What changed in this filing

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Item 1. Financial Statements

2022-05-05 compared with 2021-11-05 · 174 added, 350 removed, 453 unchanged (54% of the section changed)

3 unchanged sentences

(in thousands, except unit and per unit data)

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Current assets:

1 unchanged sentence

Accounts receivable 20,350 15,384

Accounts receivable from related parties — 5,932

Inventory 1,779 2,406

29 unchanged sentences

Common unitholders - public;

8,713,195 units issued and outstanding at September 30, 2021 ( 8,697,468 at December 31, 2020)

9,162,504 units issued and outstanding at March 31, 2022 ( 8,774,053 at December 31, 2021)

170,696 166,067

Common unitholders - Delek Holdings;

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

34,311,278 units issued and outstanding at March 31, 2022 ( 34,696,800 at December 31, 2021)

( 277,218 ) ( 270,059 )

6 unchanged sentences

(in thousands, except unit and per unit data)

Three months ended Nine months ended

September 30, September 30,

2021 2020 2021 2020

Three months ended

Net revenues:

18 unchanged sentences

Total non-operating expenses, net 7,223 5,719

Income before income tax (benefit) expense 43,430 46,160 123,293 118,606

Income tax (benefit) expense ( 194 ) ( 168 ) 156 67

Income before income tax expense 39,615 36,451

Income tax expense 101 184

Net income attributable to partners $ 39,514 $ 36,267

Comprehensive income attributable to partners $ 39,514 $ 36,267

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

Limited partners' interest in net income $ 43,624 $ 46,328 $ 123,137 $ 99,815

Net income per limited partner unit:

6 unchanged sentences

(1) See Note 2 for a description of our material affiliate revenue transactions.

(2) See Note 3 for a description of the IDR Restructuring Transaction.

See accompanying notes to the condensed consolidated financial statements

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(in thousands)

Common - Public Common -

Delek Holdings Total

Balance at June 30, 2021 $ 164,679 $ ( 272,525 ) $ ( 107,846 )

Cash distributions (1)

( 8,237 ) ( 32,661 ) ( 40,898 )

Net income attributable to partners

8,745 34,879 43,624

Balance at September 30, 2021 $ 165,281 $ ( 270,034 ) $ ( 104,753 )

(1) Cash distributions include a nominal amount related to distribution equivalents on vested phantom units for the three months ended September 30, 2021 .

Common - Public Common -

Delek Holdings General Partner Total

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

Cash distributions ( 7,819 ) ( 18,671 ) ( 9,478 ) ( 35,968 )

Net income attributable to partners 11,258 35,070 — 46,328

Distribution to general partner for conversion of its economic interest and IDR elimination — — ( 45,000 ) ( 45,000 )

Non-cash conversion of general partner's economic interest and IDR elimination — ( 57,702 ) 57,702 —

Sponsor Contribution of fixed assets — 1,378 — 1,378

Other 4 119 — 123

Balance at September 30, 2020 $ 164,313 $ ( 275,767 ) $ — $ ( 111,454 )

Common - Public Common -

Delek Holdings Total

Common - Public Common - Delek Holdings Total

Balance at December 31, 2021 $ 166,067 $ ( 270,059 ) $ ( 103,992 )

Cash distributions (1)

( 8,570 ) ( 33,830 ) ( 42,400 )

Net income attributable to partners 8,328 31,186 39,514

Delek Holdings unit sale to public 5,110 ( 5,110 ) —

Other ( 239 ) 595 356

Balance at September 30, 2021 $ 165,281 $ ( 270,034 ) $ ( 104,753 )

Common - Public Common -

Delek Holdings General Partner Total

Balance at March 31, 2022 $ 170,696 $ ( 277,218 ) $ ( 106,522 )

(1) Cash distributions include a nominal amount related to distribution equivalents on vested phantom units for the three months ended March 31, 2022 .

Common - Public Common - Delek Holdings Total

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

Cash distributions ( 7,914 ) ( 31,619 ) ( 39,533 )

( 23,653 ) ( 46,220 ) ( 27,635 ) ( 97,508 )

General partner units issued to maintain 2 % interest

Net income attributable to partners 7,261 29,006 36,267

Delek Holdings unit purchases ( 4,979 ) 4,979 — —

Issuance of units in connection with the Big Spring Gathering Assets Acquisition — 107,323 2,190 109,513

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

Distribution to general partner for conversion of its economic interest and IDR elimination — — ( 45,000 ) ( 45,000 )

Non-cash conversion of general partner's economic interest and IDR elimination — ( 57,702 ) 57,702 —

Sponsor Contribution of fixed assets — 1,378 — 1,378

Other 139 38 177

Balance at September 30, 2020 $ 164,313 $ ( 275,767 ) $ — $ ( 111,454 )

(2) Cash distributions include $ 0.1 million and a nominal amount related to distribution equivalents on vested phantom units for the nine months ended September 30, 2021 and 2020, respectively.

