions believed to be reasonable but which are inherently uncertain.

Accordingly, actual results may differ materially from the projected results used to determine fair value.

Management's Discussion and Analysis

The chart below illustrates the quarterly average prices of Waha (Permian Basin) and Henry Hub (Gulf Coast) per million British Thermal Units ("MMBtu") for each of the quarterly periods in 2022 and for the first quarterly period in 2023.

Non-GAAP Measures

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These financial and operational non-GAAP measures are important factors in assessing our operating results and profitability and include:

• Refining margin - calculated based on the regional market sales price of refined products produced, less allocated transportation, RFS renewable volume obligation and associated feedstock costs.

This measure reflects the economics of each refinery exclusive of the financial impact of inventory price risk mitigation programs and marketing uplift strategies;

• Refining segment margin- calculated as the difference between net refining revenues and total cost of materials and other;

• Refining margin per barrels sold - calculated as refining margin divided by our average refining sales in barrels per day (excluding purchased barrels) multiplied by 1,000 and multiplied by the number of days in the period.

We believe these non-GAAP operational and financial measures are useful to investors, lenders, ratings agencies and analysts to assess our ongoing performance because, when reconciled to their most comparable GAAP financial measure, they provide improved comparability between periods through the exclusion of certain items that we believe are not indicative of our core operating performance and that may obscure our underlying results and trends.

• Earnings before interest, taxes, depreciation and amortization ("EBITDA") - calculated as net income (loss) attributable to Delek adjusted to add back interest expense, income tax expense, depreciation and amortization;

• Refining margin - calculated as gross margin (which we define as sales minus cost of sales) adjusted for operating expenses and depreciation and amortization included in cost of sales.

Non-GAAP measures have important limitations as analytical tools, because they exclude some, but not all, items that affect net earnings and operating income.

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GAAP financial measures.

Management's Discussion and Analysis

Non-GAAP Reconciliations

The following table provides a reconciliation of segment EBITDA to the most directly comparable U.S.

GAAP measure, net income attributable to Delek:

Reconciliation of segment EBITDA to net income attributable to Delek

Three Months Ended March 31,

(In millions)

Refining segment EBITDA $ 192.1 $ 80.0

Logistics segment EBITDA 91.4 64.2

Retail segment EBITDA 6.4 10.3

Corporate, Other and Eliminations EBITDA (49.9) (38.1)

EBITDA attributable to Delek $ 240.0 $ 116.4

Interest expense, net (76.5) (38.4)

Income tax expense (15.8) (3.1)

Depreciation and amortization (83.4) (68.3)

Net income attributable to Delek $ 64.3 $ 6.6

The following table provides a reconciliation of refining margin to the most directly comparable U.S.

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Refining Segment

Three Months Ended September 30, Nine Months Ended September 30,

As Adjusted (1)

$ 4,246.1 $ 2,814.6 $ 12,550.3 $ 6,970.4

Three Months Ended March 31,

Net revenues $ 3,794.5 $ 4,392.3

Cost of sales 3,654.5 4,365.7

4,189.0 2,778.4 11,880.7 7,012.8

57.1 36.2 669.6 (42.4)

Gross margin 140.0 26.6

Add back (items included in cost of sales):

Operating expenses (excluding depreciation and amortization) 139.1 122.7

172.0 84.2 456.9 313.9

Depreciation and amortization 56.6 52.8

48.9 45.9 151.6 149.0

Refining segment margin $ 278.0 $ 166.3 $ 1,278.1 $ 420.5

(1) Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories.

For further discussion, see Note 7 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

(2) Reflects the prior period conforming reclassification adjustment between operating expenses and general and administrative expenses.

Refining margin $ 335.7 $ 202.1

Management's Discussion and Analysis

Summary Financial and Other Information

The following table provides summary financial data for Delek:

Consolidated Summary Statement of Operations Data

Three Months Ended Nine Months Ended

(in millions) (1)

September 30, September 30,

As Adjusted (2)

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

Summary Statement of Operations Data (1)

Three Months Ended March 31,

2023 2022 (2)

Net revenues $ 3,924.3 $ 4,459.1

Cost of sales:

Cost of materials and other 3,439.6 4,152.5

Operating expenses (excluding depreciation and amortization presented below) 170.8 142.4

Depreciation and amortization 76.8 62.7

Total cost of sales 3,687.2 4,357.6

Operating expenses related to retail and wholesale business (excluding depreciation and amortization presented below) 27.0 27.4

General and administrative expenses 71.5 50.2

Depreciation and amortization 6.6 5.6

Other operating income, net (10.8) (28.4)

Total operating costs and expenses 3,781.5 4,412.4

5,271.9 2,918.6 15,173.6 7,599.9

Operating income (loss)

53.0 37.9 593.0 (59.7)

Total non-operating expense, net 32.2 12.8 85.3 69.5

Income (loss) before income tax expense (benefit) 20.8 25.1 507.7 (129.2)

Income tax expense (benefit) 4.0 4.5 107.5 (39.0)

Net income (loss) 16.8 20.6 400.2 (90.2)

Operating income 142.8 46.7

Interest expense, net 76.5 38.4

Income from equity method investments (14.6) (10.9)

Other income, net (7.1) 1.3

Total non-operating expenses, net 54.8 28.8

Income before income tax expense 88.0 17.9

Income tax expense 15.8 3.1

Net income 72.2 14.8

Net income attributed to non-controlling interests 7.9 8.2

Net income (loss) attributable to Delek $ 7.4 $ 11.8 $ 375.8 $ (114.9)

Net income attributable to Delek $ 64.3 $ 6.6

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

See the Condensed Consolidated Statements of Income included in Item 1.

to this Quarterly Report on Form 10-Q for more detail regarding our results of operations and net loss per share.

(2) Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories.

For further discussion, see Note 7 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

See the Condensed Consolidated Statements of Income in Item 1.

to this Quarterly Report on Form 10-Q for more detail regarding our results of operations and net income (loss) per share.

(2) In the current period, we reassessed the classification of certain expenses and made certain reclassification adjustments to better represent the nature of those expenses.

Accordingly, we have made reclassifications to the prior period in order to conform to this revised current period classification, which resulted in a decrease in the prior period general and administrative expenses and an increase in the prior period operating expenses of approximately $2.9 million for the three months ended March 31, 2022.

We report operating results in three reportable segments:

Decisions concerning the allocation of resources and assessment of operating performance are made based on this segmentation.

Management measures the operating performance of each of its reportable segments based on the segment contribution margin which is defined as net revenues less costs of materials and other and operating expenses, excluding depreciation and amortization.

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

Management's Discussion and Analysis

Results of Operations

Consolidated Results of Operations — Comparison of the Three and Nine Months Ended September 30, 2022 versus the Three and Nine Months Ended September 30, 2021

Net Income (Loss)

Consolidated net income for the third quarter of 2022 was $16.8 million compared to net income of $20.6 million for the third quarter of 2021.

Consolidated net income attributable to Delek for the third quarter of September 30, 2022 was $7.4 million, or $0.11 per basic share, compared to a net income of $11.8 million, or $0.16 per basic share, for the third quarter 2021.

Consolidated Results of Operations — Comparison of the Three Months Ended March 31, 2023 versus the Three Months Ended March 31, 2022.

Consolidated net income for the three months ended March 31, 2023 was $72.2 million compared to a net income of $14.8 million for the three months ended March 31, 2022.

Consolidated net income attributable to Delek for the three months ended March 31, 2023 was $64.3 million, or $0.96 per basic share, compared to income of $6.6 million, or $0.09 per basic share, for the three months ended March 31, 2022.

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

Consolidated net income for the nine months ended September 30, 2022 was $400.2 million compared to a net loss of $90.2 million for the nine months ended September 30, 2021.

Consolidated net income attributable to Delek for the nine months ended September 30, 2022 was $375.8 million, or $5.26 per basic share, compared to a net loss of $114.9 million, or $(1.55) per basic share, for the nine months ended September 30, 2021.

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

In the third quarter of 2022 and 2021, we generated net revenues of $5,324.9 million and $2,956.5 million, respectively, an increase of $2,368.4 million, or 80.1%.

The increase in net revenues was primarily driven by the following factors:

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

Gulf Coast gasoline of 23.3%, ULSD of 67.9%, and HSD of 60.1%;

• in our logistics segment, increases in the average volumes of diesel sold and in the average sales price per gallon of diesel and gasoline sold in our West Texas marketing operations as well as incremental revenues from the 3 Bear Acquisition;

• in our retail segment, increases in fuel sales primarily attributable to a 26.8% increase in average price charged per gallon sold.

For the nine months ended September 30, 2022 and 2021, we generated net revenues of $15,766.6 million and $7,540.2 million, respectively, an increase of $8,226.4 million, or 109.1%.

The increase in net revenues was primarily driven by the following factors:

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

Gulf Coast gasoline of 49.3%, ULSD of 82.4%, and HSD of 80.3%;

• in our logistics segment, increases in the average volumes of diesel sold and in the average sales price per gallon of diesel and gasoline sold in our West Texas marketing operations;

• in our retail segment, increases in fuel sales primarily attributable to a 38.8% increase in average price charged per gallon sold.

