What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-09 compared with 2023-05-09 · 282 added, 172 removed, 734 unchanged (38% of the section changed)

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

Forward-looking statements include, among other things, statements 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.

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, the information concerning possible future results of operations, business and growth strategies, including as the same may be impacted by any ongoing military conflict, such as the war between Russia and Ukraine ("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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• actions of our competitors and customers;

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

• 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;

• our ability to execute our long-term sustainability strategy and growth through acquisitions such as the Delaware Gathering Acquisition and joint ventures, including our ability to successfully integrate acquisitions, complete strategic transactions, safety initiatives and capital projects, realize expected synergies, cost savings and other benefits therefrom, return value to shareholders, or achieve operational efficiencies;

• 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;

• 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;

• the impact on commercial activity and other economic effects of any widespread public health crisis, including uncertainty regarding the timing, pace and extent of economic recovery following any such crisis;

• general economic and business conditions affecting the southern, southwestern and western U.S., particularly levels of spending related to travel and tourism;

• volatility under our derivative instruments;

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

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

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

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

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• 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;

• seasonality;

• 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;

• earthquakes, hurricanes, tornadoes, and other weather events, which can unforeseeably affect the price or availability of electricity, natural gas, crude

Management's Discussion and Analysis

oil, and other feedstocks, critical supplies, refined petroleum products and ethanol;

• 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;

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

• our ability to execute our sustainability improvement plans, including greenhouse gas reduction targets;

• acts of terrorism (including cyber-terrorism) aimed at either our facilities or other facilities;

• impacts of global conflicts;

• future decisions by the Organization of Petroleum Exporting Countries ("OPEC") and the members of other leading oil producing countries (together with OPEC, “OPEC+”) regarding production and pricing and disputes between OPEC+ members regarding the same;

• impacts of global conflicts such as the Russia-Ukraine War;

• future decisions by the Organization of Petroleum Exporting Countries ("OPEC") and the members of other leading oil producing countries

(together with OPEC, “OPEC+”) regarding production and pricing and disputes between OPEC+ members regarding the same;

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

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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.

Although crack spreads were lower than the historic highs in the second quarter of 2022, refining margins remain strong and demand for refined products has been robust driven by the continued constrained supply in the markets we serve.

During the second quarter 2023, we experienced reduced throughputs at our refineries as a result of unplanned downtime including a catalyst change at our Big Spring refinery requiring additional operating and capital expenditures and weather related operational disruptions at our El Dorado refinery, partially offset by improved throughputs at our Tyler refinery as a result of turnaround activities completed in the first quarter 2023.

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.

The domestic WTI differentials compared to Brent continued to be favorable during the second quarter of 2023, while the WTI Midland differential to Cushing remained relatively flat coming off the first quarter 2023.

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.

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

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

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.

We continue to progress our business transformation focused on enterprise-wide opportunities to improve the efficiency of our cost structure.

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 that Delek must balance as we move 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").

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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.

The refining segment has a combined nameplate capacity of 302,000 bpd as of June 30, 2023.

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

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Total Nameplate Capacity (bpd) 75,000 80,000 73,000 74,000

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

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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"), 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 .

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

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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.

DKL), where we owned a 78.7% interest at June 30, 2023.

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

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Retail Overview

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 retail segment (or "Retail") at June 30, 2023 includes the operations of 247 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.

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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.

As of June 30, 2023, we have removed the 7-Eleven brand name at 145 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.

Management's Discussion and Analysis

Corporate and Other Overview

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

Management's Discussion and Analysis

Strategic Overview

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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.

• Explore opportunities to monetize our retail operations or 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.

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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.

• Identify and evaluate investment opportunities that fit our sustainability view and integrate into our current asset footprint, 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.

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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.

During the six months ended June 30, 2023, we reduced our long-term obligations by approximately $246.7 million.

Focus on Leadership:

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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.

Increasing Shareholder Value through Payment of Dividends:

We maintained our quarterly cash dividend including the quarterly cash dividend of $0.235 per share of our common stock which was declared by our Board of Directors on August 4, 2023 and payable on August 21, 2023.

In addition, a cash dividend of $0.23 per share of our common stock was paid on May 22, 2023.

Increasing Shareholder Value through Share Repurchases:

During the three months ended months ended June 30, 2023, 1,795,335 shares of our common stock were repurchased for a total of $40.0 million .

Subsequent to June 30, 2023, 981,690 shares of our common stock were repurchased for a total of $25.0 million .

Market Trends

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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.

We expect gasoline and diesel demand to continue 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 which we expect to result in continued strong market conditions in downstream refining.

