What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-28 compared with 2023-03-01 · 395 added, 579 removed, 668 unchanged (59% of the section changed)

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Forward-Looking Statements

This Annual Report on Form 10-K contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act.

This Annual Report on Form 10-K contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934.

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 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 the related 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 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 (subsequently renamed to Delek Delaware Gathering), 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 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 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 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 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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• increases in our debt levels or costs;

• 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;

• possibility of accelerated repayment on a portion of our Inventory Intermediation Agreement 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;

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• 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 GHG;

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

• impacts of global conflicts such as the war between Israel and Hamas and the Russia-Ukraine War;

• future decisions by OPEC and 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 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.

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") costing method from the last-in, first-out ("LIFO") costing method, which will conform the Company’s refining inventory to a single method of accounting.

This change in accounting method is preferable because it provides better consistency across our refineries and improves transparency, and results in 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, 2020 beginning retained earnings.

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

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

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.

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.

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

Business and Economic Environment Overview

Along with higher crack spreads driven by economic recovery observed during 2022, the industry witnessed higher inflation rates, higher natural gas costs, and supply constraints due to post-Pandemic disruptions and geopolitical events, putting pressure on operating costs which counterbalanced favorable crack spreads.

Since Q2 2022, major commodity prices have declined from their peak and indications are that overall inflation may be slowing along with declining natural gas prices as the trend toward stabilization continues.

It is more than likely that domestic export pressure of LNG, with significant increases of exports from the Gulf Coast, will continue to buoy natural gas prices, even as natural gas production continues to increase domestically, led by production in the Gulf Coast and the Permian Basin.

Expected production increases in oil and natural gas in the Permian Basin and in the Gulf Coast, and manufacturing activity should provide opportunity for optimizing our existing logistics infrastructure.

Our 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 recycling and disposal.

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

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

As we reflect on the macro environment in 2023, the economy continued to be impacted by higher rates of inflation and geopolitical uncertainty, both globally and domestically.

In order to temper inflation, the Federal Reserve continued to increase interest rates through mid-2023, which drove down inflation throughout the year.

If inflation continues to drop, the Federal Reserve may be open to rate cuts sometime in 2024.

economy remained resilient during 2023 and performed better than expected.

Demand for transportation fuels continues to be reshaped after the recovery from the COVID-19 pandemic as gasoline inventories continue to be higher, while distillate inventories were constrained during most of 2023.

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 year we have made investments in our technology infrastructure which has positioned the Company to become more efficient.

By executing on our initiatives to optimize our cost structure, we are positioning the Company for potential economic headwinds that coincide with a global recession, reduction in the reliance of liquid fuels, a tightening of capital markets, increased regulatory pressures, and volatility in the commodity markets.

The prioritization of energy security, highlighted by geopolitical events including the Russia-Ukraine War, and the continued global focus toward decarbonization, will continue to create opportunity for the development of the domestic production of liquid fuels with lower carbon footprint.

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 GHG emissions.

Our focus on safe and reliable operations allowed us to achieve record throughput during 2023.

Although average crack spreads were lower than historic highs in 2022, refining margins remained strong until the fourth quarter and demand for refined products was robust during 2023 driven by the continued constrained supply in the markets we serve.

Given the strong refining margins during most of 2023, we made a strategic decision to optimize our inventory levels to reduce carrying costs and improve working capital efficiency.

Further impacting our current quarter results were consistent refinery throughput and production rates compared to 2022 driven by safe and reliable operations.

We will continue to identify opportunities for operational efficiency improvements.

The domestic West Texas Intermediate ("WTI") differentials compared to Brent continued to be favorable during 2023, and the WTI Midland to Cushing premium remained relatively consistent compared to 2022.

Our logistics segment again contributed strong results while completing the successful integration of the Delaware Gathering operations which further diversifies our logistics customer base to include significantly more third-party customers and allow us to provide comprehensive logistics services in the Delaware Basin.

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

Retail stores continue to perform well and we are realizing the benefit of store optimization activities as margins have increased in 2023, and we expect to begin seeing benefits from successful re-branding.

The near term economic outlook still has some uncertainty with geopolitical instability, and as a result 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, 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 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 issues facing the industry and Delek specifically, and identifying transformational opportunities consistent with the Intergovernmental Panel on Climate Change’s 2°scenarios.

Following the enactment of the IRA, Delek is also investing in carbon capture technology and continuing our production of biodiesel fuel to meet the world’s growing demand for low-carbon energy.

We were selected by the Department of Energy's ("DOE") Office of Clean Energy Demonstrations to negotiate a cost-sharing agreement in support of a carbon capture pilot project at the Big Spring refinery.

The DOE Carbon Capture Large-Scale Pilot Project program provides 70% cost-share for up to $95 million of federal funding to support project development.

The project will deploy carbon capture technology at the Big Spring refinery's FCC unit, while maintaining existing production capabilities and turnaround schedule.

Expectations for the project are to capture 145,000 metric tons of carbon dioxide per year, as well as reduce health-harming pollutants, such as sulfur oxide and particulate matter.

Carbon dioxide is expected to be transported by existing pipelines for permanent storage or utilization.

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

Delek's Sustainable Operations Team ("SOT") which is led by our Executive Vice President, Operations coordinates execution of our sustainability objectives including 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.

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.

Management's Discussion and Analysis

We want to reward our shareholders with a disciplined and balanced capital allocation framework.

As we strengthen our relative financial position, we believe a balanced approach between shareholder returns and balance sheet improvement is appropriate.

In 2023, we reduced our long-term obligations by approximately $463.2 million and we returned $145.7 million of capital to shareholders in 2023, including $85.4 million of share repurchases and $60.3 million in dividends.

Our near-term focus is centered around the following:

(1) operations excellence, (2) financial strength and flexibility and (3) strategic initiatives which includes 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.

See further discussion in the "Strategic Objectives" section below.

See further discussion on macroeconomic factors and market trends, including the impact on 2023 and the outlook for 2024, in the ‘Market Trends’ section below.

Management's Discussion and Analysis

Other 2023 Developments

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, American Entertainment Properties Corp., Icahn Enterprises Holdings L.P., Icahn Enterprises G.P.

Inc., Beckton Corp., 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, 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 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.

Delek also announced on March 27, 2022, that Leonardo Moreno, a highly experienced executive in the global renewable energy and technology sector, was 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.

Increasing Shareholder Value through Payment of Dividends

In July 2022, our Board of Directors (the "Board") reinstated the quarterly cash dividend of $0.20 per share of our common stock and increased the quarterly cash dividend to $0.21 per share of our common stock in October 2022.

In addition, our Board declared a special dividend of $0.20 per share of our common stock in July 2022.

Increasing Shareholder Value through Increase of Share Repurchase Program

On August 1, 2022, our 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.

For the year ended December 31, 2022, Delek repurchased 4,261,185 shares for an aggregate purchase price of $129.6 million, exclusive of the shares purchased under the Icahn Group Purchase Agreement.

Increasing Flexibility through Delek Logistics Debt Amendments

On October 13, 2022, Delek Logistics entered into a fourth amended and restated senior secured revolving credit agreement which 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 with an extend maturity date of October 13, 2027 (the "Delek Logistics Revolving Facility"), and (B) a new senior secured term loan facility for a term loan in the original principal amount of $300 million with a maturity date of October 13, 2024 (the "Delek Logistics Term Facility").

Increasing Flexibility through Delek Long-term Obligation Amendments

On October 26, 2022, Delek entered into a third amended and restated credit agreement 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”).

On November 18, 2022, Delek entered into an amended and restated term loan credit agreement providing for a senior secured term loan facility in an initial principal amount of $950 million with an extended maturity date of November 19, 2029 (the “Amended and Restated Term Loan Credit Agreement”).

Outstanding term loans of Delek US were reduced by an aggregate amount of approximately $300 million.

On December 22, 2022, Delek entered into an Inventory Intermediation Agreement with Citigroup Energy Inc.

(“Citi”) (the "Inventory Intermediation Agreement").

Pursuant to the Inventory Intermediation Agreement, Citi will (i) purchase from and sell to Delek crude oil and other petroleum feedstocks in connection with refining processing operations at El Dorado, Big Spring, and Krotz Springs, (ii) purchase from and sell to Delek all refined products produced by such refineries other than certain excluded products and (iii) in connection with such purchases and sales, Delek will enter into certain market risk hedges in each case, on the terms and subject to certain conditions.

The Inventory Intermediation Agreement results in up to $800 million of working capital capacity for Delek.

The Inventory Intermediation Agreement has a term of 24 months, subject to extension by Citi for an additional 12 months.

The Inventory Intermediation Agreement replaces the Supply and Offtake Agreements with J.

Aron that expired on December 30, 2022.

On November 6, 2023, Delek Logistics entered into a First Amendment, a Second Amendment and a Third Amendment to the Delek Logistics Credit Facility (together, the “Amendments”) which among other things:

extended the maturity of the Delek Logistics Term Loan Facility to April 15, 2025, (ii) added a maturity acceleration clause which will accelerate the maturity of the Delek Logistics Term Loan Facility to 180 days prior to the stated maturity date of the Delek Logistics 2025 Notes if any of the Delek Logistics 2025 Notes remain outstanding on that date, (iii) increased the U.S.

Revolving Credit Commitments (as defined in the Delek Logistics Credit Facility) by an amount equal to $150.0 million, resulting in aggregate lender commitments under the Delek Logistics Revolving Credit Facility of $1.050 billion and (iv) increased the limit allowed for general unsecured debt (as defined in the Delek Logistics Credit Facility) by an amount equal to $95.0 million, resulting in an unsecured general debt limit of $150.0 million.

