Delek US Holdings, Inc. 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is management’s analysis of our financial performance and of significant trends that may affect our future performance. The MD&A should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and in the Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on February 28, 2024 (the "Annual Report on Form 10-K"). Those statements in the MD&A that are not historical in nature should be deemed forward-looking statements that are inherently uncertain. Delek US Holdings, Inc. is a registrant pursuant to the Securities Act of 1933, as amended ("Securities Act") and is listed on the New York Stock Exchange ("NYSE") under the ticker symbol "DK". Unless otherwise noted or the context requires otherwise, the terms "we," "our," "us," "Delek" and the "Company" are used in this report to refer to Delek US Holdings, Inc. and its consolidated subsidiaries for all periods presented. You should read the following discussion of our financial condition and results of operations in conjunction with our historical condensed consolidated financial statements and notes thereto. The Company announces material information to the public about the Company, its products and services and other matters through a variety of means, including filings with the SEC, press releases, public conference calls, the Company’s website ( www.delekus.com ), the investor relations section of its website ( ir.delekus.com ), the news section of its website ( www.delekus.com/news ), and/or social media, including its X (previously known as Twitter) account ( @DelekUSHoldings ). The Company encourages investors and others to review the information it makes public in these locations, as such information could be deemed to be material information. Please note that this list may be updated from time to time. Forward-Looking Statements This Quarterly Report on Form 10-Q 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 ("Exchange Act"). These forward-looking statements reflect our current estimates, expectations and projections about our future results, performance, prospects and opportunities. Forward-looking statements include, among other things, statements that refer to the acquisition of 3 Bear (subsequently renamed to Delek Delaware Gathering ("Delaware Gathering")) (the "Delaware Gathering Acquisition"), including any statements regarding the expected benefits, synergies, growth opportunities, impact on liquidity and prospects, and other financial and operating benefits thereof, the information concerning possible future results of operations, business and growth strategies, including as the same may be impacted by any ongoing military conflict, such as the war between Russia and Ukraine ("the Russia-Ukraine War"), financing plans, expectations that regulatory developments or other matters will or will not have a material adverse effect on our business or financial condition, our competitive position and the effects of competition, the projected growth of the industry in which we operate, and the benefits and synergies to be obtained from our completed and any future acquisitions or dispositions, including the sale of our Retail Stores and H2O Midstream acquisition, 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. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking information is based on information available at the time and/or management’s good faith belief with respect to future events, and is subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements. Important factors that, individually or in the aggregate, could cause such differences include, but are not limited to: • volatility in our refining margins or fuel gross profit as a result of changes in the prices of crude oil, other feedstocks and refined petroleum products; • reliability of our operating assets; • 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 future public health crises; • our ability to execute our long-term sustainability strategy and growth through acquisitions and dispositions such as the sale of our Retail Stores, the H20 Midstream acquisition, 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 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 United States ("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 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; • operating hazards, natural disasters, weather related disruptions, casualty losses and other matters beyond our control; • increases in our debt levels or costs; • 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; • compliance, or failure to comply, with restrictive and financial covenants in our various debt agreements; • changes in our ability to pay dividends; 33 | Management's Discussion and Analysis • seasonality; • the decline in margins impacting current results and forecasts could result in impairments in certain of our long-lived or indefinite-lived assets, including goodwill, or have other financial statement impacts that cannot currently be anticipated; • earthquakes, hurricanes, tornadoes, and other weather events, which can unforeseeably affect the price or availability of electricity, natural gas, crude oil, and other feedstocks, critical supplies, refined petroleum products and ethanol; • increases in costs of compliance with, or liability for violation of, existing or future laws, regulations and other requirements; • societal, legislative and regulatory measures to address climate change and greenhouse gases emissions ("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 such as the war between Israel and Hamas and the Russia-Ukraine War; • future decisions by the Organization of Petroleum Exporting Countries ("OPEC") and the members of other leading oil producing countries (together with OPEC, “OPEC+”) regarding production and pricing and disputes between OPEC+ members regarding the same; • disruption, failure, or cybersecurity breaches affecting or targeting our i nformation technology ("IT"), systems and controls, our infrastructure, or the infrastructure of our cloud-based IT service providers; • changes in the cost or availability of transportation for feedstocks and refined products; and • other factors discussed under Item 1A. Risk Factors and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and in our other filings with the SEC. In light of these risks, uncertainties and assumptions, our actual results of operations and execution of our business strategy could differ materially from those expressed in, or implied by, the forward-looking statements, and you should not place undue reliance upon them. In addition, past financial and/or operating performance is not necessarily a reliable indicator of future performance, and you should not use our historical performance to anticipate future results or period trends. We can give no assurances that any of the events anticipated by any forward-looking statements will occur or, if any of them do, what impact they will have on our results of operations and financial condition. All forward-looking statements included in this report are based on information available to us on the date of this report. We undertake no obligation to revise or update any forward-looking statements as a result of new information, future events or otherwise. 34 | Management's Discussion and Analysis Executive Summary: Management's View of Our Business and Strategic Overview Management's View of Our Business We are an integrated downstream energy business focused on petroleum refining, the transportation, storage and wholesale distribution of crude oil, intermediate and refined products and, prior to July 2024, convenience store retailing. Prior to July 2024, we aggregated our operating segments into three reportable segments: refining, logistics, and retail. However, in July 2024, we entered into a definitive equity purchase agreement (the "Retail Purchase Agreement") with a subsidiary of Fomento Económico Mexicano, S.A.B. de C.V. (“FEMSA”). Under the terms of the Retail Purchase Agreement, Delek agreed to sell, and FEMSA has agreed to purchase, 100% of the equity interests in four of Delek’s wholly-owned subsidiaries that own and operate 249 retail fuel and convenience stores (the "Retail Stores") under the Delek US Retail brand ("Retail Transaction"). On September 20, 2024, the Retail Transaction closed. As a result of the Retail Purchase Agreement, we met the requirements of Accounting Standards Codification ("ASC") 205-20, Presentation of Financial Statements - Discontinued Operations and ASC 360, Property, Plant and Equipment, to report the results of the Retail Stores as discontinued operations and to classify the Retail Stores as a group of discontinued operations assets. During the second quarter 2024, 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 represents reporting the operating results of our 50% interest in a joint venture that owns asphalt terminals located in the southwestern region of the U.S. within the refining segment. Prior to this change, these operating results were reported as part of corporate, other and eliminations. While this reporting change did not change our consolidated results, segment data for previous years has been restated and is consistent with the current year presentation. Business and Economic Environment Overview 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 third quarter of 2024, we made steady progress on our "sum of the parts" efforts. We completed the sale of our Retail Stores during the third quarter 2024 for proceeds of $390.2 million and also entered into a 10 year fuel supply agreement whereby Delek will sell to FEMSA certain motor fuel products for use at the Retail Stores. The completion of the Retail Transaction is an important step in our value creation journey. Our logistics segment (or "Logistics") successfully closed H2O Midstream acquisition that expands our gathering footprint in the Midland sub-basin of the Permian, and extended our product offering of wastewater processing and disposal. This acquisition diversifies our logistics customer base to include more third-party customers. While the impact on the third quarter is not significant (as a result of the acquisition closing in September 2024), we expect that the acquisition itself will be immediately accretive, delivering incremental contribution margin and cash flows. We also completed strategic transactions with Delek Logistics including the dropdown of W2W Holdings LLC ("HoldCo") which includes our 15.6% indirect interest in the Wink to Webster Pipeline LLC joint venture as well as amended and extended certain commercial agreements. These transactions are expected to make both Delek and Delek Logistics stronger companies. We had another safe and reliable quarter from an operational perspective; however, the current refining margin environment is challenging as crack spreads narrowed and followed atypical seasonal patterns during the third quarter of 2024. The domestic West Texas Intermediate ("WTI") differentials compared to Brent continued to be favorable, and the WTI Midland to Cushing differential narrowed favorably during the quarter and compared to the third quarter of 2023. Though refining margins softened, demand for refined products continues to be strong. Logistics continued to contribute strong results driven by increased volumes from the Delaware Basin and rate increases. Additionally, Logistics also continues to benefit from strong performance amongst our pipeline joint venture investments. We will continue to execute on our priorities of running safe and reliable operations, and making further progress on our "sum of the parts" efforts, and delivering shareholder value while maintaining our financial strength and flexibility. The near term economic outlook still has some uncertainty with geopolitical instability and commodity market volatility, and as a result we continue to progress our business transformation focused on enterprise-wide opportunities to improve the efficiency of our cost structure. During 2024, we have implemented additional cost reduction measures across the organization, including reducing contract services and reducing or eliminating non-critical travel. We completed our zero based budget action plans and announced a new enterprise optimization plan ("EOP") which includes initiatives that are focused on improving our financial health and ability to generate cash flows. The EOP includes leaner costs including lower general and administrative expenses, lower operating expenses specifically at the Big Spring Refinery and Krotz Springs Refinery and lowering interest expense. The EOP also includes stronger margins including accretive minimal capital projects in our Refining segment and commercial improvements including market optionality, improved product slate and optimization. By executing on our initiatives to optimize our cost structure, we are positioning the Company in the event of lower crack spreads and volatility in the commodity markets. 35 | Management's Discussion and Analysis 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. Following the enactment of the IRA, Delek is investing in carbon capture technology. 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, Texas 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 Fluid Catalytic Cracking 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. 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 2024 to date, we have returned $68.1 million of capital to shareholders through dividends and share buybacks. 