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

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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 2022 and for the first quarterly period in 2023.

Management's Discussion and Analysis

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 two quarterly periods in 2023.

Crude Pricing Differentials

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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 2022 and for the first quarterly period in 2023.

Management's Discussion and Analysis

Refined Product Prices

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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 2022 and for the first quarterly period in 2023.

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

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 two quarterly periods in 2023.

Management's Discussion and Analysis

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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

The chart below illustrates the volatility in RINs for each of the quarterly periods in 2022 and for the two quarterly periods in 2023.

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.

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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) per million British Thermal Units ("MMBtu") for each of the quarterly periods in 2022 and for the first quarterly period in 2023.

Management's Discussion and Analysis

Non-GAAP Measures

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GAAP financial measures.

Management's Discussion and Analysis

Non-GAAP Reconciliations

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GAAP measure, net income attributable to Delek:

Reconciliation of segment EBITDA to net income attributable to Delek

Three Months Ended March 31,

(In millions)

Reconciliation of segment EBITDA to net (loss) income attributable to Delek (in millions)

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Refining segment EBITDA $ 110.5 $ 587.9 $ 302.6 $ 667.9

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Interest expense, net (80.4) (43.6) (156.9) (82.0)

Income tax expense (15.8) (3.1)

Income tax benefit (expense) 3.8 (100.4) (12.0) (103.5)

Depreciation and amortization (89.4) (68.0) (172.8) (136.3)

Net income attributable to Delek $ 64.3 $ 6.6

Net (loss) income attributable to Delek $ (8.3) $ 361.8 $ 56.0 $ 368.4

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 March 31,

Net revenues $ 3,794.5 $ 4,392.3

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Total revenues $ 4,052.5 $ 5,874.9 $ 7,847.0 $ 10,267.2

Cost of sales 3,996.9 5,315.8 7,651.4 9,681.5

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Summary Statement of Operations Data (1)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 (2)

Net revenues $ 4,195.6 $ 5,982.6 $ 8,119.9 $ 10,441.7

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Income from equity method investments (25.5) (15.7) (40.1) (26.6)

Other income, net (7.1) 1.3

Other expense (income), net 0.5 (3.6) (6.6) (2.3)

Total non-operating expenses, net 55.4 24.3 110.2 53.1

Income before income tax expense 88.0 17.9

Income tax expense 15.8 3.1

Net income 72.2 14.8

(Loss) income before income tax (benefit) expense (5.3) 469.0 82.7 486.9

Income tax (benefit) expense (3.8) 100.4 12.0 103.5

Net (loss) income (1.5) 368.6 70.7 383.4

Net income attributed to non-controlling interests 6.8 6.8 14.7 15.0

Net income attributable to Delek $ 64.3 $ 6.6

Net (loss) income attributable to Delek $ (8.3) $ 361.8 $ 56.0 $ 368.4

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

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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.

(2) In the first quarter 2023, 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 $4.2 million and $7.1 million for the three and six months ended June 30, 2022.

We report operating results in three reportable segments:

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

Management's Discussion and Analysis

Results of Operations

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.

Consolidated Results of Operations — Comparison of the Three and Six Months Ended June 30, 2023 versus the Three and Six Months Ended June 30, 2022.

Net Income (Loss)

Consolidated net loss for the second quarter of 2023 was $1.5 million compared to net income of $368.6 million for the second quarter of 2022.

Consolidated net loss attributable to Delek for the second quarter of June 30, 2023 was $8.3 million, or $(0.13) per basic share, compared to a net income of $361.8 million, or $5.11 per basic share, for the second quarter 2022.

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

We generated net revenues of $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%.

Management's Discussion and Analysis

Consolidated net income for the six months ended June 30, 2023 was $70.7 million compared to a net income of $383.4 million for the six months ended June 30, 2022.

Consolidated net income attributable to Delek for the six months ended June 30, 2023 was $56.0 million, or $0.84 per basic share, compared to income of $368.4 million, or $5.12 per basic share, for the six months ended June 30, 2022.

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

In the second quarter of 2023 and 2022, we generated net revenues of $4,195.6 million and $5,982.6 million, respectively, a decrease of $1,787.0 million, or 29.9%.

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

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

Gulf Coast gasoline of 31.1%, ULSD of 40.2%, and HSD of 57.4%;

• in our logistics segment, decreases in the average volumes of gasoline and diesel 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 decrease of $1.06 in average price charged per gallon sold, partially offset by an increase in merchandise sales primarily driven by the same-store sales increase of 0.1%.