On December 21, 2023, we amended the Inventory Intermediation Agreement with Citigroup Energy Inc.

(“Citi”) (the "Inventory Intermediation Agreement") to among other things, (i) extend the term of the Inventory Intermediation Agreement from December 30, 2024 to January 31, 2026, (ii) reduce Citi’s unilateral term extension option from a twelve month extension period to a six month extension period and (iii) increase the amount of the payment deferral mechanism from $70 million to $250 million.

We continue to progress our multi-year cost optimization initiative focused on identifying and implementing opportunities to improve our cost structure, improve efficiencies and align our workforce with strategic activities and operations.

We are executing on our initiatives to achieve a sustainable run-rate cost reduction of $100.0 million per year.

In 2023, we incurred total restructuring costs of $37.8 million (including a $23.1 million right-of-use asset impairment) as part of this cost optimization initiative.

During the fourth quarter of 2023, Delek determined that leased crude oil tanks in Canada were not needed to support the future growth of its business.

The exit of these leased crude oil tanks are intended to align with our continued operational and cost optimization efforts.

We have the ability and intent to sublease these crude oil tanks for the remainder of the respective lease terms, however, the expected sublease has a lower rate than the head lease, resulting in a right-of-use asset impairment of $23.1 million.

Management's Discussion and Analysis

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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 bpd, in order to qualify for the small refinery exemption under the EPA’s Renewable Fuel Standards regulations total output cannot exceed 75,000 bpd.

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

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

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

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

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

(2) Our Big Spring refinery is capable of processing substantial volumes of sour crude oil, which has historically cost less than intermediate, and/or substantial volumes of sweet crude oil, and therefore the WTI Cushing/ 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) 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.

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

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 logistics segment's gathering and processing business owns or leases capacity on approximately 398 miles of crude oil transportation pipelines, approximately 406 miles of refined product pipelines, and an approximately 1,400-mile crude oil gathering system of which 489 miles is decommissioned.

The storage and transportation business owns or leases associated crude oil storage tanks with an aggregate of approximately 10.0 million barrels of active shell capacity.

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

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

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

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Our retail segment (or "Retail") at December 31, 2023 includes the operations of 250 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.

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

As of December 31, 2022, we have removed the 7-Eleven brand name at 106 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

Management's Discussion and Analysis

commodity pricing information.

In connection with our Retail strategic initiatives, we closed or sold 52 under-performing or non-strategic store locations since the fourth quarter of 2018.

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

As of December 31, 2023, we have removed the 7-Eleven brand name from all of our store locations.

Corporate and Other Overview

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

Strategic Overview

The Road So Far:

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

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

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

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

Previous Key Initiatives

During 2022, our principal focus was on these Key Initiatives:

Safety and wellness.

Reliability and integrity.

Systems and processes.

Risk-based decision making.

Positioning for growth.

We also have continued to actively review our targeted strategies and related operational objectives and consider the need for changes in order to address the evolving industry and market, while ensuring that we continue to appropriately consider and capitalize on our operational strengths and strategic positioning in the near term.

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

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

Management's Discussion and Analysis

Evolving Focus:

A Sustainability Strategy

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

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

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

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

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

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

A New Framework:

Long-Term Sustainability

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

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

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

Long-Term Sustainability Framework:

Overarching Objectives

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

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

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

Focus on Operational Optimization and Improved Margin Capture.

Implement Digital Transformation Strategy.

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

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

Long-Term Sustainability Framework:

Key Initiatives

Effective June 2022, Avigal Soreq was named the President and Chief Executive Officer of the Company.

As a result of this change in leadership, the Company revisited its key initiatives.

Management's Discussion and Analysis

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.

Strategic Objectives

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

More consolidation in our industry is expected from increased cost pressures due in part to the regulatory environment continuing to move towards reducing carbon emissions and transitioning to renewable energy in the long-term.

However, we believe we are uniquely positioned as a leader in operating and excelling in niche markets and could continue capitalizing on and growing our integrated business model.

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.

The emphasis on environmental responsibility and long-term economic and environmental sustainability has increased.

Demand for additional transparency continues to evolve.

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

We have developed overarching key objectives that guide us when we formulate our strategic plans.

Key Objectives

Certain fundamental principles are foundational to our long-term strategy and direct us as we develop our strategic objectives.

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

Operational Excellence

Financial Strength and Flexibility

Strategic Initiatives

Operational Excellence

We are committed to operational excellence which includes maintaining safe, reliable, and environmentally responsible operations.

It also encompasses the dedication and drive for constant improvement across our operations in reliability, safety, and efficiency.

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 understand that if our assets run reliably and safely, it is better for the safety of our employees, communities, and environment.

We believe that focusing on people, processes and equipment will lead to improved utilization and yields and ultimately better employee retention and lower costs, which translates to improved returns for our shareholders.

For 2024, 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 innovation solutions.

• Improve discipline around outage spend and optimizing downtimes.

• Prioritize safety and environmental compliance by implementing foundational best practices to increase operations ability to provide safe, compliant, and reliable operations.

• Focus on operational excellence by building out our operations centric area business teams, frontline supervisor training as well as other key competency training.

• Execute a major turnaround at the Krotz Springs refinery, focusing on outage spend and optimizing downtime and implementing margin enhancement .

• Identify and evaluate organic growth projects that improve yield and increase utilization.

• 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.

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.

Financial Strength and Flexibility

In our industry, as with many volatile businesses, it is very important to make capital investments with accretive returns and maintain a debt balance at a comfortable leverage ratio.

We want to reward our shareholders and investors with a disciplined and balanced capital allocation framework, which we believe will strengthen shareholder value by, among other things, a stable dividend complemented by opportunistic share repurchases.

We are also committed to lowering costs and improving the efficiency of our cost structure in all aspects of our business.

For 2024, 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 the 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

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.

• Reward our shareholders and investors with a disciplined and balanced capital allocation framework, including opportunities to strengthen our balance sheet by reducing debt or opportunistically repurchasing shares with excess cash.

• Pursue strategic investments and acquisitions with a focus on geographic and revenue stream diversity.

• Build upon the zero-based budget foundation set in 2022 by implementing phase 2, which includes further improvements to our operating and general and administrative cost structure.

Strategic Initiatives

One of our near-term strategic initiatives is centered around unlocking the "sum of the parts" value of our existing business while identifying growth opportunities to diversify the Company’s geographic footprint and revenue stream, including in the alternative energy markets, as well as enhance its scale, compensate investors and develop other areas of its business.

For 2024, 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.

• Execute on our strategic initiatives, which may include opportunities to monetize our retail operations or some of our investment in Delek Logistics.

The goal being, to help unlock value embedded in the Delek valuation, while also improving liquidity in the market for DKL units without diluting overall DKL market capitalization.

Management's Discussion and Analysis

2022 Strategic Activities - A Look Back

• 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.

2023 Strategic Developments

The following table highlights our 2023 Strategic Developments:

2023 Key Initiatives

2022 Strategic Developments One Delek Culture Refinery of the Future New Energy Transition

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 of 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, which conformed our refining inventory to a single method of accounting, and eliminated 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.

We expect improved 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, 2020 beginning retained earnings.

Committed to Lowering Costs and Improving the Efficiency of Our Cost Structure:

In 2022, we announced that we are progressing a business transformation focused on enterprise-wide opportunities to improve the efficiency of our cost structure.

For the three months ended December 31, 2022, we recorded restructuring costs totaling $13 million associated with our business transformation.

Improving process for investment opportunities:

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

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 million and was financed through a combination of cash on hand and borrowings under Delek Logistics' existing credit agreement.

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

Committed to Lowering Costs and Improving the Efficiency of Our Cost Structure:

For the 2023 budget, we performed a first phase of a zero-based budget assessment of our resources and assets and their associated cost to develop a baseline for our operations.

We engaged an external consultant to help challenge our thinking as we went through this process.

During this process, each business leader was required to justify every dollar in their proposed budget submission and the external consultant team ensured consistency, set policies, and confirmed that the budgeted expenses matched the priorities to be achieved by the Company.

2023 Strategic Developments

Safe & Reliable Operations Financial Flexibility & 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.

We are targeting $100 million annual run-rate cost reduction.

Reducing Debt to Provide Shareholder Value:

During the year ended December 31, 2023, we reduced our long-term obligations by approximately $463.2 million.

Executing Safe and Reliable Operations:

Our focus on safe and reliable operations allowed us to achieve record throughput during 2023.

Focus on Leadership:

In March 2023, Joseph Israel was named EVP, Operations and is responsible for refining operations at Delek.

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

Also in March 2023, Patrick Reilly was appointed EVP 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 who has over three decades of refining experience was named SVP, Refining Operations.

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.

This plan resulted in record Tier 1 process safety event performance company-wide in 2023.

Increasing Shareholder Value through Payment of Dividends:

We increased our quarterly cash dividend to $0.245 per share of our common stock which was declared by our Board of Directors on February 20, 2024 and payable on March 8, 2024.

In addition, a cash dividend of $0.230 per share of our common stock was paid on May 22, 2023, a cash dividend of $0.235 per share of our common stock was paid on August 21, 2023, and a cash dividend of $0.240 per share of common stock was paid on November 20, 2023.

Increasing Shareholder Value through Share Repurchases:

During the year ended December 31, 2023, 3,562,767 shares of our common stock were repurchased for a total of $85.4 million.