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. In 2024, we took steps to refinance the Delek Logistics Partners, LP ("Delek Logistics") long term debt, ending with a more attractive maturity profile. Delek Logistics also completed two public equity offerings of its common units in March and October 2024. These steps allowed us to further execute on our "sum of the parts" plan by facilitating Delek Logistics' acquisition of H2O Midstream, purchase of the Wink to Webster Pipeline joint venture and planned expansion of its natural gas processing plant. These Delek Logistics transactions will enhance Delek Logistics position as a full service (crude, natural gas and water) provider in the most prolific areas of the Permian basin while increasing third party revenue. In addition, the Retail Transaction will allow us to strengthen our balance sheet. We believe each of these steps is consistent with our focus on strategic initiatives which includes unlocking the "sum of the parts". See further discussion in the "Strategic Objectives" section below. See further discussion on macroeconomic factors and market trends, including the impact on 2024, in the ‘Market Trends’ section below. Other 2024 Developments Delek Logistics Equity Offerings On March 12, 2024, Delek Logistics completed a public offering of its common units in which it sold 3,584,416 common units (including an overallotment option of 467,532 common units) to the underwriters of the offering at a price to the public of $38.50 per unit. The proceeds received from this offering (net of underwriting discounts, commissions and expenses) were $132.2 million and were used to repay a portion of the outstanding borrowings under the Delek Logistics Revolving Facility (as defined in Note 10 of the condensed consolidated financial statements in Item 1. Financial Statements, of this Quarterly Report on Form 10-Q). On October 10, 2024, Delek Logistics completed a public offering of its common units in which it sold 3,846,153 common units (including an overallotment option of 576,922 common units) to the underwriters of the offering at a price to the public of $39.00 per unit. The proceeds received from this offering (net of underwriting discounts, commissions and expenses) were $165.3 million and were used to redeem Delek Logistics’ preferred units outstanding and repay a portion of the outstanding borrowings under the Delek Logistics Revolving Facility (as defined in Note 10 of the condensed consolidated financial statements in Item 1. Financial Statements, of this Quarterly Report on Form 10-Q). Delek Logistics Debt Agreements On March 13, 2024, Delek Logistics sold $650.0 million in aggregate principal amount of 8.625% Senior Notes due 2029 (the “Delek Logistics 2029 Notes”), at par. Net proceeds were used to redeem the Delek Logistics 2025 Notes including accrued interest, pay off the Delek Logistics Term Loan Facility (as defined in Note 10 of the condensed consolidated financial statements in Item 1. Financial Statements, of this Quarterly Report on Form 10-Q) including accrued interest and to repay a portion of the outstanding borrowings under the Delek Logistics Revolving Facility. On March 29, 2024, Delek Logistics entered into a fourth amendment to the Delek Logistics Revolving Facility which among other things increased the U.S. Revolving Credit Commitments (as defined in the Delek Logistics Credit Facility) by an amount equal to $100.0 million resulting in aggregate lender commitments under the Delek Logistics Revolving Credit Facility in an amount of $1,150.0 million. 36 | Management's Discussion and Analysis On April 17, 2024, Delek Logistics sold $200 million in aggregate principal amount of additional 8.625% senior notes due 2029 at 101.25% and on August 16, 2024, Delek Logistics sold $200.0 million in aggregate principal amount of additional 8.625% senior notes due 2029 at 103.25% (collectively, the "Additional 2029 Notes"). The Additional 2029 Notes were issued under the same indenture as the Delek Logistics 2029 Notes and formed a part of the same series of notes as the Delek Logistics 2029 Notes. The net proceeds were used to repay a portion of the outstanding borrowings under the Delek Logistics Revolving Facility. These steps improved availability under the Delek Logistics Revolving Facility and helped create the foundation for a "sum of the parts" initiative. Renewables During the second quarter of 2024, we made the decision to idle the Crossett, Arkansas, Cleburne, Texas and New Albany, Mississippi biodiesel facilities, while exploring viable and sustainable alternatives. Those alternatives could include restarting if market conditions improve, marketing for sale or permanently closing any of the facilities. Our decision to idle these facilities was driven by the decline in the overall biodiesel market and aligns with our continued operational and cost optimization efforts. As a result, we conducted an evaluation of impairment and based on our review we recorded a $22.1 million impairment which included property, plant and equipment and right of use assets. In addition, $0.4 million of severance and benefit expenses were recognized in the nine months ended months ended September 30, 2024. No severance and benefit expenses were recognized in the three months ended September 30, 2024. Property Settlement On June 27, 2024, we settled a dispute that was in litigation related to a property that we historically operated as an asphalt and marine fuel terminal both as an owner and, subsequently, as a lessee under an in-substance lease agreement (the “License Agreement”). The settlement included the purchase of the property for $10.0 million and $42.0 million for settlement of the litigation for a total of $52.0 million. The total settlement was comprised of $24.0 million of cash paid at closing and a promissory note for $28.0 million to be paid in three equal installments of $9.3 million on each of April 1, 2025, April 1, 2026 and April 1, 2027, plus accrued interest. As a result of the termination of the License Agreement, we are no longer obligated to remove equipment from the property for certain development activities and as a result we reversed the $17.9 million asset retirement obligation since we intend to operate the property as an asphalt and marine fuel terminal. Additionally, as a result of the settlement, we reduced the non-contingent guarantee and environmental liability to $1.0 million since our risk of a contingent guarantee was eliminated and determined it appropriate to retain an accrual based on what we can reasonably estimate as the cost of the initial steps once operations cease or a cleanup is ordered. Total net gain from the property settlement was $53.4 million and is recorded in other operating expense (income), net in the condensed consolidated statements of income. Refer to Note 13 of the condensed consolidated financial statements in Item 1. Financial Statements, of this Quarterly Report on Form 10-Q for further information. Delek Logistics Gas Plant Expansion In second quarter of 2024, Delek Logistics made the final investment decision to build a new natural gas processing plant adjacent to its plant in the Permian Basin. The plant is expected to have a capacity of approximately 110 MMcf/d (as defined below) and aims to meet the rising demand for natural gas in the region. Total estimated cost is between $160.0 and $165.0 million with an anticipated start-up of early 2025. This expansion project will also increase Delek Logistics' third party revenue. Expected annual EBITDA is estimated to be approximately $40.0 million. Retail Divestiture On September 30, 2024, Delek US closed the previously announced transaction to sell 100% of the equity interests in four of Delek US' wholly-owned subsidiaries that own and operate 249 retail fuel and convenience stores (the "Retail Stores") under the Delek US Retail brand to a subsidiary of FEMSA. Net cash proceeds before taxes related to this transaction were approximately $390.2 million. As a result, we met the requirements of ASC 205-20 and ASC 360 to report the results of the Retail Stores as discontinued operations and to classify the Retail Stores as a group of discontinued operations assets. The operating results for the Retail Stores, in all periods presented, have been reclassified to discontinued operations. Refer to Note 4 of the condensed consolidated financial statements in Item 1. Financial Statements, of this Quarterly Report on Form 10-Q for further information. Acquisition of H2O Midstream On September 11, 2024, Delek Logistics completed the previously announced acquisition of 100% of the limited liability company interests in H2O Midstream Intermediate, LLC, H2O Midstream Permian LLC, and H2O Midstream LLC (the “Purchased Interests” or "H2O Midstream") from H2O Midstream Holdings, LLC (the “Seller”) related to the Seller’s water disposal and recycling operations, in the Midland Basin in Texas (the “H2O Purchase Agreement”) for total consideration of $229.5 million, subject to customary adjustments under the H2O Purchase Agreement for net working capital and indebtedness (the "H2O Transaction"). The purchase price is comprised of approximately $159.5 million in cash and $70.0 million of preferred equity. Refer to Note 2 of the condensed consolidated financial statements in Item 1. Financial Statements, of this Quarterly Report on Form 10-Q for further information. 37 | Management's Discussion and Analysis Wink to Webster Pipeline On August 1, 2024, we purchased an additional 0.6% indirect investment in Wink to Webster Pipeline LLC for $18.6 million, bringing our total indirect ownership in the pipeline joint venture to 15.6%. On August 5, 2024, we contributed all of our 50% investment in HoldCo which includes our 15.6% indirect interest in the Wink to Webster Pipeline LLC joint venture and related joint venture indebtedness, to a subsidiary of Delek Logistics. Total consideration was comprised of $83.9 million in cash, forgiveness of a $60.0 million payable to Delek Logistics and 2,300,000 of Delek Logistics common units. Delek Logistics Commercial Agreements On August 5, 2024, we amended and extended expired, or soon to be expired, commercial agreements with subsidiaries of Delek Logistics under which the Delek Logistics subsidiaries provide various services, including crude oil gathering and crude oil, intermediate and refined products transportation and storage services, and marketing, terminalling and offloading services to us. These agreements have an initial term of five to seven years, with the ability to extend for an additional five years at our option. In addition, we also entered into an assignment agreement with a subsidiary of Delek Logistics to assign the Big Spring Refinery Marketing Agreement to Delek Holdings. As a result of these agreements, we transferred 2,500,000 of our Delek Logistics common units to Delek Logistics to be retired. We also entered into an amended and restated Omnibus Agreement with Delek Logistics that provides us an option to purchase certain critical assets from Delek Logistics at market value during the period beginning upon any change in control, sale of substantially all assets, or other deconsolidation transaction involving Delek Logistics and extending (i) in the case of a deconsolidation involving a third party, for six months following closing, and (ii) for any other deconsolidation, for four years following closing. Refining Overview The refining segment (or "Refining") processes crude oil and other feedstocks for the manufacture of transportation motor fuels, including various grades of gasoline, diesel fuel, aviation fuel, asphalt and other petroleum-based products that are distributed through owned and third-party product terminals. The refining segment has a combined nameplate capacity of 302,000 barrels per day ("bpd") as of September 30, 2024. A high-level summary of the refinery activities is presented below: Tyler, Texas refinery (the "Tyler refinery") El Dorado, Arkansas refinery (the "El Dorado refinery") Big Spring, Texas refinery (the "Big Spring refinery") Krotz Springs, Louisiana refinery (the "Krotz Springs refinery") Total Nameplate Capacity (bpd) 75,000 80,000 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 Relevant Crack Spread Benchmark Gulf Coast 5-3-2 Gulf Coast 5-3-2 (1) Gulf Coast 3-2-1 (2) Gulf Coast 2-1-1 (3) Marketing and Distribution The refining segment's petroleum-based products are marketed primarily in the south central and southwestern regions of the United States, and the refining segment also ships and sells gasoline into wholesale markets in the southern and eastern United States. Motor fuels are sold under the Alon or Delek brand through various terminals to supply Alon or Delek branded retail sites. In addition, we sell motor fuels through our wholesale distribution network on an unbranded basis. (1) While there is variability in the crude slate and the product output at the El Dorado refinery, we compare our per barrel refined product margin to the U.S. Gulf Coast ("Gulf Coast") 5-3-2 crack spread because we believe it to be the most closely aligned benchmark. (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. Our refining segment also owns three biodiesel facilities involved in the production of biodiesel fuels and related activities, located in Crossett, Arkansas, Cleburne, Texas, and New Albany, Mississippi. During the second quarter of 2024, we made the decision to idle the biodiesel facilities, while exploring viable and sustainable alternatives. See Note 17 of the condensed consolidated financial statements in Item 1. Financial Statements, of this Quarterly Report on Form 10-Q for further information. In addition, the refining segment includes our wholesale crude operations and our 50% interest in a joint venture that owns asphalt terminals located in the southwestern region of the U.S. 38 | Management's Discussion and Analysis Logistics Overview Our logistics segment gathers, transports and stores crude oil and natural gas; markets, distributes, transports and stores refined products; and disposes and recycles water in select regions of the southeastern United States, West Texas and New Mexico for our refining segment and third parties. It is comprised of the consolidated balance sheet and results of operations of Delek Logistics (NYSE: DKL), where we owned a 70.4% interest at September 30, 2024. Delek Logistics was formed by Delek in 2012 to own, operate, acquire and construct crude oil and refined products logistics and marketing assets. 