We generated net revenues of $8,119.9 million and $10,441.7 million during the six months ended June 30, 2023 and 2022, respectively, a decrease of $2,321.8 million, or 22.2%.

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

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Gulf Coast gasoline of 22.5%, ULSD of 25.0%, and HSD of 44.7% 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 $0.69 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 2.4%.

These decreases were partially offset by the following:

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

Total Operating Costs and Expenses

Cost of Materials and Other

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%.

Cost of materials and other was $3,766.6 million for the second quarter of 2023 compared to $5,082.6 million for the second quarter of 2022, a decrease of $1,316.0 million, or 25.9%.

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

• decreases in cost of crude oil feedstocks at the refineries, including a 32.3% decrease in the average cost of WTI Cushing crude oil and a 32.2% decrease in the average cost of WTI Midland crude oil;

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

• a decrease in retail cost of materials and other due to 26.9% decrease in average cost per gallon sold applied to higher fuel sales volumes.

Cost of materials and other was $7,206.2 million for the six months ended June 30, 2023, compared to $9,235.1 million for six months ended June 30, 2022, a decrease of $2,028.9 million, or 22.0%.

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;

• a decrease in the cost of crude oil feedstocks at the refineries, including a 26.7% decrease in the average cost of WTI Cushing crude oil and a 26.6% decrease in the average cost of WTI Midland crude oil and decreased wholesale activity;

• 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 18.5% decrease in average cost per gallon sold applied to higher fuel sales volumes.

Management's Discussion and Analysis

Operating Expenses

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%.

Operating expenses (included in both cost of sales and other operating expenses) were $219.8 million for the second quarter of 2023 compared to $226.7 million for the second quarter of 2022, a decrease of $6.9 million, or 3.0%.

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

• lower natural gas prices in 2023.

These decreases were partially offset by the following:

• an increase in maintenance costs including costs related to our Safety Action Plan, which we expect will continue at least through the end of 2023.

Operating expenses (included in both cost of sales and other operating expenses) were $417.6 million for the six months ended June 30, 2023 compared to $396.5 million in six months ended June 30, 2022, an increase of $21.1 million, or 5.3%.

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

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

• an increase in maintenance costs including costs related to our Safety Action Plan, which we expect will continue at least through the end of 2023;

• an increase in employee costs.

These increases were partially offset by the following:

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General and Administrative Expenses

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

General and administrative expenses were $75.8 million for the second quarter of 2023 compared to $122.3 million for the second quarter of 2022, a decrease of $46.5 million, or 38.0%.

The decrease was primarily driven by a decrease in employee costs including incentive compensation costs and no transactions costs related to the Delaware Gathering Acquisition in the 2023 period.

General and administrative expenses were $147.3 million for the six months ended June 30, 2023 compared to $172.5 million in six months ended June 30, 2022, a decrease of $25.2 million, or 14.6%.

The decrease was primarily driven by a decrease in employee costs including incentive compensation costs and no transactions costs related to the Delaware Gathering Acquisition in the 2023 period.

Depreciation and Amortization

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%.

Depreciation and amortization (included in both cost of sales and other operating expenses) was $89.4 million for the second quarter of 2023 compared to $68.0 million for the second quarter of 2022, an increase of $21.4 million, or 31.5%.

The increase was a result of a general increase in our fixed asset base due to capital projects and turnarounds completed since the first quarter of 2022 and depreciation and amortization attributable to the Delaware Gathering Acquisition.

Depreciation and amortization (included in both cost of sales and other operating expenses) was $172.8 million and $136.3 million for the six months ended June 30, 2023 and 2022, respectively, an increase of $36.5 million, or 26.8%.

The increase was a result of a general increase in our fixed asset base due to capital projects and turnarounds completed since the first quarter of 2022 and amortization attributable to the Delaware Gathering Acquisition.

Other Operating Income, Net

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.

Other operating income, net decreased by $4.2 million in the second quarter of 2023 to $6.1 million compared to $10.3 million in the second quarter of 2022.

The decrease was primarily due to a $3.9 million decrease in insurance recoveries related to the fire and freeze events that occurred during the first quarter 2021.

Management's Discussion and Analysis

Other operating income, net was $16.9 million and $38.7 million for the six months ended June 30, 2023 and 2022, respectively, a decrease of $21.8 million, primarily due to an $8.8 million decrease in insurance recoveries related to the fire and freeze events that occurred during the first quarter 2021 and decreased hedge gains realized in 2023 compared to 2022 associated with our trading derivatives.

Non-Operating Expenses, Net

Interest Expense, Net

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.