We generated net revenues of $3,924.3 million and $4,459.1 million during the three months ended March 31, 2023 and 2022, respectively, a decrease of $534.8 million, or 12.0%.

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

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

Gulf Coast gasoline of 11.6%, ULSD of 4.9%, and HSD of 28.6% and decreases in wholesale activity;

• in our logistics segment, decreases in the average volumes of gasoline sold and in the average sales price per gallon of diesel and gasoline sold in our West Texas marketing operations, partially offset by increased volumes from the Midland Gathering operations and incremental revenues from the Delaware Gathering Acquisition;

• in our retail segment, a decrease in total fuel sales primarily attributable to a $0.26 decrease in average price charged per gallon sold, partially offset by an increase in merchandise sales primarily driven by the same-store sales increase of 5.3%.

Total Operating Costs and Expenses

Cost of Materials and Other

Cost of materials and other was $4,916.0 million for the third quarter of 2022 compared to $2,678.0 million for the third quarter of 2021, an increase of $2,238.0 million, or 83.6%.

The net increase in cost of materials and other was primarily driven by the following:

• increases in cost of crude oil feedstocks at the refineries, including a 29.9% increase in the average cost of WTI Cushing crude oil and a 29.2% increase in the average cost of WTI Midland crude oil;

• increases in the average volumes sold and average cost per gallon of gasoline and diesel sold in our logistics segment;

• an increase in retail cost of materials and other due to 29.4% increase in average cost per gallon sold applied to higher fuel sales volumes.

Cost of materials and other was $14,151.1 million for the nine months ended September 30, 2022 compared to $6,811.4 million for the nine months ended September 30, 2021, an increase of $7,339.7 million, or 107.8%.

The net increase in cost of materials and other was primarily driven by the following:

Management's Discussion and Analysis

• increases in cost of crude oil feedstocks at the refineries, including a 51.4% increase in the average cost of WTI Cushing crude oil and a 50.1% increase in the average cost of WTI Midland crude oil;

• increases in average RINs expense due to increased production during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021;

• increases in the average volumes sold and average cost per gallon of gasoline and diesel sold in our logistics segment;

• an increase in retail cost of materials and other due to 45.5% increase in average cost per gallon sold applied to higher fuel sales volumes.

Cost of materials and other was $3,439.6 million for the three months ended March 31, 2023, compared to $4,152.5 million for three months ended March 31, 2022, a decrease of $712.9 million, or 17.2%.

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 20.2% decrease in the average cost of WTI Cushing crude oil and a 20.0% decrease in the average cost of WTI Midland crude oil;

• decreases in average RINs cost due to decreased production during the three months ended March 31, 2023 compared to the three months ended March 31, 2022;

• decreases in the average volumes sold and average cost per gallon of gasoline and diesel sold, partially offset by incremental cost of materials and other from the Delaware Gathering Acquisition in our logistics segment;

• a decrease in retail cost of materials and other due to 6.6% decrease in average cost per gallon sold applied to higher fuel sales volumes.

Operating Expenses

Operating expenses were $226.4 million for the third quarter of 2022 compared to $128.5 million for the third quarter of 2021, an increase of $97.9 million, or 76.2%.

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

• an increase in variable costs and utilities associated with higher throughput during current period;

• higher natural gas prices in the third quarter of 2022;

• increases in employee costs including incentive compensation costs.

Operating expenses were $615.8 million for the nine months ended September 30, 2022 compared to $450.0 million for the nine months ended September 30, 2021, an increase of $165.8 million, or 36.8%.

Operating expenses (included in both cost of sales and other operating expenses) were $197.8 million for the three months ended March 31, 2023 compared to $169.8 million in three months ended March 31, 2022, an increase of $28.0 million, or 16.5%.

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

• an increase in variable costs and utilities associated with higher throughput during current period;

• higher natural gas prices in the first half of 2022;

• increases in employee costs including incentive compensation costs.

• increases in outside services related to maintenance and employee costs including incentive compensation costs.

These increases were partially offset by the following:

• lower natural gas prices in 2023.

General and Administrative Expenses

General and administrative expenses were $62.4 million for the third quarter of 2022 compared to $53.0 million for the third quarter of 2021, an increase of $9.4 million, or 17.7%.

The increase was primarily driven by an increase in employee costs including incentive compensation costs and incremental transaction costs related to the 3 Bear Acquisition.

General and administrative expenses were $242.0 million and $147.6 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of $94.4 million, or 64.0%.

The increase was primarily driven by an increase in employee costs including incentive compensation costs and incremental transaction costs related to the 3 Bear Acquisition.

General and administrative expenses were $71.5 million for the three months ended March 31, 2023 compared to $50.2 million in three months ended March 31, 2022, an increase of $21.3 million, or 42.4%.

The increase was primarily driven by the following:

• an increase in employee costs including incentive compensation costs.

Management's Discussion and Analysis

Depreciation and Amortization

Depreciation and amortization (included in both cost of sales and other operating expenses) was $72.9 million for the third quarter of 2022 compared to $60.8 million for the third quarter of 2021, an increase of $12.1 million, or 19.9%.

Depreciation and amortization (included in both cost of sales and other operating expenses) was $209.2 million compared to $195.6 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of $13.6 million, or 7.0%.

Depreciation and amortization (included in both cost of sales and other operating expenses) was $83.4 million and $68.3 million for the three months ended March 31, 2023 and 2022, respectively, an increase of $15.1 million, or 22.1%.

Other Operating Income, Net

Other operating income, net increased by $4.1 million in the third quarter of 2022 to $5.8 million compared to $1.7 million in the third quarter of 2021.

The increases were due to insurance proceeds received in the third quarter of 2022.

Other operating income, net increased by $39.8 million during the nine months ended September 30, 2022 to $44.5 million compared to $4.7 million during the nine months ended September 30, 2021.

The increases were primarily driven by an increase due to realized hedge gains during the 2022 period and insurance proceeds received in 2022.

Management's Discussion and Analysis

Other operating income, net was $10.8 million and $28.4 million for the three months ended March 31, 2023 and 2022, respectively, a decrease of $17.6 million, primarily due to decreased hedge gains realized in 2023 compared to 2022 associated with our trading derivatives.

Non-Operating Expenses, Net

Interest Expense, Net

Interest expense, net increased by $13.2 million, or 35.2%, to $50.7 million in the third quarter of 2022 compared to $37.5 million in the third quarter of 2021, primarily driven by the following:

• an increase in the average effective interest rate of 56 basis points in the third quarter of 2022 compared to the third quarter of 2021 (where effective interest rate is calculated as interest expense divided by the net average borrowings/obligations outstanding);

• an increase in net average borrowings outstanding (including the obligations under the supply and offtake agreements which have an associated interest charge) of approximately $738.4 million in the third quarter of 2022 (calculated as a simple average of beginning borrowings/obligations and ending borrowings/obligations for the period) compared to the third quarter of 2021.

Interest expense, net increased by $32.7 million, or 32.7%, to $132.7 million during the nine months ended September 30, 2022 compared to $100.0 million during the nine months ended September 30, 2021, primarily driven by the following:

• an increase in the average effective interest rate of 101 basis points during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 (where effective interest rate is calculated as interest expense divided by the net average borrowings/obligations outstanding);

• an increase in net average borrowings outstanding (including the obligations under the supply and offtake agreements which have an associated interest charge) of approximately $316.1 million during the nine months ended September 30, 2022 (calculated as a simple average of beginning borrowings/obligations and ending borrowings/obligations for the period) compared to the nine months ended September 30, 2021.

Interest expense, net was $76.5 million in the three months ended March 31, 2023, compared to $38.4 million for three months ended March 31, 2022, an increase of $38.1 million, or 99.2% primarily due to the following:

• an increase in the average effective interest rate of 372 basis points during the three months ended March 31, 2023 compared to the three months ended March 31, 2022 (where effective interest rate is calculated as interest expense divided by the net average borrowings/obligations outstanding);

• an increase in net average borrowings outstanding (including the obligations under the supply and offtake agreements which have an associated interest charge) of approximately $699.5 million during the three months ended March 31, 2023 (calculated as a simple average of beginning borrowings/obligations and ending borrowings/obligations for the period) compared to the three months ended March 31, 2022.

Results from Equity Method Investments

We recognized income of $17.8 million from equity method investments during the third quarter of 2022, compared to $2.9 million for the third quarter of 2021, an increase of $14.9 million.

This increase was primarily driven by the following:

• increase in income from our Red River and Caddo equity method investment due to higher throughput volumes and resulting revenue increases;

• an increase in income from our investment in W2W Holdings LLC to income of $1.2 million in the third quarter of 2022 from a loss of $8.8 million in the third quarter of 2021.

We recognized income of $44.4 million from equity method investments during the nine months ended September 30, 2022, compared to $14.5 million for the nine months ended September 30, 2021, an increase of $29.9 million.

We recognized income from equity method investments of $14.6 million for the three months ended March 31, 2023, compared to $10.9 million for the three months ended March 31, 2022, an increase of $3.7 million.