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 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. In addition, this segment also includes water disposal and recycling operations, located in the Delaware Basin of New Mexico and the Midland Basin of Texas. 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 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. The logistics segment owns or leases approximately 199 tractors and 353 trailers used to haul primarily crude oil and other products for related and third parties. Corporate and Other Overview Our corporate activities, results of certain immaterial operating segments, and intercompany eliminations are reported in 'corporate, other and eliminations' in our segment disclosures. Additionally, our corporate activities include certain of our commodity and other hedging activities. 39 | Management's Discussion and Analysis 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 Environmental, Social and Governance ("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: I. Operational Excellence II. Financial Strength and Flexibility III. 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 are focused on the following: • 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. 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 are focused on the following: • 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 are focused on the following: 40 | Management's Discussion and Analysis • 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 Delek Logistics units without diluting overall Delek Logistics market capitalization. • 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. 41 | Management's Discussion and Analysis 2024 Strategic Developments The following table highlights our 2024 Strategic Developments: 2024 Key Initiatives 2024 Strategic Developments Operational Excellence Financial Strength & Flexibility Strategic Initiatives 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. ü Extending Long Term Debt Maturities: On March 13, 2024, Delek Logistics sold $650.0 million in aggregate principal amount of 8.625% Senior Notes due 2029, at par. Net proceeds were used to redeem the Delek Logistics 2025 Notes including accrued interest, pay off the Delek Logistics Term Loan Facility including accrued interest and to repay borrowings under the Delek Logistics Revolving Facility. On April 17, 2024, Delek Logistics sold $200 million in aggregate principal amount of additional 8.625% senior notes due 2029 at 101.25% and on August 16, 2024, the Co-issuers sold $200.0 million in aggregate principal amount of additional 8.625% senior notes due 2029 at 103.25%. The Additional 2029 Notes were issued under the same indenture as the Delek Logistics 2029 Notes and formed a part of the same series of notes as the Delek Logistics 2029 Notes. The net proceeds were used to repay a portion of the outstanding borrowings under the Delek Logistics Revolving Facility. ü Strengthening the Balance Sheet: On March 12, 2024, Delek Logistics completed a public offering of its common units in which it sold 3,584,416 common units (including an overallotment option of 467,532 common units) to the underwriters of the offering at a price to the public of $38.50 per unit. The proceeds received from this offering (net of underwriting discounts, commissions and expenses) were $132.2 million and were used to repay borrowings under the Delek Logistics Revolving Facility. On October 10, 2024, Delek Logistics completed a public offering of its common units in which it sold 4,423,075 common units (including an overallotment option of 576,922 common units) to the underwriters of the offering at a price to the public of $39.00 per unit. The proceeds received from this offering (net of underwriting discounts, commissions and expenses) were $165.3 million and were used to redeem Delek Logistics’ preferred units outstanding and repay a portion of the outstanding borrowings under the Delek Logistics Revolving Facility. ü Executing Safe and Reliable Operations: Our focus on safe and reliable operations allowed us to achieve record throughput for the second quarter of 2024 as reliability continues to increase. ü Enhancing Environmental Standards with Capital Expenditures: We successfully completed a benzene stripper project at the Big Spring Refinery, which supports achievement of our Clean Air Act Consent Decree requirements related to benzene in wastewater. ü Expanding Delek Logistics' Natural Gas Processing: In the second quarter of 2024, Delek Logistics made the final investment decision to build a new natural gas processing plant adjacent to its plant in the Permian Basin. The plant is expected to have a capacity of approximately 110 MMcf/d (as defined below) and aims to meet the rising demand for natural gas in the region. (1) Total estimated cost is between $160.0 and $165.0 million with an anticipated start-up of early 2025. This expansion project will also increase Delek Logistics' third party revenue. ü ü Monetizing Our Retail Operations: On September 30, 2024, Delek US closed the previously announced transaction to sell 100% of the equity interests in four of Delek US' wholly-owned subsidiaries that own and operate 249 retail fuel and convenience stores under the Delek US Retail brand to a subsidiary of FEMSA. Net cash proceeds before taxes related to this transaction were approximately $390.2 million. ü ü Executing Strategic Midstream Acquisition: On September 11, 2024, Delek Logistics completed the previously announced acquisition of 100% of the limited liability company interests in H2O Midstream from H2O Midstream Holdings, LLC related to the Seller’s water disposal and recycling operations, in the Midland Basin in Texas for total consideration of $229.5 million, subject to customary adjustments under the H2O Purchase Agreement for net working capital and indebtedness. The purchase price is comprised of approximately $159.5 million in cash and $70.0 million of preferred equity. This transaction will enhance Delek Logistics' position as a full service (crude, natural gas and water) provider in the most prolific areas of the Permian basin. ü ü Maximizing Shareholder Value: On August 1, 2024, we purchased an additional 0.6% indirect investment in Wink to Webster Pipeline LLC for $18.6 million, bringing our total indirect ownership in the pipeline joint venture to 15.6%. On August 5, 2024, we contributed all of our 50% investment in HoldCo which includes our 15.6% indirect interest in the Wink to Webster Pipeline LLC joint venture and related joint venture indebtedness, to a subsidiary of Delek Logistics. Total consideration was comprised of $83.9 million in cash, forgiveness of a $60.0 million payable to Delek Logistics and 2,300,000 of Delek Logistics common units. ü (1) Million cubic feet ("MMcf") per day ("MMcf/d"). 42 | Management's Discussion and Analysis Market Trends Our results of operations are significantly affected by fluctuations in the prices of certain commodities, including, but not limited to, crude oil, gasoline, distillate fuel, biofuels, natural gas and electricity, among others. Historically, the impact of commodity price volatility on our refining margins (as defined in our "Non-GAAP Measures" in MD&A Item 2), specifically as it relates to the price of crude oil as compared to the price of refined products and timing differences in the movements of those prices (subject to our inventory costing methodology), as well as location differentials, may be favorable or unfavorable compared to peers. Additionally, our refining margin profitability is impacted by regulatory factors, including the cost of renewable identification numbers ("RINs"). 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 business with an eye towards the One Delek vision. Many uncertainties remain with respect to the global supply and demand of the crude oil and refined products markets and it is difficult to predict the ultimate economic impacts this may have on our operations. We expect refining capacity to shut down, lower refined products inventory and crude oil demand to continue to rise. These factors will help absorb the recent additions in global supply and balance the market over the next 6 to 12 months. However, escalating conflicts in the Middle East could potentially result in supply disruptions or further volatility in crude oil prices. See below for further discussion on how certain key market trends impact our operating results. Crude Prices WTI crude oil represents the largest component of our crude slate at all of our refineries, and can be sourced through our gathering channels or optimization efforts from Midland, Texas or Cushing, Oklahoma or other locations. We manage our supply chain risk to ensure that we have the barrels to meet our crude slate consumption plan for each month through gathering supply contracts and throughput agreements on various strategic pipelines, some of which include those where we hold equity method investments. We manage market price risk on crude oil through financial derivative hedges, in accordance with our risk management strategies. The table below reflects the quarterly average prices of WTI Midland and WTI Cushing crude oil for each of the quarterly periods in 2023 and for the three quarterly periods in 2024. Crude Pricing Differentials 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. Because of our positioning in the Permian basin, including our access to significant sources of WTI Midland crude through our gathering system, we are even further benefited by discounts for WTI Midland/WTI Cushing differentials. When these discounts shrink or become premiums, our reliance on WTI-linked crude pricing, and specifically WTI Midland crude, can negatively impact our refining margins. Conversely, as these price discounts widen, so does our competitive advantage, created specifically by our access to WTI Midland crude sourced through our gathering systems. 43 | Management's Discussion and Analysis The chart below illustrates the key differentials impacting our refining operations, including WTI Cushing to Brent, WTI Midland to WTI Cushing, and Louisiana Light Sweet crude oil ("LLS") to WTI Cushing for each of the quarterly periods in 2023 and for the three quarterly periods in 2024. Refined Product Prices We are impacted by refined product prices in two ways: (1) in terms of the prices we are able to sell our refined product for in our refining segment, and (2) in terms of the cost to acquire the refined products to meet Refining production shortfalls (e.g., when we have outages), or to acquire refined fuel products we sell to our wholesale customers in our logistics segment. These prices largely depend on numerous factors beyond our control, including the supply of, and demand for, crude oil, gasoline and other refined petroleum products which, in turn, depend on, among other factors, changes in domestic and foreign economies, weather conditions, domestic and foreign political affairs, production levels, the availability of imports, the marketing of competitive fuels and government regulation. Our refineries produce the following products: Tyler Refinery El Dorado Refinery Big Spring Refinery Krotz Springs Refinery 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 The charts below illustrate the quarterly average prices of Gulf Coast Gasoline ("CBOB"), U.S. High Sulfur Diesel ("HSD") and U.S. Ultra Low Sulfur Diesel ("ULSD") for each of the quarterly periods in 2023 and for the three quarterly periods in 2024. 44 | Management's Discussion and Analysis Crack Spreads Crack spreads are used as benchmarks for predicting and evaluating a refinery's product margins by measuring the difference between the market price of feedstocks/crude oil and the resultant refined products. Generally, a crack spread represents the approximate refining margin resulting from processing one barrel of crude oil into its outputs, generally gasoline and diesel fuel. The table below reflects the quarterly average Gulf Coast 5-3-2 ULSD, 3-2-1 ULSD and 2-1-1 HSD/LLS crack spreads for each of the quarterly periods in 2023 and for the three quarterly periods in 2024. RIN Volatility Environmental regulations and the political environment continue to affect our refining margins in the form of volatility in the price of RINs . We enter into future commitments to purchase or sell RINs at fixed prices and quantities, which are used to manage the costs of our credits for commitments required by the U.S. Environmental Protection Agency (“EPA”) to blend biofuels into fuel products ("RINs Obligation"). On a consolidated basis, we work to balance our RINs Obligation in order to minimize the effect of RINs prices on our results. While we obtain RINs in our refining and logistics segments through our ethanol and biodiesel blending and generate RINs through biodiesel production, our refining segment still must purchase additional RINs to satisfy its obligations. Additionally, our ability to obtain RINs through blending is limited by our refined product slate, blending capabilities and market constraints. The cost to purchase these additional RINs is a significant cash outflow for our business. Increases in the market prices of RINs generally adversely affect our results of operations through changes in fair value to our existing RINs Obligation, to the extent we do not have offsetting RINs inventory on hand or effective economic hedges through net forward purchase commitments. RINs prices are highly sensitive to regulatory and political influence and conditions, and therefore often do not correlate to movements in crude oil prices, refined product prices or crack spreads. Because of the volatility in RINs prices, it is not possible to predict future RINs cost with certainty, and movements in RINs prices can have significant and unanticipated adverse effects on our refining margins that are outside of our control. The chart below illustrates the volatility in RINs for each of the quarterly periods in 2023 and for the three quarterly periods in 2024. 