What changed in this filing

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Item 1. Financial Statements

2021-08-05 compared with 2021-05-07 · 207 added, 147 removed, 578 unchanged (38% of the section changed)

3 unchanged sentences

(in thousands, except unit and per unit data)

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Current assets:

28 unchanged sentences

Asset retirement obligations 6,245 6,015

Deferred tax liabilities 681 616

Operating lease liabilities, net of current portion 16,976 15,418

3 unchanged sentences

Common unitholders - public;

8,697,468 units issued and outstanding at March 31, 2021 ( 8,697,468 at December 31, 2020)

8,707,565 units issued and outstanding at June 30, 2021 ( 8,697,468 at December 31, 2020)

164,678 164,614

Common unitholders - Delek Holdings;

34,745,868 units issued and outstanding at March 31, 2021 ( 34,745,868 at December 31, 2020)

34,745,868 units issued and outstanding at June 30, 2021 ( 34,745,868 at December 31, 2020)

( 272,525 ) ( 272,915 )

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(in thousands, except unit and per unit data)

Three months ended

Three months ended Six months ended

June 30, June 30,

2021 2020 2021 2020

Net revenues:

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Income from equity method investments ( 6,642 ) ( 6,462 ) ( 10,691 ) ( 12,015 )

Other expense, net 31 —

Other income, net ( 34 ) ( 2 ) ( 3 ) ( 2 )

Total non-operating expenses, net 4,982 4,206 10,701 10,477

Income before income tax expense 36,451 28,771

Income tax expense 184 975

Income before income tax expense (benefit) 43,412 43,675 79,863 72,446

Income tax expense (benefit) 166 ( 740 ) 350 235

Net income attributable to partners $ 43,246 $ 44,415 $ 79,513 $ 72,211

1 unchanged sentence

General partner's interest in net income, including incentive distribution rights (2)

— 9,647 — 18,724

Limited partners' interest in net income $ 43,246 $ 34,768 $ 79,513 $ 53,487

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(in thousands)

Common - Public Common - Delek Holdings Total

Common - Public Common -

Delek Holdings Total

Balance at March 31, 2021 $ 164,100 $ ( 275,490 ) $ ( 111,390 )

Cash distributions

( 8,002 ) ( 31,966 ) ( 39,968 )

Net income attributable to partners

8,666 34,580 43,246

( 86 ) 351 265

Balance at June 30, 2021 $ 164,678 $ ( 272,525 ) $ ( 107,847 )

Common - Public Common -

Delek Holdings General Partner Total

Balance at March 31, 2020 $ 158,332 $ ( 199,943 ) $ ( 2,785 ) $ ( 44,396 )

Cash distributions (1)

( 7,753 ) ( 14,014 ) ( 9,139 ) ( 30,906 )

General partner units issued to maintain 2 % interest

Net income attributable to partners 10,262 24,506 9,647 44,415

Distribution to Delek Holdings for Trucking Assets Acquisition — ( 46,607 ) ( 951 ) ( 47,558 )

Other 29 97 — 126

Balance at June 30, 2020 $ 160,870 $ ( 235,961 ) $ ( 3,224 ) $ ( 78,315 )

(1) Cash distributions include a nominal amount related to distribution equivalents on vested phantom units.

Common - Public Common -

Delek Holdings Total

Balance at December 31, 2020 $ 164,614 $ ( 272,915 ) $ ( 108,301 )

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Other 53 389 442

Balance at March 31, 2021 $ 164,100 $ ( 275,490 ) $ ( 111,390 )

Balance at June 30, 2021 $ 164,678 $ ( 272,525 ) $ ( 107,847 )

Common - Public Common -

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Issuance of units in connection with the Big Spring Gathering Assets Acquisition — 107,324 2,190 109,514

Distribution to Delek Holdings for Trucking Assets Acquisition — ( 46,607 ) ( 951 ) ( 47,558 )

Other 334 ( 168 ) 1 167

Balance at March 31, 2020 $ 158,332 $ ( 199,943 ) $ ( 2,785 ) $ ( 44,396 )

Balance at June 30, 2020 $ 160,870 $ ( 235,961 ) $ ( 3,224 ) $ ( 78,315 )

See accompanying notes to the condensed consolidated financial statements

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(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

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Amortization of deferred financing costs and debt discount 1,325 1,172

Accretion of asset retirement obligations 115 107

Income from equity method investments ( 10,691 ) ( 12,015 )

Dividends from equity method investments 8,311 12,500

Gain on asset disposals ( 83 ) ( 107 )

Deferred income taxes 65 812

Other non-cash adjustments 453 1,218

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Distributions to common unitholders - Delek Holdings ( 63,585 ) ( 27,549 )

Distributions to Delek Holdings unitholders and general partner related to Trucking Assets Acquisition — ( 47,558 )

Proceeds from revolving credit facility 148,300 413,000

Payments on revolving credit facility ( 606,100 ) ( 251,400 )

Proceeds from issuance of senior notes 400,000 —

Deferred financing costs paid in connection with debt issuances ( 6,326 ) —

Payments on financing lease liabilities ( 756 ) —

Net cash (used in) provided by financing activities ( 144,383 ) 52,512

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Interest $ 17,081 $ 21,298

Income taxes $ — $ 3

Non-cash investing activities:

Increase in accrued capital expenditures in accounts payable/receivable related parties $ 3,119 $ —

Decrease in accrued capital expenditures $ ( 1,439 ) $ ( 1,220 )

Increase (decrease) in accrued capital expenditures $ 1,557 $ ( 1,317 )

Equity issuance to Delek Holdings unitholders in connection with Big Spring Gathering Assets Acquisition $ — $ 109,514

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("Delek Holdings") and its subsidiary Delek Logistics GP, LLC, our general partner (our "general partner").

Effective August 13, 2020, the Partnership closed the transaction contemplated by a definitive exchange agreement with the general partner to eliminate all of the incentive distribution rights ("IDRs") held by the general partner and convert the 2 % general partner interest into a non-economic general partner interest, all in exchange for 14.0 million newly issued common limited partner units and $ 45.0 million in cash ("IDR Restructuring Transaction").

Refer to Note 3 - Related Party Transactions for further information, Note 5 - Net Income per Unit for more information on how these transactions impact our earnings per unit calculations, and Note 8 - Equity for additional information on the impact to our equity accounts.