This increase was primarily driven by the following:

• increase in income from our Red River and Caddo equity method investment due to higher throughput volumes and resulting revenue increases;

• an increase in income from our investment in W2W Holdings LLC to income of $5.4 million during the nine months of 2022 from a loss of $12.9 million during the nine months of 2021.

During the three and nine months ended September 30, 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 the condensed consolidated financial statements in Item 1.

Financial Statements, for additional information.

Income tax expense decreased by $0.5 million in the third quarter of 2022 compared to the third quarter of 2021, primarily driven by the following:

• pre-tax income of $20.8 million in the third quarter of 2022, as compared to a pre-tax loss of $25.1 million for the third quarter of 2021;

Management's Discussion and Analysis

• an increase in our effective tax rate which was 19.2% for the third quarter of 2022, compared to 17.9% for the third quarter of 2021 primarily due to the following:

◦ the impact of credits and permanent differences on the tax rate due to changes in pre-tax book income;

◦ changes in the valuation allowance for state tax attributes;

◦ changes in the third quarter estimated annual tax rate applied to year-to-date loss for the third quarter of 2021.

Income tax expense increased by $146.5 million during the nine months ended September 30, 2022 compared to the same period for 2021, primarily driven by the following:

• pre-tax income of $507.7 million in the nine months ended September 30, 2022, as compared to a pre-tax loss of $129.2 million for the nine months ended September 30, 2021;

• a decrease in our effective tax rate which was 21.2% for the nine months ended September 30, 2022, compared to 30.2% for the nine months ended September 30, 2021 primarily due to the following:

◦ the impact of credits and permanent differences on the tax rate due to changes in pre-tax book income;

◦ changes in the valuation allowance for state tax attributes.

• an increase in income from our asphalt terminal equity method investment due to higher volumes and resulting revenue increases;

• an increase in income from our investment in W2W Holdings LLC to income of $4.5 million during the three months ended March 31, 2023 from income of $2.1 million in the three months ended March 31, 2022.

These increases were partially offset by the following:

• decrease in income from our Red River equity method investment due to lower throughput volumes as a result of the Tyler turnaround and resulting revenue decrease.

For the three months ended March 31, 2023, we recorded income tax expense of $15.8 million compared to $3.1 million for the three months ended March 31, 2022, primarily driven by the following:

• Our effective tax rates were 18.0% and 17.3% for the three months ended March 31, 2023 and 2022, respectively;

• an increase in pre-tax net income of $70.1 million.

Management's Discussion and Analysis

Refining Segment

The tables and charts below set forth certain information concerning our refining segment operations ($ in millions, except per barrel amounts):

Refining Segment Margins

Three Months Ended Nine Months Ended

September 30, September 30,

2022 Adjusted 2021 (1)

$ 4,246.1 $ 2,814.6 $ 12,550.3 $ 6,970.4

The tables and charts below set forth selected information concerning our refining segment operations ($ in millions, except per barrel amounts):

Selected Refining Financial Information

Three Months Ended March 31,

Revenues $ 3,794.5 $ 4,392.3

Cost of materials and other 3,458.8 4,190.2

Refining segment margin 278.0 166.3 1,278.1 420.5

Refining Margin $ 335.7 $ 202.1

Operating expenses (excluding depreciation and amortization) $ 139.1 $ 122.7

172.0 84.2 456.9 313.9

Contribution margin (1)

$ 106.0 $ 82.1 $ 821.2 $ 106.6

(1) Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories.

For further discussion, see Note 7 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

(2) Reflects the prior period conforming reclassification adjustment between operating expenses and general and administrative expenses.

Refining segment EBITDA $ 192.1 $ 80.0

Factors Impacting Refining Profitability

Our profitability in the refining segment is substantially determined by the difference between the cost of the crude oil feedstocks we purchase and the price of the refined products we sell, referred to as the "crack spread" or "refining margin".

Refining margin is used as a metric to assess a refinery's product margins against market crack spread trends, where "crack spread" is a measure of the difference between market prices for crude oil and refined products and is a commonly used proxy within the industry to estimate or identify trends in refining margins.

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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.

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.

Finally, Refining EBITDA 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, 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.

Additionally, volatility in energy costs, which are captured in our operating expenses and impact our Refining EBITDA, 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

Management's Discussion and Analysis

our crack spread capture.

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

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.

Management's Discussion and Analysis

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.

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However, because of the volatility of the market in terms of pricing and availability, it is possible that we may have material positions with timing differences or, more rarely, that we are unable to cover a position with an offsetting position as intended.

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.

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

Refinery Statistics

Three Months Ended Nine Months Ended

September 30, September 30,

As Adjusted (2)

(Unaudited) (Unaudited)

Three Months Ended March 31,

Total Refining Segment

7 unchanged sentences

268,535 287,027

Total refining segment margin ($ in millions) (2)

$ 278.0 $ 166.3 $ 1,278.1 $ 420.5

Total refining segment operating expenses ($ in millions) (3)

172.0 84.2 456.9 313.9

Total refining segment contribution margin ($ in millions) (2)

$ 106.0 $ 82.1 $ 821.2 $ 106.6

(% based on amount received in period)

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Other 21.0 % 23.5 %

Crude utilization (% based on nameplate capacity) 82.2 % 90.1 %

Management's Discussion and Analysis

Refinery Statistics (continued)

Three Months Ended Nine Months Ended

September 30, September 30,

As Adjusted (2)

(Unaudited) (Unaudited)

Tyler, AR Refinery

Three Months Ended March 31,

Tyler, TX Refinery

Days in period 90 90

Products manufactured (average bpd):

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Operating expenses $ 8.70 $ 4.64

$ 6.93 $ 3.54 5.87 $ 3.73

(% based on amount received in period)

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East Texas crude oil 62.5 % 13.2 %

Other — % — % — % 0.3 %

El Dorado, AR Refinery

Days in period 90 90

Products manufactured (average bpd):

11 unchanged sentences

Operating expenses $ 4.47 $ 4.14

$ 4.73 $ 1.90 $ 4.65 $ 4.31

(% based on amount received in period)

2 unchanged sentences

Other 23.4 % 51.2 %

Management's Discussion and Analysis

Refinery Statistics (continued)

Three Months Ended March 31,

Big Spring, TX Refinery

Days in period 90 90

Products manufactured (average bpd):

5 unchanged sentences

Total production 71,568 62,076

Management's Discussion and Analysis

Refinery Statistics (continued)

Three Months Ended Nine Months Ended

September 30, September 30,

As Adjusted (2)

As Adjusted (3)

(Unaudited) (Unaudited)

Throughput (average bpd):

Crude oil 70,955 70,473 67,455 66,693

67,989 60,633

Other feedstocks

Total throughput 72,614 62,372

Per barrel of throughput:

Direct operating expenses (3)

$ 7.19 $ 2.97 $ 6.96 $ 5.13

Per barrel of refined throughput:

Operating expenses $ 5.80 $ 6.06

(% based on amount received in period)

WTI crude oil

74.8 % 66.7 %

WTS crude oil

25.2 % 33.3 %

Krotz Springs, LA Refinery

Days in period 90 90

Products manufactured (average bpd):

Gasoline 32,371 31,465 32,111 23,639

Diesel/Jet 31,195 26,364 31,537 19,075

Heavy Oils 944 1,216 1,439 759

41,846 32,667

32,783 30,994

Petrochemicals, LPG, NGLs

Other 5,960 3,960 5,881 7,267

Total production

85,198 78,843

Throughput (average bpd):

Crude Oil 73,510 65,583 74,120 50,197

77,764 72,997

Other feedstocks

Total throughput

Per barrel of throughput:

Direct operating expenses (3)

84,223 78,461

Per barrel of throughput:

Operating expenses $ 5.21 $ 4.12

(% based on amount received in period)

WTI Crude 70.1 % 62.5 % 61.0 % 65.5 %

79.8 % 64.3 %

Gulf Coast Sweet Crude

14.3 % 35.7 %

Other 5.9 % — %

(1) Includes sales to other segments which are eliminated in consolidation.

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

See tables below.

(2) Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories.

For further discussion, see Note 7 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

(3) Reflects the prior period conforming reclassification adjustment between operating expenses and general and administrative expenses.

Included in the refinery statistics above are the following sales to other segments:

Management's Discussion and Analysis

Included in the refinery statistics above are the following inter-refinery and sales to other segments:

Inter-refinery Sales

Three Months Ended March 31,

(in barrels per day) 2023 2022

El Dorado refined product sales to other Delek refineries — 866

Big Spring refined product sales to other Delek refineries — 639

Krotz Springs refined product sales to other Delek refineries — 501

Refinery Sales to Other Segments

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended March 31,

(in barrels per day) 2023 2022

(Unaudited) (Unaudited)

Tyler refined product sales to other Delek segments — 50 — 619

El Dorado refined product sales to other Delek segments — 7

Big Spring refined product sales to other Delek segments 19,433 21,766

Krotz Springs refined product sales to other Delek segments — 3,180 — 2,423

Management's Discussion and Analysis

Pricing Statistics (average for the period presented)

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

(Unaudited) (Unaudited)

Three Months Ended March 31,

WTI — Cushing crude oil (per barrel) $ 75.96 $ 95.18

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LLS (per barrel) $ 78.84 $ 97.49

Brent crude oil (per barrel) $ 97.69 $ 73.15 $ 102.48 $ 67.96

Brent (per barrel) $ 82.10 $ 97.92

Gulf Coast 5-3-2 crack spread (per barrel) - utilizing HSD $ 16.60 $ 18.20

9 unchanged sentences

Natural gas (per MMBtu) $ 2.73 $ 4.59

$ 7.97 $ 4.32 $ 6.69 $ 3.35

(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.