Executing Retail Growth Plans:

In September 2023, we opened a new-to-industry retail location in Tyler, TX.

Our first store in this market, which features expanded food serviced and leading digital technology.

Pursuing Zero Incidents:

Our “Drive Zero” effort kicked off in 2023 aimed at building a stronger safety culture and improving operational excellence.

We’re committed to both personal safety (mitigating risks that cause smaller scale, local incidents and injuries), and process safety (managing the integrity of our operating systems and process equipment).

Investing in Energy Transition:

We were selected by the DOE Office of Clean Energy Demonstrations to negotiate a cost-sharing agreement in support of a carbon capture pilot project at the Big Spring refinery.

The DOE Carbon Capture Large-Scale Pilot Project program provides 70% cost-share for up to $95 million of federal funding to support project development.

Management's Discussion and Analysis

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Additionally, the EPA denied the petitions for small refinery exemptions for prior period compliance years.

In December 2022, the EPA released proposed volumes for compliance years 2023, 2024 and 2025.

In June 2023, the EPA released final volumes for compliance years 2023, 2024 and 2025.

The cost of RINs continues to negatively impact our results of operations.

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

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

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

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

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

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

and previously executed facility shutdowns that were later divested.

We were selected by the DOE Office of Clean Energy Demonstrations to negotiate a cost-sharing agreement in support of a carbon capture pilot project at the Big Spring refinery.

The DOE Carbon Capture Large-Scale Pilot Project program provides 70% cost-share for up to $95 million of federal funding to support project development.

Our pledge is the first step towards a long-term roadmap which we are seeking to align with the Science Based Target initiatives (SBTi), to move Delek firmly in the direction of the carbon-neutral operating environment as envisioned by the Paris Accords.

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

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

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.

We have positioned the Company to continue to run safely, reliably and environmentally responsibly at near or above nameplate capacity while leveraging our Delek Logistics and retail 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.

The demand for gasoline and diesel continue to be reshaped after the COVID-19 pandemic.

Work from home policies and increased electric vehicle usage have caused increased gasoline inventories which has weakened the gasoline crack spread.

Diesel inventories have recently increased and started to normalize.

We do expect gasoline and diesel demand to continue to follow typical seasonal patterns.

We anticipate additional global refinery capacity to come online in 2024 which will further increase gasoline and diesel inventories and put additional downward pressure on crack spreads.

Additionally, if inflation continues to soften, the Federal Reserve may implement rate cuts in 2024 however the cuts are expected to be slow and gradual.

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

Management's Discussion and Analysis

The table below reflects the average quarterly prices of WTI Midland and WTI Cushing over the past three years.

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

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 CBOB, HSD and ULSD over the past three years.

Management's Discussion and Analysis

Crack Spreads

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

Management's Discussion and Analysis

Summary Financial and Other Information

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

Summary Statement of Operations Data (1)

Year Ended December 31,

2022 As Adjusted (2)

As Adjusted (2)

Net revenues $ 20,245.8 $ 10,648.2 $ 7,301.8

Cost of sales:

Cost of materials and other 18,355.6 9,643.9 6,845.5

Operating expenses (excluding depreciation and amortization presented below) 701.8 502.0 475.7

Depreciation and amortization 263.8 239.6 241.6

Total cost of sales 19,321.2 10,385.5 7,562.8

Insurance proceeds (31.2) (23.3) —

Operating expenses related to retail and wholesale business (excluding depreciation and amortization presented below) 106.8 110.4 97.8

General and administrative expenses 348.8 212.6 234.6

Depreciation and amortization 23.2 25.0 26.0

Impairment of goodwill — — 126.0

Other operating income, net (12.5) (27.3) (13.1)

Total operating costs and expenses (3)

19,756.3 10,682.9 8,034.1

Operating income (loss) (3)

489.5 (34.7) (732.3)

Interest expense, net 195.3 136.7 125.7

Income from equity method investments (57.7) (18.3) (30.3)

Gain on sale of non-operating refinery — — (56.8)

Other income, net (2.5) (15.8) (3.5)

Total non-operating expenses, net 135.1 102.6 35.1

Income (loss) before income tax expense (benefit) 354.4 (137.3) (767.4)

Income tax expense (benefit) 63.9 (42.0) (193.6)

Net income (loss) 290.5 (95.3) (573.8)

Net income attributed to non-controlling interests 33.4 33.0 37.6

Net income (loss) attributable to Delek $ 257.1 $ (128.3) $ (611.4)

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

See the Consolidated Statements of Income included in item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for more detail regarding our results of operations and net loss per share.

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

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

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

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

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

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

We report operating results in three reportable segments:

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 EBITDA.

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

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

Year Ended December 31,

(In millions) 2021 2020

2022 As Adjusted (1)

As Adjusted (1)

Refining segment EBITDA $ 529.4 $ 719.1

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Corporate, Other and Eliminations EBITDA (2)

(244.6) (264.7)

EBITDA attributable to Delek $ 694.7 $ 803.3

Interest expense, net (318.2) (195.3)

Income tax (expense) benefit (63.9) 42.0 193.6

Income tax expense (5.1) (63.9)

Depreciation and amortization (351.6) (287.0)

Net income (loss) attributable to Delek $ 257.1 $ (128.3) $ (611.4)

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

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

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

Net income attributable to Delek $ 19.8 $ 257.1

(1) Includes a $14.8 million goodwill impairment charge for the year ended December 31, 2023.

Refer to Note 16 - Goodwill and Intangible Assets to our accompanying consolidated financial statements included in Item 8.

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

(2) Includes a $23.1 million right-of-use asset impairment charge for the year ended December 31, 2023.

Refer to Note 19 - Restructuring to our accompanying consolidated financial statements included in Item 8.

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

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

GAAP measure, gross margin:

Reconciliation of refining margin to gross margin

Reconciliation of refining margin to gross margin (in millions)

Refining Segment

Year Ended December 31,

(In millions) 2021 2020

2022 As Adjusted (1)

As Adjusted (1)

Net revenues $ 19,763.0 $ 10,267.8 $ 6,855.3

Total revenues $ 16,406.9 $ 19,763.0

Cost of sales 16,095.7 19,240.4

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Refining margin $ 1,164.6 $ 1,350.2

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

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

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

Management's Discussion and Analysis

Summary Financial and Other Information

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

Summary Statement of Operations Data (1)

Year Ended December 31,

2023 2022 (2)

Net revenues $ 16,917.4 $ 20,245.8

Cost of sales:

Cost of materials and other 15,112.0 18,355.6

Operating expenses (excluding depreciation and amortization presented below) 770.6 718.1

Depreciation and amortization 322.8 263.8

Total cost of sales 16,205.4 19,337.5

Insurance proceeds (20.3) (31.2)

Operating expenses related to retail and wholesale business (excluding depreciation and amortization presented below) 106.5 106.8

General and administrative expenses 286.4 332.5

Depreciation and amortization 28.8 23.2

Asset impairment 37.9 —

Other operating income, net (7.2) (12.5)

Total operating costs and expenses 16,637.5 19,756.3

Operating income 279.9 489.5

Interest expense, net 318.2 195.3

Income from equity method investments (86.2) (57.7)

Other income, net (3.9) (2.5)

Total non-operating expenses, net 228.1 135.1

Income before income tax expense 51.8 354.4

Income tax expense 5.1 63.9

Net income 46.7 290.5

Net income attributed to non-controlling interests 26.9 33.4

Net income attributable to Delek $ 19.8 $ 257.1

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

See the Consolidated Statements of Income included in item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for more detail regarding our results of operations and net income per share.

(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 $16.3 million for the year ended December 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 EBITDA.

Management's Discussion and Analysis

Results of Operations

Consolidated Results of Operations — Comparison of the Year Ended December 31, 2022 versus the Year Ended December 31, 2021 and the Year Ended December 31, 2021 versus the Year Ended December 31, 2020

Net Income (Loss)

Consolidated net income for the year ended December 31, 2022 was $290.5 million compared to a net loss of $95.3 million for the year ended December 31, 2021.

Consolidated net income attributable to Delek for the year ended December 31, 2022 was $257.1 million, or $3.63 per basic share, compared to a loss of $128.3 million, or $(1.73) per basic share, for the year ended December 31, 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.

Consolidated net loss for the year ended December 31, 2021 was $95.3 million compared to $573.8 million for the year ended December 31, 2020.

Consolidated net loss attributable to Delek for the year ended December 31, 2021 was $128.3 million, or $(1.73) per basic share, compared to $611.4 million, or $(8.31) per basic share, for the year ended December 31, 2020.

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

We generated net revenues of $20,245.8 million and $10,648.2 million during the years ended December 31, 2022 and 2021, respectively, an increase of $9,597.6 million, or 90.1%.

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

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

Gulf Coast gasoline of 37.1%, ULSD of 71.8%, and HSD of 65.7% and increases in wholesale activity;

• in our logistics segment, increases 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 as well as incremental revenues from the 3 Bear Acquisition;

• in our retail segment, increases in fuel sales primarily attributable to a 30.6% increase in average price charged per gallon sold.

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

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

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

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

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

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

Consolidated Results of Operations — Comparison of the Year Ended December 31, 2023 versus the Year Ended December 31, 2022

Consolidated net income for the year ended December 31, 2023 was $46.7 million compared to a net income of $290.5 million for the year ended December 31, 2022.

Consolidated net income attributable to Delek for the year ended December 31, 2023 was $19.8 million, or $0.30 per basic share, compared to income of $257.1 million, or $3.63 per basic share, for the year ended December 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.