45 | Management's Discussion and Analysis Energy Costs Energy costs are a significant element of our Refining Earnings before interest, taxes, depreciation and amortization ("EBITDA") and can significantly impact our ability to capture crack spreads, with natural gas representing the largest component. Natural gas prices are driven by supply-side factors such as amount of natural gas production, level of natural gas in storage and import and export activity, while demand-side factors include variability of weather, economic growth and the availability and price of other fuels. Refiners and other large-volume fuel consumers may be more or less susceptible to volatility in natural gas prices depending on their consumption levels as well as their capabilities to switch to more economical sources of fuel/energy. Additionally, geographic location of facilities make consumers vulnerable to price differentials of natural gas available at different supply hubs. Within Delek’s geographic footprint, we source the majority of our natural gas from the Gulf Coast, and secondarily from the Permian, coinciding with the physical locations of our refineries. We manage our risk around natural gas prices by entering into variable and fixed-price supply contracts in both the Gulf and Permian Basin or by entering into derivative hedges based on forecasted consumption and forward curve prices, as appropriate, in accordance with our risk policy. The chart below illustrates the quarterly average prices of Waha (Permian Basin) and Henry Hub (Gulf Coast) per million British Thermal Units ("MMBtu") beginning with the first quarter of 2023 through the third quarter of 2024. Non-GAAP Measures Our management uses certain non-Generally Accepted Accounting Principles (“non-GAAP”) operational measures to evaluate our operating segment performance and non-GAAP financial measures to evaluate past performance and prospects for the future to supplement our GAAP financial information presented in accordance with U.S. GAAP. These financial and operational non-GAAP measures are important factors in assessing our operating results and profitability and include: • EBITDA - calculated as net income (loss) attributable to Delek adjusted to add back interest expense, income tax expense, depreciation and amortization; and • Refining margin - calculated as gross margin (which we define as sales minus cost of sales) adjusted for operating expenses and depreciation and amortization included in cost of sales. We believe these non-GAAP operational and financial measures are useful to investors, lenders, ratings agencies and analysts to assess our ongoing performance because, when reconciled to their most comparable GAAP financial measure, they provide improved comparability between periods through the exclusion of certain items that we believe are not indicative of our core operating performance and they may obscure our underlying results and trends. Non-GAAP measures have important limitations as analytical tools, because they exclude some, but not all, items that affect net earnings and operating income. These measures should not be considered substitutes for their most directly comparable U.S. GAAP financial measures. 46 | Management's Discussion and Analysis Non-GAAP Reconciliations The following table provides a reconciliation of segment EBITDA to the most directly comparable U.S. GAAP measure, net (loss) income attributable to Delek: Reconciliation of segment EBITDA to net (loss) income attributable to Delek (in millions) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Refining segment EBITDA $ 12.8 $ 295.7 $ 135.2 $ 613.0 Logistics segment EBITDA 68.6 96.5 268.9 278.8 Corporate, Other and Eliminations EBITDA (88.9) (74.8) (163.3) (198.4) EBITDA attributable to Delek $ (7.5) $ 317.4 $ 240.8 $ 693.4 Interest expense, net (78.8) (82.4) (244.1) (239.1) Income tax benefit (expense) 40.3 (29.1) 56.7 (38.3) Depreciation and amortization (98.1) (87.7) (278.2) (255.2) Income from discontinued operations, net of tax 67.3 10.5 78.2 23.9 Net (loss) income attributable to Delek $ (76.8) $ 128.7 $ (146.6) $ 184.7 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 (in millions) Refining Segment Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Total revenues $ 3,027.8 $ 4,624.5 $ 9,443.3 $ 12,471.5 Cost of sales 3,083.3 4,394.4 9,506.8 12,045.8 Gross margin $ (55.5) $ 230.1 $ (63.5) $ 425.7 Add back (items included in cost of sales): Operating expenses (excluding depreciation and amortization) 145.0 166.5 459.4 459.4 Depreciation and amortization 76.0 60.1 194.8 176.5 Refining margin $ 165.5 $ 456.7 $ 590.7 $ 1,061.6 47 | 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) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net revenues $ 3,042.4 $ 4,628.8 $ 9,478.5 $ 12,525.1 Cost of sales: Cost of materials and other 2,788.7 4,049.4 8,547.1 11,111.2 Operating expenses (excluding depreciation and amortization presented below) 181.4 217.7 580.3 577.2 Depreciation and amortization 92.5 83.7 259.6 243.1 Total cost of sales 3,062.6 4,350.8 9,387.0 11,931.5 Operating expenses related to wholesale business (excluding depreciation and amortization presented below) 3.7 (3.7) 5.7 3.9 General and administrative expenses 70.4 67.7 191.6 208.0 Depreciation and amortization 5.6 4.0 18.6 12.1 Asset impairment 9.2 — 31.3 — Other operating expense (income), net 12.8 (2.1) (67.6) (19.0) Total operating costs and expenses 3,164.3 4,416.7 9,566.6 12,136.5 Operating income (121.9) 212.1 (88.1) 388.6 Interest expense, net 78.8 82.4 244.1 239.1 Income from equity method investments (25.1) (27.0) (77.4) (67.1) Other (income) expense, net (0.5) 2.0 (1.1) (4.6) Total non-operating expenses, net 53.2 57.4 165.6 167.4 (Loss) income from continuing operations before income tax (benefit) expense (175.1) 154.7 (253.7) 221.2 Income tax (benefit) expense (40.3) 29.1 (56.7) 38.3 (Loss) income from continuing operations, net of tax (134.8) 125.6 (197.0) 182.9 Discontinued operations: Income from discontinued operations, including gain on sale of discontinued operations 95.4 12.9 107.8 29.1 Income tax expense 28.1 2.4 29.6 5.2 Income from discontinued operations, net of tax 67.3 10.5 78.2 23.9 Net (loss) income (67.5) 136.1 (118.8) 206.8 Net income attributable to: Non-controlling interests 9.3 7.4 27.8 22.1 Net (loss) income attributable to Delek $ (76.8) $ 128.7 $ (146.6) $ 184.7 (1) This information is presented at a summary level for your reference. See the Condensed Consolidated Statements of Income in Item 1. to this Quarterly Report on Form 10-Q for more detail regarding our results of operations and net income per share. We report operating results in two reportable segments: • Refining • Logistics 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. 48 | Management's Discussion and Analysis Results of Operations Consolidated Results of Operations — Comparison of the Three and Nine Months Ended September 30, 2024 versus the Three and Nine Months Ended September 30, 2023. Net (Loss) Income Q3 2024 vs. Q3 2023 Consolidated net loss for the third quarter of 2024 was $67.5 million compared to net income of $136.1 million for the third quarter of 2023. Consolidated net loss attributable to Delek for the third quarter of September 30, 2024 was $76.8 million, or $(1.20) per basic share, compared to a net income of $128.7 million, or $1.98 per basic share, for the third quarter 2023. Explanations for significant drivers impacting net (loss) income as compared to the comparable period of the prior year are discussed in the sections below. YTD 2024 vs. YTD 2023 Consolidated net loss for the nine months ended September 30, 2024 was $118.8 million compared to a net income of $206.8 million for the nine months ended September 30, 2023. Consolidated net loss attributable to Delek for the nine months ended September 30, 2024 was $146.6 million, or $(2.29) per basic share, compared to income of $184.7 million, or $2.80 per basic share, for the nine months ended September 30, 2023. Explanations for significant drivers impacting net (loss) income as compared to the comparable period of the prior year are discussed in the sections below. Net Revenues Q3 2024 vs. Q3 2023 In the third quarter of 2024 and 2023, we generated net revenues of $3,042.4 million and $4,628.8 million, respectively, a decrease of $1,586.4 million, or 34.3%. The decrease in net revenues was primarily driven by the following factors: • in our refining segment, decreases in the average price of U.S. Gulf Coast gasoline of 18.2% and ULSD of 24.6% and decreases in wholesale activity, decreased sales volume (including purchased products), partially offset by increases in the average price of U.S. Gulf Coast HSD of 2.0%; and • in our logistics segment, decreases in our West Texas marketing operations and decreases due to recording certain throughput and storage fees as interest income under sales-type lease accounting that were previously recorded as revenue in the prior year period. YTD 2024 vs. YTD 2023 We generated net revenues of $9,478.5 million and $12,525.1 million during the nine months ended September 30, 2024 and 2023, respectively, a decrease of $3,046.6 million, or 24.3%. 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 9.4% and ULSD of 11.3% and decreases in wholesale activity, partially offset by increased sales volume (including purchased products) and an increase in the average price of U.S. Gulf Coast HSD of 9.4%; and • in our logistics segment, decreases in our West Texas marketing operations and decreases due to recording certain throughput and storage fees as interest income under sales-type lease accounting that were previously recorded as revenue in the prior year period. Total Operating Costs and Expenses Cost of Materials and Other Q3 2024 vs. Q3 2023 Cost of materials and other was $2,788.7 million for the third quarter of 2024 compared to $4,049.4 million for the third quarter of 2023, a decrease of $1,260.7 million, or 31.1%. The net decrease in cost of materials and other was primarily driven by the following: • decreases in cost of crude oil feedstocks at the refineries, including an 8.8% decrease in the average cost of WTI Cushing crude oil and a 9.4% decrease in the average cost of WTI Midland crude oil, decreased wholesale activity decreased RINs pricing, decreased sales volume (including purchased products), and a decrease in lease expense as a result of reclassification of certain fees with Delek Logistics from lease expense to interest expense under finance lease accounting; and • decrease in logistics costs due to decreased costs of materials and other in our West Texas marketing operations primarily driven by decreases in the volumes of gasoline and diesel sold and decreases in the average cost per gallon. 49 | Management's Discussion and Analysis YTD 2024 vs. YTD 2023 Cost of materials and other was $8,547.1 million for the nine months ended September 30, 2024, compared to $11,111.2 million for nine months ended September 30, 2023, a decrease of $2,564.1 million, or 23.1%. The net decrease in cost of materials and other primarily related to the following: • decreased wholesale activity, decreased RINs pricing and decreased sales volume (including purchased products) and a decrease in lease expense as a result of reclassification of certain fees with Delek Logistics from lease expense to interest expense under finance lease accounting; and • decrease in logistics costs due to decreased costs of materials and other in our West Texas marketing operations primarily driven by decreased costs per gallon, partially offset by increases in the average volumes of gasoline and diesel sold. Operating Expenses Q3 2024 vs. Q3 2023 Operating expenses (included in both cost of sales and other operating expenses) were $185.1 million for the third quarter of 2024 compared to $214.0 million for the third quarter of 2023, a decrease of $28.9 million, or 13.5%. The decrease in operating expenses was primarily driven by the following: • a decrease in natural gas costs; • a decrease in outside services; and • a decrease in insurance costs. YTD 2024 vs. YTD 2023 Operating expenses (included in both cost of sales and other operating expenses) were $586.0 million for the nine months ended September 30, 2024 compared to $581.1 million in nine months ended September 30, 2023, an increase of $4.9 million, or 0.8%. The increase in operating expenses was primarily driven by the following: • an increase in maintenance costs; and • an increase in employee costs. These increases were partially offset by the following: • lower natural gas prices; and • a decrease in insurance costs. General and Administrative Expenses Q3 2024 vs. Q3 2023 General and administrative expenses were $70.4 million for the third quarter of 2024 compared to $67.7 million for the third quarter of 2023, an increase of $2.7 million, or 4.0%. The increase was primarily driven by transaction costs associated with the H20 Transaction, transaction costs associated with the amended and new agreements with Delek Logistics and restructuring costs, partially offset by lower employee expenses incentive compensation costs. YTD 2024 vs. YTD 2023 General and administrative expenses were $191.6 million for the nine months ended September 30, 2024 compared to $208.0 million in nine months ended September 30, 2023, a decrease of $16.4 million, or 7.9%. The decrease was primarily driven by a decrease in employee costs including incentive compensation costs, partially offset by transaction costs associated with the H20 Transaction, transaction costs associated with the amended and new agreements with Delek Logistics and restructuring costs. Depreciation and Amortization Q3 2024 vs. Q3 2023 Depreciation and amortization (included in both cost of sales and other operating expenses) was $98.1 million for the third quarter of 2024 compared to $87.7 million for the third quarter of 2023, an increase of $10.4 million, or 11.9%. The increase was a result of a general increase in our fixed asset base due to capital projects. YTD 2024 vs. YTD 2023 Depreciation and amortization (included in both cost of sales and other operating expenses) was $278.2 million and $255.2 million for the nine months ended September 30, 2024 and 2023, respectively, an increase of $23.0 million, or 9.0%. The increase was a result of a general increase in our fixed asset base due to capital projects and turnarounds completed. 