Effective May 1, 2020, the Partnership, through its wholly-owned subsidiary DKL Transportation, LLC, acquired Delek Trucking, LLC consisting of certain leased and owned tractors and trailers and related assets (the "Trucking Assets") from Delek Holdings, such transaction the "Trucking Assets Acquisition." See Note 2 for further information.

In addition, effective March 31, 2020, the Partnership, through its wholly-owned subsidiary DKL Permian Gathering, LLC, acquired from Delek Holdings a crude oil gathering system located in Howard, Borden and Martin Counties, Texas (the "Big Spring Gathering System"), and certain related assets, such transaction the "Big Spring Gathering Assets Acquisition." See Note 2 for further information.

Effective August 13, 2020, the Partnership closed the transaction contemplated by a definitive exchange agreement with the general partner to eliminate all of the incentive distribution rights ("IDRs") held by the general partner and convert the 2 % general partner interest into a non-economic general partner interest, such transaction the "IDR Restructuring Transaction."

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S.

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Risks and Uncertainties Arising from the COVID-19 Pandemic

The on-going impact of the COVID-19 outbreak and its development into a pandemic in March 2020 (the “COVID-19 Pandemic” or the “Pandemic”), the restrictions imposed to prevent its spread, the challenges with the vaccination rollout, and the spread of new variants of the virus, continue to cause significant economic disruption globally, including in the U.S.

and specific geographic areas where we operate.

Compared to the prior year, the first quarter of 2021 has witnessed economic recovery trends including a resumption of flights by major airlines and increased motor vehicle use.

This has in turn resulted in increased demand for, thus also the market prices of, crude oil and certain products, particularly refined petroleum products that we receive revenue for the transportation and storage services we provide and an increase in demand and sales volumes in our wholesale marketing business.

As of March 31, 2021 there is continued uncertainty about the duration and future impact of the COVID-19 Pandemic.

Our business model, which includes executing minimum volume commitment contracts with our major customers, to an extent, cushioned us from the impact of the COVID-19 Pandemic in 2020 and during the first quarter of 2021.

economic activity continued on a recovery trend during the quarter ended June 30, 2021, albeit remaining subject to heightened levels of uncertainty related to the on-going impact of the COVID-19 outbreak that developed into a pandemic in March 2020 (the “COVID-19 Pandemic” or the “Pandemic”), and the spread of new variants of the virus.

Some of the restrictions imposed in the prior year to prevent its spread have been eased and the government vaccination campaigns continue to yield positive results in terms of increase in the number of people who have been inoculated, a critical requirement to continue removing restrictions.

Compared to the prior year, the economic recovery trends in the three and six months ended June 30, 2021 included a resumption of flights by major airlines and increased motor vehicle use.

This has in turn resulted in increased demand and market prices for crude oil and other products, particularly refined petroleum products from which we receive revenue for transporting and storing.

We also saw an increase in demand and sales volumes in our wholesale marketing business during the three and six months ended June 30, 2021.

Nonetheless, there remains continued uncertainty about the duration and future impact of the COVID-19 Pandemic.

Uncertainties related to the impact of the COVID-19 Pandemic and other events exist that could impact our future results of operations and financial position, the nature of which and the extent to which are currently unknown.

To the extent these uncertainties have been identified and are believed to have an impact on our current period results of operations or financial position based on the requirements for assessing such financial statement impact under GAAP, we have considered them in the preparation of our financial statements as of and for the three months ended March 31, 2021.

Notes to Condensed Consolidated Financial Statements (Unaudited)

New Accounting Pronouncements Adopted During 2021

ASU 2019-12, Simplifying the Accounting for Income Taxes

In December 2019, the Financial Accounting Standards Board (the “FASB”) issued guidance intended to simplify various aspects related to accounting for income taxes, eliminate certain exceptions within Accounting Standards Codification ("ASC") 740 and clarify certain aspects of the current guidance to promote consistency among reporting entities.

The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 2020, with early adoption permitted.

We adopted this guidance prospectively on January 1, 2021.

The adoption of this guidance did not have a material impact on our business, financial condition or results of operations.

ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815

In January 2020, the FASB issued ASU 2020-01 which is intended to clarify interactions between the guidance to account for certain equity securities under Topics 321, 323 and 815, and improve current GAAP by reducing diversity in practice and increasing comparability of accounting.

In January 2020, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Codification (" ASU") 2020-01 which is intended to clarify interactions between the guidance to account for certain equity securities under Topics 321, 323 and 815, and improve current GAAP by reducing diversity in practice and increasing comparability of accounting.

The pronouncement is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020, and early adoption is permitted.

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See our Annual Report on Form 10-K for further information.

The total consideration is subject to certain post-closing adjustments and was approximately $ 48.0 million in cash.

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

See our Annual Report on Form 10-K for further information.

The total consideration was subject to certain post-closing adjustments and was comprised of $ 100.0 million in cash and 5.0 million common units representing limited partner interest in us.

We financed the cash component of this acquisition with borrowings from the DKL Credit Facility (as defined in Note 7).

Notes to Condensed Consolidated Financial Statements (Unaudited)

The Big Spring Gathering Assets are recorded in our pipelines and transportation segment and include:

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• Terminals (total storage of approximately 650,000 bbls);

Notes to Condensed Consolidated Financial Statements (Unaudited)

• Applicable rights-of-way.

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Under each of these agreements, we are required to maintain the capabilities of our pipelines and terminals, such that Delek Holdings may throughput and/or store, as the case may be, specified volumes of crude oil, intermediate and refined products.

To the extent that Delek Holdings is prevented by our failure to maintain such capacities from throughputting or storing such specified volumes for more than 30 days per year, Delek Holdings' minimum throughput commitment will be reduced proportionately and prorated for the portion of the quarter during which the specified throughput capacity was unavailable, and/or the storage fee will be reduced, prorated for the portion of the month during which the specified storage capacity was unavailable.

To the extent that Delek Holdings is prevented by our failure to maintain such capacities to throughput or from storing such specified volumes for more than 30 days per year, Delek Holdings' minimum throughput commitment will be reduced proportionately and prorated for the portion of the quarter during which the specified throughput capacity was unavailable, and/or the storage fee will be reduced, prorated for the portion of the month during which the specified storage capacity was unavailable.

Such reduction would occur even if actual throughput or storage amounts were below the minimum volume commitment levels.