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

See accompanying notes to the condensed consolidated financial statements

3 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

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Cash flows from investing activities:

Asset acquisitions from Delek Holdings, net of assumed liabilities — ( 100,527 )

Purchases of property, plant and equipment ( 10,613 ) ( 6,119 )

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Cash flows from financing activities:

Proceeds from issuance of additional units to maintain 2 % General Partner interest

Distributions to general partner — ( 27,635 )

Distributions to common unitholders - public ( 8,570 ) ( 7,914 )

Distributions to common unitholders - Delek Holdings ( 33,830 ) ( 31,619 )

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

Distribution to general partner for conversion of its interest and IDR elimination — ( 45,000 )

Proceeds from revolving credit facility 113,600 77,500

Payments on revolving credit facility ( 107,500 ) ( 86,600 )

Proceeds from issuance of senior notes 400,000 —

Deferred financing costs paid in connection with debt issuances ( 6,216 ) —

Payments on financing lease liabilities ( 710 ) —

Net cash used in financing activities ( 37,010 ) ( 48,633 )

Net increase in cash and cash equivalents 621 479

Net (decrease) increase in cash and cash equivalents ( 1,566 ) 9,134

Cash and cash equivalents at the beginning of the period 4,292 4,243

3 unchanged sentences

Interest $ 2,110 $ 4,937

Income taxes $ — $ 141

Non-cash investing activities:

Increase (decrease) in accrued capital expenditures and other $ 1,638 $ ( 948 )

Equity issuance to Delek Holdings unitholders in connection with Big Spring Gathering Assets Acquisition $ — $ 109,513

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

Decrease in accrued capital expenditures and other $ ( 1,527 ) $ ( 1,439 )

Non-cash financing activities:

Non-cash lease liability arising from obtaining right of use assets during the period $ — $ 2,623

Sponsor contribution of property, plant and equipment $ — $ 1,378

See accompanying notes to the condensed consolidated financial statements

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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, such transaction the "IDR Restructuring Transaction."

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."

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 and certain related assets, located in Howard, Borden and Martin Counties, Texas (the "Big Spring Gathering Assets"), such transaction the "Big Spring Gathering Assets Acquisition."

On April 8, 2022, DKL Delaware Gathering, LLC (the “Purchaser”), a subsidiary of the Partnership, entered into a Membership Interest Purchase Agreement with 3 Bear Energy – New Mexico LLC (the “Seller”) to purchase 100 % of the limited liability company interests in 3 Bear Delaware Holding – NM, LLC (the “Purchased Interests”), related to Seller’s crude oil and gas gathering, processing and transportation businesses, as well as water disposal and recycling operations, in the Delaware Basin in New Mexico (the “Purchase Agreement”).

The Partnership also entered into a guaranty agreement with the Seller in order to guaranty the payment obligations of the Purchaser under the Purchase Agreement.

See Note 14 for further information.

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

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GAAP applied on a consistent basis with those of the annual audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 (our "Annual Report on Form 10-K"), filed with the U.S.

Securities and Exchange Commission (the "SEC") on March 1, 2021 and in accordance with the rules and regulations of the SEC.

Securities and Exchange Commission (the "SEC") on February 25, 2022 and in accordance with the rules and regulations of the SEC.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2021 included in our Annual Report on Form 10-K .

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Reclassifications

Certain immaterial reclassifications have been made to prior period presentation in order to conform to the current period presentation.

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

Accordingly, we have made reclassifications to the prior period in order to conform to this revised current period classification, which resulted in an immaterial decrease in the prior period general and administrative expenses and an increase in the prior period operating expenses.

Risks and Uncertainties Arising from the COVID-19 Pandemic

economic activity continued on a recovery trend during the quarter ended September 30, 2021.

The spike in number of new cases due to the COVID-19 delta variant did not slow down the economic recovery.

Towards the end of third quarter the trend started to show a reduction in the number of new COVID-19 cases and in the number of COVID-19 related hospitalizations.

However, we remain 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.

Additional government measures to curb the spread of the virus include the proposed government mandates for employers to require mandatory vaccination or COVID-19 weekly testing for employees.

Compared to the prior year, the economic recovery trends in the three and nine months ended September 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 nine months ended September 30, 2021.

Nonetheless, there remains 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 three and nine months ended September 30, 2021.

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

financial statement impact under GAAP, we have considered them in the preparation of our financial statements as of and for the three and nine months ended September 30, 2021.

During the quarter ended March 31, 2022, the economic environment in which we operate continued to improve as a result of the widespread availability of vaccines and testing in the U.S.

over recent months which, in turn, has contributed to return to work, return to schools, and increased travel, with a corresponding increase in the demand for vehicle motor fuel and jet fuel.

While we continue to face uncertainties around the COVID-19 Pandemic in terms of new variants, these stabilization trends as well as other factors impacting demand for our products, such as the global supply constraints caused by the military conflict between Russia and the Ukraine have mitigated the risks that remaining Pandemic-related uncertainties could have a material adverse impact on our financial position or results of operations.

While these remaining uncertainties did not have a material impact on the preparation of our unaudited financial statements as of and for the three months ended March 31, 2022, to the extent these uncertainties were identified and were believed to have had a material impact on our prior year 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 unaudited financial statements as of and for the three months ended March 31, 2022.

New Accounting Pronouncements Adopted During 2022

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 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.

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.

There were no new accounting pronouncements adopted during the three months ended March 31, 2022.

Accounting Pronouncements Not Yet Adopted

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In July 2021, the FASB issued an amendment which is intended to provide lease classification guidance for Lessors on how to classify and account for a lease with variable lease payments that do not depend on a reference index or a rate.

The amendments are effective for fiscal years beginning after December 15, 2021, for all entities, and interim periods within those fiscal years for public business entities and interim periods within fiscal years beginning after December 15, 2022, for all other entities.

The amendments are effective for fiscal years beginning after December 15, 2021, for all entities, and interim periods within those fiscal years for public business entities and

Notes to Condensed Consolidated Financial Statements (Unaudited)

interim periods within fiscal years beginning after December 15, 2022, for all other entities.

The Partnership is evaluating the impact of this guidance but does not believe this new guidance will have a material impact on its condensed consolidated financial statements and related disclosures.

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The Partnership is evaluating the impact of this guidance but does not currently expect that adopting this new guidance will have a material impact on its condensed consolidated financial statements and related disclosures.

Note 2 - Acquisitions

Trucking Assets Acquisition

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

The total consideration was approximately $ 48.0 million in cash.

We financed this acquisition with a combination of cash on hand and borrowings under the DKL Credit Facility (as defined in Note 7).