50 | Management's Discussion and Analysis Asset Impairment Q3 2024 vs. Q3 2023 Asset impairment was $9.2 million for the three months ended September 30, 2024. We recorded $9.2 million asset impairment because it's no longer probable certain pipeline assets will be utilized. There was no asset impairment in the three months ended September 30, 2023. YTD 2024 vs. YTD 2023 Asset impairment was $31.3 million for the nine months ended September 30, 2024. We recorded $22.1 million asset impairment as a result of our second quarter 2024 decision to idle the biodiesel facilities, while exploring viable and sustainable alternatives and recorded $9.2 million asset impairment because it's no longer probable certain pipeline assets will be utilized. There was no asset impairment in the nine months ended September 30, 2023. Refer to Note 17 condensed consolidated financial statements in Item 1. Financial Statements, of this Quarterly Report on Form 10-Q for further information. Other Operating Expense (Income), Net Q3 2024 vs. Q3 2023 Other operating expense (income), net decreased by $14.9 million in the third quarter of 2024 to expense of $12.8 million compared to income of $2.1 million in the third quarter of 2023. During the three months ended September 30, 2024, we made a strategic decision to abandon certain capital projects included in construction in progress that no longer fit our core objectives and as a result we recognized a loss of $14.1 million. YTD 2024 vs. YTD 2023 Other operating income, net was $67.6 million and $19.0 million for the nine months ended September 30, 2024 and 2023, respectively, an increase of $48.6 million. The increase was primarily driven by the following: • for the nine months ended September 30, 2024, we recorded a net gain of $53.4 million in the 2024 period related to a property settlement; • for the nine months ended September 30, 2024, we recorded a gain of $30.1 million related to insurance proceeds and other third party recoveries related to the 2021 El Dorado refinery fire, the 2021 freeze events and the 2022 Big Spring refinery fire related to property damage and business interruption claims, compared to $13.3 million of business interruption and property damage insurance recoveries in the 2023 period related to the fire and freeze events that occurred in 2021 and 2022 Big Spring refinery fire; • for the nine months ended September 30, 2024, we recorded a gain of $8.3 million related to Delek Logistics' sale of storage tanks in Texas due to an eminent domain settlement; • for the nine months ended September 30, 2024, we made a strategic decision to abandon certain capital projects included in construction in progress that no longer fit our core objectives and as a result we recognized a loss of $14.1 million; and • decreased hedge gains in 2024 compared to 2023 associated with our derivatives. Refer to Note 13 of the condensed consolidated financial statements in Item 1. Financial Statements, of this Quarterly Report on Form 10-Q for further information. Non-Operating Expenses, Net Interest Expense, Net Q3 2024 vs. Q3 2023 Interest expense, net decreased by $3.6 million, or 4.4%, to $78.8 million in the third quarter of 2024 compared to $82.4 million in the third quarter of 2023, primarily driven by the following: • a decrease in net average borrowings outstanding (including the obligations under the inventory intermediation agreements which have an associated interest charge) of approximately $146.2 million in the third quarter of 2024 (calculated as a simple average of beginning borrowings/obligations and ending borrowings/obligations for the period) compared to the third quarter of 2023. The decrease was partially offset by the following: • an increase in the average effective interest rate of 22 basis points in the third quarter of 2024 compared to the third quarter of 2023 (where effective interest rate is calculated as interest expense divided by the net average borrowings/obligations outstanding); and • an increase in unrealized hedge losses associated with our interest rate swap. 51 | Management's Discussion and Analysis YTD 2024 vs. YTD 2023 Interest expense, net was $244.1 million in the nine months ended September 30, 2024, compared to $239.1 million for nine months ended September 30, 2023, an increase of $5.0 million, or 2.1% primarily due to the following: • an increase in the average effective interest rate of 110 basis points during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 (where effective interest rate is calculated as interest expense divided by the net average borrowings/obligations outstanding); • debt extinguishment costs of $3.6 million in the nine months ended September 30, 2024 related to the payoff of the Delek Logistics Term Loan Facility and Delek Logistics 2025 Notes with proceeds from the Delek Logistics 2029 Notes issued in March 2024; and • an increase in unrealized hedge losses associated with our interest rate swap. The increase was partially offset by the following: • a decrease in net average borrowings outstanding (including the obligations under the inventory intermediation agreements which have an associated interest charge) of approximately $275.0 million during the nine months ended September 30, 2024 (calculated as a simple average of beginning borrowings/obligations and ending borrowings/obligations for the period) compared to the nine months ended September 30, 2023; and Results from Equity Method Investments Q3 2024 vs. Q3 2023 We recognized income of $25.1 million from equity method investments during the third quarter of 2024, compared to $27.0 million for the third quarter of 2023, a decrease of $1.9 million. YTD 2024 vs. YTD 2023 We recognized income from equity method investments of $77.4 million for the nine months ended September 30, 2024, compared to $67.1 million for the nine months ended September 30, 2023, an increase of $10.3 million. This increase was primarily driven by the following: • an increase in income from our investment in W2W Holdings LLC to $26.0 million during the nine months ended September 30, 2024 from $18.2 million in the nine months ended September 30, 2023. Income Taxes Q3 2024 vs. Q3 2023 For the third quarter of 2024, we recorded an income tax benefit of $40.3 million compared to income tax expense of $29.1 million for the third quarter of 2023, primarily driven by the following: • a decrease in pre-tax net income of $329.8 million; and • our effective tax rates were 23.0% and 18.8% for the three months ended September 30, 2024 and 2023, respectively, due to the impact of fixed dollar permanent differences on the tax rate and changes to valuation allowances on certain attributes. YTD 2024 vs. YTD 2023 For the nine months ended September 30, 2024, we recorded an income tax benefit of $56.7 million compared to income tax expense of $38.3 million for the nine months ended September 30, 2023, primarily driven by the following: • a decrease in pre-tax net income of $474.9 million, and • our effective tax rates were 22.3% and 17.3% for the nine months ended September 30, 2024 and 2023, respectively, due to the impact of fixed dollar favorable permanent differences on the tax rate and changes in valuation allowance on certain attributes. 52 | Management's Discussion and Analysis Refining Segment The tables and charts below set forth selected information concerning our refining segment operations ($ in millions, except per barrel amounts): Selected Refining Financial Information Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Revenues $ 3,027.8 $ 4,624.5 $ 9,443.3 $ 12,471.5 Cost of materials and other 2,862.3 4,167.8 8,852.6 11,409.9 Refining Margin $ 165.5 $ 456.7 $ 590.7 $ 1,061.6 Operating expenses (excluding depreciation and amortization) $ 145.0 $ 166.5 $ 459.4 $ 459.4 Refining segment EBITDA $ 12.8 $ 295.7 $ 135.2 $ 613.0 Factors Impacting Refining Profitability Our profitability in the refining segment is substantially determined by the difference between the cost of the crude oil feedstocks we purchase and the price of the refined products we sell, referred to as the "crack spread", "refining margin" or "refined product margin". Refining margin is used as a metric to assess a refinery's product margins against market crack spread trends, where "crack spread" is a measure of the difference between market prices for crude oil and refined products and is a commonly used proxy within the industry to estimate or identify trends in refining margins. The cost to acquire feedstocks and the price of the refined petroleum products we ultimately sell from our refineries depend 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 such as hurricanes or tornadoes, local, domestic and foreign political affairs, global conflict, production levels, the availability of imports, the marketing of competitive fuels and government regulation. Other significant factors that influence our results in the refining segment include operating costs (particularly the cost of natural gas used for fuel and the cost of electricity), seasonal factors, refinery utilization rates and planned or unplanned maintenance activities or turnarounds. Moreover, while the fluctuations in the cost of crude oil are typically reflected in the prices of light refined products, such as gasoline and diesel fuel, the price of other residual products, such as asphalt, coke, carbon black oil and liquefied petroleum gas ("LPG") are less likely to move in parallel with crude cost. This could cause additional pressure on our realized margin during periods of rising or falling crude oil prices. Additionally, our margins are impacted by the pricing differentials of the various types and sources of crude oil we use at our refineries and their relation to product pricing. Our crude slate is predominantly comprised of WTI crude oil. Therefore, favorable differentials of WTI compared to other crude will favorably impact our operating results, and vice versa. Additionally, because of our gathering system presence in the Midland area and the significant source of crude specifically from that region into our network, a widening of the WTI Cushing less WTI Midland spread will favorably influence the operating margin for our refineries. Alternatively, a narrowing of this differential will have an adverse effect on our operating margins. Global product prices are influenced by the price of Brent which is a global benchmark crude. Global product prices influence product prices in the U.S. As a result, our refineries are influenced by the spread between Brent and WTI Midland. The Brent less WTI Midland spread represents the differential between the average per barrel price of Brent crude oil and the average per barrel price of WTI Midland crude oil. A widening of the spread between Brent and WTI Midland will favorably influence our refineries' operating margins. Also, the Krotz Springs refinery is influenced by the spread between Brent and LLS. The Brent less LLS spread represents the differential between the average per barrel price of Brent and the average per barrel price of LLS crude oil. A discount in LLS relative to Brent will favorably influence the Krotz Springs refinery operating margin. Finally, Refining EBITDA is impacted by regulatory costs associated with the cost of RINs as well as energy costs, including the cost of natural gas. In periods of unfavorable regulatory sentiment, RINs prices can increase at higher rates than crack spreads, or even when crack spreads are declining. This can be particularly impactful on smaller refineries, where the operating cost structure does not have as much scalability as larger refineries. Additionally, volatility in energy costs, which are captured in our operating expenses and impact our Refining EBITDA, can significantly impact our ability to capture crack spreads, with natural gas representing the most significant component. Within Delek’s geographic footprint, we source the majority of our natural gas from the Gulf Coast, and secondarily from the Permian, and we do not currently have the capability at our refineries to switch our energy consumption to utilize alternative sources of fuel. For this reason, unfavorable Gulf Coast (Henry Hub) differentials can impact our crack spread capture. 