See our Annual Report on Form 10-K for a more complete description of our material commercial agreements and other agreements with Delek Holdings.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Other Agreements with Delek Holdings

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The Partnership entered into an omnibus agreement with Delek Holdings, Delek Logistics Operating, LLC, Lion Oil Company and certain of the Partnership's and Delek Holdings' other subsidiaries on November 7, 2012, which has been amended from time to time in connection with acquisitions from Delek Holdings (collectively, as amended, the "Omnibus Agreement").

The Omnibus Agreement governs the provision of certain operational services and reimbursement obligations, among other matters, between the Partnership and Delek Holdings, and obligates us to pay an annual fee of $ 4.7 million to Delek Holdings for its provision of centralized corporate services to the Partnership.

The Omnibus Agreement governs the provision of certain operational services and reimbursement obligations, among other matters, between the Partnership and Delek

Notes to Condensed Consolidated Financial Statements (Unaudited)

Holdings, and obligates us to pay an annual fee of $ 4.7 million to Delek Holdings for its provision of centralized corporate services to the Partnership.

Pursuant to the terms of the Omnibus Agreement, we are reimbursed by Delek Holdings for certain capital expenditures.

There were no reimbursements by Delek Holdings during the three months ended March 31, 2021 During the three months ended March 31, 2020, we were reimbursed by Delek Holdings for certain capital expenditures in the amount of $ 0.6 million.

There were no reimbursements by Delek Holdings during the three and six months ended June 30, 2021.

During the three and six months ended June 30, 2020, we were reimbursed by Delek Holdings for certain capital expenditures of a nominal amount and $ 0.6 million, respectively.

These amounts are recorded in other long-term liabilities and are amortized to revenue over the life of the underlying revenue agreement corresponding to the asset.

Ad ditionally, we are reimbursed or indemnified, as the case may be, for costs incurred in excess of certain amounts related to certain asset failures, pursuant to the terms of the Omnibus Agreeme nt.

As of March 31, 2021, we have recorded a nominal receivable from related parties for these matters for which we expect to be reimbursed.

Additionally, we are reimbursed or indemnified, as the case may be, for costs incurred in excess of certain amounts related to certain asset failures, pursuant to the terms of the Omnibus Agreeme nt.

As of June 30, 2021, there was no receivable from related parties for these matters.

These reimbursements are recorded as reductions to operating expense.

We were reimbursed a nominal amount for these matters during the both three months ended March 31, 2021 and 2020.

We were reimbursed a nominal amount for these matters during the both three and six months ended June 30, 2021, and a nominal amount and $ 0.1 million during the three and six months ended June 30, 2020, respectively.

Other Transactions

The Partnership manages a long-term capital project on behalf of Delek Holdings pursuant to a construction management and operating agreement (the "DPG Management Agreement") for the construction of a 250-mile gathering system in the Permian Basin.

The majority of the gathering system has been constructed, however, additional costs pertaining to a pipeline connection that was not acquired by the Partnership continue to be incurred and are still subject to the terms of the DPG Management Agreement.

The Partnership manages long-term capital projects on behalf of Delek Holdings pursuant to a construction management and operating agreement (the "DPG Management Agreement") for the construction of gathering systems in the Permian Basin.

The majority of the gathering systems have been constructed, however, additional costs pertaining to a pipeline connection that was not acquired by the Partnership continue to be incurred and are still subject to the terms of the DPG Management Agreement.

The Partnership is also considered the operator for the project and is responsible for oversight of the project design, procurement and construction of project segments and provides other related services.

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The agreement extends through December 2022.

Total fees paid to the Partnership were $ 0.4 million and $ 0.9 million for the three months ended March 31, 2021 and 2020, respectively, which are recorded in affiliate revenue in our condensed consolidated statements of income.

Total fees paid to the Partnership were $ 0.4 million and $ 0.8 million for the three and six months ended June 30, 2021, respectively, and $ 0.4 million and $ 1.2 million for the three and six months ended June 30, 2020, respectively, which are recorded in affiliate revenue in our condensed consolidated statements of income.

Additionally, the Partnership incurs the costs in connection with the construction of the assets and is subsequently reimbursed by Delek Holdings.

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Amendment No.

2 amended the Prior Partnership Agreement to provide for a waiver of distributions in respect of the IDRs for General Partner Additional Units ("GP

Notes to Condensed Consolidated Financial Statements (Unaudited)

Additional Units") associated with the 5.0 million Additional Units for at least two years, through at least the distribution for the quarter ending March 31, 2022 ( the “IDR Waiver”).

2 amended the Prior Partnership Agreement to provide for a waiver of distributions in respect of the IDRs for General Partner Additional Units ("GP Additional Units") associated with the 5.0 million Additional Units for at least two years, through at least the distribution for the quarter ending March 31, 2022 ( the “IDR Waiver”).

The IDR Waiver essentially reduced the distribution made to the holders of the IDRs during this period, as the holders would not receive a share of the distribution made on the GP Additional Units.

The IDRs were eliminated in the IDR Restructuring Transaction on August 13, 2020.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Conversion of GP Economic Interest and Elimination of IDRs

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A summary of revenue, purchases from affiliates and expense transactions with Delek Holdings and its affiliates are as follows (in thousands):

Three Months Ended March 31,

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

2021 2020 2021 2020

Revenues $ 88,722 $ 87,629 $ 184,916 $ 194,328

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Pursuant to the IDR Restructuring Transaction on August 13, 2020, the general partner will no longer receive any cash distributions.

In February 2021, we paid quarterly cash distributions of $ 39.5 million, of which $ 31.6 million were paid to Delek Holdings.

In February 2020, we paid quarterly cash distributions of $ 30.6 million, of which $ 22.6 million were paid to Delek Holdings and our general partner.

On April 29, 2021, our board of directors declared a quarterly cash distribution totaling $ 40.0 million, based on the available cash as of the date of determination for the end of the first quarter of 2021, payable on May 14, 2021, of which $ 32.0 million is expected to be paid to Delek Holdings.

In February and May 2021, we paid quarterly cash distributions of $ 39.5 million and $ 40.0 million, of which $ 31.6 million and $ 32.0 million, respectively, were paid to Delek Holdings.

In February and May 2020, we paid quarterly cash distributions of $ 30.6 million and $ 30.9 million, respectively, of which $ 22.6 million and $ 23.2 million, respectively, were paid to Delek Holdings and our general partner.