The Trucking Assets are recorded in our pipelines and transportation segment and include approximately 150 trucks and trailers, which are primarily leased or owned, respectively.

In connection with the closing of the transaction, Delek Holdings, the Partnership and various of their respective subsidiaries entered into a Transportation Services Agreement (the “Trucking Assets TSA Agreement”).

Under the Trucking Assets TSA Agreement, the Partnership will gather, coordinate pickup of, transport and deliver petroleum products for Delek Holdings, as well as provide ancillary services as requested.

The transaction and related agreements were approved by the Conflicts Committee of the Board of Directors of the Partnership's general partner, which is comprised solely of independent directors.

See Note 3 for more detailed descriptions of these agreements.

The Trucking Assets Acquisition was considered a transaction between entities under common control.

Accordingly, the Trucking Assets were recorded at amounts based on Delek Holdings' historical carrying value as of the acquisition date.

The carrying value of the Trucking Assets as of the acquisition date was $ 13.3 million, consisting of $ 0.5 million of owned assets and a $ 12.8 million right of use asset for leased assets.

The right of use asset offsets with an equivalent operating lease liability.

Prior periods have not been recast as these assets do not constitute a business in accordance with Accounting Standard Update 2017-01, Clarifying the Definition of a Business ("ASU 2017-01").

We capitalized approximately $ 0.3 million of acquisition costs related to the Trucking Assets Acquisition.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Big Spring Gathering Assets Acquisition

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 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).

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

• Crude oil pipelines;

• Approximately 200 miles of gathering systems;

• Approximately 65 Tank battery connections;

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

• Applicable rights-of-way.

In connection with the closing of the transaction, Delek Holdings, the Partnership and various of their respective subsidiaries entered into a Throughput and Deficiency Agreement (the “Big Spring T&D Agreement”).

Under the Big Spring T&D Agreement, the Partnership will operate and maintain the Big Spring Gathering Assets connecting Delek Holdings' interests in and to certain crude oil with the Partnership's Big Spring, Texas terminal and provide gathering, transportation and other related services with respect to any and all crude produced from shipper’s and certain other producers’ respective interests for delivery at the Big Spring Terminal.

The transaction and related agreements were approved by the Conflicts Committee of the Board of Directors of the Partnership's general partner, which is comprised solely of independent directors.

See Note 3 for more detailed descriptions of these agreements.

The Big Spring Gathering Assets Acquisition was considered a transaction between entities under common control.

Accordingly, the Big Spring Gathering Assets were recorded at amounts based on Delek Holdings' historical carrying value as of the acquisition date.

The carrying value of the Big Spring Gathering Assets as of the acquisition date was $ 209.5 million.

Pursuant to the common control guidance, the 5.0 million units issued (which had a closing market price of $ 9.10 per unit on the transaction date) were recorded in equity at $ 109.5 million, representing the net carrying value of the Big Spring Gathering Assets purchased of $ 209.5 million less the $ 100.0 million cash consideration.

Prior periods have not been recast as these assets do not constitute a business in accordance with ASU 2017-01.

We capitalized approximately $ 0.7 million of acquisition costs related to the Big Spring Gathering Assets Acquisition.

Note 2 - Related Party Transactions

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

In November 2017, Delek Holdings opted to renew certain of these agreements for subsequent five-year terms expiring in November 2022.

In the case of our marketing agreement with Delek Holdings with respect to the Tyler Refinery, the initial term was extended through 2026.

Effective fourth quarter of 2018, the term of certain of our agreements with Delek Holdings were further extended pursuant to the requirements of the amended and restated DKL Credit Facility (as defined in Note 7).

The fees under each agreement are payable to us monthly by Delek Holdings or certain third parties to whom Delek Holdings has assigned certain of its rights and are generally subject to increase or decrease on July 1 of each year, by the amount of any change in various inflation-based indices, including the Federal Energy Regulatory Commission (the "FERC") oil pipeline index or various iterations of the consumer price index ("CPI") and the producer price index ("PPI");

provided, however, that in no event will the fees be adjusted below the amount initially set forth in the applicable agreement.

In most circumstances, if Delek Holdings or the applicable third party assignee fails to meet or exceed the minimum volume or throughput commitment during any calendar quarter, Delek Holdings, and not any third party assignee, will be required to make a quarterly shortfall payment to us equal to the volume of the shortfall multiplied by the applicable fee, subject to certain exceptions as specified in the applicable agreement.

Carry-over of any volumes or revenue in excess of such commitment to any subsequent quarter is not permitted.

The fees under each agreement are payable to us monthly by Delek Holdings or certain third parties to whom Delek Holdings has assigned certain of its rights and are generally subject to increase or decrease on July 1 of each year, by the amount of any change in various inflation-based indices, however, in no event will the fees be adjusted below the amount initially set forth in the applicable agreement.

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 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

Notes to Condensed Consolidated Financial Statements (Unaudited)

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.

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In addition to the commercial agreements described above, the Partnership has entered into the following agreements with Delek Holdings:

Slurry Clarifying Services Agreement

We executed a series of agreements with DK Trading & Supply, LLC (“DKT&S”) and Alon Refining Krotz Springs, whereby the Partnership will operate and maintain a facility, located within the Krotz Springs, Louisiana refinery, to process slurry for DKT&S.

Using a process that incorporates horizontal and vertical centrifuges, we will remove metals, ash, and other solids from the slurry.

The clarified product can then be sold to DKT&S or one of its affiliates.

As consideration for the processing services, we will receive a fixed rate per barrel processing fee in addition to a margin-based payment.

The Partnership and DKT&S have agreed to a minimum delivery commitment volume to be processed in the facility.

The initial term of the agreement is for a period of three years , and thereafter, will continue a year-to-year basis unless canceled by either party.