We generated net revenues of $16,917.4 million and $20,245.8 million during the years ended December 31, 2023 and 2022, respectively, a decrease of $3,328.4 million, or 16.4%.

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

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

Gulf Coast gasoline of 15.5%, ULSD of 21.4%, and HSD of 36.2% and decreases in wholesale activity, partially offset by an increase in sales volume (including purchased product);

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

• in our retail segment, a decrease in total fuel sales primarily attributable to a $0.47 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 0.6% and an increase in total retail fuel gallons sold.

Total Operating Costs and Expenses

Cost of Materials and Other

Cost of materials and other was $18,355.6 million for the year ended December 31, 2022, compared to $9,643.9 million for 2021, an increase of $8,711.7 million, or 90.3%.

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

• an increase in the cost of crude oil feedstocks at the refineries, including a 38.9% increase in the average cost of WTI Cushing crude oil and a 37.7% increase in the average cost of WTI Midland crude oil;

• increases in average RINs cost due to increased production during the year ended December 31, 2022 compared to the year ended December 31, 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 35.3% increase in average cost per gallon sold applied to higher fuel sales volumes.

Management's Discussion and Analysis

Cost of materials and other was $9,643.9 million for the year ended December 31, 2021, compared to $6,845.5 million for 2020, an increase of $2,798.4 million, or 40.9%.

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

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

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

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

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

Such increases were partially offset by an increase in commodity hedging gains to a loss of $51.7 million recognized during the year ended December 31, 2021 from a loss of $87.5 million recognized during the year ended December 31, 2020.

Operating Expenses

Operating expenses (included in both cost of sales and other operating expenses) were $808.6 million for the year ended December 31, 2022 compared to $612.4 million in 2021, an increase of $196.2 million, or 32.0%.

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 2022;

• increases maintenance cost and employee costs including incentive compensation costs.

Operating expenses (included in both cost of sales and other operating expenses) were $612.4 million for the year ended December 31, 2021 compared to $573.5 million in 2020, an increase of $38.9 million, or 6.8%.

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

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

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

Such increases were partially offset by the following:

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

Cost of materials and other was $15,112.0 million for the year ended December 31, 2023, compared to $18,355.6 million for year ended December 31, 2022, a decrease of $3,243.6 million, or 17.7%.

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

• a decrease in the cost of crude oil feedstocks at the refineries, including a 17.9% decrease in the average cost of WTI Cushing crude oil and a 17.8% decrease in the average cost of WTI Midland crude oil and decreased wholesale activity;

• decreases in the average diesel 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 14.0% decrease in average cost per gallon sold applied to higher fuel sales volumes.

Insurance Proceeds

Insurance proceeds were $31.2 million for the year ended December 31, 2022 compared to $23.3 million in 2021, an increase of $7.9 million, or 33.9%.

The increase was primarily driven by the following:

• We received insurance recoveries related to the fire and freeze events that occurred during the first quarter 2021, which favorably impacted our results during the first two quarters of 2021.

For the year ended December 31, 2022, we recognized $31.2 million of business interruption insurance recoveries compared to $23.3 million in the 2021 period.

Insurance proceeds were $20.3 million for the year ended December 31, 2023 compared to $31.2 million in year ended December 31, 2022, a decrease of $10.9 million, or 34.9%.

The decrease in insurance proceeds was due to following:

• For the year ended December 31, 2023, we recognized $10.0 million of business interruption and property damage insurance recoveries compared to $31.2 million of business interruption insurance recoveries in the 2022 period related to the fire and freeze events that occurred during the first quarter 2021;

• For the year ended December 31, 2023, we recognized $10.3 million of insurance recoveries related to property damage with no comparable activity in the 2022 period related to the fire events that occurred during the fourth quarter 2022.

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

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Management's Discussion and Analysis

Insurance proceeds were $23.3 million for the year ended December 31, 2021 with no comparable activity in the 2020 period.

The increase was primarily driven by the following:

• We received insurance recoveries related to the fire and freeze events that occurred during the first quarter 2021, which favorably impacted our results during the first two quarters of 2021.

For the year ended December 31, 2021, we recognized $23.3 million of business interruption insurance recoveries.

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

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

Operating Expenses

Operating expenses (included in both cost of sales and other operating expenses) were $877.1 million for the year ended December 31, 2023 compared to $824.9 million in year ended December 31, 2022, an increase of $52.2 million, or 6.3%.

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

• an increase in maintenance costs including costs related to our Safety Action Plan;

• an additional $8.7 million expense for uncovered litigation, claims and assessments associated with the 2021 El Dorado refinery fire;

• an increase in employee costs.

These increases were partially offset by the following:

• lower natural gas prices in 2023.

General and Administrative Expenses

General and administrative expenses were $348.8 million for the year ended December 31, 2022 compared to $212.6 million in 2021, an increase of $136.2 million, or 64.1%.

The increase was primarily driven by the following:

• an increase in employee costs including incentive compensation costs and incremental transaction costs related to the 3 Bear Acquisition;

• $12.5 million of restructuring costs primarily for consulting fees and severance costs associated with our cost optimization plans initiated in 2022.

General and administrative expenses were $212.6 million for the year ended December 31, 2021 compared to $234.6 million in 2020, a decrease of $22.0 million, or 9.4%.

The decrease was primarily driven by the following:

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

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

General and administrative expenses were $286.4 million for the year ended December 31, 2023 compared to $332.5 million in year ended December 31, 2022, a decrease of $46.1 million, or 13.9%.

The decrease was primarily driven by a decrease in employee costs including incentive compensation costs and no transaction 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 $351.6 million and $287.0 million for the years ended December 31, 2023 and 2022, respectively, an increase of $64.6 million, or 22.5%.

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

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.

Asset Impairment

Asset impairment was $37.9 million for the year ended December 31, 2023.

Asset impairment included $14.8 million of goodwill impairment and $23.1 million of right-of-use asset impairment.

The goodwill impairment is related to our Delaware Gathering reporting unit due to significant increases in interest rates and timing of system connections with our producer customers.

The right-of-use asset impairment related to leased crude oil tanks in Canada that were not needed to support the future growth of our business.

Refer to Note 16 and Note 19 to our accompanying consolidated financial statements included in Item 8.

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

There was no asset impairment in the year ended December 31, 2022.

Other Operating Income, Net

Other operating income, net was $12.5 million and $27.3 million for the years ended December 31, 2022 and 2021, respectively, a decrease of $14.8 million;

primarily due to hedge losses realized in 2022 compared to hedge gains realized in 2021 associated with our trading derivatives.

Other operating income, net was $27.3 million and $13.1 million for the years ended December 31, 2021 and 2020, respectively, an increase of $14.2 million, primarily due to an increase in gains from our trading derivatives in 2021 compared to 2020.

Other operating income, net was $7.2 million and $12.5 million for the years ended December 31, 2023 and 2022, respectively, a decrease of $5.3 million, primarily due to decreased hedge gains in 2023 compared to 2022 associated with our derivatives.

Management's Discussion and Analysis

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Interest Expense, Net

Interest expense, net was $195.3 million in the year ended December 31, 2022, compared to $136.7 million for 2021, an increase of $58.6 million, or 42.9% primarily due to the following:

Interest expense, net was $318.2 million in the year ended December 31, 2023, compared to $195.3 million for year ended December 31, 2022, an increase of $122.9 million, or 62.9% primarily due to the following:

• an increase in the average effective interest rate of 390 basis points during the year ended December 31, 2023 compared to the year ended December 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 $151.0 million during the year ended December 31, 2023 (calculated as a simple average of beginning borrowings/obligations and ending borrowings/obligations for the period) compared to the year ended December 31, 2022.

Interest expense, net was $136.7 million in the year ended December 31, 2021, compared to $125.7 million for 2020, an increase of $11.0 million, or 8.8% primarily due to the following:

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

• an increase in the average effective interest rate of 16 basis points during the year ended December 31, 2021 compared to the year ended December 31, 2020 (where effective interest rate is calculated as interest expense divided by the net average borrowings/obligations outstanding).

Results from Equity Method Investments

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This 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 $7.6 million during the year ended December 31, 2022 from a loss of $17.7 million in the year ended December 31, 2021.

We recognized income from equity method investments of $18.3 million for the year ended December 31, 2021, compared to $30.3 million for the year ended December 31, 2020, a decrease of $12.0 million.

This decrease was primarily driven by the following:

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

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

During the year ended December 31, 2021, we recognized a $20.9 million gain in other income related to a loan buy-out agreement between Wink to Webster Pipeline LLC and the Company.

There were no such gains in 2022.

Refer to Note 7 of our consolidated financial statements included in Item 8.

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

During the year ended December 31, 2021, we recognized a $20.9 million gain in other income related to a loan buy-out agreement between Wink to Webster Pipeline LLC and the Company.

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

Management's Discussion and Analysis

For the year ended December 31, 2022, we recorded income tax expense of $63.9 million compared to a benefit of $42.0 million for the same period for 2021, primarily driven by the following:

• This change to income tax expense in 2022 from income tax benefit in 2021 was principally due to pre-tax income during the year ended December 31, 2022 compared to a pre-tax loss for the year ended December 31, 2021.

Our effective tax rates were 18.0% and 30.6% for the years ended December 31, 2022 and 2021, respectively;

• an increase in valuation allowance on certain state attributes as a result of a shift in state nexus footprints.