Interest expense, net increased by $36.8 million, or 84.4%, to $80.4 million in the second quarter of 2023 compared to $43.6 million in the second quarter of 2022, primarily driven by the following:

• an increase in the average effective interest rate of 492 basis points in the second quarter of 2023 compared to the second quarter of 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 $92.6 million in the second quarter of 2023 (calculated as a simple average of beginning borrowings/obligations and ending borrowings/obligations for the period) compared to the second quarter of 2022.

Interest expense, net was $156.9 million in the six months ended June 30, 2023, compared to $82.0 million for six months ended June 30, 2022, an increase of $74.9 million, or 91.3% primarily due to the following:

• an increase in the average effective interest rate of 444 basis points during the six months ended June 30, 2023 compared to the six months ended June 30, 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 $283.0 million during the six months ended June 30, 2023 (calculated as a simple average of beginning borrowings/obligations and ending borrowings/obligations for the period) compared to the six months ended June 30, 2022.

Results from Equity Method Investments

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.

We recognized income from equity method investments of $25.5 million during the second quarter of 2023, compared to $15.7 million for the second quarter of 2022, an increase of $9.8 million.

This increase was primarily driven by the following:

• 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.

• an increase in income from our investment in W2W Holdings LLC to $6.8 million in the second quarter of 2023 from $2.1 million in the second quarter of 2022.

We recognized income from equity method investments of $40.1 million for the six months ended June 30, 2023, compared to $26.6 million for the six months ended June 30, 2022, an increase of $13.5 million.

This increase was primarily driven by the following:

• 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 $11.3 million during the six months ended June 30, 2023 from $4.2 million in the six months ended June 30, 2022.

For the second quarter of 2023, we recorded an income tax benefit of $3.8 million compared to income tax expense of $100.4 million for the second quarter of 2022, primarily driven by the following:

• a decrease in pre-tax net income of $474.3 million;

• Our effective tax rates were 71.7% and 21.4% for the three months ended June 30, 2023 and 2022, respectively, due to the impact of fixed dollar favorable permanent differences on the tax rate and changes in the second quarter estimated annual effective tax rate applied to year to date earnings.

Management's Discussion and Analysis

For the six months ended June 30, 2023, we recorded income tax expense of $12.0 million compared to $103.5 million for the six months ended June 30, 2022, primarily driven by the following:

• a decrease in pre-tax net income of $404.2 million, and

• Our effective tax rates were 14.5% and 21.3% for the six months ended June 30, 2023 and 2022, respectively, due to the impact of fixed dollar favorable permanent differences on the tax rate.

Management's Discussion and Analysis

Refining Segment

1 unchanged sentence

Selected Refining Financial Information

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Revenues $ 4,052.5 $ 5,874.9 $ 7,847.0 $ 10,267.2

40 unchanged sentences

Refinery Statistics

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Total Refining Segment

15 unchanged sentences

Refinery Statistics (continued)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Tyler, TX Refinery

12 unchanged sentences

Operating expenses (2)

$ 3.78 $ 6.20 $ 5.29 $ 5.40

(% based on amount received in period)

16 unchanged sentences

Operating expenses (2)

$ 5.00 $ 5.07 $ 4.73 $ 4.63

(% based on amount received in period)

4 unchanged sentences

Refinery Statistics (continued)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Big Spring, TX Refinery

10 unchanged sentences

Other feedstocks

3,020 (1,093) 3,818 315

Total throughput 62,260 69,569 67,408 65,990

1 unchanged sentence

Operating expenses (2)

$ 8.91 $ 7.58 $ 7.24 $ 6.86

(% based on amount received in period)

8 unchanged sentences

31,968 32,419 32,373 31,711

3,725 845 3,618 1,690

Petrochemicals, LPG, NGLs

6,588 7,152 6,730 7,040

240 5,970 214 5,840

Total production

3 unchanged sentences

Other feedstocks

4,002 922 5,224 3,181

Total throughput

2 unchanged sentences

Operating expenses (2)

$ 4.74 $ 6.14 $ 4.97 $ 5.12

(% based on amount received in period)

5 unchanged sentences

See tables below.

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

Management's Discussion and Analysis

1 unchanged sentence

Inter-refinery Sales

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in barrels per day) 2023 2022 2023 2022

3 unchanged sentences

Refinery Sales to Other Segments

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in barrels per day) 2023 2022 2023 2022

2 unchanged sentences

Pricing Statistics (average for the period presented)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

WTI — Cushing crude oil (per barrel) $ 73.57 $ 108.74 $ 74.78 $ 102.02

31 unchanged sentences

Management's Discussion and Analysis

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.