Omnibus Agreement

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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 and nine months ended September 30, 2021.

During the three and nine months ended September 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.

We were reimbursed a nominal amount by Delek Holdings during the three months ended March 31, 2022.

There were no reimbursements by Delek Holdings during the three months ended March 31, 2021.

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 September 30, 2021, there was no receivable from related parties for these matters.

As of March 31, 2022, there was no receivable from related parties for these matters.

These reimbursements are recorded as reductions to operating expense.

We were reimbursed nominal amounts for these matters in each of the three and nine month periods ended September 30, 2021 and 2020.

There were no reimbursements for these matters in each of the three month periods ended March 31, 2022 and 2021.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Other Transactions

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The agreement extends through December 2022.

Total fees paid to the Partnership were $ 0.4 million and $ 1.2 million for the three and nine months ended September 30, 2021, respectively, and $ 0.4 million and $ 1.6 million for the three and nine months ended September 30, 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 for both the three months ended March 31, 2022 and 2021, 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.

Amounts reimbursable by Delek Holdings are recorded in accounts receivable from related parties.

Unregistered Sale of Equity Securities

In connection with the Partnership's issuance of the common limited partner units under the Big Spring Gathering Assets Acquisition and in accordance with the Partnership's First Amended and Restated Agreement of Limited Partnership, as amended (the "Prior Partnership Agreement", as amended and restated by the Partnership's Second Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement")), the Partnership issued general partner units to the general partner in an amount necessary to maintain its 2% general partner interest as defined in the Prior Partnership Agreement.

The sale and issuance of the Additional Units (as defined below) and such general partner units in connection with the Big Spring Gathering Assets Acquisition is exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.

Additionally, in March 2020, Delek Marketing & Supply, LLC ("Delek Marketing"), a wholly owned subsidiary of Delek Holdings, repurchased 451,822 common limited partner units from an unaffiliated investor pursuant to a Common Unit Purchase Agreement between Delek Marketing and such investor.

The purchase price of the units amounted to approximately $ 5.0 million.

As a result of the transaction, Delek Holdings' ownership in our outstanding limited partner units increased to 64.5 % from 62.6 %.

Delek Holdings' ownership in our common limited partner units was further increased to 70.5 % as a result of the issuance of 5.0 million common limited partner units (the “Additional Units”) in connection with the Big Spring Gathering Assets Acquisition described above.

Notes to Condensed Consolidated Financial Statements (Unaudited)

In August 2020, Delek Holdings' ownership in our common limited partner units was further increased to approximately 80.0 % in connection with the IDR Restructuring Transaction, where the Partnership issued 14.0 million of the Partnership's newly issued common limited partner units to Delek Holdings.

Amendment No.

2 to the First Amended and Restated Agreement of Limited Partnership of Delek Logistics Partners, LP

On March 31, 2020, in connection with the completion of the Big Spring Gathering Assets Acquisition, the board of directors of the general partner adopted Amendment No.

2 (“Amendment No.

2”) to the Prior Partnership Agreement, effective upon adoption.

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 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.

Conversion of GP Economic Interest and Elimination of IDRs

On August 13, 2020, we closed the transaction contemplated by a definitive exchange agreement with Delek Holdings to eliminate all of the IDRs held by the general partner and convert the 2 % general partner economic interest into a non-economic general partner interest, all in exchange for 14.0 million of the Partnership's newly issued common limited partner units and $ 45.0 million cash.

Contemporaneously, 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.

Delek Holdings now owns a 100 % interest in the general partner and owns approximately 34.7 million common limited partner units, representing approximately 80 % of the Partnership's outstanding common limited partner units.

To implement the transaction, our Prior Partnership Agreement was amended and restated.

Summary of Transactions

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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 September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Revenues $ 123,754 $ 96,194

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Quarterly Cash Distributions

Prior to August 13, 2020, our common and general partner unitholders and the holders of IDRs were entitled to receive quarterly distributions of available cash as determined by the board of directors of our general partner in accordance with the terms and provisions of our Prior Partnership Agreement.

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

In February, May and August 2021, we paid quarterly cash distributions of $ 39.5 million, $ 40.0 million and $ 40.8 million, respectively, of which $ 31.6 million, $ 32.0 million and $ 32.7 million, respectively, were paid to Delek Holdings.

In February, May and August 2020, we paid quarterly cash distributions of $ 30.6 million, $ 30.9 million and $ 36.0 million, respectively, of which $ 22.6 million, $ 23.2 million and $ 28.1 million, respectively, were paid to Delek Holdings and our general partner.

On October 26, 2021, our board of directors declared a quarterly cash distribution totaling $ 41.3 million, based on the available cash as of the date of determination, for the end of the third quarter of 2021, payable on November 10, 2021, of which $ 33.0 million is expected to be paid to Delek Holdings.

Notes to Condensed Consolidated Financial Statements (Unaudited)

In February 2022, we paid quarterly cash distributions of $ 42.4 million, of which $ 33.8 million were paid to Delek Holdings.

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

On April 25, 2022, our board of directors declared a quarterly cash distribution totaling $ 42.6 million, based on the available cash as of the date of determination, for the end of the first quarter of 2022, payable on May 12, 2022, of which $ 33.6 million is expected to be paid to Delek Holdings.

Note 3 - Revenues

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

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

Of our $ 448.2 million net property, plant, and equipment balance as of September 30, 2021, $ 428.0 million is subject to operating leases under our commercial agreements.