(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 (Argus pricing) WTI Cushing crude, U.S.

Gulf Coast CBOB gasoline and U.S.

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2 heating oil (ultra low sulfur diesel).

For our Big Spring refinery, we compare our refining margin to the Gulf Coast 3-2-1 crack spread consisting of WTI Cushing crude, Gulf Coast CBOB gasoline and Gulf Coast ultra low sulfur diesel, and for our Krotz Springs refinery, we compare our per barrel refining margin to the Gulf Coast 2-1-1 crack spread consisting of LLS crude oil, Gulf Coast CBOB gasoline and U.S.

For our Big Spring refinery, we compare our per barrel refining margin to the Gulf Coast 3-2-1 crack spread consisting of (Argus pricing) WTI Cushing crude, U.S.

Gulf Coast CBOB gasoline and Gulf Coast ultra-low sulfur diesel.

Starting in Q1 2023, for our Krotz Springs refinery, we compare our per barrel refining margin to the Gulf Coast 2-1-1 crack spread consisting of (Argus pricing) LLS crude oil, (Argus pricing) U.S.

Gulf Coast CBOB gasoline and 50% of (Argus pricing) U.S.

Gulf Coast Pipeline No.

2 heating oil (high sulfur diesel) and 50% of (Platts pricing) U.S.

Gulf Coast Pipeline No.

2 heating oil (high sulfur diesel).

Historical Gulf Coast 2-1-1 crack spread measures have been revised to conform to current period presentation.

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.

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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 Three and Nine Months Ended September 30, 2022 versus the Three and Nine Months Ended September 30, 2021

Net revenues for the refining segment increased by $1,431.5 million, or 50.9%, in the third quarter of 2022 compared to the third quarter of 2021, primarily driven by increases in the average price of U.S.

Gulf Coast gasoline of 23.3% ULSD of 67.9%, and HSD of 60.1% and

Net revenues included sales to our retail segment of $132.1 million and $92.3 million, sales to our logistics segment of $124.7 million and $89.9 million, and sales to our other segment of $0.0 million and $28.7 million for the three months ended September 30, 2022 and September 30, 2021, respectively.

We eliminate this intercompany revenue in consolidation.

Net revenues for the refining segment increased by $5,579.9 million, or 80.1%, in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, primarily driven by the following:

• increases in the average price of U.S.

Refining Segment Operational Comparison of the Three Months Ended March 31, 2023 versus the Three Months Ended March 31, 2022.

Revenues for the refining segment decreased $597.8 million, or 13.6%, in the three months ended March 31, 2023 compared to the three months ended March 31, 2022.

The decrease was primarily driven by the following:

• a decrease in the average price of U.S.

Gulf Coast gasoline of 11.6%, ULSD of 4.9%, and HSD of 28.6%;

• an increase in total sales volumes of 13.1 million barrels, where sales volumes were lower in the nine months of 2021 due to severe weather impacting our refineries and turnaround activities at our El Dorado refinery.

Net revenues included sales to our retail segment of $404.0 million and $253.8 million, sales to our logistics segment of $374.3 million and $229.8 million and sales to our other segment of $16.7 million and $71.7 million for the nine months ended September 30, 2022 and 2021, respectively.

• a decrease in total sales volumes primarily driven by turnaround activities at the Tyler refinery;

• a decrease in wholesale activity.

Revenues included sales to our retail segment of $102.6 million and $111.7 million, sales to our logistics segment of $91.1 million and $105.9 million and sales to the other segment of $0.0 million and $8.1 million for the three months ended March 31, 2023 and 2022, respectively.

We eliminate this intercompany revenue in consolidation.

Cost of Materials and Other

Cost of materials and other increased by $1,319.8 million, or 49.8%, in the third quarter of 2022 compared to the third quarter of 2021, primarily driven by the following:

• increases in the cost of WTI Cushing crude oil, from an average of $70.54 per barrel to an average of $91.63, or 29.9%, and increases in the cost of WTI Midland crude oil, from an average of $70.74 per barrel to an average of $91.43, or 29.2%;

• an increase in sales volumes.

Cost of materials and other increased by $4,722.3 million, or 72.1%, during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, primarily driven by the following:

• increases in the cost of WTI Cushing crude oil, from an average of $65.06 per barrel to an average of $98.50, or 51.4%;

• increases in the cost of WTI Midland crude oil, from an average of $65.48 per barrel to an average of $98.29, or 50.1%;

• an increase in sales volumes;

• an increase in RINs expense primarily due to increased production.

Management's Discussion and Analysis

Our refining segment 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 $126.1 million and $109.3 million during the third quarters of 2022 and 2021, respectively, and $375.1 million and $307.0 million during the nine months ended September 30, 2022 and 2021, respectively.

Cost of materials and other decreased $731.4 million, or 17.5%, in the three months ended March 31, 2023 compared to the three months ended March 31, 2022.

This decrease was primarily driven by the following:

• decreases in the cost of WTI Cushing crude oil, from an average of $95.18 per barrel to an average of $75.96, or 20.2%;

• decreases in the cost of WTI Midland crude oil, from an average of $95.01 per barrel to an average of $75.99, or 20.0%;

• a decrease in sales volumes;

• lower natural gas costs;

• a decrease in RINs expense primarily due to decreased production.

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 $124.6 million and $123.4 million during the three months ended March 31, 2023 and 2022, respectively.

We eliminate these intercompany fees in consolidation.

Refining Segment Margin

Refining segment margin increased by $111.7 million, or 67.2%, in the third quarter of 2022 compared to the third quarter of 2021, primarily driven by the following:

• a 70.5% improvement in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery), a 67.8% improvement in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery), and a 93.8% improvement in the average Gulf Coast 2-1-1 crack spread (the primary measure for the Krotz Springs refinery) and;

• an increase in utilization and sales volumes.

Refining margin increased by $857.6 million, or 203.9%, in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, primarily driven by the following:

• a 110.8% improvement in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery), a 95.6% improvement in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery), and a 157.9% improvement in the average Gulf Coast 2-1-1 crack spread (the primary measure for the Krotz Springs refinery) and;

• an increase in sales volumes.

Such increase was partially offset by an increase in RINs expense primarily due to increased production.

Operating Expenses

Operating expenses increased by $87.8 million, or 104.3%, in the third quarter of 2022 compared to the third quarter of 2021, primarily driven by the following:

• increase in variable costs and utilities associated with higher throughput during the current period;

• higher natural gas prices in the third quarter of 2022.

Operating expenses increased by $143.0 million, or 45.6%, during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, primarily driven by the following:

• increase in variable costs and utilities associated with higher throughput during the current period;

• higher natural gas prices in the nine months ended September 30, 2022 compared to the prior year for the same period.

Management's Discussion and Analysis

Contribution Margin

Contribution margin increased by $23.9 million, in the third quarter of 2022 compared to the third quarter of 2021, primarily driven by an increase in refining margin primarily driven by improved crack spreads offset by increase in variable costs and utilities and natural gas prices.

Contribution margin increased by $714.6 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, primarily driven by an increase in refining margin primarily driven by improved crack spreads, increased sales volumes, offset by increase in variable costs and utilities, natural gas prices, and higher RINs expense primarily due to increased production.

Refining Margin

Refining margin increased by $133.6 million, or 66.1%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, with a refining margin percentage of 8.8% as compared to 4.6% for the three months ended March 31, 2023 and 2022, respectively, primarily driven by the following:

• a 37.5% improvement in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery), a 36.7% improvement in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery) and a 9.7% improvement in the average Gulf Coast 2-1-1 crack spread (the primary measure for the Krotz Springs refinery).

These increases were partially offset by the following:

• a decrease in RINs expense primarily due to decreased production;

• a decrease in total sales volumes primarily driven by turnaround activities at the Tyler refinery.

Operating Expenses

Operating expenses increased $16.4 million, or 13.4%, in the three months ended March 31, 2023, compared to three months ended March 31, 2022.

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

• higher employee and outside service costs.

These increases were partially offset by the following:

• lower natural gas prices.

EBITDA increased by $112.1 million, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, driven by an increase in refining margin primarily due to improved crack spreads, lower natural gas prices and lower RINs expense primarily due to decreased production, partially offset by decreased sales volume and increases in employee and outside services costs.