53 | Management's Discussion and Analysis The cost to acquire the refined fuel products we sell to our wholesale customers in our logistics segment largely depends on numerous factors beyond our control, including the supply of, and demand for, crude oil, gasoline and other refined petroleum products which, in turn, depend on, among other factors, changes in domestic and foreign economies, weather conditions, domestic and foreign political affairs, production levels, the availability of imports, the marketing of competitive fuels and government regulation. In addition to the above, it continues to be a strategic and operational objective to manage price and supply risk related to crude oil that is used in refinery production, and to develop strategic sourcing relationships. For that purpose, from a pricing perspective, we enter into commodity derivative contracts to manage our price exposure to our inventory positions, future purchases of crude oil and ethanol, future sales of refined products or to fix margins on future production. We also enter into future commitments to purchase or sell RINs at fixed prices and quantities, which are used to manage our RINs Obligation. Additionally, from a sourcing perspective, we often enter into purchase and sale contracts with vendors and customers or take physical or financial commodity positions for crude oil that may not be used immediately in production, but that may be used to manage the overall supply and availability of crude expected to ultimately be needed for production and/or to meet minimum requirements under strategic pipeline arrangements, and also to optimize and hedge availability risks associated with crude that we ultimately expect to use in production. Such transactions are inherently based on certain assumptions and judgments made about the current and possible future availability of crude. Therefore, when we take physical or financial positions for optimization purposes, our intent is generally to take offsetting positions in quantities and at prices that will advance these objectives while minimizing our positional and financial statement risk. However, because of the volatility of the market in terms of pricing and availability, it is possible that we may have material positions with timing differences or, more rarely, that we are unable to cover a position with an offsetting position as intended. Such differences could have a material impact on the classification of resulting gains/losses, assets or liabilities, and could also significantly impact Refining EBITDA. Refinery Statistics Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Total Refining Segment Days in period 92 92 274 273 Total sales volume - refined product (average bpd) (1) 309,175 307,626 312,075 295,141 Total production (average bpd) 303,882 303,399 302,858 287,375 Crude oil 295,350 294,726 291,042 275,310 Other feedstocks 12,245 11,222 15,727 14,815 Total throughput (average bpd): 307,595 305,948 306,769 290,125 Crude Slate: (% based on amount received in period) WTI crude oil 69.4 % 73.4 % 70.9 % 73.3 % Gulf Coast Sweet Crude 8.8 % 3.3 % 7.5 % 4.0 % Local Arkansas crude oil 3.2 % 4.0 % 3.3 % 4.1 % Other 18.6 % 19.3 % 18.3 % 18.6 % Crude utilization (% based on nameplate capacity) 97.8 % 97.6 % 96.4 % 91.2 % 54 | Management's Discussion and Analysis Refinery Statistics (continued) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Tyler, TX Refinery Days in period 92 92 274 273 Products manufactured (average bpd): Gasoline 35,962 35,615 36,620 30,750 Diesel/Jet 33,647 34,620 32,490 26,976 Petrochemicals, LPG, natural gas liquids ("NGLs") 3,429 3,429 2,432 2,409 Other 93 1,959 991 1,856 Total production 73,131 75,623 72,533 61,991 Throughput (average bpd): Crude Oil 73,385 74,877 71,671 59,379 Other feedstocks 1,613 1,118 2,641 3,243 Total throughput 74,998 75,995 74,312 62,622 Per barrel of throughput: Operating expenses $ 4.61 $ 4.74 $ 4.90 $ 5.06 Crude Slate: (% based on amount received in period) WTI crude oil 79.2 % 76.8 % 80.6 % 78.1 % East Texas crude oil 19.6 % 23.2 % 19.0 % 21.9 % Other 1.2 % — % 0.4 % — % El Dorado, AR Refinery Days in period 92 92 274 273 Products manufactured (average bpd): Gasoline 34,887 39,361 38,350 37,213 Diesel 29,854 31,927 30,587 29,211 Petrochemicals, LPG, NGLs 1,317 1,875 1,301 1,564 Asphalt 9,046 7,893 8,849 7,418 Other 993 1,168 1,291 1,034 Total production 76,097 82,224 80,378 76,440 Throughput (average bpd): Crude Oil 75,344 81,671 79,597 75,286 Other feedstocks 2,674 2,611 2,500 3,053 Total throughput 78,018 84,282 82,097 78,339 Per barrel of throughput: Operating expenses $ 5.01 $ 4.36 $ 4.61 $ 4.60 Crude Slate: (% based on amount received in period) WTI crude oil 68.3 % 71.9 % 67.0 % 67.6 % Local Arkansas crude oil 12.4 % 13.4 % 11.9 % 14.8 % Other 19.3 % 14.7 % 21.1 % 17.6 % 55 | Management's Discussion and Analysis Refinery Statistics (continued) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Big Spring, TX Refinery Days in period 92 92 274 273 Products manufactured (average bpd): Gasoline 34,510 29,274 32,925 33,755 Diesel/Jet 26,303 23,607 25,282 23,333 Petrochemicals, LPG, NGLs 5,160 3,723 4,630 3,299 Asphalt 3,176 2,220 2,703 1,833 Other 3,290 5,272 4,290 3,283 Total production 72,439 64,096 69,830 65,503 Throughput (average bpd): Crude oil 68,746 61,046 65,856 62,733 Other feedstocks 3,817 3,865 4,638 3,834 Total throughput 72,563 64,911 70,494 66,567 Per barrel of refined throughput: Operating expenses $ 6.08 $ 8.37 $ 6.78 $ 7.61 Crude Slate: (% based on amount received in period) WTI crude oil 68.9 % 64.3 % 70.5 % 68.8 % WTS crude oil 31.1 % 35.7 % 29.5 % 31.2 % Krotz Springs, LA Refinery Days in period 92 92 274 273 Products manufactured (average bpd): Gasoline 40,842 38,361 39,557 40,454 Diesel/Jet 32,879 30,653 31,203 31,794 Heavy Oils 1,559 5,461 1,773 4,239 Petrochemicals, LPG, NGLs 6,332 6,079 5,665 6,510 Other 602 902 1,919 446 Total production 82,214 81,456 80,117 83,443 Throughput (average bpd): Crude Oil 77,875 77,132 73,918 77,912 Other feedstocks 4,141 3,628 5,948 4,686 Total throughput 82,016 80,760 79,866 82,598 Per barrel of throughput: Operating expenses $ 4.82 $ 5.00 $ 5.22 $ 5.00 Crude Slate: (% based on amount received in period) WTI Crude 61.6 % 79.8 % 66.1 % 79.0 % Gulf Coast Sweet Crude 32.8 % 11.2 % 28.6 % 13.5 % Other 5.6 % 9.0 % 5.3 % 7.5 % (1) Includes inter-refinery sales and sales to other segments which are eliminated in consolidation. See tables below. 56 | Management's Discussion and Analysis Included in the refinery statistics above are the following sales to other segments: Refinery Sales to Other Segments Three Months Ended September 30, Nine Months Ended September 30, (in barrels per day) 2024 2023 2024 2023 Big Spring refined product sales to other Delek segments 19,893 — 21,121 6,406 Pricing Statistics (average for the period presented) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 WTI — Cushing crude oil (per barrel) $ 75.28 $ 82.51 $ 77.72 $ 77.37 WTI — Midland crude oil (per barrel) $ 75.96 $ 83.85 $ 78.75 $ 78.63 WTS — Midland crude oil (per barrel) $ 75.25 $ 83.01 $ 77.91 $ 77.34 LLS (per barrel) $ 77.28 $ 84.88 $ 80.23 $ 79.82 Brent (per barrel) $ 78.71 $ 85.92 $ 81.81 $ 81.96 U.S. Gulf Coast 5-3-2 crack spread (per barrel) (1) $ 15.64 $ 32.39 $ 18.89 $ 30.15 U.S. Gulf Coast 3-2-1 crack spread (per barrel) (1) $ 15.27 $ 31.30 $ 18.26 $ 29.30 U.S. Gulf Coast 2-1-1 crack spread (per barrel) (1) $ 11.42 $ 19.48 $ 14.63 $ 16.64 U.S. Gulf Coast unleaded gasoline (per gallon) $ 2.11 $ 2.58 $ 2.21 $ 2.44 Gulf Coast ultra-low sulfur diesel (per gallon) $ 2.24 $ 2.97 $ 2.43 $ 2.74 U.S. Gulf Coast high sulfur diesel (per gallon) $ 2.08 $ 2.04 $ 1.97 $ 1.80 Natural gas (per MMBTU) $ 2.23 $ 2.66 $ 2.23 $ 2.57 (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 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. For 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). For 2024, 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 (Platts pricing) U.S. Gulf Coast Pipeline No. 2 heating oil (high sulfur diesel). The Tyler refinery's crude oil input is primarily WTI Midland and East Texas, while the El Dorado refinery's crude input is primarily a combination of WTI Midland, local Arkansas and other domestic inland crude oil. The Big Spring refinery’s crude oil input is primarily comprised of WTS and WTI Midland. The Krotz Springs refinery’s crude oil input is primarily comprised of LLS and WTI Midland. 57 | Management's Discussion and Analysis Refining Segment Operational Comparison of the Three and Nine Months Ended September 30, 2024 versus the Three and Nine Months Ended September 30, 2023 Revenues Q3 2024 vs. Q3 2023 Revenues for the refining segment decreased by $1,596.7 million, or 34.5%, in the third quarter of 2024 compared to the third quarter of 2023. The decrease was primarily driven by the following: • a decrease in the average price of U.S. Gulf Coast gasoline of 18.2% and ULSD of 24.6%; • a decrease in wholesale activity; and • a decrease in sales volumes (including purchased products). These decreases were partially offset by the following: • an increase in the average price of U.S. Gulf Coast HSD of 2.0%. Net revenues included sales to our logistics segment of $84.6 million and $115.1 million for the three months ended September 30, 2024 and September 30, 2023, respectively. We eliminate this intercompany revenue in consolidation. YTD 2024 vs. YTD 2023 Revenues for the refining segment decreased $3,028.2 million, or 24.3%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The decrease was primarily driven by the following: • a decrease in the average price of U.S. Gulf Coast gasoline of 9.4% and ULSD of 11.3%; and • a decrease in wholesale activity. These decreases were partially offset by the following: • an increase in sales volumes (including purchased products); and • an increase in the average price of U.S. Gulf Coast HSD of 9.4%. Revenues included sales to our logistics segment of $284.2 million and $298.3 million for the nine months ended September 30, 2024 and 2023, respectively. We eliminate this intercompany revenue in consolidation. Cost of Materials and Other Q3 2024 vs. Q3 2023 Cost of materials and other decreased by $1,305.5 million, or 31.3%, in the third quarter of 2024 compared to the third quarter of 2023. The decrease was primarily driven by the following: • decreases in the cost of WTI Cushing crude oil, from an average of $82.51 per barrel to an average of $75.28, or 8.8%, and decreases in the cost of WTI Midland crude oil, from an average of $83.85 per barrel to an average of $75.96, or 9.4%; • a decrease in wholesale activity; • a decrease in RINs pricing; • a decrease in sales volume (including purchased products): and • a decrease in lease expense as a result of reclassification of certain fees with Delek Logistics from lease expense to interest expense under finance lease accounting. YTD 2024 vs. YTD 2023 Cost of materials and other decreased $2,557.3 million, or 22.4%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This decrease was primarily driven by the following: • a decrease in wholesale activity; • a decrease in RINs pricing; and • a decrease in lease expense as a result of reclassification of certain fees with Delek Logistics from lease expense to interest expense under finance lease accounting. These decreases were partially offset by the following: • an increase in sales volumes (including purchased products) primarily associated with Tyler Refinery operations which were negatively impacted in prior year as a result of turnaround activities. 58 | Management's Discussion and Analysis Our refining segment purchases finished product from our logistics segment and has multiple service agreements with our logistics segment which, among other things, require the refining segment to pay terminalling and storage fees based on the throughput volume of crude and finished product in the logistics segment pipelines and the volume of crude and finished product stored in the logistics segment storage tanks, subject to minimum volume commitments. These costs and fees were $111.3 million and $156.0 million during the three months ended September 30, 2024 and 2023, respectively. These costs and fees were $410.2 million and $413.2 million during the nine months ended September 30, 2024 and 2023, respectively. We eliminate these intercompany fees in consolidation. Refining Margin Q3 2024 vs. Q3 2023 Refining segment margin decreased by $291.2 million, or 63.8%, in the third quarter of 2024 compared to the third quarter of 2023, with a refining margin percentage of 5.5% as compared to 9.9% for the third quarter of 2024 and 2023, respectively, primarily driven by the following: • a 51.7% decrease in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery), a 51.2% decrease in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery) and a 41.4% decrease in the average Gulf Coast 2-1-1 crack spread (the primary measure for the Krotz Springs refinery); and • a decrease in sales volume (including purchased products). These decreases were partially offset by the following: • lower RINs pricing; and • a decrease in lease expense as a result of reclassification of certain fees with Delek Logistics from lease expense to interest expense under finance lease accounting. YTD 2024 vs. YTD 2023 Refining margin decreased by $470.9 million, or 44.4%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, with a refining margin percentage of 6.3% as compared to 8.5% for the nine months ended September 30, 2024 and 2023, respectively, primarily driven by the following: • a 37.3% decrease in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery), a 37.7% decrease in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery) and a 12.1% 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: • an increase in sales volumes primarily associated with Tyler Refinery operations which were negatively impacted in prior year as a result of turnaround activities; • lower RINs pricing; and • a decrease in lease expense as a result of reclassification of certain fees with Delek Logistics from lease expense to interest expense under finance lease accounting. Operating Expenses Q3 2024 vs. Q3 2023 Operating expenses decreased by $21.5 million, or 12.9%, in the third quarter of 2024 compared to the third quarter of 2023. The decrease in operating expenses was primarily driven by the following: • lower natural gas costs, outside services and insurance costs. YTD 2024 vs. YTD 2023 Operating expenses were flat in the nine months ended September 30, 2024, compared to nine months ended September 30, 2023. EBITDA Q3 2024 vs. Q3 2023 EBITDA decreased by $282.9 million, or 95.7%, in the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to a decrease in refining margin driven by decreased crack spreads and decreased sales volume (including purchased products), partially offset by a decrease in lease expense as a result of reclassification of certain fees with Delek Logistics from lease expense to interest expense under finance lease accounting. 59 | Management's Discussion and Analysis YTD 2024 vs. YTD 2023 EBITDA decreased by $477.8 million, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to a decrease in refining margin driven by decreased crack spreads, partially offset by an increase in sales volume, an increase in insurance and third party proceeds related to the fires in 2021 and 2022 and a decrease in lease expense as a result of reclassification of certain fees with Delek Logistics from lease expense to interest expense under finance lease accounting. 