Refining Segment Operational Comparison of the Three and Six Months Ended June 30, 2023 versus the Three and Six Months Ended June 30, 2022.

Net revenues for the refining segment decreased by $1,822.4 million, or 31.0%, in the second quarter of 2023 compared to the second quarter of 2022.

The decrease was primarily driven by the following:

1 unchanged sentence

Gulf Coast gasoline of 31.1%, ULSD of 40.2%, and HSD of 57.4%;

• 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.

Net revenues included sales to our retail segment of $111.5 million and $160.1 million, sales to our logistics segment of $92.0 million and $143.9 million, and sales to our other segment of $0.0 million and $8.3 million for the three months ended June 30, 2023 and June 30, 2022, respectively.

We eliminate this intercompany revenue in consolidation.

Revenues for the refining segment decreased $2,420.2 million, or 23.6%, in the six months ended June 30, 2023 compared to the six months ended June 30, 2022.

The decrease was primarily driven by the following:

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

Gulf Coast gasoline of 22.5%, ULSD of 25.0%, and HSD of 44.7%;

• a decrease in total sales volumes primarily driven by turnaround activities at the Tyler refinery in the first quarter 2023;

• a decrease in wholesale activity.

Revenues included sales to our retail segment of $214.1 million and $271.9 million, sales to our logistics segment of $183.1 million and $249.8 million and sales to the other segment of $0.0 million and $16.4 million for the six months ended June 30, 2023 and 2022, respectively.

We eliminate this intercompany revenue in consolidation.

Cost of Materials and Other

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.

Cost of materials and other decreased by $1,313.2 million, or 25.8%, in the second quarter of 2023 compared to the second quarter of 2022.

The decrease was primarily driven by the following:

• decreases in the cost of WTI Cushing crude oil, from an average of $108.74 per barrel to an average of $73.57, or 32.3%, and decreases in the cost of WTI Midland crude oil, from an average of $108.50 per barrel to an average of $73.56, or 32.2%;

• a decrease in wholesale activity.

Cost of materials and other decreased $2,044.6 million, or 22.0%, in the six months ended June 30, 2023 compared to the six months ended June 30, 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%;

• decreases in the cost of WTI Cushing crude oil, from an average of $102.02 per barrel to an average of $74.78, or 26.7%, and decreases in the cost of WTI Midland crude oil, from an average of $101.81 per barrel to an average of $74.77, or 26.6%;

• a decrease in sales volumes;

• lower natural gas costs;

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

• a decrease in wholesale activity.

Management's Discussion and Analysis

Our refining segment purchases finished product from our logistics segment and has multiple service agreements with our logistics segment which, among other things, require the refining segment to pay terminalling and storage fees based on the throughput volume of crude and finished product in the logistics segment pipelines and the volume of crude and finished product stored in the logistics segment storage tanks, subject to minimum volume commitments.

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

These costs and fees were $132.6 million and $123.8 million during the three months ended June 30, 2023 and 2022, respectively.

These costs and fees were $257.2 million and $247.2 million during the six months ended June 30, 2023 and 2022, respectively.

We eliminate these intercompany fees in consolidation.

Management's Discussion and Analysis

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.

Refining segment margin decreased by $509.2 million, or 65.4%, in the second quarter of 2023 compared to the second quarter of 2022, with a refining margin percentage of 6.6% as compared to 13.2% for the second quarter of 2023 and 2022, respectively, primarily driven by the following:

• a 42.0% decrease in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery), a 40.1% decrease in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery), and a 68.8% decrease in the average Gulf Coast 2-1-1 crack spread (the primary measure for the Krotz Springs refinery);

• a decrease in utilization.

Refining margin decreased by $375.6 million, or 38.3%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022, with a refining margin percentage of 7.7% as compared to 9.5% for the six months ended June 30, 2023 and 2022, respectively, primarily driven by the following:

• a 14.0% decrease in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery), a 13.0% decrease in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery) and a 43.0% decrease in the average Gulf Coast 2-1-1 crack spread (the primary measure for the Krotz Springs refinery);

• a decrease in total sales volumes primarily driven by turnaround activities at the Tyler refinery in the first quarter of 2023.

Management's Discussion and Analysis

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.

Operating expenses decreased by $15.6 million, or 9.2%, in the second quarter of 2023 compared to the second quarter of 2022.

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

• lower natural gas in 2023.

These decreases were partially offset by the following:

• increase in outside service and maintenance costs including costs related to our Safety Action Plan, which we expect will continue at least through the end of 2023.

Operating expenses increased $0.8 million, or 0.3%, in the six months ended June 30, 2023, compared to six months ended June 30, 2022.