Management's Discussion and Analysis

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The table below sets forth certain information concerning our logistics segment operations ($ in millions, except per barrel amounts):

Logistics Contribution Margin and Operating Information

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Net revenues $ 294.1 $ 189.6 $ 767.4 $ 511.0

Selected Logistics Financial and Operating Information

Three Months Ended March 31,

Revenues $ 243.5 $ 206.6

Cost of materials and other $ 126.1 $ 126.2

Operating expenses (excluding depreciation and amortization) $ 24.7 $ 18.1

Contribution margin

$ 90.5 $ 66.9 $ 222.1 $ 188.0

EBITDA $ 91.4 $ 64.2

Operating Information:

Gathering & Processing:

(average bpd)

Lion Pipeline System:

Crude pipelines (non-gathered) 63,528 72,872

Refined products pipelines 55,003 59,522

SALA Gathering System 13,872 16,156

East Texas Crude Logistics System 10,508 16,056

Midland Gathering Assets (1)

222,112 100,325

Plains Connection System 240,597 162,007

Delaware Gathering Assets:

Natural Gas Gathering and Processing (Mcfd) (3)

Crude Oil Gathering (average bpd) 103,725 n/a

Water Disposal and Recycling (average bpd) 88,182 n/a

Wholesale Marketing & Terminalling:

East Texas - Tyler refinery sales volumes (average bpd) (4)

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Big Spring wholesale marketing throughputs (average bpd) 78,380 75,549

74,238 81,880 76,135 76,680

West Texas wholesale marketing throughputs (average bpd) 8,696 9,913

10,082 10,560 10,023 10,033

West Texas wholesale marketing margin per barrel $ 2.58 $ 3.04

$ 4.23 $ 3.33 $ 3.84 $ 3.64

Terminalling throughputs (average bpd) (5)

93,305 137,622

Throughputs (average bpd):

Lion Pipeline System:

Crude pipelines (non-gathered)

87,653 81,929 81,795 60,344

Refined products pipelines to Enterprise Systems

65,761 62,263 63,391 42,733

SALA Gathering System

14,354 14,086 16,150 14,056

East Texas Crude Logistics System

23,960 18,644 20,015 24,045

Big Spring Gathering Assets (3)

121,304 84,325 107,699 79,251

Plains Connection System 184,254 131,571 166,864 120,905

Trucking Assets 15,763 11,450 13,606 10,655

(1) Formerly known as the Permian Gathering System.

Excludes volumes that are being temporarily transported via trucks while connectors are under construction.

(2) Formally known as 3 Bear, which was acquired June 1, 2022.

(3) Mcfd - average thousand cubic feet per day.

(4) Excludes jet fuel and petroleum coke.

(5) 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) Excludes volumes that are being temporarily transported via trucks while connectors are under construction.

Logistics Segment Operational Comparison of the Three and Nine Months Ended September 30, 2022 versus the Three and Nine Months Ended September 30, 2021

Net revenues increased by $104.5 million, or 55.1%, in the third quarter of 2022 compared to the third quarter of 2021, primarily driven by:

• increases in the average sales prices per gallon of diesel and gasoline sold, partially offset by a decrease in the volumes of gasoline and diesel sold in our West Texas marketing operations;

• incremental revenues from the 3 Bear Acquisition;

• increases in pipeline throughputs.

Net revenues included sales to our refining segment of $126.1 million and $109.3 million for the three months ended September 30, 2022 and September 30, 2021, respectively.

We eliminate this intercompany revenue in consolidation.

Net revenues increased by $256.4 million, or 50.2%, in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, primarily driven by the following:

• increases in the average sales prices per gallon of gasoline and diesel sold and volume of diesel sold, partially offset by a decrease in the volume of gasoline sold in our West Texas marketing operations;

• incremental revenues from the 3 Bear Acquisition;

• increases in pipeline throughputs, where the nine months ended September 30, 2021 were negatively impacted by the Pandemic as well as severe weather events.

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 minimum volume commitments ("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 are 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

Net revenues included sales to our refining segment of $375.1 million and $307.0 million for the nine months ended September 30, 2022 and 2021, respectively, and sales to our other segment of $2.0 million and $1.4 million for the nine months ended September 30, 2022 and 2021, respectively.

Logistics Segment Operational Comparison of the Three Months Ended March 31, 2023 versus the Three Months Ended March 31, 2022.

Revenues increased by $36.9 million, or 17.9%, in the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily driven by the following:

• incremental revenues from the Delaware Gathering Acquisition;

• increase in volumes associated with Midland Gathering operations due to new connections finalized during 2022.

This increase was partially offset by the following:

• decreases in the average sales prices per gallon of gasoline and diesel sold and volume of diesel and gasoline sold in our West Texas marketing operations;

• decreases in pipeline throughputs.

Revenues included sales to our refining segment of $124.6 million and $123.4 million for the three months ended March 31, 2023 and 2022, respectively, and sales to our other segment of $0.4 million and $0.4 million for the three months ended March 31, 2023 and 2022, respectively.

We eliminate this intercompany revenue in consolidation.

Cost of Materials and Other

Cost of materials and other for the logistics segment increased by $72.6 million, or 69.1%, in the third quarter of 2022 compared to the third quarter of 2021 primarily driven by the following:

• increases in the average cost per gallon of gasoline and diesel sold, and increases in the volume of gasoline sold in our West Texas marketing operations:

◦ the average cost per gallon of gasoline and diesel sold increased $0.56 per gallon and $1.42 per gallon, respectively;

◦ the average volumes of gasoline and diesel sold decreased by 0.8 million gallons and 1.1 million gallons, respectively, and;

• incremental cost of materials and other from the 3 Bear Acquisition.

Our logistics segment purchased product from our refining segment of $124.7 million and $89.9 million for the three months ended September 30, 2022 and September 30, 2021, respectively.

Cost of materials and other for the logistics segment decreased by $0.1 million, or 0.1%, in the three months ended March 31, 2023 compared to the three months ended March 31, 2022.

This decrease was primarily driven by the following:

• decreases in the average cost per gallon of gasoline and diesel sold and decreases in the average volumes of diesel and gasoline sold in our West Texas marketing operations:

◦ the average cost per gallon of gasoline and diesel sold decreased $0.22 per gallon and $0.10 per gallon, respectively;

◦ the average volumes of diesel sold decreased by 0.9 million gallons and gasoline volumes sold decreased by 2.8 million gallons.

These decreases were partially offset by the following:

• incremental cost of materials and other from the Delaware Gathering Acquisition.

Our logistics segment purchased product from our refining segment of $91.1 million and $105.9 million for the three months ended March 31, 2023 and 2022, respectively.

We eliminate these intercompany costs in consolidation.

Cost of materials and other for the logistics segment increased by $205.3 million, or 74.7%, in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily driven by the following:

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

◦ the average cost per gallon of gasoline and diesel sold increased $0.97 per gallon and $1.55 per gallon, respectively;

◦ the average volumes of diesel sold increased by 1.9 million gallons, while gasoline volumes sold decreased by 2.0 million gallons;

• incremental cost of materials and other from the 3 Bear Acquisition.

Management's Discussion and Analysis

Our logistics segment purchased product from our refining segment of $374.3 million and $229.8 million for the nine months ended September 30, 2022 and September 30, 2021, respectively.

We eliminate these intercompany costs in consolidation.

Operating Expenses

Operating expenses increased by $8.3 million, or 47.2%, in the third quarter of 2022 compared to the third quarter of 2021, driven by the following:

• increase due to additional expenses associated with 3 Bear Acquisition;

• increases in employee and outside service costs after cost cutting measures previously 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 utilities, maintenance and other variable expenses due to higher throughput.

Operating expenses increased by $17.0 million, or 35.4%, in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, driven by the following:

• increase due to additional expenses associated with 3 Bear Acquisition;

• increases in employee and outside service costs;

• increases in variable expenses such as maintenance and materials costs due to higher throughput.

Contribution Margin

Contribution margin increased by $23.6 million in the third quarter of 2022 compared to the third quarter of 2021 primarily driven by the following:

• increases in revenue due to higher throughput volumes;

• partially offset by increases in operating expense.

Contribution margin increased by $34.1 million, or 18.1%, in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, primarily driven by the following:

• increases in revenue due to higher throughput volumes;

• partially offset by increases in operating expense.

Operating expenses increased by $6.6 million, or 36.5%, in the three months ended March 31, 2023 compared to the three months ended March 31, 2022, primarily driven by the following:

• increase due to additional expenses associated with Delaware Acquisition.

EBITDA increased by $27.2 million, or 42.4%, in the three months ended March 31, 2023 compared to the three months ended March 31, 2022, primarily driven by the following:

• higher throughput volumes;

• incremental EBITDA from the Delaware Gathering Acquisition.