60 | Management's Discussion and Analysis Logistics Segment The table below sets forth certain information concerning our logistics segment operations ($ in millions, except per barrel amounts): Selected Logistics Financial and Operating Information Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Revenues $ 214.1 $ 275.9 $ 730.8 $ 766.3 Cost of materials and other $ 117.5 $ 150.6 $ 379.3 $ 404.8 Operating expenses (excluding depreciation and amortization) $ 28.0 $ 33.0 $ 89.5 $ 86.7 EBITDA $ 68.6 $ 96.5 $ 268.9 $ 278.8 Operating Information: Gathering & Processing: (average bpd) Lion Pipeline System: Crude pipelines (non-gathered) 68,430 70,153 71,576 64,835 Refined products pipelines 55,283 63,991 59,681 54,686 SALA Gathering System 13,886 14,774 12,113 13,935 East Texas Crude Logistics System 35,891 36,298 26,319 29,928 Midland Gathering Assets 185,179 248,443 201,796 230,907 Plains Connection System 188,421 250,550 218,323 248,763 Delaware Gathering Assets: Natural gas gathering and processing (Mcfd) (1) 75,719 69,737 76,092 72,569 Crude oil gathering (average bpd) 125,123 111,973 124,190 110,935 Water disposal and recycling (average bpd) 123,856 99,158 120,360 104,920 Midland Water Gathering System: (2) Water disposal and recycling (average bpd) 100,335 — 100,335 — Wholesale Marketing & Terminalling: East Texas - Tyler refinery sales volumes (average bpd) (3) 70,172 69,178 69,246 57,894 Big Spring wholesale marketing throughputs (average bpd) 22,700 81,617 60,109 78,399 West Texas wholesale marketing throughputs (average bpd) 6,552 10,692 5,276 9,871 West Texas wholesale marketing margin per barrel $ 3.38 $ 9.64 $ 2.85 $ 8.76 Terminalling throughputs (average bpd) (4) 160,849 121,430 152,272 116,455 (1) Mcfd - average thousand cubic feet per day. (2) 2024 volumes include volumes from September 11, 2024 through September 30, 2024. (3) Excludes jet fuel and petroleum coke. (4) 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 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. With respect to our equity method investments in pipeline joint ventures, our earnings from those investments (which is based on our pro rata ownership percentage of the joint venture's recognized net income or loss) are directly impacted by the operations of those joint ventures. Items impacting the joint venture net income (loss) may include (but are not limited to) the following: long-term throughput contractual arrangements and related MVCs and, in some cases, deficiency credit provisions; the demand for walk-up nominations; applicable rates or tariffs; long-lived asset or other impairments assessed at the joint venture level; and pipeline releases or other contingent liabilities. With respect to our West Texas marketing activities, our profitability is dependent upon the cost of landed product versus the rack price of refined product sold. Our logistics segment is generally protected from commodity price risk because inventory is purchased and then immediately sold at the rack. 61 | Management's Discussion and Analysis Logistics Segment Operational Comparison of the Three and Nine Months Ended September 30, 2024 versus the Three and Nine Months Ended September 30, 2023 Revenues Q3 2024 vs. Q3 2023 Net revenues decreased by $61.8 million, or 22.4%, in the third quarter of 2024 compared to the third quarter of 2023, primarily driven by: • decreased revenue of $36.2 million in our West Texas marketing operations driven by decreases in volumes sold, a decrease in average sales prices per gallon and decrease in RINs revenue: ◦ the volumes of gasoline and diesel sold decreased by 4.7 million and 0.5 million gallons, respectively; ◦ the average sales prices per gallon of gasoline and diesel sold decreased by $0.42 and $0.71 per gallon, respectively; ◦ RINs revenue decreased from $3.5 million in the third quarter of 2023 to $1.3 million in the third quarter of 2024, due to decrease in RINs prices; and • decreased revenue of $13.3 million and $8.3 million in gathering and processing and storage and transportation operations, respectively, due to recording certain throughput and storage fees as interest income under sales-type lease accounting that were previously recorded as revenue in the prior year period. Net revenues included sales to our refining segment of $111.3 million and $156.0 million for the three months ended September 30, 2024 and September 30, 2023, respectively, and sales to our other segment of $0.4 million and $0.4 million for the three months September 30, 2024 and 2023, respectively. We eliminate this intercompany revenue in consolidation. YTD 2024 vs. YTD 2023 Net revenues decreased by $35.5 million, or 4.6%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily driven by the following: • decreased revenue of $28.7 million in our West Texas marketing operations primarily driven by a decrease in average sales prices per gallon and decrease in RINs revenue, partially offset by increases in volumes sold: ◦ the average sales prices per gallon of gasoline and diesel sold decreased by $0.33 and $0.36 per gallon, respectively; and ◦ RINs revenue decreased from $9.1 million in the nine months ended September 30, 2023 to $3.7 million in the nine months ended September 30, 2024, due to decrease in RINs prices; and ◦ the volumes of gasoline and diesel sold increased by 2.9 million and 3.4 million gallons, respectively. • decreased revenue of $10.4 million and $8.6 million in gathering and processing and storage and transportation operations, respectively, due to recording certain throughput and storage fees as interest income under sales-type lease accounting that were previously recorded as revenue in the prior year period; and • partially offset by increase in terminalling and marketing revenue primarily due to increased volumes and rate increases. Revenues included sales to our refining segment of $410.2 million and $413.2 million for the nine months ended September 30, 2024 and 2023, respectively, and sales to our other segment of $1.2 million and $1.2 million for the nine months ended September 30, 2024 and 2023, respectively. We eliminate this intercompany revenue in consolidation. Cost of Materials and Other Q3 2024 vs. Q3 2023 Cost of materials and other for the logistics segment decreased by $33.1 million, or 22.0%, in the third quarter of 2024 compared to the third quarter of 2023. The decrease was primarily driven by the following: • decreased costs of materials and other of $29.4 million in our West Texas marketing operations primarily driven by decreases in the volumes and average cost per gallon of gasoline and diesel sold: ◦ the volumes of gasoline and diesel sold decreased by 4.7 million and 0.5 million gallons, respectively; and ◦ the average cost per gallon of gasoline and diesel sold decreased by $0.23 per gallon and $0.73 per gallon, respectively. Our logistics segment purchased product from our refining segment of $84.6 million and $115.1 million for the three months ended September 30, 2024 and September 30, 2023, respectively. We eliminate these intercompany costs in consolidation. 62 | Management's Discussion and Analysis YTD 2024 vs. YTD 2023 Cost of materials and other for the logistics segment decreased by $25.5 million, or 6.3%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This decrease was primarily driven by the following: • decreased costs of materials and other of $13.2 million in our West Texas marketing operations primarily driven by decreased costs per gallon, partially offset by increases in the average volumes of gasoline and diesel sold: ◦ the average cost per gallon of gasoline and diesel sold decreased by $0.20 per gallon and $0.31 per gallon, respectively; ◦ the volumes of gasoline and diesel sold increased by 2.9 million and 3.4 million gallons, respectively; and • decrease of $8.0 million in our gathering and processing segment driven primarily by lower natural gas costs. Our logistics segment purchased product from our refining segment of $284.2 million and $298.3 million for the nine months ended September 30, 2024 and 2023, respectively. We eliminate these intercompany costs in consolidation. Operating Expenses Q3 2024 vs. Q3 2023 Operating expenses decreased by $5.0 million, or 15.2%, in the third quarter of 2024 compared to the third quarter of 2023, primarily driven by a decrease in outside services. YTD 2024 vs. YTD 2023 Operating expenses increased by $2.8 million, or 3.2%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily driven by an increase in contract services. 63 | Management's Discussion and Analysis EBITDA Q3 2024 vs. Q3 2023 EBITDA decreased by $27.9 million, or 28.9%, in the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily driven by recording certain throughput and storage fees in interest income due to sales-type lease accounting that were previously recorded as revenue in prior year period. YTD 2024 vs. YTD 2023 EBITDA decreased by $9.9 million, or 3.6%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily driven by recording certain throughput and storage fees in interest income due to sales-type lease accounting that were previously recorded as revenue in prior year period, partially offset by higher terminalling and marketing fees due to rate increases as well as higher throughput volumes primarily associated with the Tyler Refinery operations which were negatively impacted in the prior year as a result of turnaround activities. 64 | Management's Discussion and Analysis Liquidity and Capital Resources Sources of Capital Our primary sources of liquidity and capital resources are • cash generated from our operating activities; • borrowings under our debt facilities; and • potential issuances of additional equity and debt securities. At September 30, 2024 our total liquidity amounted to $2,582.2 million comprised primarily of $1,544.6 million in unused credit commitments under our revolving credit facilities (as discussed in Note 10 of our condensed consolidated financial statements in Item 1. Financial Statements, of this Quarterly Report on Form 10-Q) and $1,037.6 million in cash and cash equivalents. Historically, we have generated adequate cash from operations to fund ongoing working capital requirements, pay quarterly cash dividends and fund operational capital expenditures. On October 30, 2024, our Board of Directors approved a quarterly cash dividend of $0.255 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 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. Additionally, new debt financing activities will be subject to the satisfaction of any debt incurrence limitation covenants in our existing financing agreements. Our debt limitation covenants in our existing financing documents are usual and customary for credit agreements of our type and reflective of market conditions at the time of their execution. Additionally, our ability to satisfy working capital requirements, to service our debt obligations, to fund planned capital expenditures, or to pay dividends will depend upon future operating performance, which will be affected by prevailing economic conditions in the oil industry and other financial and business factors, including oil prices, some of which are beyond our control. As of September 30, 2024, 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 condensed consolidated financial statements in Item 1. Financial Statements, of this Quarterly Report on Form 10-Q). Additionally, we were in compliance with covenants during the quarter ended September 30, 2024. Failure to meet the incurrence covenants could impose certain incremental restrictions on our ability to incur new debt and also may limit whether and the extent to which we may pay dividends, as well as impose additional restrictions on our ability to repurchase our stock, make new investments and incur new liens (among others). Such restrictions would generally remain in place until such quarter that we return to compliance under the applicable incurrence based covenants. In the event that we are subject to these incremental restrictions, we believe that we have sufficient current and alternative sources of liquidity, including (but not limited to): available borrowings under our existing Delek Revolving Credit Facility, and for Delek Logistics, under its Delek Logistics Revolving Facility; the allowance to incur an additional $400.0 million of secured debt under the Delek Term Loan Credit Facility (see further discussion of these facilities in Note 10 of our condensed consolidated financial statements in Item 1. Financial Statements, of this Quarterly Report on Form 10-Q); as well as the possibility of obtaining other secured and unsecured debt, raising capital through equity issuance, or taking advantage of transactional financing opportunities such as sale-leasebacks or joint ventures, as otherwise contemplated and allowed under our incurrence covenants. Cash Position and Indebtedness As of September 30, 2024, our total cash and cash equivalents were $1,037.6 million and we had total long-term indebtedness of approximately $2,789.4 million. The total long-term indebtedness is net of deferred financing costs and debt discount of $53.9 million. Additionally, we had letters of credit issued of approximately $270.5 million. Total unused credit commitments or borrowing base availability, as applicable, under our revolving credit facilities was approximately $1,544.6 million. The increase of $186.0 million in total long-term principle indebtedness as of September 30, 2024 compared to December 31, 2023 resulted primarily from issuance of the Delek Logistics 2029 Notes, partially offset by a decrease in net borrowings under the Delek Logistics Revolving Facility, payment of the outstanding balance of the Delek Logistics Term Loan Facility, and extinguishment of the Delek Logistics 2028 Notes. As of September 30, 2024, our total long-term indebtedness (as defined in Note 10 of the condensed consolidated financial statements in Item 1. Financial Statements, of this Quarterly Report on Form 10-Q) consisted of the following: • the Delek Revolving Credit Facility with no outstanding borrowings (maturity of October 26, 2027); • aggregate principal of $933.4 million under the Delek Term Loan Credit Facility (maturity of November 19, 2029 and effective interest of 8.90%); • aggregate principal of $454.9 million under the Delek Logistics Revolving Facility (maturity of October 13, 2027 and average borrowing rate of 7.70%); • aggregate principal of $400.0 million under the Delek Logistics 2028 Notes (due in 2028, with effective interest rate of 7.38%); • aggregate principal of $1,050.0 million under the Delek Logistics 2029 Notes (due in 2029, with effective interest rate of 8.90%); and • aggregate principal of $5.0 million under the United Community Bank Revolver (maturity of June 30, 2026 and average borrowing rate of 7.50%). 