On July 26, 2021, our board of directors declared a quarterly cash distribution totaling $ 40.8 million, based on the available cash as of the date of determination, for the end of the second quarter of 2021, payable on August 11, 2021, of which $ 32.7 million is expected to be paid to Delek Holdings.

Note 4 - Revenues

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In addition to the services we provide to Delek Holdings, we also generate substantial revenue from crude oil, intermediate and refined products transportation services for, and terminalling and marketing services to, third parties primarily in Texas, New Mexico, Tennessee and Arkansas.

Certain of these services

Notes to Condensed Consolidated Financial Statements (Unaudited)

are provided pursuant to contractual agreements with third parties.

Certain of these services are provided pursuant to contractual agreements with third parties.

Payment terms require customers to pay shortly after delivery and do not contain significant financing components.

The majority of our commercial agreements with Delek Holdings meet the definition of a lease because:

(1) performance of the contracts is dependent on specified property, plant or equipment and (2) it is remote that one or more parties other than Delek Holdings will take more than a minor amount of the output associated with the specified property, plant or equipment.

(1) performance of the contracts is dependent on specified property, plant or equipment and (2) it is remote that one or more parties other than Delek Holdings will take more

Notes to Condensed Consolidated Financial Statements (Unaudited)

than a minor amount of the output associated with the specified property, plant or equipment.

As part of our adoption of ASC 842, Leases ("ASC 842"), we applied the permitted practical expedient to not separate lease and non-lease components under the predominance principle to designated asset classes associated with the provision of logistics services.

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Therefore, the combined component is accounted for under the applicable lease accounting guidance.

Of our $ 462.1 million net property, plant, and equipment balance as of March 31, 2021, $ 339.2 million is subject to operating leases under our commercial agreements.

Of our $ 454.8 million net property, plant, and equipment balance as of June 30, 2021, $ 383.0 million is subject to operating leases under our commercial agreements.

These agreements do not include options for the lessee to purchase our leasing equipment, nor do they include any material residual value guarantees or material restrictive covenants.

The following table represents a disaggregation of revenue for each reportable segment for the periods indicated (in thousands):

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Pipelines and Transportation Wholesale Marketing and Terminalling Consolidated

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Service Revenue - Affiliate 3,797 8,554 12,351

Product Revenue - Third Party — 74,849 74,849

Product Revenue - Affiliate — 3,741 3,741

Lease Revenue - Affiliate (1)

61,867 10,762 72,629

Total Revenue $ 70,435 $ 98,043 $ 168,478

(1) Net of $ 1.8 million of amortization expense for the three months ended June 30, 2021, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.

Six Months Ended June 30, 2021

Pipelines and Transportation Wholesale Marketing and Terminalling Consolidated

Service Revenue - Third Party $ 6,698 $ 219 $ 6,917

Service Revenue - Affiliate 5,021 16,636 21,657

Product Revenue - Third Party — 129,559 129,559

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Lease Revenue - Affiliate (1)

123,691 19,439 143,130

Total Revenue $ 135,410 $ 185,981 $ 321,391

(1) Net of $ 1.8 million of amortization expense for the three months ended March 31, 2021, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.

Three Months Ended March 31, 2020

(1) Net of $ 3.6 million of amortization expense for the six months ended June 30, 2021, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.

Three Months Ended June 30, 2020

Pipelines and Transportation Wholesale Marketing and Terminalling Consolidated

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Service Revenue - Affiliate 3,326 7,810 11,136

Product Revenue - Third Party — 27,772 27,772

Product Revenue - Affiliate — 6,720 6,720

Lease Revenue - Affiliate (1)

58,068 11,705 69,773

Total Revenue $ 63,426 $ 54,211 $ 117,637

(1) Net of $ 1.8 million of amortization expense for the three months ended June 30, 2020, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Six Months Ended June 30, 2020

Pipelines and Transportation Wholesale Marketing and Terminalling Consolidated

Service Revenue - Third Party $ 11,496 $ 396 $ 11,892

Service Revenue - Affiliate 8,215 15,792 24,007

Product Revenue - Third Party — 74,818 74,818

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Lease Revenue - Affiliate (1)

91,682 20,417 112,099

Total Revenue $ 111,393 $ 169,645 $ 281,038

(1) Net of $ 1.8 million of amortization expense for the three months ended March 31, 2020, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment .

As of March 31, 2021, we expect to recognize $ 1.5 billion in lease revenues related to our unfulfilled performance obligations pertaining to the minimum volume commitments and capacity utilization under the non-cancelable terms of our commercial agreements with Delek Holdings.

(1) Net of $ 3.6 million of amortization expense for the six months ended June 30, 2020, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment .

As of June 30, 2021, we expect to recognize $ 1.4 billion in lease revenues related to our unfulfilled performance obligations pertaining to the minimum volume commitments and capacity utilization under the non-cancelable terms of our commercial agreements with Delek Holdings.

Most of these agreements have an initial term ranging from five to ten years , which may be extended for various renewal terms.

We disclose information about remaining performance obligations that have original expected durations of greater than one year .

Our unfulfilled performance obligations as of March 31, 2021 were as follows (in thousands):

Our unfulfilled performance obligations as of June 30, 2021 were as follows (in thousands):

Remainder of 2021 136,671

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Total expected revenue on remaining performance obligations $ 1,431,407

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 5 - Net Income Per Unit

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Effective August 13, 2020, the common limited partner units are the only participating security for cash distributions.

Refer to Note 8 - Equity for a discussion of the elimination of the IDRs and conversion of the 2 % general partner economic interest effective August 13, 2020.

Refer to Note 3 for additional details.

The two-class method was based on the weighted-average number of common units outstanding during the period.

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The IDRs were paid following the close of each quarter.

As discussed in Note 3 - Related Party Transactions, pursuant to Amendment No.

Pursuant to Amendment No.

2 to the Prior Partnership Agreement, an agreement was reached for a waiver of distributions in respect of the IDRs for the GP Additional Units associated with the 5.0 million Additional Units issued in connection with the Big Spring Gathering Assets Acquisition for at least two years, through at least the distribution for the quarter ending March 31, 2022.

The IDR Waiver essentially reduced the distribution made to the holders of the IDRs during this period, as the holders would not receive a share of the distribution made on the GP Additional Units.

An additional waiver letter was signed that waived all of the distributions for the first quarter of 2020 on the Additional Units with respect to base distributions and the IDRs.