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

• higher employee and outside service costs.

• higher employee, outside service and maintenance costs including costs related to our Safety Action Plan, which we expect will continue at least through the end of 2023.

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.

• lower natural gas prices in 2023.

EBITDA decreased by $477.4 million, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022, primarily due to a decrease in refining margin driven by decreased crack spreads, partially offset by lower natural gas prices.

EBITDA decreased by $365.3 million, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022, primarily due to a decrease in refining margin driven by decreased crack spreads and decreased sales volume, partially offset by lower natural gas prices.

Management's Discussion and Analysis

2 unchanged sentences

Selected Logistics Financial and Operating Information

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Revenues $ 246.9 $ 266.7 $ 490.4 $ 473.3

15 unchanged sentences

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

73,309 51,292 74,008 51,292

Crude Oil Gathering (average bpd) 117,017 78,011 110,408 78,011

Water Disposal and Recycling (average bpd) 127,195 57,625 107,848 57,625

Wholesale Marketing & Terminalling:

25 unchanged sentences

Management's Discussion and Analysis

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;

Logistics Segment Operational Comparison of the Three and Six Months Ended June 30, 2023 versus the Three and Six Months Ended June 30, 2022.

Net revenues decreased by $19.8 million, or 7.4%, in the second quarter of 2023 compared to the second quarter of 2022, primarily driven by:

• decreased revenue of $50.9 million in our West Texas marketing operations primarily driven by decreases in the average sales prices per gallon and the average volumes sold:

◦ the average sales prices per gallon of gasoline and diesel sold decreased by $0.93 per gallon and $1.53 per gallon, respectively;

◦ the average volumes of gasoline and diesel sold decreased by 0.6 million and 1.5 million gallons, respectively.

• partially offset by an increase in revenue as a result of our Delaware Gathering operations, which began in June 2022.

Net revenues included sales to our refining segment of $132.6 million and $123.8 million for the three months ended June 30, 2023 and June 30, 2022, respectively.

We eliminate this intercompany revenue in consolidation.

Revenues increased by $17.1 million, or 3.6%, in the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily driven by the following:

• increase in revenue as a result of our Delaware Gathering operations, which began in June 2022;

• 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.

• partially offset by decreased revenue in our West Texas marketing operations primarily driven by decreases in the average sales prices per gallon and the average volumes of gasoline and diesel sold in our West Texas marketing operations:

◦ the average sales prices per gallon of gasoline and diesel sold decreased by $0.58 per gallon and $0.79 per gallon, respectively;

◦ the average volumes of gasoline and diesel sold decreased by 3.4 million gallons and 2.4 million gallons, respectively.

Revenues included sales to our refining segment of $257.2 million and $247.2 million for the six months ended June 30, 2023 and 2022, respectively, and sales to our other segment of $0.8 million and $0.9 million for the six months ended June 30, 2023 and 2022, respectively.

We eliminate this intercompany revenue in consolidation.

Management's Discussion and Analysis

Cost of Materials and Other

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.

Cost of materials and other for the logistics segment decreased by $48.3 million, or 27.4%, in the second quarter of 2023 compared to the second quarter of 2022.

The decrease was primarily driven by the following:

• decrease in costs of materials and other in our West Texas marketing operations primarily driven by decreases in the average cost per gallon and the average volumes of gasoline and diesel sold:

◦ the average cost per gallon of gasoline and diesel sold decreased by $0.32 per gallon and $0.12 per gallon, respectively;

◦ the average volumes of gallons and diesel sold decreased by 0.6 million and 1.5 million gallons, respectively.

• partially offset by increase in costs of materials and other as a result of our Delaware Gathering operations, which began in June 2022.

Our logistics segment purchased product from our refining segment of $92.0 million and $143.9 million for the three months ended June 30, 2023 and June 30, 2022, respectively.

We eliminate these intercompany costs in consolidation.

Cost of materials and other for the logistics segment decreased by $48.4 million, or 16.0%, in the six months ended June 30, 2023 compared to the six months ended June 30, 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.

• decrease in costs of materials and other in our West Texas marketing operations primarily driven by decreases in the average cost per gallon and the average volumes of gasoline and diesel sold in our West Texas marketing operations:

◦ the average cost per gallon of gasoline and diesel sold decreased by $0.27 per gallon and $0.11 per gallon, respectively;

◦ the average volumes of gasoline and diesel sold decreased by 3.4 million gallons and 2.4 million gallons, respectively.

• partially offset by increase in cost of materials and other as a result of our Delaware Gathering operations, which began in June 2022.