Of our $ 448.3 million net property, plant, and equipment balance as of March 31, 2022, $ 406.1 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 September 30, 2021

The following table represents a disaggregation of revenue for the pipeline and transportation and wholesale marketing and terminalling segments for the periods indicated (in thousands):

Three Months Ended March 31, 2022

Pipelines and Transportation Wholesale Marketing and Terminalling Consolidated

1 unchanged sentence

Service Revenue - Affiliate (1)

Product Revenue - Third Party — 60,645 60,645

Product Revenue - Affiliate — 34,325 34,325

Lease Revenue - Affiliate (1)

4,004 8,545 12,549

Total Revenue $ 76,202 $ 113,425 $ 189,627

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

Nine Months Ended September 30, 2021

Pipelines and Transportation Wholesale Marketing and Terminalling Consolidated

Service Revenue - Third Party $ 12,021 $ 358 $ 12,379

Service Revenue - Affiliate 9,505 25,877 35,382

Product Revenue - Third Party — 78,045 78,045

1 unchanged sentence

Lease Revenue - Affiliate 67,019 12,440 79,459

190,086 28,514 218,600

Total Revenue $ 75,805 $ 130,776 $ 206,581

(1) Net of $ 5.4 million of amortization expense for the nine months ended September 30, 2021, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Three Months Ended September 30, 2020

(1) Net of $ 1.8 million of amortization expense for the three months ended March 31, 2022, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.

Three Months Ended March 31, 2021

Pipelines and Transportation Wholesale Marketing and Terminalling Consolidated

1 unchanged sentence

Service Revenue - Affiliate (1)

Product Revenue - Third Party — 43,660 43,660

Product Revenue - Affiliate — 5,844 5,844

Lease Revenue - Affiliate (1)

1,224 8,082 9,306

Total Revenue $ 71,479 $ 70,789 $ 142,268

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

Nine Months Ended September 30, 2020

Pipelines and Transportation Wholesale Marketing and Terminalling Consolidated

Service Revenue - Third Party $ 14,587 $ 502 $ 15,089

Service Revenue - Affiliate 13,848 24,500 38,348

Product Revenue - Third Party — 54,710 54,710

1 unchanged sentence

Lease Revenue - Affiliate 61,824 8,677 70,501

154,437 32,887 187,324

Total Revenue $ 64,975 $ 87,938 $ 152,913

(1) Net of $ 5.4 million of amortization expense for the nine months ended September 30, 2020, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment .

As of September 30, 2021, we expect to recognize $ 1.5 billion in future lease revenues, for periods up to financial year 2030, 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 $ 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 .

As of March 31, 2022, we expect to recognize $ 1.4 billion in future lease revenues, for periods up to financial year 2030, 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 September 30, 2021 were as follows (in thousands):

Our unfulfilled performance obligations as of March 31, 2022 were as follows (in thousands):

Remainder of 2022 $ 206,379

1 unchanged sentence

Total expected revenue on remaining performance obligations $ 1,409,941

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 4 - Net Income Per Unit

Basic net income per unit applicable to limited partners is computed by dividing limited partners' interest in net income by the weighted-average number of outstanding common units.

Prior to August 13, 2020, we had more than one class of participating securities and used the two class method to calculate the net income per unit applicable to the limited partners.

The classes of participating units prior to August 13, 2020 consisted of limited partner units, general partner units and IDRs.

Pursuant to the IDR Restructuring Transaction, the IDRs were eliminated and the 2 % general partner economic interest was converted to a non-economic general partner interest.

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

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.

Basic net income per unit applicable to limited partners was computed by dividing limited partners’ interest in net income, after deducting our general partner’s 2 % interest and IDRs, by the weighted-average number of outstanding common units.

Our net income was allocated to our general partner and limited partners in accordance with their respective partnership percentages after giving effect to priority income allocations for IDRs, which were held by our general partner pursuant to our Prior Partnership Agreement.

Earnings in excess of distributions were

Notes to Condensed Consolidated Financial Statements (Unaudited)

allocated to our general partner and limited partners based on their respective ownership interests.

The IDRs were paid following the close of each quarter.

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.

Refer to Note 3 for additional details.

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

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

As of March 31, 2022, 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 September 30, 2021 is November 10, 2021.

The expected date of distribution for the distributions earned during the period ended March 31, 2022 is May 12, 2022.

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 September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Net income attributable to partners $ 39,514 $ 36,267

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

Limited partners' distribution 42,604 39,968

Earnings in excess (deficit) of distributions $ ( 3,090 ) $ ( 3,701 )

General partner's earnings:

Distributions (including IDRs) (1)

$ — $ — $ — $ 18,618

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

Total general partner's earnings $ — $ — $ — $ 18,724

Limited partners' earnings on common units:

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$ 0.91 $ 0.83

(1) Prior to August 13, 2020, general partner distributions (including IDRs) consisted of the 2.0 % general partner interest and IDRs, which represented the right of the general partner to receive increasing percentages of quarterly distributions of available cash from operating surplus in excess of 0.43125 per unit per quarter.

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.

(2) There were no outstanding common units excluded from the diluted earnings per unit calculation for the three and nine months ended September 30, 2021 and 2020.

(1) There were no outstanding common units excluded from the diluted earnings per unit calculation for the three months ended March 31, 2022 and 2021.

Note 5 - Inventory

Inventories consisted of $ 2.2 million and $ 3.1 million of refined petroleum products as of September 30, 2021 and December 31, 2020, respectively, each of which are net of lower of cost or net realizable value reserve of a nominal amount.

Inventories consisted of $ 1.8 million and $ 2.4 million of refined petroleum products as of March 31, 2022 and December 31, 2021, respectively, 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.

We recognize lower of cost or net realizable value charges as a component of cost of materials and other in the consolidated statements of income and comprehensive income.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 6 - Long-Term Obligations

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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.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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.

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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 September 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 $ 5.9 million as of September 30, 2021.

As of March 31, 2022, we had $ 400.0 million in outstanding principal amount under the 2028 Notes, and the effective interest rate was 7.05 %.

Outstanding borrowings under the 2028 Notes include deferred financing costs amounting to $ 5.5 million as of March 31, 2022.