Refer to Note 3 for additional details.

Subsequently, the IDRs were eliminated in the IDR Restructuring Transaction on August 13, 2020.

Diluted net income per unit applicable to common limited partners includes the effects of potentially dilutive units on our common units.

As of March 31, 2021, the only potentially dilutive units outstanding consist of unvested phantom units.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of June 30, 2021, the only potentially dilutive units outstanding consist of unvested phantom units.

Our distributions earned with respect to a given period are declared subsequent to quarter end.

Therefore, the table below represents total cash distributions applicable to the period in which the distributions are earned.

The expected date of distribution for the distributions earned during the period ended March 31, 2021 is May 14, 2021.

The expected date of distribution for the distributions earned during the period ended June 30, 2021 is August 11, 2021.

Payments made to our unitholders are determined in relation to actual distributions declared and are not based on the net income allocations used in the calculation of net income per unit.

The calculation of net income per unit is as follows (dollars in thousands, except units and per unit amounts):

Three Months Ended March 31,

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

2021 2020 2021 2020

Net income attributable to partners $ 43,246 $ 44,415 $ 79,513 $ 72,211

General partner's distribution (including IDRs) (1)

— 9,479 — 18,618

Limited partners' distribution 40,846 26,490 80,814 48,229

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Distributions (including IDRs) (1)

$ — $ 9,479 $ — $ 18,618

Allocation of earnings in excess (deficit) of distributions — 168 — 106

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In connection with the IDR Restructuring Transaction on August 13, 2020, the IDRs were eliminated and the general partner interest became a non-economic general partner interest.

See Note 8 for further discussion related to IDRs.

(2) There were no outstanding common units excluded from the diluted earnings per unit calculation for the three months ended March 31, 2021 and 2020.

(2) Outstanding common units totaling 3,662 and 1,841 were excluded from the diluted earnings per unit calculation for the three and six months ended June 30, 2021, respectively.

Outstanding common units totaling 18,270 were excluded from the diluted earnings per unit calculation for both the three and six months ended June 30, 2020.

Note 6 - Inventory

Inventories consisted of $ 1.9 million and $ 3.1 million of refined petroleum products as of March 31, 2021 and December 31, 2020, each of which are net of lower of cost or net realizable value reserve of a nominal amount.

Inventories consisted of $ 2.0 million and $ 3.1 million of refined petroleum products as of June 30, 2021 and December 31, 2020, each of which are net of lower of cost or net realizable value reserve of a nominal amount.

Inventory is stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis.

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Note 7 - Long-Term Obligations

7.125 % Senior Notes due 2028

On May 24, 2021, the Partnership and our wholly owned subsidiary Delek Logistics Finance Corp.

("Finance Corp." and together with the Partnership, the "Issuers") sold $ 400.0 million in aggregate principal amount of 7.125 % senior notes due 2028 (the "2028 Notes") at par, pursuant to an indenture with U.S.

Bank, National Association as trustee.

The 2028 Notes are general unsecured senior obligations of the Issuers and are unconditionally guaranteed jointly and severally on a senior unsecured basis by the Partnership's subsidiaries other than Finance Corp., and will be unconditionally guaranteed on the same basis by certain of the Partnership’s future subsidiaries.

The 2028 Notes rank equal in right of payment with all existing and future senior indebtedness of the Issuers, and senior in right payment to any future subordinated indebtedness of the Issuers.

The 2028 Notes will mature on June 1, 2028, and interest on the 2028 Notes is payable semi-annually in arrears on each June 1 and December 1, commencing December 1, 2021.

At any time prior to June 1, 2024, the Issuers may redeem up to 35 % of the aggregate principal amount of the 2028 Notes with the net cash proceeds of one or more equity offerings by the Partnership at a redemption price of 107.125 % of the redeemed principal amount, plus accrued and unpaid interest, if any, subject to certain conditions and limitations.

Prior to June 1, 2024, the Issuers may also redeem all or part of the 2028 Notes at a redemption price of the principal amount plus accrued and unpaid interest, if any, plus a "make whole" premium, subject to certain conditions and limitations.

In addition, beginning on June 1, 2024, the Issuers may, subject to certain conditions and limitations, redeem all or part of the 2028 Notes, at a redemption price of 103.563 % of the redeemed principal for the twelve-month period beginning on June 1, 2024, 101.781 % for the twelve-month period beginning on June 1, 2025, and 100.00 %

Notes to Condensed Consolidated Financial Statements (Unaudited)

beginning on June 1, 2026 and thereafter, plus accrued and unpaid interest, if any.

In the event of a change of control, accompanied or followed by a ratings downgrade within a certain period of time, subject to certain conditions and limitations, the Issuers will be obligated to make an offer for the purchase of the 2028 Notes from holders at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest.

As of June 30, 2021, we had $ 400.0 million in outstanding principal amount under the 2028 Notes, and the effective interest rate was 7.41%.

Outstanding borrowings under the 2028 Notes are net of deferred financing costs amounting to $ 6.3 million as of June 30, 2021.

DKL Credit Facility

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The obligations under the DKL Credit Facility remain secured by first priority liens on substantially all of the Partnership's and its subsidiaries' tangible and intangible assets.

Notes to Condensed Consolidated Financial Statements (Unaudited)

In connection with the IDR Restructuring Transaction, the Partnership entered into a First Amendment to the DKL Credit Facility (the "First Amendment") which, among other things, permitted the exchange of the IDRs and the general partner interest in the Partnership for the non-economic general partner interest, the newly issued limited partner interests in the Partnership, plus $ 45.0 million in cash.

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The applicable margin in each case and the fee payable for any unused revolving commitments vary based upon the Partnership's most recent total leverage ratio calculation delivered to the lenders, as called for and defined under the terms of the DKL Credit Facility.

At March 31, 2021, the weighted average interest rate for our borrowings under the facility was approximately 2.45 %.

At June 30, 2021, the weighted average interest rate for our borrowings under the facility was approximately 2.50 %.

Additionally, the DKL Credit Facility requires us to pay a leverage ratio dependent quarterly fee on the average unused revolving commitment.

As of March 31, 2021, this fee was 0.35 % per year.

As of March 31, 2021, we had $ 737.5 million of outstanding borrowings under the DKL Credit Facility, with no letters of credit in place.

Unused credit commitments under the DKL Credit Facility as of March 31, 2021 were $ 112.5 million.