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

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

Income tax benefit decreased $151.6 million resulting in net benefit of $42.0 million during the year ended December 31, 2021 compared to the same period for 2020, primarily driven by the following:

• Our effective tax rates were 30.6% and 25.2% for the years ended December 31, 2021 and 2020, respectively;

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

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

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

• 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 $22.9 million during the year ended December 31, 2023 from $7.6 million in the year ended December 31, 2022.

For the year ended December 31, 2023, we recorded income tax expense of $5.1 million compared to $63.9 million for the year ended December 31, 2022, primarily driven by the following:

• a decrease in pre-tax net income of $302.6 million, and

• Our effective tax rates were 9.8% and 18.0% for the year ended December 31, 2023 and 2022, respectively, due to the impact of fixed dollar favorable permanent differences on the tax rate and changes in valuation allowance on state attributes.

Management's Discussion and Analysis

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Year Ended December 31,

2022 As Adjusted (1)

As Adjusted (1)

Revenues $ 16,406.9 $ 19,763.0

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Refining segment EBITDA $ 529.4 $ 719.1

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

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

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

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

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

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

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

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 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

Management's Discussion and Analysis

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.

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

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

Management's Discussion and Analysis

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

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Year Ended December 31,

2022 As Adjusted (2)

As Adjusted (2)

Total Refining Segment

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Year Ended December 31,

2022 As Adjusted (2)

As Adjusted (2)

Tyler, TX Refinery

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Diesel/Jet 28,670 31,419

Petrochemicals, LPG, NGLs 2,114 1,957 2,794

Petrochemicals, LPG, natural gas liquids ("NGLs") 2,341 2,114

Other 1,691 1,825

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Year Ended December 31,

2022 As Adjusted (2)

As Adjusted (2)

Big Spring, TX Refinery

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Other feedstocks

191 843 1,078

Total throughput 64,459 59,667

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31,589 31,576

2,418 719 418

Petrochemicals, LPG, NGLs

6,749 5,170 2,223

4,458 7,895 13,512

Total production

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Other feedstocks

4,118 5,912 4,126

Total throughput

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See tables below.

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

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

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

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

Management's Discussion and Analysis

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

Inter-refinery Sales

Year Ended December 31,

(in barrels per day) 2022 2021 2020

Tyler refined product sales to other Delek refineries — 1,636 2,010

El Dorado refined product sales to other Delek refineries 595 866 924

Big Spring refined product sales to other Delek refineries 275 1,502 1,356

Krotz Springs refined product sales to other Delek refineries 388 150 190

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

Refinery Sales to Other Segments

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(in barrels per day) 2023 2022

Tyler refined product sales to other Delek segments — — 502

El Dorado refined product sales to other Delek segments — 4

Big Spring refined product sales to other Delek segments 21,165 19,828

Krotz Springs refined product sales to other Delek segments — — —

Pricing Statistics (average for the period presented)

Year Ended December 31,

2022 2021 2020

WTI — Cushing crude oil (per barrel) $ 77.69 $ 94.62

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Brent (per barrel) $ 82.21 $ 99.06

Gulf Coast 5-3-2 crack spread (per barrel) - utilizing HSD $ 23.89 $ 12.14 $ 5.87

Gulf Coast 5-3-2 crack spread (per barrel) (1)

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Gulf Coast high sulfur diesel (per gallon) $ 1.85 $ 2.90

Natural gas (MMBTU) $ 6.54 $ 3.73 $ 2.13

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

Gulf Coast CBOB and U.S.

Natural gas (per MMBtu) $ 2.66 $ 6.54

(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.

Gulf Coast Pipeline No.

2 heating oil (ultra-low sulfur diesel).

For our Big Spring refinery, we compare our refined product margin to the Gulf Coast 3-2-1 crack spread consisting of WTI Cushing crude, Gulf Coast CBOB gasoline and Gulf Coast ultra low sulfur diesel, and for our Krotz Springs refinery, we compare our per barrel refined product margin to the Gulf Coast 2-1-1 crack spread consisting of LLS crude oil, Gulf Coast 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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Management's Discussion and Analysis

Refining Segment Operational Comparison of the Year Ended December 31, 2022 versus the Year Ended December 31, 2021 and the Year Ended December 31, 2021 versus the Year Ended December 31, 2020

Revenues for the refining segment increased $9,495.2 million, or 92.5%, in the year ended December 31, 2022 compared to the year ended December 31, 2021.

The increase was primarily driven by the following:

• an increase in the average price of U.S.

Gulf Coast gasoline of 37.1%, ULSD of 71.8%, and HSD of 65.7%;

• an increase in total sales volumes and wholesale activity.

Revenues included sales to our retail segment of $511.7 million and $355.7 million, sales to our logistics segment of $496.6 million and $321.9 million and sales to the other segment of $23.8 million and $25.4 million for the years ended December 31, 2022 and 2021, respectively.

We eliminate this intercompany revenue in consolidation.

Revenues for the refining segment increased $3,412.5 million, or 49.8%, in the year ended December 31, 2021 compared to the year ended December 31, 2020.

The increase was primarily driven by the following:

• increase in the average price of U.S.

Refining Segment Operational Comparison of the Year Ended December 31, 2023 versus the Year Ended December 31, 2022

Revenues for the refining segment decreased $3,356.1 million, or 17.0%, in the year ended December 31, 2023 compared to the year ended December 31, 2022.

The decrease was primarily driven by the following:

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

Gulf Coast gasoline of 15.5%, ULSD of 21.4%, and HSD of 36.2%;

• increases in sales volumes of refined and purchased product of 0.7 million and 1.6 million barrels, respectively.

Revenues included sales to our retail segment of $355.7 million and $220.0 million, sales to our logistics segment of $321.9 million and $203.8 million and sales to our other segment of $25.4 million and $13.5 million for the years ended December 31, 2021 and 2020, respectively.

• a decrease in wholesale activity.

These decreases were partially offset by the following:

• an increase in sales volumes (including purchased products).

Revenues included sales to our retail segment of $432.5 million and $511.7 million, sales to our logistics segment of $396.3 million and $496.6 million and sales to the other segment of $0.0 million and $23.8 million for the year ended December 31, 2023 and 2022, respectively.

We eliminate this intercompany revenue in consolidation.

Cost of Materials and Other

Cost of materials and other increased $8,698.3 million, or 89.5%, in the year ended December 31, 2022 compared to the year ended December 31, 2021.

This increase was primarily driven by the following:

• increases in the cost of WTI Cushing crude oil, from an average of $68.11 per barrel to an average of $94.62, or 38.9%;

• increases in the cost of WTI Midland crude oil, from an average of $68.55 per barrel to an average of $94.38, or 37.7%;

• an increase in sales volumes and wholesale activity;

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

These costs and fees were $429.0 million and $367.9 million during the years ended December 31, 2022 and 2021, respectively.

We eliminate these intercompany fees in consolidation.

Management's Discussion and Analysis

Cost of materials and other increased $2,903.3 million, or 42.6%, in the year ended December 31, 2021 compared to the year ended December 31, 2020.

This increase was primarily driven by the following:

• increases in the cost of WTI Cushing crude oil, from an average of $39.89 per barrel to an average of $68.11, or 70.7%;

• increases in the cost of WTI Midland crude oil, from an average of $40.02 per barrel to an average of $68.55, or 71.3%;

• increases in RINs costs from an average cost per RIN of $0.44 and $0.64 for ethanol and biodiesel RINs, respectively during the year ended December 31, 2020 to an average of $1.31 and $1.50 during the year ended December 31, 2021.

Cost of materials and other decreased $3,170.5 million, or 17.2%, in the year ended December 31, 2023 compared to the year ended December 31, 2022.

This decrease was primarily driven by the following:

• decreases in the cost of WTI Cushing crude oil, from an average of $94.62 per barrel to an average of $77.69, or 17.9%, and decreases in the cost of WTI Midland crude oil, from an average of $95.93 per barrel to an average of $78.90, or 17.8%;

• a decrease in wholesale activity.

These decreases were partially offset by the following:

• an increase in sales volumes (including purchased products).

These costs and fees were $562.2 million and $477.1 million during the years ended December 31, 2023 and 2022, respectively.

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Refining Margin

Refining margin increased by $796.9 million, or 144.0%, for the year ended December 31, 2022 compared to the year ended December 31, 2021, with a refining margin percentage of 6.8% as compared to 5.4% for the years ended December 31, 2022 and 2021, respectively, primarily driven by the following:

• a 96.8% improvement in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery), an 89.0% improvement in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery), and a 133.1% improvement in the average Gulf Coast 2-1-1 crack spread (the primary measure for the Krotz Springs refinery);

• an increase in total sales volumes.

These increases were partially offset by the following:

• increases in average RINs costs during the year ended December 31, 2022 compared to the year ended December 31, 2021.

Refining margin increased by $509.2 million for the year ended December 31, 2021 compared to the year ended December 31, 2020, with a refining margin percentage of 5.4% as compared to 0.6% for the years ended December 31, 2021 and 2020, respectively, primarily driven by the following:

• a 106.8% improvement in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery), a 104.5% improvement in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery), and a 157% improvement in the average Gulf Coast 2-1-1 crack spread (the primary measure for the Krotz Springs refinery);

• an increase in reversal benefit of inventory valuation reserve during the year 2021 compared to the prior year period.

Management's Discussion and Analysis

These increases were partially offset by the following:

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

Refining margin decreased by $185.6 million, or 13.7%, for the year ended December 31, 2023 compared to the year ended December 31, 2022, with a refining margin percentage of 7.1% as compared to 6.8% for the years ended December 31, 2023 and 2022, respectively, primarily driven by the following:

• a 19.0% decrease in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery), a 17.4% decrease in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery) and a 42.9% decrease in the average Gulf Coast 2-1-1 crack spread (the primary measure for the Krotz Springs refinery).