Management's Discussion and Analysis

Retail Segment

The table below sets forth certain information concerning our retail segment operations (gross sales $ in millions):

Retail Contribution Margins

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Net revenues $ 253.1 $ 206.5 $ 739.7 $ 590.3

The tables below set forth certain information concerning our retail segment operations (gross sales $ in millions):

Selected Retail Financial and Operating Information

Three Months Ended March 31,

Revenues $ 205.0 $ 209.5

Cost of materials and other $ 170.0 $ 173.0

210.3 165.2 617.1 466.4

Operating expenses (excluding depreciation and amortization) $ 24.6 $ 22.7

25.4 23.4 73.2 67.4

Contribution margin

$ 17.4 $ 17.9 $ 49.4 $ 56.5

EBITDA $ 6.4 $ 10.3

Operating Information

Three Months Ended March 31,

Number of stores (end of period) 249 248

248 250 248 250

Average number of stores 249 248

248 250 248 250

Average number of fuel stores 244 243

243 245 243 245

Retail fuel sales $ 131.1 $ 139.9

$ 169.0 $ 124.9 $ 502.4 $ 349.5

Retail fuel sales (thousands of gallons) 39,964 39,505

44,729 41,912 129,145 124,655

Average retail gallons sold per average number of fuel stores (in thousands)

184 171 533 510

Average retail gallons per average number of stores (in thousands)

Average retail sales price per gallon sold $ 3.28 $ 3.54

$ 3.78 $ 2.98 $ 3.89 $ 2.80

Retail fuel margin ($ per gallon) (1)

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Merchandise sales (in millions) $ 73.9 $ 69.7

$ 84.2 $ 81.7 $ 237.3 $ 240.9

Merchandise sales per average number of stores (in millions) $ 0.3 $ 0.3

$ 0.3 $ 0.3 $ 1.0 $ 1.0

Merchandise margin % 33.0 % 34.6 %

32.6 % 33.7 % 33.7 % 33.1 %

Same-Store Comparison (2)

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Change in same-store fuel gallons sold

7.4 % (5.9) % 4.7 % (9.6) %

Three Months Ended March 31,

Change in same-store retail fuel gallons sold (1.7) % 0.8 %

Change in same-store merchandise sales 5.3 % (5.2) %

3.9 % (7.1) % (0.3) % (3.1) %

(1) Retail fuel margin represents gross margin on fuel sales in the retail segment, and is calculated as retail fuel sales revenue less retail fuel cost of sales.

The retail fuel margin per gallon calculation is derived by dividing retail fuel margin by the total retail fuel gallons sold for the period.

(2) Same-store comparisons include period-over-period changes in specified metrics for stores that were in service at both the beginning of the earliest period and the end of the most recent period used in the comparison.

Retail Segment Operational Comparison of the Three and Nine Months Ended September 30, 2022 versus the Three and Nine Months Ended September 30, 2021

Net revenues for the retail segment increased by $46.6 million, or 22.6%, in the third quarter of 2022 compared to the third quarter of 2021, primarily driven by the following:

• an increase in total fuel sales which were $169.0 million in the third quarter of 2022 compared to $124.9 million in the third quarter of 2021, primarily attributable to an increase of $0.80 in average price charged per gallon sold;

• an increase in merchandise sales to $84.2 million in the third quarter of 2022 compared to $81.7 million in the third quarter of 2021.

Net revenues for the retail segment increased by $149.4 million, or 25.3%, in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, primarily driven by the following:

(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

• an increase in total fuel sales which were $502.4 million in the nine months of 2022 compared to $349.5 million in the nine months of 2021, primarily attributable to a $1.09 increase in average price charged per gallon sold;

• partially offset by a decrease in merchandise sales to $237.3 million in the nine months of 2022 compared to $240.9 million in the nine months of 2021, primarily driven by the same-store sales decrease of 0.3%.

Retail Segment Operational Comparison of the Three Months Ended March 31, 2023 versus the Three Months Ended March 31, 2022.

Revenues for the retail segment decreased by $4.5 million, or 2.1%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, primarily driven by the following:

• a decrease in total fuel sales which were $131.1 million for the three months ended March 31, 2023 compared to $139.9 million for the three months ended March 31, 2022, primarily attributable to a $0.26 decrease in average price charged per gallon sold.

These decreases were partially offset by the following:

• an increase in merchandise sales to $73.9 million for the three months ended March 31, 2023 compared to $69.7 million for the three months ended March 31, 2022, primarily driven by the same-store sales increase of 5.3%.

Management's Discussion and Analysis

Cost of Materials and Other

Cost of materials and other for the retail segment increased by $45.1 million, or 27.3%, in the third quarter of 2022 compared to the third quarter of 2021, primarily driven by an increase in average cost per gallon of $0.78 or 29.4% applied to fuel sales volumes that increased period over period.

Our retail segment purchased finished product from our refining segment of $132.1 million and $92.3 million for the three months ended September 30, 2022 and September 30, 2021, respectively, which is eliminated in consolidation.

Cost of materials and other for the retail segment increased by $150.7 million, or 32.3%, in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, primarily driven by an increase in average cost per gallon of $1.11 or 45.5% applied to fuel sales volumes that increased period over period.

Our retail segment purchased finished product from our refining segment of $404.0 million and $253.8 million for the nine months ended September 30, 2022 and September 30, 2021, respectively, which is eliminated in consolidation.

Cost of materials and other for the retail segment decreased by $3.0 million, or 1.7%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, primarily driven by the following:

• a decrease in average cost per gallon of $0.21 ,or 6.6%.

Our retail segment purchased finished product from our refining segment of $102.6 million and $111.7 million for the three months ended March 31, 2023 and 2022, respectively.

We eliminate this intercompany cost in consolidation.

Operating Expenses

Retail segment operating expenses increased by $2.0 million, or 8.5%, in the third quarter of 2022 compared to the third quarter of 2021, primarily due to increased salary cost and credit card expenses due to a higher price per gallon.

Operating expenses for the retail segment increased by $5.8 million, or 8.6% in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, primarily due to increased employee costs.

Operating expenses for the retail segment increased by $1.9 million, or 8.4%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily driven by higher employee cost in 2023.

EBITDA for the retail segment decreased by $3.9 million, a 37.9% decrease in EBITDA, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, primarily driven by the following:

• a decrease in average fuel margin of $0.048 per gallon, partially offset by an increase in fuel sales volume;

• an increase in operating expenses due to higher employee costs.

Management's Discussion and Analysis

Contribution Margin

Contribution margin for the retail segment decreased by $0.5 million, or 2.8%, in the third quarter of 2022 compared to the third quarter of 2021, primarily driven by the following:

• a decline in merchandise margin percentage of 1.1%;

• an increase in operating expense.

Contribution margin for the retail segment decreased by $7.1 million, or 12.6%, in the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily driven by the following:

• a decrease in average fuel margin of $0.025 per gallon and an increase in fuel sales volume;

• a 1.5% decrease in merchandise sales, partially offset by an increase in merchandise margin percentage of 0.6%.

Liquidity and Capital Resources

Sources of Capital

Our primary sources of liquidity and capital resources are

2 unchanged sentences

• potential issuances of additional equity and debt securities.

At September 30, 2022 our total liquidity amounted to $2.1 billion comprised primarily of $787.4 million in unused credit commitments under the Delek Revolving Credit Facility (as defined in Note 9 of the condensed consolidated financial statements in Item 1.

Financial Statements), $193.1 million in unused credit commitments under the Delek Logistics Credit Facility (as defined in Note 9 of the condensed consolidated financial statements in Item 1.

Financial Statements) and $1,153.8 million in cash and cash equivalents.

Refer to Note 19 of the condensed consolidated financial statements in Item 1.

Financial Statements for information on our recent amendments to our debt facilities.

Historically, we have generated adequate cash from operations to fund ongoing working capital requirements and pay quarterly cash dividends and 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.

On June 21, 2022, our Board of Directors voted to declare a special cash dividend of $0.20 per share of our common stock, payable on July 20, 2022 to shareholders of record on July 12, 2022.

Return of cash to shareholders remains a priority for the Company along with maintaining a strong and flexible balance sheet.

On August 1, 2022, our Board voted to reinstate the quarterly cash dividend and declared a quarterly cash dividend of $0.20 per share of our common stock, payable on September 6, 2022 to shareholders of record on August 22, 2022.

On October 31, 2022 , our Board declared a quarterly cash dividend of $0.21 per share of our common stock, payable on December 2, 2022 to shareholders of record on November 18, 2022.

In addition, on August 1, 2022, the Board approved an approximately $170.3 million increase in its share repurchase authorization, bringing the total amount available for repurchases under current authorizations to $400.0 million.

During the third quarter 2022, we repurchased approximately 1.4 million shares of Delek US common stock for approximately $40 million, with an average price of $27.86 per share.

At March 31, 2023 our total liquidity amounted to $1.7 billion comprised primarily of $865.8 million in unused credit commitments under our revolving credit facilities (as discussed in Note 9 of our condensed consolidated financial statements in Item 1.

Financial Statements, of this Quarterly Report on Form 10-Q) and $865.0 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.

On May 2, 2023, our Board of Directors approved a quarterly cash dividend of $0.23 per share of our common stock.

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.

In addition, we have

Management's Discussion and Analysis

historically been able to source funding that terms that reflect market conditions, our financial position and our credit ratings.

We continue to monitor market conditions, our financial position and our credit ratings and expect future funding sources to be at terms that are sustainable and profitable for the Company.

However, there can be no assurances regarding the availability of any future debt or equity financings or whether such financings can be made available on terms that are acceptable to us;

In addition, we have historically been able to source funding at terms that reflect market conditions, our financial position and our credit ratings and expect future funding sources to be at terms that are sustainable and profitable for the Company.