Our logistics segment purchased product from our refining segment of $183.1 million and $249.8 million for the six months ended June 30, 2023 and 2022, respectively.

We eliminate these intercompany costs in consolidation.

1 unchanged sentence

Operating Expenses

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:

Operating expenses increased by $8.0 million, or 38.1%, in the second quarter of 2023 compared to the second quarter of 2022, driven by incremental expenses associated with Delaware Gathering Acquisition

Operating expenses increased by $14.6 million, or 37.3%, in the six months ended June 30, 2023 compared to the six months ended June 30, 2022, primarily driven by incremental expenses associated with Delaware Gathering Acquisition.

EBITDA increased by $28.3 million, or 45.2%, in the three months ended June 30, 2023 compared to the three months ended June 30, 2022, primarily driven by the following:

• higher throughput volumes;

• incremental EBITDA from the Delaware Gathering Acquisition.

EBITDA increased by $55.5 million, or 43.8%, in the six months ended June 30, 2023 compared to the six months ended June 30, 2022, primarily driven by the following:

• higher throughput volumes;

• incremental EBITDA from the Delaware Gathering Acquisition.

Management's Discussion and Analysis

2 unchanged sentences

Selected Retail Financial and Operating Information

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Revenues $ 232.7 $ 277.1 $ 437.7 $ 486.6

3 unchanged sentences

Operating Information

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Number of stores (end of period) 247 248 247 248

4 unchanged sentences

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

189 185 354 348

Average retail sales price per gallon sold $ 3.25 $ 4.31 $ 3.26 $ 3.95

5 unchanged sentences

Same-Store Comparison (2)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Change in same-store retail fuel gallons sold (1.5) % 5.8 % (1.6) % 3.4 %

7 unchanged sentences

Management's Discussion and Analysis

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.

Retail Segment Operational Comparison of the Three and Six Months Ended June 30, 2023 versus the Three and Six Months Ended June 30, 2022.

Net revenues for the retail segment decreased by $44.4 million, or 16.0%, in the second quarter of 2023 compared to the second quarter of 2022, primarily driven by the following:

• a decrease in total fuel sales which were $148.4 million in the second quarter of 2023 compared to $193.6 million in the second quarter of 2022, primarily attributable to a decrease of $1.06 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%.

• an increase in merchandise sales to $84.3 million in the second quarter of 2023 compared to $83.4 million in the second quarter of 2022, primarily driven by the same-store sales increase of 0.1%.

Revenues for the retail segment decreased by $48.9 million, or 10.0%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022, primarily driven by the following:

• a decrease in total fuel sales which were $279.5 million for the six months ended June 30, 2023 compared to $333.5 million for the six months ended June 30, 2022, primarily attributable to a $0.69 decrease in average price charged per gallon sold.

These decreases were partially offset by the following:

• an increase in merchandise sales to $158.2 million for the six months ended June 30, 2023 compared to $153.1 million for the six months ended June 30, 2022, primarily driven by the same-store sales increase of 2.4%.

Management's Discussion and Analysis

Cost of Materials and Other

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:

Cost of materials and other for the retail segment decreased by $45.3 million, or 19.4%, in the second quarter of 2023 compared to the second quarter of 2022, primarily driven by the following:

• a decrease in average cost per gallon of $1.07, or 26.9%, applied to fuel sales volumes that increased period over period.

Our retail segment purchased finished product from our refining segment of $111.5 million and $160.1 million for the three months ended June 30, 2023 and June 30, 2022, respectively, which is eliminated in consolidation.

Cost of materials and other for the retail segment decreased by $48.3 million, or 11.9%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022, primarily driven by the following:

• a decrease in average cost per gallon of $0.67, or 18.5%.

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.

Our retail segment purchased finished product from our refining segment of $214.1 million and $271.9 million for the six months ended June 30, 2023 and 2022, respectively.

We eliminate this intercompany cost in consolidation.

Operating Expenses

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:

Retail segment operating expenses increased by $0.8 million, or 3.2%, in the second quarter of 2023 compared to the second quarter of 2022, primarily due to driven by higher employee cost in 2023.

Operating expenses for the retail segment increased by $2.7 million, or 5.6%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily driven by higher employee cost in 2023.

EBITDA for the retail segment increased by $2.5 million, or 20.0%, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022, primarily driven by the following:

• an increase in average fuel margin of $0.013 per gallon and an increase in fuel sales volume;

• a 1.0% increase in merchandise sales, partially offset by a decrease in merchandise margin percentage of 0.1%.