DKL Credit Facility

4 unchanged sentences

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.

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.

The First Amendment also modified the total leverage and senior leverage ratios (as defined in the DKL Credit Facility) calculations to reduce the total funded debt (as defined in the DKL Credit Facility) component thereof by the total amount of unrestricted consolidated cash and cash equivalents on the balance sheet of the Partnership and its subsidiaries up to $ 20.0 million.

The DKL Credit Facility has a maturity date of September 28, 2023.

4 unchanged sentences

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 September 30, 2021, the weighted average interest rate for our borrowings under the facility was approximately 2.62 %.

At March 31, 2022, the weighted average interest rate for our borrowings under the facility was approximately 2.67 %.

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

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

As of September 30, 2021, we had $ 260.9 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 September 30, 2021 were $ 589.1 million.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of March 31, 2022, this fee was 0.30 % per year.

As of March 31, 2022, we had $ 264.1 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, 2022 were $ 585.9 million.

6.750 % Senior Notes Due 2025

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

As of September 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 $ 2.7 million and $ 0.9 million, respectively, as of September 30, 2021, and $ 3.3 million and $ 1.0 million, respectively, as of December 31, 2020.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of March 31, 2022, we had $ 250.0 million in outstanding principal amount of the 2025 Notes.

As of March 31, 2022, the effective interest rate related to the 2025 Notes was approximately 7.20 %.

Outstanding borrowings under the 2025 Notes include deferred financing costs and debt discount of $ 2.3 million and $ 0.7 million, respectively, as of March 31, 2022, and $ 2.5 million and $ 0.8 million, respectively, as of December 31, 2021.

Note 7 - Equity

We had 8,713,195 common limited partner units held by the public outstanding as of September 30, 2021.

Additionally, as of September 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 September 30, 2021, Delek Holdings 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.

We had 9,162,504 common limited partner units held by the public outstanding as of March 31, 2022.

Additionally, as of March 31, 2022, Delek Holdings owned an 78.9 % limited partner interest in us, consisting of 34,311,278 common limited partner units.

On April 14, 2022, we filed a shelf registration statement with the SEC, which was declared on April 29, 2022, which provides the Partnership the ability to offer up to $ 200.0 million of our common limited partner units from time to time and through one or more methods of distribution, subject to market conditions and our capital needs.

On December 22, 2021, Delek Holdings issued a press release regarding a program to sell up to 434,590 common limited partner units representing limited partner interests in the Partnership.

We will not sell any securities under this program and we will not receive any proceeds from the sale of the securities by Delek Holdings.

Equity Activity

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

The table below summarizes the changes in the number of limited partner units outstanding from December 31, 2021 through March 31, 2022.

Common - Public Common - Delek Holdings Total

2 unchanged sentences

2,929 — 2,929

Balance at September 30, 2021 8,713,195 34,745,868 43,459,063

(1) Unit-based compensation awards are presented net of 3,237 units withheld for taxes as of September 30, 2021.

Delek Holdings resale of units 385,522 ( 385,522 ) —

Balance at March 31, 2022 9,162,504 34,311,278 43,473,782

(1) Unit-based compensation awards are presented net of 1,088 units withheld for taxes as of March 31, 2022.

Issuance of Additional Securities

1 unchanged sentence

Costs associated with the issuance of securities are allocated to all unitholders' capital accounts based on their ownership interest at the time of issuance.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Allocations of Net Income

Our Partnership Agreement contains provisions for the allocation of net income and loss to the unitholders.

For purposes of maintaining partner capital accounts, the Partnership Agreement specifies that items of income and loss shall be allocated among the partners in accordance with their respective percentage interest.

Prior to August 13, 2020, normal allocations were made according to percentage interests after giving effect to priority income allocations in an amount equal to incentive cash distributions allocated 100% to our general partner.

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 September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Net income attributable to partners $ 43,624 $ 46,328 $ 123,137 $ 118,539

General partner's IDRs — — — ( 17,632 )

Net income available to partners $ 43,624 $ 46,328 $ 123,137 $ 100,907

General partner's ownership interest — % — % — % 2.0 %

General partner's allocated interest in net income $ — $ — — $ 1,092

General partner's IDRs — — — 17,632

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

Incentive Distribution Rights ("IDRs")

Effective August 13, 2020, the Partnership closed on the IDR Restructuring Transaction and the general partner no longer receives any cash distributions.

Prior to August 13, 2020, our general partner was entitled to 2.0 % of all quarterly distributions.

Our general partner had the right, but not the obligation, to contribute up to a proportionate amount of capital to us to maintain its current general partner interest.

Our general partner held IDRs that entitled it to receive increasing percentages, up to a maximum of 48.0 %, of the cash we distributed from operating surplus (as defined in our Prior Partnership Agreement) in excess of $ 0.43125 per unit per quarter.

The maximum distribution was 48.0 % and did not include any distributions that our general partner or its affiliates may have received on common or general partner units that it owns.

As of August 12, 2020, the IDRs held by our general partner were entitled to receive the maximum distribution.

Pursuant to Amendment No.

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").

Refer to Note 3 for additional details.

Cash Distributions

Our Partnership Agreement sets forth the calculation to be used to determine the amount and priority of available cash distributions that our limited partner unitholders will receive.

The cash distributions for periods before August 13, 2020 include distributions to the 2.0 % general partner interest which was converted to a non-economic general partner interest and IDRs which were permanently eliminated.