These decreases were partially offset by the following:

• lower natural gas prices.

Operating Expenses

Operating expenses increased $166.9 million, or 38.1%, in the year ended December 31, 2022, compared to year ended December 31, 2021.

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

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

• higher employee and outside service costs;

• higher natural gas prices in the year ended December 31, 2022 compared to the prior year for the same period.

Operating expenses increased $31.2 million, or 7.7%, in the year ended December 31, 2021, compared to year ended December 31, 2020.

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

• an increase in utilities costs primarily associated with higher natural gas costs during the February 2021 related to Winter Storm Uri and pricing increases in the later half of 2021;

• an increase in catalyst costs due to increased production at the refineries.

Such increases were offset by the following:

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

EBITDA increased by $649.9 million, for the year ended December 31, 2022 compared to the year ended December 31, 2021, driven by an increase in refining margin primarily due to improved crack spreads and increased sales volumes, offset by increases in variable costs and utilities, increased employee and outside service costs, natural gas prices, and higher RINs expense primarily due to increased production.

EBITDA increased by $618.5 million, or a 112.6% improvement in EBITDA percentage, for the year ended December 31, 2021 compared to the year ended December 31, 2020, driven by an increase in refining margin primarily due to 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.

Operating expenses decreased by $3.3 million, or 0.5%, in the year ended December 31, 2023, compared to year ended December 31, 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:

• higher employee, outside service and maintenance costs including costs related to our Safety Action Plan.

Management's Discussion and Analysis

EBITDA decreased by $189.7 million, for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to a decrease in refining margin driven by decreased crack spreads.

Management's Discussion and Analysis

Logistics Segment

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Year Ended December 31,

2022 2021 2020

Revenues $ 1,020.4 $ 1,036.4

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Operating expenses (excluding depreciation and amortization) $ 118.1 $ 88.3

EBITDA $ 304.8 $ 258.0 $ 238.1

$ 363.0 $ 304.8

Operating Information:

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Natural gas gathering and processing (Mcfd) (4)

71,239 60,971

Crude oil gathering (average bpd) 111,335 87,519

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113,803 132,262

(1) Includes a $14.8 million goodwill impairment charge for the year ended December 31, 2023.

Refer to Note 16 - Goodwill and Intangible Assets to our accompanying consolidated financial statements included in Item 8.

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

(2) Formerly known as the Permian Gathering System.

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

(2) 2022 volumes include volumes from June 1, 2022 through December 31, 2022.

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

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

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(6) 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.

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.

Logistics revenue is largely based on fixed-fee or tariff rates charged for throughput volumes running through our logistics network, where many of those volumes are contractually protected by MVCs.

To the extent that our logistics volumes are not subject to MVCs, our Logistics revenue may be negatively impacted in periods where our 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.

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Management's Discussion and Analysis

Logistics Segment Operational Comparison of the Year Ended December 31, 2022 versus the Year Ended December 31, 2021 and the Year Ended December 31, 2021 versus the Year Ended December 31, 2020.

Revenues increased by $335.5 million, or 47.9%, in the year ended December 31, 2022 compared to the year ended December 31, 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 year ended December 31, 2021 were negatively impacted by the Pandemic as well as severe weather events.

Revenues included sales to our refining segment of $477.1 million and $417.0 million for the years ended December 31, 2022 and 2021, respectively, and sales to our other segment of $2.3 million and $1.8 million for the years ended December 31, 2022 and 2021, respectively.

We eliminate this intercompany revenue in consolidation.

Revenues increased by $137.5 million, or 24.4%, in the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily driven by the following:

• increased revenues associated with agreements executed in connection with Midland Gathering System and Delek Trucking acquisitions, which were effective March 31, 2020 and May 1, 2020, respectively.

• increased revenues at our Big Springs Refinery Crude Pipeline, as a result of new contracts executed in the second quarter of 2020;

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

◦ the average sales prices per gallon of gasoline and diesel sold increased by $0.78 per gallon and $0.83 per gallon, respectively;

◦ the average volumes of gasoline sold decreased by 10.5 million gallons, offset by 8.8 million decrease of diesel gallons sold.

Such increases were partially offset by the following:

• decreases in throughputs due to the impact of the severe freezing conditions that affected most of the regions where we operate resulting in lower volumes outside of contractual MVCs during the year ended December 31, 2021 when compared to the year ended December 31, 2020;

• decreases in throughputs at the Paline pipeline due to scheduled pipeline maintenance.

Logistics Segment Operational Comparison of the Year Ended December 31, 2023 versus the Year Ended December 31, 2022

Net revenues decreased by $16.0 million, or 1.5%, in the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily driven by the following:

• decreased revenue of $99.6 million in our West Texas marketing operations primarily driven by decreases in the average sales prices per gallon and the average volumes of diesel sold in our West Texas marketing operations:

◦ the average sales prices per gallon of gasoline and diesel sold decreased by $0.46 per gallon and $0.73 per gallon, respectively;

◦ the volumes of diesel sold decreased by 3.6 million gallons, partially offset by a 0.6 million increase in gallons of gasoline sold.

These decreases were partially offset 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 primarily due to new connections finalized during 2022.

Revenues included sales to our refining segment of $562.2 million and $477.1 million for the years ended December 31, 2023 and 2022, respectively, and sales to our other segment of $1.6 million and $2.3 million for the years ended December 31, 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 increased by $257.0 million, or 66.9%, in the year ended December 31, 2022 compared to the year ended December 31, 2021.

This increase was 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 $0.74 per gallon and $1.43 per gallon, respectively;

◦ the average volumes of diesel sold increased by 1.0 million gallons, while gasoline volumes sold increased by 2.0 million gallons;

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

Our logistics segment purchased product from our refining segment of $496.6 million and $321.9 million for the years ended December 31, 2022 and 2021, respectively.

We eliminate these intercompany costs in consolidation.

Cost of materials and other for the logistics segment increased by $115.3 million, or 42.8%, in the year ended December 31, 2021 compared to the year ended December 31, 2020.

This increase was primarily driven by the following related to our West Texas marketing operations:

• the average cost per gallon of gasoline and diesel sold increased by $0.83 per gallon and $0.80 per gallon, respectively;

• the average volumes of gasoline and diesel sold decreased by 10.5 million gallons and 8.8 million gallons, respectively.

Cost of materials and other for the logistics segment decreased by $108.8 million, or 17.0%, in the year ended December 31, 2023 compared to the year ended December 31, 2022.

This 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 diesel sold in our West Texas marketing operations:

◦ the average cost per gallon of gasoline and diesel sold decreased by $0.49 per gallon and $0.74 per gallon, respectively;

◦ the volumes of diesel sold decreased by 3.6 million gallons, partially offset by a 0.6 million increase in gallons of gasoline sold.

These increases were partially offset by the following:

• 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 $396.3 million and $496.6 million for the years ended December 31, 2023 and 2022, respectively.

We eliminate these intercompany costs in consolidation.

Operating Expenses

Operating expenses increased by $26.4 million, or 42.6%, in the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily 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.

Operating expenses increased by $5.7 million, or 10.1%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the following:

• increases in employee and outside service costs after cost cutting measures implemented to respond to the COVID-19 Pandemic, including delaying non-essential projects, ended;

Management's Discussion and Analysis

• increase in energy costs due to higher natural gas prices;

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

• increases in utility costs as a result of significantly higher energy costs during the February 2021 severe freezing conditions that affected most of the regions where we operate.

EBITDA increased by $46.8 million, or 18.1%, in the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily driven by the following:

• increases in revenue due to higher throughput volumes;

• partially offset by increases in operating expense.

Operating Expenses

Operating expenses increased by $29.8 million, or 33.7%, in the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily driven by incremental expenses associated with Delaware Gathering Acquisition.

EBITDA increased by $58.2 million, or 19.1%, in the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily driven by the following:

• increases in revenue due to higher throughput volumes;

• partially offset by increases in operating expense.

• higher throughput volumes;

• incremental EBITDA from the Delaware Gathering Acquisition.

These increases were partially offset by the following:

• A $14.8 million goodwill impairment related to our Delaware Gathering reporting unit due to significant increases in interest rates and timing of system connections with our producer customers.

Management's Discussion and Analysis

Retail Segment

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

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

Selected Retail Financial and Operating Information

Year Ended December 31,

2022 2021 2020

Revenues $ 882.7 $ 956.9

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Operating expenses (excluding depreciation and amortization) $ 102.1 $ 97.8

$ 44.1 $ 51.1 $ 47.0

EBITDA $ 46.9 $ 44.1

Operating Information

Year Ended December 31,

2022 2021 2020

Number of stores (end of period) 250 249

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Year Ended December 31,

2022 2021 2020

Change in same-store retail fuel gallons sold 0.7 % 2.5 %

Change in same-store merchandise sales 0.6 % 0.3 %

(1) Refer to EBITDA discussion below for impacts related to bonus expense under the Delek annual incentive plan.

(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.

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Management's Discussion and Analysis

Retail Segment Operational Comparison of the Year Ended December 31, 2022 versus the Year Ended December 31, 2021 and the Year Ended December 31, 2021 versus the Year Ended December 31, 2020.