However, there can be no assurances regarding the availability of future debt or equity financings or whether such financings can be made available on terms that are acceptable to us;

any execution of such financing activities will be dependent on the contemporaneous availability of functioning debt or equity markets.

1 unchanged sentence

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 industry and other financial and business factors, including the current COVID-19 Pandemic and oil prices, some of which are beyond our control.

If market conditions were to change, for instance due to the uncertainty created by the COVID-19 Pandemic or the Russia-Ukraine War, and our revenue was reduced significantly or operating costs were to increase significantly, our cash flows and liquidity could be unfavorably impacted.

As of September 30, 2022, 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 Note 9 of the condensed consolidated financial statements in Item 1.

Financial Statements).

We currently expect to remain in compliance with our existing debt maintenance covenants, though we can provide no assurances, particularly if conditions significantly worsen beyond our ability to predict.

Additionally, we were in compliance with incurrence covenants during the quarter ended September 30, 2022 to the extent that any of our activities triggered these covenants.

However, given the uncertainty around economic conditions, it is at least reasonably possible that conditions could change significantly, and that such changes could adversely impact our ability to meet some of these incurrence covenants.

Inability to meet the incurrence covenants could impose certain incremental restrictions on our ability to incur new debt and also may limit whether and the extent to which we may pay dividends, as well as impose additional restrictions on our ability to repurchase our stock, make new investments and incur new liens (among others).

Such restrictions would generally remain in place until such quarter that we are able to satisfy the applicable incurrence based covenants.

In the event that we are subject to these incremental restrictions, we believe that we have sufficient current and alternative sources of liquidity, including (but not limited to) the following:

available borrowings under our existing Wells Fargo Revolving Credit Facility, and for Delek Logistics, under its Delek Logistics Credit Facility (each as defined in Note 9 of the condensed consolidated financial statements in Item 1.

Financial Statements);

the allowance to incur additional secured debt under the Term Loan Credit Facility (as defined in Note 9 of the condensed consolidated financial statements in Item 1.

Financial Statements);

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, each as otherwise contemplated and allowed under our incurrence covenants.

As of March 31, 2023, 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 Term Loan Credit Facility (see further discussion in Note 9 of our condensed consolidated financial statements in Item 1.

Financial Statements, of this Quarterly Report on Form 10-Q).

Additionally, we were in compliance with incurrence covenants to the extent triggered during the quarter ended March 31, 2023.

Failure to meet the incurrence covenants could impose certain incremental restrictions on our ability to incur new debt and also may limit whether and the extent to which we may pay dividends, as well as impose additional restrictions on our ability to repurchase our stock, make new investments and incur new liens (among others).

Such restrictions would generally remain in place until such quarter that we return to compliance under the applicable incurrence based covenants.

In the event that we are subject to these incremental restrictions, we believe that we have sufficient current and alternative sources of liquidity, including (but not limited to):

available borrowings under our existing Delek Revolving Credit Facility, and for Delek Logistics, under its Delek Logistics Revolving Facility;

the allowance to incur an additional $400.0 million of secured debt under the Delek Term Loan Credit Facility (see further discussion of these facilities in Note 9 of our condensed consolidated financial statements in Item 1.

Financial Statements, of this Quarterly Report on Form 10-Q);

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.

The following table sets forth a summary of our consolidated cash flows (in millions):

Nine Months Ended September 30,

Three Months Ended March 31,

Cash Flow Data:

2 unchanged sentences

Financing activities (149.3) 1.0

Net increase $ 297.3 $ 43.1

Net increase (decrease) $ 23.7 $ (2.4)

Cash Flows from Operating Activities

Net cash provided by operating activities was $716.1 million for the nine months ended September 30, 2022, compared to cash provided of $210.2 million for the comparable period of 2021.

The increase in cash provided by operating activities was primarily due to an increase in cash receipts from customers and cash payments to suppliers and for salaries resulting in a net $555.4 million increase in cash provided by operating activities.

Additionally, interest paid increased $34.4 million, income taxes paid increased $22.4 million and dividends received increased $7.3 million.

Net cash provided by operating activities was $395.1 million for the three months ended March 31, 2023, compared to $26.8 million for the comparable period of 2022.

Increases were a result of a net $446.6 million positive impact generated by strong operating results and favorable changes in working capital, an increase in dividends received of $2.1 million, and a decrease in income taxes paid of $0.9 million.

Partially offsetting these increases in net cash provided by operating activities was an increase in cash paid for debt interest of $81.3 million.

Management's Discussion and Analysis

Cash Flows from Investing Activities

Net cash used in investing activities was $819.9 million for the first nine months of 2022, compared to $143.2 million in the comparable period of 2021.

The increase in cash flows used in investing activities was primarily due to the $625.4 million acquisition of 3 Bear, an $29.7 million increase in purchases of property, plant and equipment, partially attributable to delaying non-essential projects in light of the COVID-19 Pandemic and a $10.4 million decrease in proceeds from sale of property, plant and equipment.

Net cash used in investing activities was $222.1 million for the three months ended March 31, 2023, compared to $30.2 million in the comparable period of 2022.

The increase in cash flows used in investing activities were primarily due to the $181.8 million increase in purchases of property, plant and equipment, substantially driven by maintenance projects associated with the Tyler turnaround, other refinery additions and various interconnects associated with Logistics assets.

During the three months ended March 31, 2023, we also made payments of $12.3 million for equity interests and other investments.

Cash Flows from Financing Activities

Net cash provided by financing activities was $401.1 million for the nine months ended September 30, 2022, compared to net cash used of $23.9 million in the comparable 2021 period.

This increase in cash provided was primarily due to net proceeds on our revolvers and term debt of $510.0 million during the nine months ended September 30, 2022, compared to net repayments of $125.8 million in the comparable 2021 period and $16.4 million in proceeds from the sale of Delek Logistics limited partner units in the current period, partially offset by a $95.6 million decrease in net proceeds from inventory financing arrangements, the purchase of Delek common stock from IEP Energy Holding, LLC for $64.0 million in the current period, $40.0 million of share repurchases and $28.3 million dividends paid in the period.

Cash Position, Indebtedness and Other Financing Arrangements

As of September 30, 2022, our total cash and cash equivalents were $1,153.8 million and we had total long-term indebtedness of approximately $2,733.6 million.

The total long-term indebtedness is net of deferred financing costs and debt discount of $9.2 million and $14.3 million, respectively.

Net cash used in financing activities was $149.3 million for the three months ended March 31, 2023, compared to cash provided of $1.0 million in the comparable 2022 period.

The decrease in cash provided was predominantly due to net payments on long-term revolvers and term debt of $281.0 million during the three months ended March 31, 2023, compared to net payments of $7.2 million in the comparable 2022 period, dividend payments of $14.7 million made during the three months ended March 31, 2023.

and proceeds received of $16.4 million in the comparable 2022 period for the sale of Delek Logistics common limited partner units.

These decreases in cash flows were partially offset by share repurchases of $63.6 million in 2022, combined with the impact of the following:

net proceeds from product financing arrangements of $98.9 million for the three months ended March 31, 2023 compared to net proceeds of $64.8 million in the comparable 2022 period, and the receipt of settlement proceeds of $58.0 million during the first quarter of 2023 associated with the termination of the J.

Aron Supply & Offtake Agreements and origination of the Citi Inventory Intermediation Agreement..

Cash Position and Indebtedness

As of March 31, 2023, our total cash and cash equivalents were $865.0 million and we had total long-term indebtedness of approximately $2,775.0 million.

The total long-term indebtedness is net of deferred financing costs and debt discount of $64.5 million.

Additionally, we had letters of credit issued of approximately $238.6 million.

Total unused credit commitments or borrowing base availability, as applicable, under our revolving credit facilities was approximately $865.8 million.

Our total long-term indebtedness consisted of the following:

• an aggregate principal amount of $1,250.2 million under the Term Loan Credit Facility, due on March 30, 2025, with effective interest rate of 6.41%;

• an aggregate principal amount of $806.9 million under the Delek Logistics Credit Facility, due on September 28, 2023, with average borrowing rate of 5.64%;

• an aggregate principal amount of $250.0 million under the Delek Logistics 2025 Notes, due in 2025, with effective interest rate of 7.19%;

• an aggregate principal amount of $400.0 million under the Delek Logistics 2028 Notes, due in 2028, with effective interest rate of 7.40%;

• an aggregate principal amount of $50.0 million under the United Community Bank Revolver (formally Reliant Bank), due on June 30, 2023, with fixed interest rate of 7.00%;

• the Revolving Credit Facility, due on March 30, 2023, with borrowing rate of 6.50% for base rate loans, with no principal amount outstanding.

See Note 9 and Note 19 of the condensed consolidated financial statements in Item 1.

Financial Statements, for additional information about our separate credit facilities included in long-term indebtedness.

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 $596.2 million at September 30, 2022, $413.0 million of which is due on December 30, 2022.

(See Note 8 of the condensed consolidated financial statements in Item 1.

Financial Statements, for additional information about our supply and offtake facilities).

Our product financing liabilities consisted primarily of RIN financings as of September 30, 2022, and totaled $305.7 million, all of which is due by December 31, 2022.