65 | Management's Discussion and Analysis On March 13, 2024, Delek Logistics sold $650.0 million in aggregate principal amount of 8.625% Senior Notes due 2029, at par. Net proceeds were used to redeem the Delek Logistics 2025 Notes including accrued interest, pay off the Delek Logistics Term Loan Facility including accrued interest and to repay a portion of the outstanding borrowings under the Delek Logistics Revolving Facility. On April 17, 2024, Delek Logistics sold $200 million in aggregate principal amount of additional 8.625% senior notes due 2029 at 101.25% and on August 16, 2024, the Co-issuers sold $200.0 million in aggregate principal amount of additional 8.625% senior notes due 2029 at 103.25%. The net proceeds were used to repay a portion of the outstanding borrowings under the Delek Logistics Revolving Facility. See Note 10 to our accompanying condensed consolidated financial statements in Item 1. Financial Statements, of this Quarterly Report on Form 10-Q for additional information about our separate debt and credit facilities. Additionally, we utilize other financing arrangements to finance operating assets and/or, from time to time, to monetize other assets that may not be needed in the near term, when internal cost of capital and other criteria are met. Such arrangements include our inventory intermediation arrangement, which finances a significant portion of our first-in, first-out inventory at the refineries and, from time to time, RINs or other non-inventory product financing liabilities and funded letters of credit. Our inventory intermediation obligation with Citigroup Energy Inc. ("Citi") was $388.9 million at September 30, 2024. See Note 9 of the accompanying condensed consolidated financial statements in Item 1. Financial Statements, of this Quarterly Report on Form 10-Q for additional information about our inventory intermediation agreement. Our product financing liabilities consisted primarily of RIN financings as of September 30, 2024, and totaled $163.9 million, all of which is due in the next 12 months. See further description of these types of arrangements in the Environmental Credits and Related Regulatory Obligations accounting policy disclosed in Note 2 to our accompanying consolidated financial statements included in Item 8. Financial Statements and Supplementary Data, of our December 31, 2023 Annual Report on Form 10-K. For both arrangements and the related commitments, see also our "Cash Requirements" section below. Debt Ratings We receive debt ratings from the major ratings agencies in the U.S. In determining our debt ratings, the agencies consider a number of qualitative and quantitative items including, but not limited to, commodity pricing levels, our liquidity, asset quality, reserve mix, debt levels and seniorities, cost structure, planned asset sales and production growth opportunities. There are no "rating triggers" in any of our contractual debt obligations that would accelerate scheduled maturities should our debt rating fall below a specified level. However, a downgrade could adversely impact our interest rate on new credit facility borrowings and the ability to economically access debt markets in the future. Additionally, any rating downgrades may increase the likelihood of us having to post additional letters of credit or cash collateral under certain contractual arrangements. Cash Flows The following table sets forth a summary of our consolidated cash flows (in millions): Consolidated Nine Months Ended September 30, 2024 2023 Cash Flow Data: Operating activities - continuing operations $ 78.9 $ 891.7 Operating activities - discontinued operations 17.8 31.1 Total Operating activities 96.7 922.8 Investing activities - continuing operations (387.4) (320.6) Investing activities - discontinued operations 361.7 (18.0) Total Investing activities (25.7) (338.6) Financing activities - continuing operations 144.4 (523.8) Financing activities - continuing operations — — Total Financing activities 144.4 (523.8) Net (decrease) increase $ 215.4 $ 60.4 Cash Flows from Operating Activities Continuing Operations Net cash provided by operating activities from continuing operations was $78.9 million for the nine months ended September 30, 2024, compared to $891.7 million for the comparable period of 2023. Decreases were a result of cash receipts from customers and cash payments to suppliers and for salaries resulting in a net $824.5 million decrease in cash provided by operating activities, an increase in cash paid for debt interest of $1.2 million, partially offset by a decrease in cash paid for taxes of $4.8 million. 66 | Management's Discussion and Analysis Discontinued Operations Net cash provided by operating activities from discontinued operations include the Retail Stores business income. Cash Flows from Investing Activities Continuing Operations Net cash used in investing activities from continuing operations was $387.4 million for the nine months ended September 30, 2024, compared to $320.6 million in the comparable period of 2023. The increase in cash flows used in investing activities was primarily due to $229.5 million acquisition of H2O Midstream of which $159.5 million was paid in cash, purchase of an additional 0.6% indirect investment in Wink to Webster Pipeline LLC for $18.6 million, partially offset by an $83.1 million decrease in purchases of property, plant and equipment, substantially driven by maintenance projects associated with the Tyler turnaround in 2023 and a $14.0 million increase in insurance proceeds in 2024. Discontinued Operations Net cash provided by investing activities from discontinued operations in 2024 primarily includes the $381.7 million net proceeds from the sale of the Retail Stores, partially offset by cash used for Retail Stores capital expenditures of $19.8 million. Cash Flows from Financing Activities Continuing Operations Net cash provided by financing activities from continuing operations was $144.4 million for the nine months ended September 30, 2024, compared to cash used of $523.8 million in the comparable 2023 period. The decrease in cash used was primarily due to the receipt of net proceeds of $132.2 million from the Delek Logistics' public offering of common units in the nine months ended September 30, 2024, net proceeds from term debt of $520.6 million for the nine months ended September 30, 2024 compared to net payments on term debt of $18.4 million in the comparable 2023 period, primarily related to the issuance of the Delek Logistics 2029 Notes and the related repayment of the Delek Logistics Term Loan Facility, a decrease in net payments on long-term revolvers of $78.4 million and Delek Logistics 2025 Notes and a decrease of $45.4 million in share buybacks. These decreases in cash flows were partially offset by an increase in net payments from product and other financing arrangements of $38.5 million, 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 (as defined in Note 2 to the audited consolidated financial statements included in Item. 8 Financial Statements and Supplementary Data, of our December 31, 2023 Annual Report on Form 10-K) and origination of the Citi Inventory Intermediation Agreement (as defined in Note 9 of the condensed consolidated financial statements in Item 1. Financial Statements, of this Quarterly Report on Form 10-Q) and an increase of $16.8 million related to the payment of deferred financing costs primarily related to the issuance of the Delek Logistics 2029 Notes. Capital Spending A key component of our long-term strategy is our capital expenditure program. The following table summarizes our actual capital expenditures for the nine months ended September 30, 2024, by operating segment and major category (in millions): 2024 Forecast (1) Nine Months Ended September 30, 2024 Actual (1) (2) Refining Regulatory $ 42 $ 33.6 Sustaining maintenance, including turnaround activities 163 92.4 Growth projects 15 0.2 Refining segment total 220 126.2 Logistics Regulatory 5 1.1 Sustaining maintenance 15 6.8 Growth projects 50 29.3 Logistics segment total 70 37.2 Corporate and Other Regulatory 2 — Sustaining maintenance 23 15.9 Growth projects — 1.9 Other total 25 17.8 Total capital spending $ 315 $ 181.2 67 | Management's Discussion and Analysis (1) Excludes estimated 2024 costs of $90.0 million to $100.0 million and actual 2024 costs of $53.4 million related to the new Delek Logistics natural gas processing plant . Refer to 'Other 2024 Developments' section of Item 2. Management's Discussion and Analysis, of this Quarterly Report on Form 10-Q for further information. (2) Excludes a $10.0 million land purchase in connection with a settlement that was in litigation related to a property that we historically operated as an asphalt and marine fuel terminal. Refer to Note 13 of the condensed consolidated financial statements in Item 1. Financial Statements, of this Quarterly Report on Form 10-Q for further information. 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 2. Management's Discussion and Analysis, of this Quarterly Report on Form 10-Q. For further information, please refer to our discussion in Item 1A. Risk Factors, of our December 31, 2023 Annual Report on Form 10-K. Cash Requirements Long-Term Cash Requirements Under Contractual Obligations Information regarding our known cash requirements under contractual obligations of the types described below as of September 30, 2024, is set forth in the following table (in millions): Payments Due by Period < 1 Year 1-3 Years 3-5 Years >5 Years Total Long-term debt and notes payable obligations $ 9.5 $ 478.9 $ 1,469.0 $ 885.9 $ 2,843.3 Interest (1) 227.2 450.6 363.2 9.4 1,050.4 Operating lease commitments (2) 50.4 53.6 12.0 7.8 123.8 Purchase commitments (3) 437.9 — — — 437.9 Product financing agreements (4) 163.9 — — — 163.9 Transportation agreements (5) 198.7 323.7 204.4 223.8 950.6 Inventory intermediation obligation (6) 39.5 15.7 — — 55.2 Retail Stores obligations (7) 8.6 17.2 17.5 10.4 53.7 Total $ 1,135.7 $ 1,339.7 $ 2,066.1 $ 1,137.3 $ 5,678.8 (1) Expected interest payments on debt outstanding at September 30, 2024. Floating interest rate debt is calculated using September 30, 2024 rates. For additional information, see Note 10 to the condensed consolidated financial statements in Item 1. Financial Statements, of this Quarterly Report on Form 10-Q. (2) Amounts reflect future estimated lease payments under operating leases having remaining non-cancelable terms in excess of one year as of September 30, 2024. (3) We have purchase commitments to secure certain quantities of crude oil, finished product and other resources used in production at both fixed and market prices. We have estimated future payments under the market-based agreements using current market rates. Excludes purchase commitments in buy-sell transactions which have matching notional amounts with the same counterparty and are generally net settled in exchanges. (4) Balances consist of obligations under RINs product financing arrangements, as described in Note 13 to the condensed consolidated financial statements in Item 1. Financial Statements, of this Quarterly Report on Form 10-Q and further discussed in the ''Environmental Credits and Related Regulatory Obligations" accounting policy included in Note 2 to our consolidated financial statements in Item 8. Financial Statements and Supplementary Data, of our December 31, 2023 Annual Report on Form 10-K. (5) Balances consist of contractual obligations under agreements with third parties (not including Delek Logistics) for the transportation of crude oil to our refineries. (6) Balances consist of contractual obligations under the Citi Inventory Intermediation Agreement, including principal obligation for the Baseline Volume Step-Out Liability and other recurring fees. For additional information, see Note 9 to the condensed consolidated financial statements in Item 1. Financial Statements, of this Quarterly Report on Form 10-Q. (7) Amounts reflect a rebate arrangement included in the long-term agreement with FEMSA entered into in conjunction with the Retail Transaction as well as certain underground storage tank cleanup obligations. For additional information, see Note 4 to the condensed consolidated financial statements in Item 1. Financial Statements, of this Quarterly Report on Form 10-Q. Other Cash Requirements Our material short-term cash requirements under contractual obligations are presented above, and we expect to fund the majority of those requirements with cash flows from operations. Our other cash requirements consisted of operating activities and capital expenditures. Operating activities include cash outflows related to payments to suppliers for crude and other inventories (which are largely reflected in our contractual purchase commitments in the table above) and payments for salaries and other employee related costs. Cash outlays in 2024 are planned to include incentive compensation payments that were earned and accrued in 2023. 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. 68 | Management's Discussion and Analysis Refer to the cash flow section for our operating activities spend during the nine months ended September 30, 2024. 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 the nine months ended September 30, 2024 and our anticipated cash requirements for planned capital expenditures for the full year 2024.