As of June 30, 2021, this fee was 0.35 % per year.

As of June 30, 2021, we had $ 288.8 million of outstanding borrowings under the DKL Credit Facility, with no letters of credit in place.

Unused credit commitments under the DKL Credit Facility as of June 30, 2021 were $ 561.2 million.

6.750 % Senior Notes Due 2025

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The 2025 Notes rank equal in right of payme nt with all existing and future senior indebtedness of the Issuers, and senior in right of payment to any future subordinated indebtedness of the Issuers.

Interest on the 2025 Notes is payable semi-annually in arrears on each May 15 and November 15, commencing November 15, 2017.

Th e Issuers may, subject to certain conditions and limitations, redeem all or part of the 2025 Notes at a redemption price of 105.063 % of the redeemed principal during the twelve-month period beginning on May 15, 2020, 103.375 % for the twelve-month period beginning on May 15, 2021, 101.688 % for the twelve-month period beginning on May 15, 2022 and 100.00 % beginning on May 15, 2023 and thereafter, plus accrued and unpaid interest, if any.

Interest on the 2025 Notes is payable semi-annually in arrears on each May 15 and November 15.

Th e Issuers may, subject to certain conditions and limitations, redeem all or part of the 2025 Notes at a redemption price of 103.375 % of the redeemed principal during the twelve-month period beginning on May 15, 2021, 101.688 % for the twelve-month period beginning on May 15, 2022 and 100.00 % beginning on May 15, 2023 and thereafter, plus accrued and unpaid interest, if any.

In the event of a change of control, accompanied or followed by a ratings downgrade within a certain period of time, subject to certain conditions and limitations, the Issuers will be obligated to make an offer for the purchase of the 2025 Notes from holders at a price equal to 101 % of the principal amount thereof, plus accrued and unpaid interest.

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The terms of the exchange notes that were issued in May 2018 as a result of the exchange (also referred to as the "2025 Notes") are substantially identical to the terms of the original 2025 Notes.

As of March 31, 2021, we had $ 250.0 million in outstanding principal amount of the 2025 Notes.

As of March 31, 2021, the effective interest rate related to the 2025 Notes was approximately 7.25 %.

Outstanding borrowings under the 2025 Notes are net of deferred financing costs and debt discount of $ 3.1 million and $ 1.0 million, respectively, as of March 31, 2021, and $ 3.3 million and $ 1.0 million, respectively, as of December 31, 2020.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of June 30, 2021, we had $ 250.0 million in outstanding principal amount of the 2025 Notes.

As of June 30, 2021, the effective interest rate related to the 2025 Notes was approximately 7.21 %.

Outstanding borrowings under the 2025 Notes are net of deferred financing costs and debt discount of $ 2.9 million and $ 0.9 million, respectively, as of June 30, 2021, and $ 3.3 million and $ 1.0 million, respectively, as of December 31, 2020.

Note 8 - Equity

We had 8,697,468 common limited partner units held by the public outstanding as of March 31, 2021.

Additionally, as of March 31, 2021, Delek Holdings owned an 80.0 % limited partner interest in us, consisting of 34,745,868 common limited partner units.

Effective August 13, 2020, the Partnership closed on the IDR Restructuring Transaction, and contemporaneous with this transaction, Delek Holdings purchased a 5.2 % ownership interest in our general partner from certain affiliates, who were also members of our general partner's management and board of directors, at fair market value.

Delek Holdings now owns 100 % of the outstanding ownership interest in our general partner.

We had 8,707,565 common limited partner units held by the public outstanding as of June 30, 2021.

Additionally, as of June 30, 2021, Delek Holdings owned an 80.0 % limited partner interest in us, consisting of 34,745,868 common limited partner units.

Effective August 13, 2020, the Partnership closed on the IDR Restructuring Transaction.

As part of this transaction, we expensed approximately $ 1.1 million of transaction costs.

Refer to Note 3 for additional details.

In August 2020, we filed a shelf registration statement with the SEC, which subsequently became effective, for the proposed re-sale or other disposition from time to time by Delek Holdings of up to 14.0 million of our common limited partner units.

As of March 31, 2021, we

Notes to Condensed Consolidated Financial Statements (Unaudited)

had not sold any securities under this shelf registration statement and we will not receive any proceeds from the sale of securities by Delek Holdings.

As of June 30, 2021, we had not sold any securities under this shelf registration statement and we will not receive any proceeds from the sale of securities by Delek Holdings.

Equity Activity

There were no changes in the number of common limited partner units outstanding from December 31, 2020 through March 31, 2021.

The table below summarizes the changes in the number of limited partner units outstanding from December 31, 2020 through June 30, 2021.

Common - Public Common - Delek Holdings Total

Balance at December 31, 2020 8,697,468 34,745,868 43,443,336

Unit-based compensation awards (1)

10,097 — 10,097

Balance at June 30, 2021 8,707,565 34,745,868 43,453,433

(1) Unit-based compensation awards are presented net of 445 units withheld for taxes as of June 30, 2021.

Issuance of Additional Securities

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Effective August 13, 2020, the IDRs were eliminated and the 2 % general partner economic interest was converted to a non-economic general partner interest that no longer receives cash distributions.

Refer to Note 3 for additional details.

The following table presents the allocation of the general partner's interest in net income (in thousands, except percentage of ownership interest):

Three Months Ended March 31,

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

2021 2020 2021 2020

Net income attributable to partners $ 43,246 $ 44,415 $ 79,513 $ 72,211

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Total general partner's interest in net income $ — $ 9,647 $ — $ 18,724

Notes to Condensed Consolidated Financial Statements (Unaudited)

Incentive Distribution Rights ("IDRs")

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2 to the Prior Partnership Agreement, prior to the IDR Restructuring Transaction, an agreement was reached for a waiver of distributions in respect of the IDRs associated with the 5.0 million Additional Units for at least two years, through at least the distribution for the quarter ending March 31, 2022 (the "IDR Waiver").

The IDR Waiver essentially reduced the distribution made to the holders of the IDRs during this period, as the holders would not receive a share of the distribution made on the Additional Units.

An additional waiver letter was signed that waived all of the distributions for the first quarter of 2020 on the Additional Units with respect to base distributions and the IDRs.

Refer to Note 3 for additional details.