Revenues for the retail segment increased by $159.5 million, or 20.0%, for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily driven by the following:

• an increase in total fuel sales which were $642.2 million for the year ended December 31, 2022 compared to $480.9 million for 2021, primarily attributable to a $0.88 increase in average price charged per gallon sold;

• partially offset by a decrease in merchandise sales to $314.7 million for the year ended December 31, 2022 compared to $316.4 million for the year ended December 31, 2021, primarily driven by the same-store sales decrease of 0.3%.

Revenues for the retail segment increased by $115.7 million, or 17.0%, for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the following:

• an increase in total fuel sales which were $480.9 million for the year ended December 31, 2021 compared to $357.9 million for 2020, primarily attributable to a $0.86 increase in average price charged per gallon sold, slightly offset by a decrease in total retail fuel gallons sold;

• slightly offset by a decrease in merchandise sales to $316.4 million for the year ended December 31, 2021 compared to $323.8 million for 2020, primarily driven by the same-store sales decrease of (1.8)%.

Management's Discussion and Analysis

Retail Segment Operational Comparison of the Year Ended December 31, 2023 versus the Year Ended December 31, 2022

Revenues for the retail segment decreased by $74.2 million, or 7.8%, for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily driven by the following:

• a decrease in total fuel sales which were $566.6 million for the year ended December 31, 2023 compared to $642.2 million for the year ended December 31, 2022, primarily attributable to a $0.47 decrease in average price charged per gallon sold.

These decreases were partially offset by the following:

• an increase in total retail fuel gallons sold of 172,452 thousand gallons during 2023 compared to 170,668 thousand gallons in 2022, primarily attributable to a same-store increase in fuel volumes of 0.7%

• an increase in merchandise sales to $316.1 million for the year ended December 31, 2023 compared to $314.7 million for the year ended December 31, 2022, primarily driven by the same-store sales increase of 0.6%.

Cost of Materials and Other

Cost of materials and other for the retail segment increased by $160.7 million, or 25.3%, for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily driven by the following:

• an increase in average cost per gallon of $0.90 or 35.3% applied to fuel sales volumes that decreased period over period.

Our retail segment purchased finished product from our refining segment of $511.7 million and $355.7 million for the years ended December 31, 2022 and 2021, respectively.

We eliminate this intercompany cost in consolidation.

Cost of materials and other for the retail segment increased by $112.0 million, or 21.4%, for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the following:

• an increase in average cost per gallon of $0.86 or 51.6% applied to fuel sales volumes that decreased period over period.

Cost of materials and other for the retail segment decreased by $77.1 million, or 9.7%, for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily driven by the following:

• a decrease in average cost per gallon of $0.48, or 14.0%.

Our retail segment purchased finished product from our refining segment of $432.5 million and $511.7 million for the years ended December 31, 2023 and 2022, respectively.

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Operating expenses for the retail segment increased by $4.3 million, or 4.4%, for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily driven by higher employee cost in 2023.

Operating expenses for the retail segment decreased by $0.5 million, or 0.5%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.

EBITDA for the retail segment decreased by $7.0 million, a 13.7% decrease in EBITDA percentage, for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily driven by the following:

• a decrease in average fuel margin of $0.014 per gallon and an increase in fuel sales volume;

• an increase in operating expenses due to higher employee costs which included $1.8 million increase in bonus expense.

EBITDA for the retail segment increased by $4.1 million, an 8.7% increase in EBITDA percentage, for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by a $0.071 per gallon improvement in the retail fuel margin and a 0.2% increase in merchandise margin.

Management's Discussion and Analysis

EBITDA for the retail segment increased by $2.8 million, or 6.3%, for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily driven by the following:

• an increase in average fuel margin of $0.004 per gallon and an increase in fuel sales volume;

• a 0.4% increase in merchandise sales.

These increases were partially offset by the following:

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

A detailed discussion of the fiscal year 2022 compared to year-over-year changes from fiscal year 2021 can be found in Part II, Item 7.

Management's Discussion and Analysis, "Results of Operations", of our 2022 Annual Report on Form 10-K, filed on March 1, 2023.

Management's Discussion and Analysis

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• potential issuances of additional equity and debt securities.

At December 31, 2022 our total liquidity amounted to $1.4 billion comprised primarily of $362.6 million in unused credit commitments under the Delek Revolving Credit Facility (as defined in Note 10 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K), $179.5 million in unused credit commitments under the Delek Logistics Credit Facility (as defined in Note 10 of our consolidated financial statements included in Item 8.

At December 31, 2023 our total liquidity amounted to $1.9 billion comprised primarily of $1,084.0 million in unused credit commitments under our revolving credit facilities (as discussed in Note 10 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K) and $822.2 million in cash and cash equivalents.

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

In response to the COVID-19 Pandemic and the decline in oil prices, on November 5, 2020, we announced that we elected to suspend dividends in order to conserve capital;

however, on August 1, 2022, our Board of Directors voted to reinstate the quarterly cash dividend and declared a quarterly cash dividend of $0.20 per share of our common stock.

On October 31, 2022, our Board of Directors increased the quarterly cash dividend to $0.21 per share of our common stock.

On 2/27/2023, our Board of Directors increased the quarterly cash dividend to $0.22 per share of our common stock.

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 2022, we repurchased approximately 4.3 million shares of Delek US common stock for approximately $129.6 million, with an average price of $30.40 per share, exclusive of the shares purchased under the Icahn Group Purchase Agreement .

On February 20, 2024, our Board of Directors approved a quarterly cash dividend of $0.245 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 historically been able to source funding at 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.

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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 December 31, 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 further discussion in Note 10 of our consolidated financial statements included in Item 8.

As of December 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 10 of our consolidated financial statements included in Item 8.

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

Additionally, we were in compliance with incurrence covenants that were triggered during the quarter ended December 31, 2022.

Additionally, we were in compliance with covenants during the quarter ended December 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).

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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 Wells Fargo Revolving Credit Facility, and for Delek Logistics, under its Delek Logistics Credit Facility (see further discussion in Note 10 of our consolidated financial statements included in Item 8.

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

the allowance to incur an additional $400 million of secured debt under the Wells Fargo Term Loan Credit Facility (see further discussion in Note 10 of our consolidated financial statements included in Item 8.

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 10 of our consolidated financial statements included in Item 8.

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

as well as the possibility of obtaining other secured and unsecured debt, raising capital through equity issuance, or taking advantage of transactional financing opportunities such as sale-leasebacks or joint ventures, as otherwise contemplated and allowed under our incurrence covenants.

Management's Discussion and Analysis

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

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Financing activities (624.7) 491.1

Net increase (decrease) $ (15.2) $ 69.0

Net decrease $ (19.1) $ (15.2)

Cash Flows from Operating Activities

Net cash provided by operating activities was $1,013.6 million for the year ended December 31, 2023, compared to $425.3 million for the comparable period of 2022.

Increases were a result of a net $135.6 million increase in cash from operating activities in addition to an increase in dividends received of $3.1 million.

Partially offsetting these increases was an increase in cash paid for debt interest of $61.4 million and an increase in income taxes paid of $23.4 million.

Increases were a result of cash receipts from customers and cash payments to suppliers and for salaries resulting in a net $679.6 million increase in cash provided by operating activities and an increase in dividends received of $28.7 million, partially offset by an increase in cash paid for debt interest of $136.8 million.

Management's Discussion and Analysis

Cash Flows from Investing Activities

Net cash used in investing activities was $408.0 million for the year ended December 31, 2023, compared to $931.6 million in the comparable period of 2022.

The increase in cash flows used in investing activities was primarily due to the $625.6 million acquisition of 3 Bear, a $89.2 million increase in purchases of property, plant and equipment, partially attributable to delaying non-essential projects in light of the COVID-19 Pandemic in 2021, a $17.3 million decrease in contract termination recoveries of capital expenditures occurring in 2021, a $10.7 million decrease in proceeds from sale of property, plant and equipment and a $7.0 million decrease in insurance recoveries occurring in 2021.

The decrease in cash flows used in investing activities was primarily due to the $625.6 million Delaware Gathering Acquisition in 2022, $10.3 million of insurance proceeds in 2023 and a $5.0 million increase in distributions from equity method investments, partially offset by a $108.2 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 Delek Logistics assets, and payments of $11.9 million for equity interests investments.

Cash Flows from Financing Activities

Net cash provided by financing activities was $491.1 million for the year ended December 31, 2022, compared to cash used of $124.0 million in the comparable 2021 period.

This increase in cash provided was predominantly due to net proceeds on long-term revolvers and term debt of $810.9 million during the year ended December 31, 2022, compared to net payments of $138.2 million in the comparable 2021 period.

We also sold $16.4 million of Delek Logistics limited partner units during 2022.

Such increases were partially offset by decreases attributable to share repurchases of $193.6 million with no comparable activity in 2021, $42.8 million due to the reinstatement of dividends in the second quarter of 2022, and net payments on product financing arrangements of $12.3 million for the year ended December 31, 2022 compared to proceeds of $38.5 million in the comparable 2021 period.

Additionally, we refinanced our existing J.

Aron Supply & Offtake Agreements with a new Citi Inventory Intermediation Agreement with net repayments of $48.1 million.

Net cash used in financing activities was $624.7 million for the year ended December 31, 2023, compared to cash provided of $491.1 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 $467.8 million during the year ended December 31, 2023, compared to net proceeds of $810.9 million in the comparable 2022 period, an increase in net payments from product and other financing arrangements of $13.1 million for the year ended December 31, 2023 compared to the comparable 2022 period, an increase in dividend payments of $17.5 million 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 $108.2 million 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, compared to net payment of settlements of $48.1 million in the comparable 2022 period (as defined in Note 9 of the consolidated financial statements included in Item 8.