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

2 unchanged sentences

(in thousands) Date of Distribution Unitholders Record Date

September 30, 2020 $ 0.905 $ 39,308 November 12, 2020 November 6, 2020

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

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

June 30, 2021 $ 0.940 $ 40,846 August 11, 2021 August 5, 2021

September 30, 2021 $ 0.950 $ 41,286 November 10, 2021 (1)

November 5, 2021

September 30, 2021 $ 0.950 $ 41,286 November 10, 2021 November 5, 2021

December 31, 2021 $ 0.975 $ 42,384 February 8, 2022 February 1, 2022

March 31, 2022 $ 0.980 $ 42,604 May 12, 2022 (1)

(1) Expected date of distribution.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The allocations of total quarterly cash distributions made to limited partners for the three and nine months ended September 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 September 30, Nine Months Ended September 30,

2021 2020 2021 2020

General partner's distributions:

General partner's distributions $ — $ — $ — $ 986

General partner's IDRs — — — 17,632

Total general partner's distributions — — — 18,618

Limited partners' distributions:

Common limited partners' distributions 41,286 39,307 122,100 87,536

Total cash distributions $ 41,286 $ 39,307 $ 122,100 $ 106,154

Cash distributions per limited partner unit $ 0.950 $ 0.905 $ 3.800 $ 2.695

Note 8 - Equity Based Compensation

1 unchanged sentence

The LTIP is administered by the Conflicts Committee of the board of our general partner.

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 and nine months ended September 30, 2021 and 2020.

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, 2022 and 2021.

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 Common Units to 912,207 Common Units.

5 unchanged sentences

In addition, we contributed $ 0.4 million of startup capital pursuant to the Amended and Restated Limited Liability Company Agreement.

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 and during 2020 made additional capital contributions of $ 12.2 million based on capital calls received.

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

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 in 2020.

During the three months ended March 31, 2022, we made no capital contributions.

During the three months ended March 31, 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):

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Current Assets $ 28,830 $ 28,735

1 unchanged sentence

Current liabilities $ 6,637 $ 10,040

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

2021 2020 2021 2020

Three Months Ended March 31,

Revenues $ 22,686 $ 9,043

7 unchanged sentences

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Current assets $ 17,382 $ 15,010

1 unchanged sentence

Current liabilities $ 2,916 $ 1,492

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

2021 2020 2021 2020

Three Months Ended March 31,

Revenues $ 8,895 $ 9,626

2 unchanged sentences

Net Income $ 3,569 $ 4,179

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 September 30, 2021 and December 31, 2020, the Partnership's investment balance in these joint ventures was $ 251.9 million and $ 253.7 million, respectively.

The Partnership's investment balances in these joint ventures were as follows (in thousands):

March 31, 2022 December 31, 2021

Red River $ 144,567 $ 144,041

CP LLC $ 61,926 $ 61,670

Andeavor Logistics $ 43,400 $ 44,319

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

5 unchanged sentences

Note 10 - Segment Data

We aggregate our operating segments into two reportable segments:

(i) pipelines and transportation and (ii) wholesale marketing and terminalling:

• The assets and investments reported in the pipeline and transportation segment provide crude oil gathering and crude oil, intermediate and refined products transportation and storage services to Delek Holdings' refining operations and independent third parties.

• The wholesale marketing and terminalling segment provides marketing services for the refined products output of the Delek Holdings' refineries, engages in wholesale activity at our terminals and terminals owned by third parties, whereby we purchase light product for sale and exchange to third parties, and provides terminalling services at our refined products terminals to independent third parties and Delek Holdings.

Notes to Condensed Consolidated Financial Statements (Unaudited)

We aggregate our operating segments into three reportable segments:

(i) pipelines and transportation;

(ii) wholesale marketing and terminalling;

and (iii) investment in pipeline joint ventures.

Our operating segments adhere to the accounting policies used for our consolidated financial statements.

1 unchanged sentence

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 segment contribution margin.

Management measures the operating performance of each of its reportable segments based on segment contribution margin, with the exception of investments in pipeline joint ventures segment, which is measured based on net income.

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

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

(in thousands) Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following is a summary of business segment operating performance as measured by contribution margin, with the exception of investments in pipeline joint ventures segment, which is measured based on net income, for the periods indicated (in thousands):

(in thousands) Three Months Ended March 31,

Pipelines and Transportation

7 unchanged sentences

Capital spending (1)

$ 8,149 $ 5,845

Wholesale Marketing and Terminalling

8 unchanged sentences

Capital spending (1)

$ 937 $ 1,954

Investments in Pipeline Joint Ventures

Income from equity method investments $ ( 7,026 ) $ ( 4,049 )

Equity method investments contributions $ — $ ( 1,379 )

Net revenues:

9 unchanged sentences

Operating income 46,838 42,170

Interest expense, net 14,250 9,737

Income from equity method investments ( 7,026 ) ( 4,049 )

Other (income) expense, net ( 1 ) 31

Total non-operating expenses, net 7,223 5,719

Income before income tax expense 39,615 36,451

Income tax expense 101 184

Net income attributable to partners $ 39,514 $ 36,267

Capital spending (1)

$ 9,086 $ 7,799

(1) There were no capital contributions to equity method investments for the three months ended March 31, 2022.

Capital spending for the three months ended March 31, 2021 excludes contributions to equity method investments in the amount of $ 1.4 million.

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

See Note 3 for additional information.

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

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

September 30, 2021 December 31, 2020

The following table summarizes the total assets for each segment as of March 31, 2022 and December 31, 2021 (in thousands).

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

March 31, 2022 December 31, 2021

Pipelines and transportation $ 455,145 $ 452,690

Wholesale marketing and terminalling 205,686 211,723

Other 24,365 26,182

Investments in pipeline joint ventures 249,893 250,030

24,542 20,628

Total assets 935,266 $ 935,071

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

(1) Other includes cash and cash equivalents and related party receivables and other assets which are recorded at the corporate level.