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Our distributions earned with respect to a given period are declared subsequent to quarter end.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The table below summarizes the quarterly distributions related to our quarterly financial results:

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(in thousands) Date of Distribution Unitholders Record Date

March 31, 2020 $ 0.890 $ 30,878 May 12, 2020 May 5, 2020

June 30, 2020 $ 0.900 $ 35,969 August 12, 2020 August 7, 2020

1 unchanged sentence

December 31, 2020 $ 0.910 $ 39,533 February 9, 2021 February 2, 2021

March 31, 2021 $ 0.920 $ 39,968 May 14, 2021 (1)

March 31, 2021 $ 0.920 $ 39,968 May 14, 2021 May 10, 2021

June 30, 2021 $ 0.940 $ 40,846 August 11, 2021 (1)

August 5, 2021

(1) Expected date of distribution.

The allocations of total quarterly cash distributions made to limited partners for the three months ended March 31, 2021 and 2020 are set forth in the table below.

The allocations of total quarterly cash distributions made to limited partners for the three and six months ended June 30, 2021 and 2020 are set forth in the table below.

Distributions earned with respect to a given period are declared subsequent to quarter end.

Therefore, the table below presents total cash distributions applicable to the period in which the distributions are earned (in thousands, except per unit amounts):

Three Months Ended March 31,

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

2021 2020 2021 2020

General partner's distributions:

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The LTIP is administered by the Conflicts Committee of the board of directors.

Equity-based compensation expense is included in general and administrative expenses in the accompanying condensed consolidated statements of income and comprehensive income and is immaterial for the three months ended March 31, 2021 and 2020.

On June 9, 2021, the LTIP was amended to increase the number of units representing limited partner interest in the Partnership (the "Common Units") authorized for issuance by 300,000 Units to 912,207 Common Units.

Additionally, the term of the LTIP was extended to June 9, 2031.

Note 10 - Equity Method Investments

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During the third quarter of 2020, Red River, which owns a crude oil pipeline running from Cushing, Oklahoma to Longview, Texas, completed a planned expansion project to increase the pipeline capacity and commenced operations on the completed expansion project on October 1, 2020.

We contributed $ 3.5 million related to such expansion project in May 2019.

During the three months ended March 31, 2021, we made additional capital contributions totaling $ 1.4 million based on capital calls received.

Notes to Condensed Consolidated Financial Statements (Unaudited)

We contributed $ 3.5 million related to such expansion project in May 2019 and during 2020 made additional capital contributions of $ 12.2 million based on capital calls received.

During the six months ended June 30, 2021, we made additional capital contributions totaling $ 1.4 million based on capital calls received.

Summarized unaudited financial information for Red River on a 100% basis is shown below (in thousands):

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Current Assets $ 21,877 $ 13,488

1 unchanged sentence

Current liabilities $ 11,211 $ 7,789

Three Months Ended March 31,

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

2021 2020 2021 2020

Revenues $ 17,744 $ 11,873 $ 26,787 $ 21,969

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Combined summarized unaudited financial information for these two equity method investees on a 100% basis is shown below (in thousands):

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Current assets $ 20,551 $ 20,763

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Current liabilities $ 2,825 $ 1,496

Three Months Ended March 31,

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

2021 2020 2021 2020

Revenues $ 13,600 $ 12,738 $ 23,226 $ 28,185

2 unchanged sentences

Net Income $ 8,544 $ 7,729 $ 12,723 $ 17,887

Notes to Condensed Consolidated Financial Statements (Unaudited)

The Partnership's investments in these three entities were financed through a combination of cash from operations and borrowings under the DKL Credit Facility.

As of March 31, 2021 and December 31, 2020, the Partnership's investment balance in these joint ventures was $ 251.4 million and $ 253.7 million, respectively.

As of June 30, 2021 and December 31, 2020, the Partnership's investment balance in these joint ventures was $ 252.0 million and $ 253.7 million, respectively.

We do not consolidate any part of the assets or liabilities or operating results of our equity method investees.

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Our investment in these joint ventures is reflected in our pipelines and transportation segment.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 11 - Segment Data

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Segment contribution margin is defined as net revenues less cost of materials and other and operating expenses, excluding depreciation and amortization.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following is a summary of business segment operating performance as measured by contribution margin for the periods indicated:

(in thousands) Three Months Ended March 31,

(in thousands) Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Pipelines and Transportation

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Capital spending $ 2,591 $ 652 $ 10,390 $ 3,681

(1) Affiliate revenue for the wholesale marketing and terminalling segment is presented net of amortization expense pertaining to the Marketing Contract Intangible Acquisition.

(1) Affiliate revenue for the wholesale marketing and terminalling segment is presented net of amortization expense related to a customer contract intangible asset.

See Note 4 for additional information.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table summarizes the total assets for each segment as of March 31, 2021 and December 31, 2020 (in thousands).

The following table summarizes the total assets for each segment as of June 30, 2021 and December 31, 2020 (in thousands).

Assets for each segment include property, plant and equipment, equity method investments, intangible assets and inventory.

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Pipelines and transportation $ 699,588 $ 723,317

2 unchanged sentences

Total assets $ 935,476 $ 956,417

Property, plant and equipment and accumulated depreciation as of March 31, 2021 and depreciation expense by reporting segment for the three months ended March 31, 2021 were as follows (in thousands):

Notes to Condensed Consolidated Financial Statements (Unaudited)

Property, plant and equipment and accumulated depreciation as of June 30, 2021 and depreciation expense by reporting segment for the three and six months ended June 30, 2021 were as follows (in thousands):

Pipelines and Transportation Wholesale Marketing and Terminalling Consolidated

2 unchanged sentences

Property, plant and equipment, net $ 395,744 $ 59,007 $ 454,751

Depreciation expense for the three months ended March 31, 2021 $ 8,827 $ 1,912 $ 10,739

Depreciation expense for the three months ended June 30, 2021 $ 8,035 $ 1,932 $ 9,967

Depreciation expense for the six months ended June 30, 2021 $ 16,862 $ 3,844 $ 20,706

In accordance with ASC 360, Property, Plant & Equipment , we evaluate the realizability of property, plant and equipment as events occur that might indicate potential impairment.

There were no indicators of impairment of our property, plant and equipment as of March 31, 2021.

There were no indicators of impairment of our property, plant and equipment as of June 30, 2021.

Note 12 - Income Taxes

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These laws and regulations govern the discharge of materials into the environment, waste management practices and pollution prevention measures, as well as the safe operation of our pipelines and the safety of our workers and the public.