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

Cash Position and Indebtedness

As of December 31, 2023, our total cash and cash equivalents were $822.2 million and we had total long-term indebtedness of approximately $2,599.8 million.

The total long-term indebtedness is net of deferred financing costs and debt discount of $8.2 million and $58.3 million, respectively.

The total long-term indebtedness is net of deferred financing costs and debt discount of $57.5 million.

Additionally, we had letters of credit issued of approximately $305.5 million.

Total unused credit commitments or borrowing base availability, as applicable, under our revolving credit facilities was approximately $1,084.0 million.

The increase of $835.7 million in total long-term indebtedness as of December 31, 2022 compared to the prior year resulted primarily from net borrowings under the Delek Logistics Credit Facility and other term debt in 2022.

As of December 31, 2022, our total long-term indebtedness consisted of the following:

• an aggregate principal amount of $450.0 million under the Revolving Credit Facility, due on October 26, 2027, with average borrowing rate of 5.67%;

• an aggregate principal amount of $950.0 million under the Term Loan Credit Facility, due on March 30, 2025, with effective interest of 9.14%;

• an aggregate principal amount of $720.5 million under the Delek Logistics Revolving Facility, due on October 13, 2027, with average borrowing rate of 7.55%;

• an aggregate principal amount of $300.0 million under the Delek Logistics Term Facility, due on October 13, 2024, with average borrowing rate of 7.92%;

• an aggregate principal amount of $250.0 million under the Delek Logistics 2025 Notes, due in 2025, with effective interest rate of 7.21%;

• 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, due on June 30, 2022, with fixed interest rate of 6.75%.

The decrease of $463.2 million in total long-term indebtedness as of December 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 December 31, 2023, our total long-term indebtedness (as defined in Note 10 of the consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K) consisted of the following:

• the Delek Revolving Credit Facility with no outstanding borrowings (maturity of October 26, 2027);

• aggregate principal of $940.5 million under the Delek Term Loan Credit Facility (maturity of November 19, 2029 and effective interest of 10.19%);

• aggregate principal of $780.5 million under the Delek Logistics Revolving Facility (maturity of October 13, 2027 (which will accelerate to 180 days prior to the stated maturity date of the Delek Logistics 2025 Notes if any of the Delek Logistics 2025 Notes remain outstanding on that date) and average borrowing rate of 8.46%);

• aggregate principal of $281.3 million under the Delek Logistics Term Loan Facility (maturity of April 15, 2025 (which will accelerate to 180 days prior to the stated maturity date of the Delek Logistics 2025 Notes if any of the Delek Logistics 2025 Notes remain outstanding on that date) and average borrowing rate of 9.46%);

• 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 7.39%);

• aggregate principal of $5.0 million under the United Community Bank Revolver (maturity of June 30, 2024 and average borrowing rate of 7.75%).

As of December 31, 2023, the Delek Logistics Revolving Facility and Delek Logistics Term Loan Credit Facility were classified as long-term in the accompanying consolidated balance sheets in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K as we currently have the ability and intent to refinance the 2025 Notes on a long-term basis through available capacity under the Delek Logistics Revolving Facility and other or new funding sources.

See Note 10 to our accompanying consolidated financial statements included in Item 8.

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Management's Discussion and Analysis

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 inventory intermediation arrangement, 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 inventory intermediation obligation with Citi amounted to $541.7 million at December 31, 2022, $491.8 million of which is due on December 22, 2024.

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 and funded letters of credit.

Our inventory intermediation obligation with Citi was $407.6 million at December 31, 2023, $0.4 million of which was current.

See Note 9 of the accompanying consolidated financial statements included in Item 8.

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

For both arrangements and the related commitments, see also our "Contractual Obligations" section included in Item 7.

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.

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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 any credit facility implementations and the ability to economically access debt markets in the future.

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.

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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 2022, by segment, as well as planned capital expenditures for 2023 by operating segment and major category (in millions):

Year Ended December 31,

The following table summarizes our actual capital expenditures for the year ended December 31, 2023, by operating segment and major category (in millions):

2024 Forecast Year Ended December 31, 2023 Actual

Sustaining maintenance, including turnaround activities $ 173.1 $ 129.3

Regulatory $ 42 $ 28.7

Discretionary projects 7.2 1.3

Sustaining maintenance, including turnaround activities 163 217.1

Growth projects 15 1.1

Refining segment total 220 246.9

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Sustaining maintenance 15 4.7

Discretionary projects 66.1 119.7

Growth projects 50 73.7

Logistics segment total 70 81.3

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Sustaining maintenance 5 25.3

Discretionary projects 4.2 29.6

Growth projects 10 4.5

Retail segment total 15 29.8

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Sustaining maintenance 23 23.2

Discretionary projects 2.1 1.8

Growth projects — 5.2

Other total 25 31.1

Total capital spending $ 330 $ 389.1

The amount of our capital expenditure budget is subject to change due to unanticipated increases in the cost, scope and completion time for our capital projects and subject to the changes and uncertainties discussed under the 'Forward-Looking Statements' section of Item 7.

We received insurance proceeds and customer reimbursements of approximately $17.0 million in 2023 that are not reflected in the full year actual amounts.

Excluding these amounts, 2023 capital expenditures were $372.1 million.

The amount of our capital expenditure forecast is subject to change due to unanticipated increases in the cost, scope and completion time for our capital projects and subject to the changes and uncertainties discussed under the 'Forward-Looking Statements' section of Item 7.

Management Discussion and Analysis, of this Annual Report on Form 10-K.

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

(4) Balances consist of obligations under RINs product financing arrangements, as described in the 'Environmental Credits and Related Regulatory Obligations' accounting policy included in Note 2 to the consolidated financial statements included in Item 8.

(4) Balances consist of obligations under RINs product financing arrangements, as described in Note 13 to the consolidated financial statements included in Item 8.

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

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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.

Our material short-term cash requirements under contractual obligations are presented above, and we expect to fund the majority of those requirements with cash flows from operations.

Our other cash requirements consisted of operating activities and capital expenditures.

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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 in 2022.

Refer to the cash flow section for our operating activities spend during the year ended December 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 2022 and our anticipated cash requirements for planned capital expenditures for 2023.

Refer to the 'Capital Spending' section for our capital expenditures for the year ended December 31, 2023 and our anticipated cash requirements for planned capital expenditures for the full year 2024.

Management's Discussion and Analysis

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In assessing the recoverability of goodwill, assumptions are made with respect to future business conditions and estimated expected future cash flows to determine the fair value of a reporting unit.

We may consider inputs such as a market participant weighted average cost of capital ("WACC"), forecasted crack spreads, gross margin, capital expenditures, and long-term growth rate based on historical information and our best estimate of future forecasts, all of which are subject to significant judgment and estimates.

We may consider inputs such as WACC, forecasted crack spreads, gross margin, capital expenditures, and long-term growth rate based on historical information and our best estimate of future forecasts, all of which are subject to significant judgment and estimates.

We may also consider a market approach in determining or corroborating the fair values of the reporting units using a multiple of expected future cash flows, such as those used by third-party analysts.

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The crack spread is often unpredictable and may negatively impact our results of operations in ways that cannot be anticipated and that are beyond management's control.

Additionally, rising interest rates (which often occur in under inflationary conditions) may also adversely impact our WACC.

Additionally, rising interest rates (which often occur under inflationary conditions) may also adversely impact our WACC.

A higher WACC, all other things being equal, will result in a lower valuation using a discounted cash flow model, which is an income approach.

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Alternatively, if a company concludes based on the qualitative assessment that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it has completed its goodwill impairment test and does not need to perform the quantitative impairment test.

We performed a qualitative assessment on the reporting units in our logistics segment for the years ended December 31, 2022, 2021 and 2020, which did not result in an impairment charge nor did our analysis reflect any reporting units at risk.

We performed a qualitative assessment on the reporting units in our refining and retail segments during the year ended December 31, 2022.

Our quantitative assessment of goodwill performed on the reporting units in our refining and retail segments during the fourth quarter of 2021, resulted in no impairment during the year ended December 31, 2021.

There was $126.0 million impairment during the year ended December 31, 2020.

As part of our 2021 assessment, the aggregate fair value of all reporting units were reconciled to our market capitalization for reasonableness.

Each of the reporting units had a fair value that was substantially in excess of its carrying value, with the exception of the Krotz Springs refinery ("KSR") reporting unit.

For the 2023 annual impairment assessment, we performed a qualitative assessment on the reporting units in our logistics segment except for the Delaware Gathering reporting unit, as we determined it was more likely than not that the fair value of the reporting unit exceeded the carrying value.

Our annual impairment assessment was performed on a quantitative basis for our Delaware Gathering reporting unit during the fourth quarter of 2023.

As part of our annual assessment, we recorded a $14.8 million impairment charge in the fourth quarter of 2023 related to our Delaware Gathering reporting unit within the logistics segment, which brought the amount of goodwill recorded within this reporting unit to zero.

The impairment was primarily driven by the significant increases in interest rates and timing effect of system connections with our producer customers.

For the 2023 and 2022 annual impairment assessment, we performed a qualitative assessment on the reporting units in our refining and retail segments, as we determined it was more likely than not that the fair value of the reporting units exceeded the carrying value.

Details of remaining goodwill balances by segment are included in Note 16 to the consolidated financial statements in Item 8.

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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 in accordance with the provisions of ASC 805.

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.

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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-K

Item 7. Management’s Discussion and Analysis