EBITDA for the retail segment decreased by $1.4 million, or 6.1%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022, primarily driven by the following:

• a decrease in average fuel margin of $0.015 per gallon, partially offset by an increase in fuel sales volume;

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• potential issuances of additional equity and debt securities.

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.

At June 30, 2023 our total liquidity amounted to $1.6 billion comprised primarily of $787.5 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 $821.6 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.

On August 4, 2023, our Board of Directors approved a quarterly cash dividend of $0.235 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.

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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 oil prices, some of which are beyond our control.

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.

As of June 30, 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.

Additionally, we were in compliance with incurrence covenants to the extent triggered during the quarter ended June 30, 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).

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

Three Months Ended March 31,

Six Months Ended June 30,

Cash Flow Data:

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Financing activities (230.0) 523.1

Net increase (decrease) $ 23.7 $ (2.4)

Net (decrease) increase $ (19.7) $ 388.1

Cash Flows from Operating Activities

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.

Net cash provided by operating activities was $490.2 million for the six months ended June 30, 2023, compared to $585.9 million for the comparable period of 2022.

Decreases were a result of an increase in cash paid for debt interest of $84.5 million, partially offset by an increase in dividends received of $5.0 million.

Additionally, cash receipts from customers and cash payments to suppliers and for salaries increased resulting in a net $18.8 million increase in cash provided by operating activities.

Management's Discussion and Analysis

Cash Flows from Investing Activities

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.

Net cash used in investing activities was $279.9 million for the six months ended June 30, 2023, compared to $720.9 million in the comparable period of 2022.

The decrease in cash flows used in investing activities was primarily due to the $621.7 million Delaware Gathering Acquisition in 2022 and a $5.6 million increase in distributions from equity method investments, partially offset by a $179.5 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 and payments of $9.0 million for equity interests investments.

Cash Flows from Financing Activities

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.

Net cash used in financing activities was $230.0 million for the six months ended June 30, 2023, compared to cash provided of $523.1 million in the comparable 2022 period.

The decrease in cash provided was primarily due to net payments on long-term revolvers and term debt of $248.0 million during the six months ended June 30, 2023, compared to net proceeds of $595.5 million in the comparable 2022 period, dividend payments of $29.7 million made during the six months ended June 30, 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 a decrease in share repurchases of $23.6 million, combined with the impact of the following:

net proceeds from product financing arrangements of $52.8 million for the six months ended June 30, 2023 compared to net payments $2.8 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.

As of June 30, 2023, our total cash and cash equivalents were $821.6 million and we had total long-term indebtedness of approximately $2,810.9 million.

The total long-term indebtedness is net of deferred financing costs and debt discount of $62.9 million.

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Total unused credit commitments or borrowing base availability, as applicable, under our revolving credit facilities was approximately $787.5 million.

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.

The decrease of $246.7 million in total long-term indebtedness as of June 30, 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 June 30, 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:

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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.

On June 21, 2023, DKTS entered into a letter agreement to the Inventory Intermediation Agreement with Citi to temporarily increase its letter of credit issued to Citi by $100.0 million which will allow DKTS to defer payments of certain obligations under the Inventory Intermediation Agreement until July 2023.

These deferred obligations will be subject to applicable interest charges.

Our inventory intermediation obligation with Citi was $453.4 million at June 30, 2023, none of which is current.

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.

Our product financing liabilities consisted primarily of RIN financings as of June 30, 2023, and totaled $322.4 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.

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A key component of our long-term strategy is our capital expenditure program.

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

The following table summarizes our actual capital expenditures for the six months ended June 30, 2023, by segment, as well as planned capital expenditures for the full year 2023 by operating segment and major category (in millions):

2023 Forecast Six Months Ended June 30, 2023 Actual

Regulatory $ 21.5 $ 2.7

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Long-Term Cash Requirements Under Contractual Obligations

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):

Information regarding our known cash requirements under contractual obligations of the types described below as of June 30, 2023, is set forth in the following table (in millions):

Payments Due by Period

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Total $ 1,476.5 $ 1,918.1 $ 2,021.1 $ 1,406.8 $ 6,822.5

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

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

(1) Expected interest payments on debt outstanding at June 30, 2023.

Floating interest rate debt is calculated using June 30, 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 March 31, 2023.

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

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Operating activities include cash outflows related to payments to suppliers for crude and other inventories (which are largely reflected in our contractual purchase commitments in the table above) and payments for salaries and other employee related costs.

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

Cash outlays in 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.

Refer to the cash flow section for our operating activities spend during the six months ended June 30, 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.

Refer to the 'Capital Spending' section for our capital expenditures for six months ended June 30, 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