Property, plant and equipment, accumulated depreciation and depreciation expense for the pipelines and transportation and wholesale marketing and terminalling reportable segments as of and for the three months ended March 31, 2022 were as follows (in thousands):

Pipelines and Transportation Wholesale Marketing and Terminalling Consolidated

2 unchanged sentences

Property, plant and equipment, net $ 390,573 $ 57,761 $ 448,334

Depreciation expense for the three months ended September 30, 2021 $ 8,056 $ 2,100 $ 10,156

Depreciation expense for the nine months ended September 30, 2021 $ 24,918 $ 5,944 $ 30,862

Depreciation expense for the three months ended March 31, 2022 $ 7,937 $ 2,398 $ 10,335

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 September 30, 2021.

There were no indicators of impairment of our property, plant and equipment as of March 31, 2022.

Note 11 - 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, 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

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.

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.

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.

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

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

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 the receipt and response to 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.

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 governmental agencies or other persons for personal injury, property damage, response costs, or natural resources damages.

Crude Oil and Other Releases

During the nine months ended September 30, 2021, there was one significant release of finished product, involving one of our pipelines and it occurred in August 2021.

This release of finished product from our Greenville pipeline occurred near Dixon, Texas (the "Greenville Dixon Release").

Cleanup operations, site maintenance and remediation on this release are currently on-going where such costs incurred as of September 30, 2021 totaled $ 0.3 million.

Additionally, as of September 30, 2021 we have accrued $ 2.4 million for remediation and other such matters related to this release.

During the three months ended March 31, 2022, there were no significant releases.

In August 2021, a release of finished product from our Greenville pipeline occurred near Dixon, Texas (the "Greenville Dixon Release").

Cleanup operations, site maintenance and remediation on this release are currently on-going where such costs incurred as of March 31, 2022 totaled $ 3.6 million.

Additionally, as of March 31, 2022 we have accrued $ 0.5 million for remediation and other such matters related to this release.

The affected area is currently being treated to bring it to acceptable residential levels protective of groundwater.

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.

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 were removed in the second quarter of 2021.

Cleanup operations, site maintenance and remediation on this release have been completed with closure granted and ground water monitoring wells removed.

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

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

As of March 31, 2022, we have accrued $ 0.3 million for remediation and other such matters related to these releases.

Expenses incurred for the remediation of these crude oil and other releases are included in operating expenses in our condensed consolidated statements of income and comprehensive income.

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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 and nine months ended September 30, 2021 and 2020, the crude oil and other releases remediation expenses, net of reimbursable costs, were immaterial.

During the three months ended March 31, 2022, there were no crude oil and other releases remediation expenses, net of reimbursable expenses.

During the three months ended March 31, 2021, the crude oil and other releases remediation expenses, net of reimbursable costs, were immaterial.

Other Commitments

In connection with the Permian Gathering System Acquisition (formerly known as the Big Spring Gathering Acquisition), we agreed to expend $ 33.8 million to construct additional Receipt Points on our gathering pipeline at the request of Delek Holdings producers with which we have dedicated acreage agreements, to be owned and operated by the Partnership.

Such Receipt Points, once completed, result in incremental pipeline revenues, subject to the minimum volume commitments and other terms of the throughput and deficiency commercial agreement with Delek Holdings, entered into in connection with this Acquisition.

As of March 31, 2022 and March 31, 2021, the Partnership had $ 4.2 million and $ 28.4 million remaining commitments under the Receipt Point construction provision of the Permian Gathering System Acquisition agreement.

Additionally, both Delek Holdings and the Partnership continue to identify and secure dedicated acreage and producer agreements that require construction of receipt points and also provide the opportunity for additional pipeline volumes, but that are not required under the original commitment.

Related to these incremental agreements, the Partnership has begun

Notes to Condensed Consolidated Financial Statements (Unaudited)

construction or otherwise separately committed to construct receipt points where the estimated remaining costs to complete totaled $ 45.8 million as of March 31, 2022, all of which is expected to be expended during 2022.

Note 13 - Leases

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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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2022 2021

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Leased assets obtained in exchange for new operating lease liabilities $ — $ 2,623

Lease assets obtained in exchange for new financing liabilities $ 2,858 $ — $ 3,071 $ —

September 30, 2021 September 30, 2020

Three Months Ended March 31,

Weighted-average remaining lease term (years) for operating leases 3.2 3.5

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Distribution Declaration

On October 26, 2021, our general partner's board of directors declared a quarterly cash distribution of $ 0.950 per unit, payable on November 10, 2021, to unitholders of record on November 5, 2021.

On April 25, 2022, our general partner's board of directors declared a quarterly cash distribution of $ 0.98 per unit, payable on May 12, 2022, to unitholders of record on May 5, 2022.

Planned 3 Bear Energy - New Mexico, LLC Acquisition

The Partnership also entered into a guaranty agreement with the Seller in order to guaranty the payment obligations of the Purchaser under the Purchase Agreement.

The purchase price for the Purchased Interests is $ 624.7 million, subject to customary adjustments under the Purchase Agreement for net working capital and indebtedness.

The Purchaser paid a deposit under the Purchase Agreement of approximately $ 31.2 million.

The deposit may be retained by the Seller upon certain termination events described in the Purchase Agreement.

At closing, the deposit will be applied to the purchase price to be paid under the Purchase Agreement.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The transactions contemplated by the Purchase Agreement are expected to close around mid-year 2022.

The closing is subject to customary closing conditions set forth in the Purchase Agreement, including regulatory approvals.

The Purchase Agreement also contains representations and warranties of the parties, indemnification obligations, termination rights, and other covenants and agreements.

Shelf Registration Statement

On April 14, 2022, we filed a shelf registration statement with the SEC, which was declared effective on April 29, 2022, which provides the Partnership the ability to offer up to $ 200.0 million of our common limited partner units from time to time and through one or more methods of distribution, subject to market conditions and our capital needs.

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