Numerous permits or other authorizations are required under these laws and regulations for the operation of our terminals, pipelines, saltwells, trucks and related operations, and may be subject to revocation, modification and renewal.

Numerous permits or other authorizations are required under these laws and regulations for the operation of our terminals, pipelines, salt wells, trucks and related operations, and may be subject to revocation, modification and renewal.

These laws and permits raise potential exposure to future claims and lawsuits involving environmental and safety matters, which could include soil and water contamination, air pollution, personal injury and property damage allegedly caused by substances which we handled, used, released or disposed of, transported, or that relate to pre-existing conditions for which we have assumed responsibility.

We believe that our current operations are in substantial compliance with existing environmental and safety requirements.

However, there

Notes to Condensed Consolidated Financial Statements (Unaudited)

have been and we expect that there will continue to be ongoing discussions about environmental and safety matters between us and federal and state authorities, including notices of violations, citations and other enforcement actions, some of which have resulted or may result in changes to operating procedures and in capital expenditures.

However, there have been and we expect that there will continue to be ongoing discussions about environmental and safety matters between us and federal and state authorities, including notices of violations, citations and other enforcement actions, some of which have resulted or may result in changes to operating procedures and in capital expenditures.

While it is often difficult to quantify future environmental or safety related expenditures, we anticipate that continuing capital investments and changes in operating procedures will be required to comply with existing and new requirements, as well as evolving interpretations and more strict enforcement of existing laws and regulations.

Releases of hydrocarbons or hazardous substances into the environment could, to the extent the event is not insured, or is not a reimbursable event under the Omnibus Agreement, subject us to substantial expenses, including costs to respond to, contain and remediate a release, to comply with applicable laws and regulations and to resolve claims by third parties for personal injury, property damage or natural resources damages.

Notes to Condensed Consolidated Financial Statements (Unaudited)

remediate a release, to comply with applicable laws and regulations and to resolve claims by third parties for personal injury, property damage or natural resources damages.

Crude Oil and Other Releases

We have experienced several crude oil and other releases involving our assets.

There were no material releases that occurred during the three months ended March 31, 2021.

There were no material releases that occurred during the six months ended June 30, 2021.

For releases that occurred in prior years, we have received regulatory closure or a majority of the cleanup and remediation efforts are substantially complete.

2 unchanged sentences

We may incur additional expenses as a result of further scrutiny by regulatory authorities and continued compliance with laws and regulations to which our assets are subject.

As of March 31, 2021, we have accrued $ 0.3 million for remediation and other such matters related to these releases.

As of June 30, 2021, we have accrued $ 0.3 million for remediation and other such matters related to these releases.

On October 3, 2019, a release of diesel fuel involving one of our pipelines occurred near Sulphur Springs, Texas (the "Sulphur Springs Release").

Cleanup operations and site maintenance and remediation on this release have been substantially completed where such costs incurred totaled $ 7.1 million during 2019 and $ 0.5 million during 2020.

During the three months ended March 31, 2021, we incurred a nominal amount of additional costs related to final clean-up of this release.

Ground water monitoring wells were installed in the third quarter of 2020 and will be monitored quarterly until the site is closed.

Additionally, in the third quarter of 2020 we conducted creek bed sediment sampling and the results indicated no issues with the groundwater.

In the fourth quarter of 2020 we submitted an actual property assessment report that assessed site conditions and recommends closure of the site.

In the fourth quarter of 2020 we submitted an actual property assessment report that assessed site conditions and recommended closure of the site.

Closure of the site was approved in the first quarter of 2021.

The ground water monitoring wells are scheduled to be removed in the second quarter of 2021.

The ground water monitoring wells were removed in the second quarter of 2021.

We filed suit in January 2020 against a third party contractor, seeking damages related to this release;

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We do not believe the total costs associated with these events, whether alone or in the aggregate, including any fines or penalties and net of available insurance, indemnification or reimbursement, will have a material adverse effect upon our business, financial condition or results of operations.

During the three months ended March 31, 2021 and 2020, we recorded $ 0.1 million and a nominal amount of crude oil and other releases remediation expenses, net of reimbursable costs, respectively.

During the three and six months ended June 30, 2021 and 2020, the crude oil and other releases remediation expenses, net of reimbursable costs, were immaterial.

Note 14 - Leases

6 unchanged sentences

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table presents additional information related to our operating leases in accordance ASC 842:

Three Months Ended March 31,

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

(in thousands) 2021 2020 2021 2020

2 unchanged sentences

Short-term lease cost (2)

Variable lease costs — 212

631 817 778 1,349

Total lease cost $ 3,996 $ 2,743 $ 6,887 $ 3,875

3 unchanged sentences

Leased assets obtained in exchange for new operating lease liabilities (1)

March 31, 2021 March 31, 2020

$ 2,736 $ 15,779 $ 5,572 $ 15,779

June 30, 2021 June 30, 2020

Weighted-average remaining lease term (years) for operating leases 3.5 3.8

Weighted-average discount rate (3) operating leases

Weighted-average remaining lease term (years) for financing lease 2.7 0.0

Weighted-average discount rate (3) financing lease

(1) Includes an immaterial amount of financing lease cost.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(1) Includes an immaterial amount of financing lease.

(2) Includes an immaterial amount of variable lease cost.

2 unchanged sentences

Distribution Declaration

On April 29, 2021, our general partner's board of directors declared a quarterly cash distribution of $ 0.920 per unit, payable on May 14, 2021, to unitholders of record on May 10, 2021.

Exclusivity Supply Agreement

In May 2021, we executed a strategic exclusivity supply agreement with Baker Petrolite LLC (an affiliate of Baker Hughes Company) ("Baker"), for the supply of chemicals to meet IMO regulations through blending competencies utilizing proprietary intellectual property.

The agreement has a 5 -year initial term and a 5 -year extension option.

Terms of the agreement are intended to incentivize a cooperative arrangement relating to strategic blending activities to be operated by the Partnership, and provide for profit sharing opportunities through a variable price structure.

Annual minimum requirements under the contract are nominal and may be applied towards purchases.

On July 26, 2021, our general partner's board of directors declared a quarterly cash distribution of $ 0.940 per unit, payable on August 11, 2021, to unitholders of record on August 5, 2021.

Management's Discussion and Analysis

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

What changed 10-Q

Item 1. Financial Statements