See further description of these types of arrangements in the Environmental Credits and Related Regulatory Obligations accounting policy disclosed in Note 2 to our audited consolidated financial statements included Item 8.

The decrease of $281.0 million in total long-term indebtedness as of March 31, 2023 compared to December 31, 2022 resulted primarily from a decrease in net borrowings under the Delek Revolving Credit Facility and the United Community Bank Revolver, partially offset by an increase in net borrowings under the Delek Logistics Revolving Facility.

As of March 31, 2023, our total long-term indebtedness (as defined in Note 9 of the condensed consolidated financial statements in Item 1.

Financial Statements) consisted of the following:

• aggregate principal of $150.0 million under the Delek Revolving Credit Facility (maturity of October 26, 2027 and average borrowing rate of 6.31%);

• aggregate principal of $947.6 million under the Delek Term Loan Credit Facility (maturity of November 19, 2029 and effective interest of 9.71%);

• aggregate principal of $770.6 million under the Delek Logistics Revolving Facility, (maturity of October 13, 2027 and average borrowing rate of 7.57%);

• aggregate principal of $296.3 million under the Delek Logistics Term Loan Facility (maturity of October 13, 2024 and average borrowing rate of 8.41%);

• aggregate principal of $250.0 million under the Delek Logistics 2025 Notes (due in 2025, with effective interest rate of 7.19%);

• aggregate principal of $400.0 million under the Delek Logistics 2028 Notes (due in 2028, with effective interest rate of 7.40%);

• aggregate principal of $25.0 million under the United Community Bank Revolver (maturity of June 30, 2023 and average borrowing rate of 7.00%).

See Note 9 to our accompanying condensed consolidated financial statements in Item 1.

Financial Statements, of this Quarterly Report on Form 10-Q for additional information about our separate debt and credit facilities.

Additionally, we 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 inventory intermediation arrangement, which finances 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 inventory intermediation obligation with Citi was $536.2 million at March 31, 2023, $57.1 of which is current, and the remaining balance of $479.1 million which is due on December 30, 2024.

See Note 8 of the accompanying condensed consolidated financial statements in Item 1.

Financial Statements, of this Quarterly Report on Form 10-Q for additional information about our inventory intermediation agreement.

Our product financing liabilities consisted primarily of RIN financings as of March 31, 2023, and totaled $362.1 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 in Item 8.

Financial Statements and Supplementary Data, of our December 31, 2022 Annual Report on Form 10-K.

For both arrangements and the related commitments, see also our "Contractual Obligations" section included in Item 2.

Management's Discussion and Analysis.

For both arrangements and the related commitments, see also our "Cash Requirements" section below.

We receive debt ratings from the major ratings agencies in the U.S.

In determining our debt ratings, the agencies consider a number of qualitative and quantitative items including, but not limited to, commodity pricing levels, our liquidity, asset quality, reserve mix, debt levels and seniorities, cost structure, planned asset sales and production growth opportunities.

Management's Discussion and Analysis

There are no "rating triggers" in any of our contractual debt obligations that would accelerate scheduled maturities should our debt rating fall below a specified level.

However, a downgrade could adversely impact our interest rate on new credit facility borrowings and the ability to economically access debt markets in the future.

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 nine months ended September 30, 2022 were $174.1 million, of which approximately $56.0 million was spent in our refining segment, $68.0 million in our logistics segment, $22.6 million in our retail segment and $27.5 million primarily at the holding company level.

The following table summarizes our actual capital expenditures for the nine months ended September 30, 2022 and planned capital expenditures for the full year 2022 by operating segment and major category (in millions):

2022 Forecast Nine Months Ended September 30, 2022

Sustaining maintenance, including turnaround activities $ 100.9 $ 50.6

The following table summarizes our actual capital expenditures for the three months ended March 31, 2023, by segment, as well as planned capital expenditures for the full year 2023 by operating segment and major category (in millions):

2023 Forecast Three Months Ended March 31, 2023 Actual

Regulatory $ 21.5 $ 1.1

Discretionary projects 2.9 1.4

Sustaining maintenance, including turnaround activities 173.1 146.4

Growth projects 7.2 0.1

Refining segment total 201.8 147.6

1 unchanged sentence

Sustaining maintenance 4.0 3.1

Discretionary projects 110.5 64.0

Growth projects 64.2 32.9

Logistics segment total 81.3 36.1

1 unchanged sentence

Sustaining maintenance 26.9 2.4

Discretionary projects 29.0 19.3

Growth projects 4.2 0.3

Retail segment total 31.1 2.7

Corporate and Other

Regulatory 1.1 0.7

Sustaining maintenance 33.1 4.1

Discretionary projects 8.0 5.0

Growth projects 2.1 0.9

Other total 36.3 5.7

Total capital spending $ 350.5 $ 192.1

$ 300.0 $ 174.1

(1) The current year spend excludes approximately $8.1 million for equipment purchased during the nine months ended September 30, 2021 to be used in future expansion projects.

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 2, of this Quarterly Report on Form 10-Q.

We have no material off-balance sheet arrangements through the date of the filing of this Quarterly Report on Form 10-Q.

Management Discussion and Analysis, of this Quarterly Report on Form 10-Q.

For further information, please refer to our discussion in Item 1A.

Risk Factors, of our December 31, 2022 Annual Report on Form 10-K.

Management's Discussion and Analysis

1 unchanged sentence

Long-Term Cash Requirements Under Contractual Obligations

Information regarding our known cash requirements under contractual obligations of the types described below as of September 30, 2022, is set forth in the following table (in millions):

Information regarding our known cash requirements under contractual obligations of the types described below as of March 31, 2023, is set forth in the following table (in millions):

Payments Due by Period

<1 Year 1-3 Years 3-5 Years >5 Years Total

1-3 Years 3-5 Years >5 Years Total

Long-term debt and notes payable obligations

3 unchanged sentences

61.3 81.6 37.2 22.7 202.8

Finance lease commitments (3)

4.4 3.8 2.8 4.8 15.8

Purchase commitments (3)

591.9 — — — 591.9

Product financing commitments (5)

Product financing agreements (4)

362.1 — — — 362.1

1 unchanged sentence

186.1 366.8 301.0 426.0 1,279.9

Aron supply and offtake obligations (7)

Inventory intermediation obligation (6)

102.4 513.3 — — 615.7

Total $ 1,571.9 $ 1,901.4 $ 1,594.4 $ 1,888.7 $ 6,956.4

(1) Expected interest payments on debt outstanding at September 30, 2022.

Floating interest rate debt is calculated using September 30, 2022 rates.

For additional information, see Note 9 of our condensed consolidated financial statements included in Item 1.

(1) Expected interest payments on debt outstanding at March 31, 2023.

Floating interest rate debt is calculated using March 31, 2023 rates.

For additional information, see Note 9 to the condensed consolidated financial statements in Item 1.

Financial Statements, of this Quarterly Report on Form 10-Q.

(2) Amounts reflect future estimated lease payments under operating leases having remaining non-cancelable terms in excess of one year as of September 30, 2022.

(3) Amounts reflect future estimated lease payments under financing leases having remaining non-cancelable terms in excess of one year as of September 30, 2022.

(2) Amounts reflect future estimated lease payments under operating leases having remaining non-cancelable terms in excess of one year as of March 31, 2023.

(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.

1 unchanged sentence

Excludes purchase commitments in buy-sell transactions which have matching notional amounts with the same counterparty and are generally net settled in exchanges.

(5) Balances consist of obligations under RINs product financing arrangements.

For additional information, see Note 11 of our condensed consolidated financial statements included in Item 1.

Financial Statements, of this Quarterly Report on Form 10-Q.

(4) Balances consist of obligations under RINs product financing arrangements, as described in Note 12 to the condensed consolidated financial statements in Item 1.

Financial Statements, of this Quarterly Report on Form 10-Q and further discussed in the ''Environmental Credits and Related Regulatory Obligations' accounting policy included in Note 2 to our consolidated financial statements in Item 8.

Financial Statements and Supplementary Data, of our December 31, 2022 Annual Report on Form 10-K.

(5) Balances consist of contractual obligations under agreements with third parties (not including Delek Logistics) for the transportation of crude oil to our refineries.

(7) Balances consists of contractual obligations under the J.

Aron Supply and Offtake Agreements, including annual fees and principal obligation for the Baseline Volume Step-Out Liability.

For additional information, see Note 8 of our condensed consolidated financial statements included in Item 1.

(6) Balances consist of contractual obligations under the Citi Inventory Intermediation Agreement, including principal obligation for the Baseline Volume Step-Out Liability and other recurring fees.

For additional information, see Note 8 to the condensed consolidated financial statements in Item 1.

Financial Statements, of this Quarterly Report on Form 10-Q.

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 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.

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.

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.

Management's Discussion and Analysis

Cash outlays in the first quarter of 2023 included incentive compensation payments that were earned and accrued in 2022.

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 sum of the parts initiatives.

Refer to the cash flow section for our operating activities spend during the three months ended March 31, 2023.

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 three months ended March 31, 2023 and our anticipated cash requirements for planned capital expenditures for the full year 2023.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis