What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-05 compared with 2021-11-05 · 201 added, 316 removed, 406 unchanged (56% of the section changed)

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The MD&A should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and in the Annual Report on Form 10-K filed with the U.S.

Securities and Exchange Commission ("SEC") on March 1, 2021 (the "Annual Report on Form 10-K").

Securities and Exchange Commission ("SEC") on February 25, 2022 (the "Annual Report on Form 10-K").

Those statements in the MD&A that are not historical in nature should be deemed forward-looking statements that are inherently uncertain.

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and any of its subsidiaries, other than the Partnership and its subsidiaries and its 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." See Note 3 to the accompanying condensed consolidated financial statements for further information.

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 to the accompanying condensed consolidated financial statements for further information.

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 Assets"), and certain related assets, such transaction the "Big Spring Gathering Assets Acquisition." See Note 2 to the accompanying condensed consolidated financial statements for further information.

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.

The Partnership announces material information to the public about the Partnership, its products and services and other matters through a variety of means, including filings with the Securities and Exchange Commission, press releases, public conference calls, the Partnership's website (www.deleklogistics.com), the investor relations section of the website (ir.deleklogistics.com), the news section of its website (www.deleklogistics.com/news), and/or social media, including its Twitter account (@DelekUSLogistics).

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Important factors that, individually or in the aggregate, could cause such differences include, but are not limited to:

Management's Discussion and Analysis

• our substantial dependence on Delek Holdings or its assignees and their support of and respective ability to pay us under our commercial agreements;

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• Delek Holdings' future growth, financial performance, share repurchases, crude oil supply pricing and flexibility and product distribution;

Management's Discussion and Analysis

• industry dynamics, including Permian Basin growth, ownership concentration, efficiencies and takeaway capacity;

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• the effects of existing and future laws and governmental regulations, including, but not limited to, the rules and regulations promulgated by the Federal Energy Regulatory Commission ("FERC") and state commissions and those relating to environmental protection, pipeline integrity and safety as well as current and future restrictions on commercial and economic activities in response to the COVID-19 Pandemic;

• significant operational, investment or other changes required by existing or future environmental statutes and regulations, including international agreements and national or regional legislation and regulatory measures to limit or reduce greenhouse gas emissions;

• competitive conditions in our industry including capacity overbuild in areas where we operate;

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• changes in tax status and regulations;

Management's Discussion and Analysis

• the effects of future litigation or environmental liabilities that are not covered by insurance;

• other factors discussed elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K.

Management's Discussion and Analysis

Many of the foregoing risks and uncertainties are, and will be, exacerbated by the COVID-19 Pandemic and any worsening of the global business and economic environment.

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The taxable income reportable to each partner takes into account differences between the tax basis and the fair market value of our assets and financial reporting bases of assets and liabilities, the acquisition price of the partner's units and the taxable income allocation requirements under the Partnership's Second Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement").

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 the on-going impact of the COVID-19 Pandemic, and the spread of new variants of the virus.

Most of the COVID-19 Pandemic related restrictions imposed in the prior year have been eased, major airlines have resumed their flights, motor vehicle use continues to increase and government vaccination campaigns continue.

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

The economic recovery has in turn resulted in increased demand and market prices for crude oil and other products, particularly refined petroleum products that we receive revenue for transporting and storing.

It has also resulted in an increase in demand and sales volumes in our wholesale marketing business.

Crude oil production as well as the consumption of the hydrocarbon products continued to increase.

Although we expect the direct effects from the Pandemic on U.S.

oil consumption to continue to decrease, some consumption patterns may be more lasting, including increased working from home and changes in travel behavior, which could limit growth in gasoline and jet fuel consumption.

Furthermore, as of September 30, 2021, the COVID-19 Pandemic and the spread of new variants of the virus, continues to cause significant economic disruption globally, including in the U.S.

and specific geographic areas where we operate.

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

Additionally, increased infection rates could impact our logistics operations, particularly in high-infection states, if our employees are personally affected by the illness, both through direct infection and quarantine procedures.

During the three and nine months ended September 30, 2021, both our West Texas wholesale marketing business and many of our pipeline and transportation customers experienced an increase in demand and pricing due to the resumption of some economic activities as discussed above.

For the nine months ended September 30, 2021, the impact of this positive trend was netted by the reduced volumes during the severe freezing conditions experienced in February 2021.

Our pipelines and transportation revenue streams were largely protected by minimum volume commitments under existing throughput contracts with customers during the current and prior periods, but continued pressure on our customers could present risks to our existing and new business opportunities as well as on collectability on our receivables.

Our management continues to monitor the COVID-19 infections in the communities around our company locations, the impact on our operations and whether there is a need to update our remote policies and quarantine protocols.

We continue to be exposed to risk from our suppliers and customers who are facing similar challenges.

To the extent that uncertainties related to the COVID-19 Pandemic 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 U.S.

Management's Discussion and Analysis

generally accepted accounting principles, we have considered them in the preparation of our condensed consolidated financial statements as of and for the three and nine months ended September 30, 2021, which are included in Item 1.

of this Quarterly Report on Form 10-Q.

Other uncertainties related to the impact of the COVID-19 Pandemic and other events may exist that have not been identified, and could impact our future results of operations and financial position, the nature of which and the extent to which are currently unknown.

Federal Government's passage and/or enactment of additional stimulus and relief measures, may impact the extent to which the risk underlying these uncertainties are realized.

In addition, management continues to actively respond to the impact of the COVID-19 Pandemic and other events on our business.

The economy continues to recover from the impact of the COVID-19 Pandemic, both globally and domestically.

Improved consumer demand resulting from stabilization in cases of COVID-19 and decreasing mortality rates during much of the period and across much of the country, and corresponding to the availability of vaccines, have contributed to improvements in domestic refining margins.

However, on February 24, 2022 Russia launched a military invasion on Ukraine (the "Russia-Ukraine war").

In response to the unprovoked invasion, among other sanctions imposed, many countries, including the US, have banned the import of Russian commodities, including oil and gas.

Russia is one of the world's top oil and gas suppliers, responsible for providing more than 40% of the natural gas supply to Europe and more than 8% of the world's oil supply.

To combat record high oil prices, the Biden administration recently announced the largest release of oil in U.S.

history from the nation’s strategic stockpiles, followed by a smaller, but still sizable, release from European countries.

While these events have contributed to additional uncertainty in the global market, it's impact on supply of crude oil and refined products has caused significant increases in demand for our customers' products which is expected to continue for much of 2022.

Management has actively responded to the continuing impact of these economic disruptions on our business.

To the extent warranted, we continue to monitor the impact and implement measures to mitigate the risk.

Such efforts include (but are not limited to) the following:

• Identifying alternative financing solutions to enhance our access to sources of liquidity;

• Implementing regular site cleaning and disinfecting procedures;

• Adopting remote working where possible.

Where on-site operations are required, appropriate safety precautions taken;

• Working with our employees to implement other site-specific precautionary measures to reduce the risk of exposure.

The extent to which our future results are affected by the COVID-19 Pandemic will depend on various factors and consequences beyond our control, such as the duration and scope of the COVID-19 Pandemic;

additional actions by businesses and governments in response to the COVID-19 Pandemic;

and the speed and effectiveness of responses to combat the virus.

The COVID-19 Pandemic, and the volatile regional and global economic conditions stemming from the Pandemic, could also exacerbate the risk factors identified in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K.

The COVID-19 Pandemic may also materially adversely affect our results in a manner that is either not currently known or that we do not currently consider to be a significant risk to our business.

• Reviewing planned production throughputs at our refineries and planning for optimization of operations;

• Coordinating planned maintenance activities with possible downtime as a result of possible reductions in throughputs;

• Searching for additional storage capacity if needed to store potential builds in crude oil or refined product inventories;

• Finding additional suppliers for key or specialty items or securing inventory or priority status with existing vendors;

• Continued monitoring of capital expenditures;

• Suspending the share repurchase program and dividend distributions until our internal parameters are met for resuming such activities;

• Adopting modified remote working where possible and when immediate exposure risk warrants, and where on-site operations are required, taking appropriate safety precautions;

• Identifying alternative financing solutions as needed to enhance our access to sources of liquidity;

• Enacting cost reduction measures across the organization, including reducing contract services, reducing overtime and other employee related costs, and reducing or eliminating non-critical travel.

The combination of these efforts has served to mitigate other negative factors impacting our cash flows and operations, and has improved our liquidity positioning, operational flexibility and ability to respond to the continued economic impact of the COVID-19 Pandemic, the Russia-Ukraine War, and other events.

Management's Discussion and Analysis

See also 'Risk Factors' in Part I, Item 1A.

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Our Reporting Segments and Assets

Our business consists of two reportable segments:

Our business consists of three reportable segments:

Pipelines and Transportation

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We generate revenue in our wholesale marketing and terminalling segment by providing marketing services for the refined products output of the Tyler and Big Spring refineries, engaging in wholesale activity at our terminals in West Texas and at terminals owned by third parties, whereby we purchase light products for sale and exchange to third parties, and by providing terminalling services at our refined products terminals to independent third parties and Delek Holdings.

Investments in Pipeline Joint Ventures

The Partnership owns a portion of three joint ventures (accounted for as equity method investments) that have constructed separate crude oil pipeline systems and related ancillary assets, which serve third parties and subsidiaries of Delek Holdings.

2022 Strategic Developments

Inflation Adjustments

On July 1, 2021, the tariffs on certain of our FERC regulated pipelines and the throughput fees and storage fees under certain of our agreements with Delek Holdings and third parties that are subject to adjustments using FERC indexing decreased by approximately 0.6%, which was the amount of the change in the FERC oil pipeline index.

Under certain of our agreements with Delek Holdings and third parties, the fees that are subject to adjustments using the consumer price index increased 4.4% and the fees that are subject to adjustments using the producer price index increased approximately 2.3%.

High Yield Debt - 7.125% Senior Notes due 2028

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

("Finance Corp." and together with the Partnership, the "Issuers") issued $400.0 million in aggregate principal amount of the Issuers’ 7.125% Senior Notes due 2028 (the “2028 Notes”), along with the related guarantees of the 2028 Notes.

We used the net proceeds from the sale of the 2028 Notes to repay a

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.

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.

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.

Expansion of connectors project

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 to 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

Management's Discussion and Analysis

portion of the outstanding borrowings under our revolving credit facility.

See Note 7 to our accompanying condensed consolidated financial statements for additional information.

Exclusive Supply Agreement

In May 2021, we executed an exclusive supply and strategic relationship agreement with Baker Petrolite LLC (an affiliate of Baker Hughes Company) ("Baker").

The agreement provides that, under certain circumstances, Baker will supply certain chemicals exclusively to us within a defined territory.

Those chemicals allow us, through blending competencies utilizing proprietary intellectual property, to clarify slurry which can then be used in International Maritime Organization-compliant products.

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

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.

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 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.

See Note 12 for additional information.

How We Generate Revenue

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Generally, these agreements include minimum quarterly volume, revenue or throughput commitments and have tariffs or fees indexed to inflation-based indices, provided that the tariffs or fees will not be decreased below the initial amount.

See our Annual Report on Form 10-K filed with the SEC on March 1, 2021 for a discussion of our material commercial agreements with Delek Holdings.

See our Annual Report on Form 10-K filed with the SEC on February 25, 2022 for a discussion of our material commercial agreements with Delek Holdings.

Other Transactions

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■ EBITDA and distributable cash flow (as such terms are defined below).

Management's Discussion and Analysis

The amount of revenue we generate primarily depends on the volumes of crude oil and refined products that we handle in our pipeline, transportation, terminalling, storage and marketing operations.

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• Delek Holdings' utilization of our assets in excess of its minimum volume commitments;

Management's Discussion and Analysis

• our ability to identify and execute acquisitions and organic expansion projects, and capture incremental volume increases from Delek Holdings or third parties;

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Contribution Margin per Barrel

Because we do not allocate general and administrative expenses by segment, we measure the performance of our segments by the amount of contribution margin as generated in operations.

Because we do not allocate general and administrative expenses by segment, we measure the performance of our segments by the amount of contribution margin as generated in operations, except for the investments in pipeline joint ventures segment.

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

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Gross margin per barrel reflects the gross margin (net revenues less cost of materials and other) of the wholesale marketing operations divided by the number of barrels of refined products sold during the measurement period.

Both contribution margin and gross margin per barrel can be affected by fluctuations in the prices and cost of gasoline, distillate fuel, ethanol and RINs.

Both contribution margin and gross margin per barrel can be affected by fluctuations in the prices and cost of gasoline, distillate fuel, ethanol and Renewable Identification Numbers ("RINs").

Historically, the profitability of our wholesale marketing operations has been affected by commodity price volatility, (specifically as it relates to changes in the price of refined products between the time we purchase such products from our suppliers and the time we sell the products to our wholesale customers), and the fluctuation in the value of RINs.

Commodity price volatility may also impact our wholesale marketing operations when the selling price of refined products does not adjust as quickly as the purchase price.

Our wholesale marketing gross margin may also be impacted by the fixed price ethanol agreements we enter into to fix the price we pay for ethanol.

Operating and Maintenance Expenses

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Operating expenses related to the wholesale business are excluded from cost of sales because they primarily relate to costs associated with selling the products through our wholesale business.

These expenses generally remain relatively stable across broad ranges of throughput volumes, but can fluctuate from period to period depending on the mix of activities performed during that period and the timing of these expenses.

Additionally, compliance with federal, state and local laws and regulations relating to the protection of the environment, health and safety may require us to incur additional expenditures.

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(iv) gains and losses related to our commodity hedging activities.

Management's Discussion and Analysis

The Partnership has declared its intent to make a cash distribution to its unitholders at a distribution rate of $0.95 per unit for the quarter ended September 30, 2021 ($3.80 per unit on an annualized basis).

The Partnership has declared its intent to make a cash distribution to its unitholders at a distribution rate of $0.98 per unit for the quarter ended March 31, 2022 ($3.92 per unit on an annualized basis).

Our Partnership Agreement requires that the Partnership distribute all of its available cash (as defined in the Partnership Agreement) to its unitholders quarterly.

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See Note 7 to the accompanying condensed consolidated financial statements for a discussion of historic cash distributions.

How We Evaluate Our Investments in Pipeline Joint Ventures

We make strategic investments in pipeline joint ventures generally when it provides an economic benefit in terms of pipeline access we can use for our existing or future customers and when we expect a rate of return that meets our internal investment criteria.

Management's Discussion and Analysis

investments in pipeline joint ventures all provide a combination of strategic benefit and return on investment.

The strategic benefit for each is described below:

• The RIO Pipeline is positioned in the Delaware basin and benefits from drilling activity in the area, while also offering producers and shippers connections to Midland, Texas takeaway pipelines;

• The Caddo Pipeline provides crude oil logistics connectivity for shippers from Longview, Texas area to Shreveport, Louisiana area;

• The Red River Pipeline provides crude oil transportation and optionality from Cushing, Oklahoma to Longview, Texas area and connectivity to our Caddo JV along with DKL Paline pipeline for access to Gulf Coast markets.

It also has additional expansion optionality.

Market Trends

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In particular, crude oil prices and the prices of related refined products have the ability to influence drilling activity in many basins and the amounts of capital spending that crude oil exploration and production companies incur to support future growth.

During the three and nine months ended September 30, 2021, the U.S.

During the three months ended March 31, 2022, the U.S.

economic activity continued its recovery path resulting in increases in consumption and demand for crude oil and refined products, although heightened uncertainty still remains due to the on-going COVID-19 Pandemic and the spread of new variants of the virus.

Compared to the three and nine months ended September 30, 2020, where reduced demand for crude oil and refined products related to the COVID-19 Pandemic, combined with production increases from OPEC+, had led to a significant reduction in crude oil prices, crude oil prices during the three and nine months ended September 30, 2021 were steadily increasing.

The price of oil (WTI Cushing) closed at $75.03 per barrel on September 30, 2021, $34.81 per barrel higher than on September 30, 2020.

The opening January 2021 price of oil (WTI Cushing) was $47.62 and reached the January 2021 high closing price of oil of $53.57 per barrel, which further increased to $61.45 beginning April 2021 and reached a high of $75.45 per barrel on September 27, 2021.

Due to the sustained increase in oil prices, during the three and nine months ended September 30, 2021, we experienced improved margins in the West Texas area, and better throughput for our assets with improved gross margins, when compared to the same period in 2020.

Compared to the three months ended March 31, 2021, crude oil prices during the three months ended March 31, 2022 were steadily increasing.

The price of oil (WTI Cushing) closed at $100.28 per barrel on March 31, 2022, $41.12 per barrel higher than on March 31, 2021.

The opening January 2022 price of oil (WTI Cushing) was $76.08 and reached the January 2022 high closing price of oil of $88.15 per barrel.

Due to the sustained increase in oil prices, during the three months ended March 31, 2022, we experienced improved margins in the West Texas area, and better throughput for our assets with improved gross margins, when compared to the same period in 2021.

We remain positively cautious about the recovery in demand and price of crude oil as it is not without volatility.

The COVID-19 Pandemic, future OPEC+ decisions, global geopolitical and economic uncertainty continue to contribute to volatility in the financial and commodity markets.

Our exposure to crude oil production, demand and commodity price fluctuations in our pipelines and transportation segment and our joint venture entities was limited due to minimum volume commitments under existing throughput contracts with customers, but continued pressure on our customers could present risks to our existing and new business opportunities as well as on collectability on our receivables.

We believe we are strategically positioned, in these tougher market conditions to continue developing profitable growth projects that are needed to support future distribution growth in the midstream energy sector for the Partnership.

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Additionally, volatility in crude oil, intermediate and refined products prices in the West Texas area and the value attributable to RINs can affect the results of our West Texas operations.

For example, demand for refined products from our West Texas operations to industries that support crude oil exploration and production was subdued during the three and nine months ended September 30, 2020 due to the impact of the COVID-19 Pandemic leading to lower demand and sales of refined products and remained largely depressed during most of 2020.

For example, demand for and prices of crude oil and related refined products increased as economic activity began to recover during 2021 due to the increase in vaccinations.

As discussed above, the U.S.

economic activity is recovering and demand for and prices of crude oil and related refined products increased during the three and nine months ended September 30, 2021 as consumption of oil increased spurred by easing of COVID-19 related restrictions.

economic activity continues to recover and demand for and prices of crude oil and related refined products continued on the rise during the three months ended March 31, 2022, as consumption of oil increased, spurred by easing of COVID-19 related restrictions.

Although we expect the direct effects from the pandemic on U.S.

oil consumption to decrease, some consumption patterns may be more lasting, including increased working from home and changes in travel behavior, which could limit growth in gasoline and jet fuel consumption.

See the chart below for the high, low and average price per barrel of WTI crude oil for each of the quarterly periods in 2020 and for the three quarterly periods in 2021.

See the chart below for the high, low and average price per barrel of WTI crude oil for each of the quarterly periods in 2021 and for the quarterly period in 2022.

Management's Discussion and Analysis

The volatility of refined products prices may impact our margin in the West Texas operations when the selling price of refined products does not adjust as quickly as the purchase price.

See the charts below for the range of prices per gallon of gasoline and diesel for each of the quarterly periods in 2020 and for the three quarterly periods in 2021.

Management's Discussion and Analysis

Our West Texas operations can benefit from RINs that are generated by ethanol blending activities.

As a result, changes in the price of RINs can affect our results of operations.

The RINs we generate are sold primarily to Delek Holdings at market prices.

We sold approximately $2.7 million and $8.1 million of RINs to Delek Holdings during the three and nine months ended September 30, 2021, respectively.

Additionally, we sold approximately $0.8 million and $2.3 million of RINs to Delek Holdings during the three and nine months ended September 30, 2020, respectively.

See below for the high, low and average prices of RINs for each of the quarterly periods in 2020 and in the three quarterly periods in 2021.

All of these factors are subject to change over time.

As part of our overall business strategy, management considers aspects such as location, acquisition and expansion opportunities and factors impacting the utilization of the refineries (and therefore throughput volumes), which may impact our performance in the market.

See the charts below for the range of prices per gallon of gasoline and diesel for each of the quarterly periods in 2021 and for the quarterly period in 2022.

Management's Discussion and Analysis

Contractual Obligations

There have been no material changes to our contractual obligations and commercial commitments during the three and nine months ended September 30, 2021 from those disclosed in our Annual Report on Form 10-K.

Critical Accounting Policies

There have been no material changes to our contractual obligations and commercial commitments during the three months ended March 31, 2022 from those disclosed in our Annual Report on Form 10-K.

Critical Accounting Estimates

The preparation of our condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities.

The SEC has defined critical accounting policies as those that are both most important to the portrayal of our financial condition and results of operations and require our most difficult, complex or subjective judgments or estimates.

Based on this definition and as further described in our Annual Report on Form 10-K, we believe our critical accounting policies include the following:

(i) evaluating impairment for property, plant and equipment and intangibles, and (ii) evaluating potential impairment of goodwill.

During the nine months ended September 30, 2021, we updated our critical accounting policies to include accounting policies that have become critical as a result of new events.

Accordingly we added a critical accounting policy related to equity method investments impairment assessment as follows:

Equity Method Investments and Impairment

Equity investments for which we determine we have significant influence are accounted for as equity method investments.

Amounts recognized for equity method investments are included in our consolidated balance sheets and adjusted for our share of the net earnings and losses of the investee, dividends received and cash distributions from the investee, which are separately stated in our consolidated statements of income and comprehensive income and our consolidated statements of cash flows.

The equity method investments are assessed for possible impairment when events indicate that the fair value of the investment may be below the carrying value.

In such circumstances, we are required to determine the fair value of the investment and compare it to the carrying value.

When the fair value is less than carrying value and when such condition is deemed to be other than temporary, the carrying value of the investment is considered to be impaired and is adjusted to its fair value, and the amount of the impairment is included in net income.

In making the determination as to whether a decline is other than temporary, the Partnership considers such factors as the duration and extent of the decline, the investee’s financial performance, and our ability and intention to retain the investment for a period that will be sufficient to allow for any anticipated recovery in the investment’s market value.

The new cost basis of the investment is not changed for subsequent recoveries in fair value.

During the second quarter ended June 30, 2021, we identified the non-renewal of a significant revenue contract which expired on August 31, 2021 by a customer and major shareholder of Andeavor Logistics RIO Pipeline LLC ("Andeavor Logistics") and lower competitor tariff rates compared to FERC approved tariff rates as triggering events requiring that we perform an impairment assessment on our equity method investment.

The fair value of our equity method investment was estimated using the income approach and the market approach.

The income approach utilizes a discounted cash flow model incorporating management’s expectations of the investee’s future revenue (including the throughput barrel per day sold and related reduced tariff rates), operating expenses and earnings before interest, taxes, depreciation and amortization, capital expenditures and an anticipated tax rate (“EBITDA”) and the estimated long term growth rate.

The related cash flow forecasts are discounted using an estimated weighted average cost of capital (“WACC”) at the date of valuation.

For the market approach, we utilized the estimated 2022 EBITDA multiples for guideline comparable companies applied to Andeavor Logistics' estimated 2022 EBITDA to estimate the fair value.

We performed certain analyses on the most significant inputs in our valuation model to evaluate the impact of the judgments made on the fair value of the investee.

This included sensitivity analysis and stress testing on certain of our inputs to our valuation model, including the estimated revenue (including the throughput barrel per day and tariff rates), EBITDA margin and WACC.

Based on our analyses, we determined that there was no other than temporary impairment on our equity method investment as of June 30, 2021.

As of September 30, 2021 we performed a qualitative assessment evaluating whether there were any significant changes in the key assumptions and other significant inputs in our valuation model and concluded that there were no significant changes that would warrant a quantitative assessment to be performed.

Qualitative matters that may impact our estimates of the fair value of our equity method investment include assumptions regarding the timing of another throughput contract and ramp up of throughput volumes, timing of competitor tariff rates recovery compared to FERC tariff rates, the pipeline location and resultant impact on possible customers capacity utilization, the Delaware Permian Basin takeaway and production levels, regulatory impacts, competitors entering the location by building competing pipelines, and other operational issues which might affect Andeavor Logistics’ ability to scale up throughput capacity.

The Partnership bases its assumptions on projected financial information that the Partnership believes is reasonable, but those assumptions require judgment and are forward looking in nature.

However, actual results may differ materially from those projections.

If actual results were subsequently materially lower than expected, if significant adverse changes were to occur in its operating environment, if a significant increase in the discount rate were to be needed, and/or if changes in other assumptions were to happen, the Partnership’s estimate of the fair value of its equity investment could change materially.

Management's Discussion and Analysis

The SEC has defined critical accounting estimates as those that are both most important to the portrayal of our financial condition and results of operations and require our most difficult, complex or subjective judgments or estimates.

Based on this definition and as further described in our Annual Report on Form 10-K, we believe our critical accounting estimates include estimates related to equity method investments impairment assessment.

Non-GAAP Measures

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We believe that the presentation of EBITDA and distributable cash flow provide information useful to investors in assessing our financial condition and results of operations.

EBITDA and distributable cash flow should not be considered alternatives to net income, operating income, cash flow from operating activities or any other measure of financial performance or liquidity presented in accordance with U.S.

EBITDA and distributable cash flow should not be considered alternatives to net income, operating

Management's Discussion and Analysis

income, cash flow from operating activities or any other measure of financial performance or liquidity presented in accordance with U.S.

EBITDA and distributable cash flow have important limitations as analytical tools because they exclude some, but not all, items that affect net income and net cash provided by operating activities.

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The financial statements, together with the following information, are intended to provide investors with a reasonable basis for assessing our historical operations, but should not serve as the only criteria for predicting our future performance.

The following table and discussion present a summary of our consolidated results of operations for the three and nine months ended September 30, 2021 and 2020, including a reconciliation of net income to EBITDA and net cash flow provided by operating activities to distributable cash flow.

The following table and discussion present a summary of our consolidated results of operations for the three months ended March 31, 2022 and 2021, including a reconciliation of net income to EBITDA and net cash flow provided by operating activities to distributable cash flow.

Statement of Operations Data (in thousands, except unit and per unit amounts)

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

2021 2020 2021 2020

Three Months Ended March 31,

Net revenues:

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$ 66,003 $ 58,730

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:

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(1) For a definition of EBITDA, please see "Non-GAAP Measures" above.

(2) 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.

Management's Discussion and Analysis

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Reconciliation of net income to EBITDA (in thousands)

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

2021 2020 2021 2020

Three Months Ended March 31,

Net income $ 39,514 $ 36,267

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

Income tax expense 101 184

Depreciation and amortization 10,335 10,739

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Reconciliation of net cash from operating activities to distributable cash flow (in thousands)

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

2021 2020 2021 2020

Three Months Ended March 31,

Net cash provided by operating activities $ 47,920 $ 61,732

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Maintenance and regulatory capital expenditures (1)

(850) (27) (3,712) (760)

Reimbursement from Delek Holdings for capital expenditures (2)

11 26 1,588 81

(Refund to) reimbursement from Delek Holdings for capital expenditures (2)

Accretion of asset retirement obligations (124) (115)

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Examples of maintenance and regulatory capital expenditures are expenditures for the repair, refurbishment and replacement of pipelines and terminals, to maintain equipment reliability, integrity and safety and to address environmental laws and regulations.

(2) For the three and nine month periods ended September 30, 2021 and 2020, Delek Holdings reimbursed us for certain capital expenditures pursuant to the terms of the Omnibus Agreement (as defined in Note 3 to our accompanying condensed consolidated financial statements).

(2) For the three month periods ended March 31, 2022 and 2021, Delek Holdings reimbursed us for certain capital expenditures pursuant to the terms of the Omnibus Agreement (as defined in Note 2 to our accompanying condensed consolidated financial statements).

(3) For a definition of distributable cash flow, please see "Non-GAAP Measures" above.

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Results of Operations

Consolidated Results of Operations — Comparison of the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020

Consolidated Results of Operations — Comparison of the three months ended March 31, 2022 compared to the three months ended March 31, 2021

The table below presents a summary of our consolidated results of operations.

The discussion immediately following presents the consolidated results of operations (in thousands):

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

2021 2020 2021 2020

Three Months Ended March 31,

Net Revenues:

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Operating income $ 46,838 $ 42,170

Net revenues increased by $47.4 million, or 33.3%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• increased revenues at our Big Spring Refinery Crude Pipeline (the "BSR Crude Pipeline"), as a result of new contracts executed in the second quarter of 2020, which had higher throughput volumes during the third quarter of 2021 compared to the third quarter of 2020;

• increased revenues for the Trucking Assets, due to higher volumes transported from El Dorado;

• increase in revenues for the Paline pipeline and Plains connection system, due to higher throughput volumes;

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

◦ the average sales prices per gallon of gasoline and diesel sold increased $0.93 per gallon and $0.95 per gallon, respectively;

◦ the average volumes of gasoline sold increased by 2.9 million gallons, partially offset by a 0.5 million gallons decrease in the average volumes of diesel sold.

Net revenues increased by $87.7 million, or 20.7%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

• increased revenues associated with agreements executed in connection with the Big Spring Gathering Assets and the Trucking Assets acquisitions, which were effective March 31, 2020 and May 1, 2020, respectively.

See Note 2 to the condensed consolidated financial statements in Item 1.

Financial Statements, for additional information;

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

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

Management's Discussion and Analysis

Net revenues increased by $53.7 million, or 35.1%, in the three months ended March 31, 2022 compared to the three months ended March 31, 2021, primarily driven by the following:

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

◦ the average sales prices per gallon of gasoline and diesel sold increased by $0.94 per gallon and $1.25 per gallon, respectively;

◦ the volume of gasoline and diesel sold decreased by 10.7 million gallons and 9.0 million gallons, respectively.

Such increases were partially offset by the following:

• decreases in throughputs due to the impact of the severe freezing conditions that affected most of the regions where we operate resulting in lower volumes outside of contractual minimum volume commitments during the nine months ended September 30, 2021 when compared to the nine months ended September 30, 2020;

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

◦ the average volume of gasoline sold decreased by 3.4 million gallons and the average volume of diesel sold increased by 2.5 million gallons.

• increases in pipeline throughputs, where the first quarter of 2021 were negatively impacted by severe weather events.

Cost of Materials and Other

Cost of materials and other increased by $44.4 million, or 73.2%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

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

◦ the average cost per gallon of gasoline and diesel sold increased $1.01 per gallon and $0.96 per gallon, respectively;

◦ the average volumes of gasoline sold increased by 2.9 million gallons, partially offset by a 0.5 million gallons decrease in the average volumes of diesel sold.

Cost of materials and other increased by $69.1 million, or 33.6%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

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

Cost of materials and other increased by $45.0 million, or 55.5%, in the three months ended March 31, 2022 compared to the three months ended March 31, 2021, primarily driven by the following:

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

◦ the average cost per gallon of gasoline and diesel sold increased by $0.97 per gallon and $1.25 per gallon, respectively;

◦ the average volumes of gasoline and diesel sold decreased by 10.7 million gallons and 9.0 million gallons, respectively.

◦ the average volume of gasoline sold decreased by 3.4 million gallons and the average volume of diesel sold increased by 2.5 million gallons.

Management's Discussion and Analysis

Operating Expenses

Operating expenses increased by $3.1 million, or 21.9%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

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

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

• increases in utilities, maintenance and other variable expenses due to higher throughput.

Operating expenses increased by $5.5 million, or 13.3%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

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

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

Operating expenses increased by $3.3 million, or 22.3%, in the three months ended March 31, 2022 compared to the three months ended March 31, 2021, primarily driven by the following:

• increases in employee and outside service costs;

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

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

Management's Discussion and Analysis

General and Administrative Expenses

The changes in general and administrative expenses for both the third quarter of 2021 compared to the third quarter of 2020 and the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 were immaterial.

General and administrative expenses increased by $1.0 million, or 24.1%, in the three months ended March 31, 2022 compared to the three months ended March 31, 2021, primarily driven by the following:

• increase in professional consulting fees;

• increase in employee and outside services costs.

Depreciation and Amortization

Depreciation and amortization increased by $0.7 million, or 7.4%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• additions to assets as part of operational growth projects.

Depreciation and amortization increased by $6.4 million, or 26.2%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

• addition of assets to our asset base as a result of the Trucking Assets Acquisition and the Big Spring Gathering Assets Acquisition.

The changes in depreciation and amortization for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 were immaterial.

Interest Expense

During the three months ended September 30, 2021 we incurred $14.5 million of interest expense, compared to $10.4 million during the three months ended September 30, 2020, an increase of $4.1 million, or 40.0%.

This increase was primarily driven by the following:

• higher fixed rate interest on the new 2028 Notes during the third quarter of 2021 compared to our floating interest rates under the DKL Credit Facility;

• partially offset by a decrease in floating interest rates applicable to the DKL Credit Facility and lower total debt levels.

During the nine months ended September 30, 2021 we incurred $35.9 million of interest expense, compared to $32.9 million during the nine months ended September 30, 2020, an increase of $3.0 million, or 9.3%.

During the three months ended March 31, 2022 we incurred $14.3 million of interest expense, compared to $9.7 million during the three months ended March 31, 2021, an increase of $4.6 million, or 47.4%.

This increase was primarily driven by the following:

• higher fixed rate interest on the new 2028 Notes issued during second quarter of 2021 compared to our floating interest rates under the DKL Credit Facility;

• increased borrowings under the DKL Credit Facility as a result of our Big Spring Gathering Assets Acquisition, the Trucking Assets Acquisition and the IDR Restructuring Transaction;

• partially offset by a decrease in floating interest rates applicable to the DKL Credit Facility.

• higher fixed rate interest on the 2028 Notes compared to our floating interest rates under the DKL Credit Facility;

• increase in floating interest rates applicable to the DKL Credit Facility.

Results from Equity Method Investments

We recognized income of $7.3 million from equity method investments during the third quarter of 2021 compared to $4.9 million for the third quarter of 2020, an increase of $2.4 million, or 49.4%.

This increase was primarily driven by the following:

• increase in income from our Red River equity method investment due to higher throughput volumes and resulting revenue increases.

Caddo and Rio equity method investments income slightly increased as well.

During the nine months ended September 30, 2021 we recognized income of $18.0 million from equity method investments, compared to $16.9 million for the nine months ended September 30, 2020, an increase of $1.1 million, or 6.4%.

During the three months ended March 31, 2022 we recognized income of $7.0 million from equity method investments, compared to $4.0 million for the three months ended March 31, 2021, an increase of $3.0 million, or 73.5%.

This increase was primarily driven by the following:

• increase in income from our Red River equity method investment due to higher throughput volumes and resulting revenue increases.

Caddo and Rio equity method investments income slightly increased as well;

• partially offset by lower income from our equity method investments in the first quarter of 2021 due to lower volumes as the impact of the February 2021 severe freezing conditions was pervasive across all of our equity method investments' pipeline systems.

• increase in income from our Red River and Caddo equity method investment due to higher throughput volumes and resulting revenue increases;

• partially offset by decrease in income from Rio equity method investments.

Management's Discussion and Analysis

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• refined product pipeline capacity leased from Enterprise TE Products Pipeline Company ("Enterprise") that runs from El Dorado, Arkansas to our Memphis terminal and the Big Spring Pipeline

• pipelines and storage assets acquired in the Big Spring Logistic Assets Acquisition

• assets acquired in the Big Spring Gathering Assets Acquisition

• pipelines and storage assets acquired in the Big Spring Logistics Assets Acquisition

• assets acquired in the Permian Gathering Assets Acquisition

• assets acquired in the Trucking Assets Acquisition

In addition to these operating systems, we own or lease 264 tractors and 353 trailers used to haul primarily crude oil and other products for related and third parties.

The following tables and discussion present the results of operations and certain operating statistics of the pipelines and transportation segment for the three and nine months ended September 30, 2021 and 2020:

The following tables and discussion present the results of operations and certain operating statistics of the pipelines and transportation segment for the three months ended March 31, 2022 and 2021:

Pipelines and Transportation

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

2021 2020 2021 2020

Three Months Ended March 31,

Net Revenues:

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Throughputs (average bpd)

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

2021 2020 2021 2020

Three Months Ended March 31,

El Dorado Assets:

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East Texas Crude Logistics System 16,056 26,075

Big Spring Gathering System 84,325 90,719 79,251 85,845

Permian Gathering System (1)

100,325 73,724

Plains Connection System 162,007 108,361

Trucking Assets 9,306 10,187

(1) Formerly known as the Big Spring Gathering System.

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

Management's Discussion and Analysis

Comparison of the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020

Net revenues for the pipelines and transportation segment increased by $4.7 million, or 6.6%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• increased revenues at our BSR Crude Pipeline, as a result of new contracts executed in the second quarter of 2020, which had higher throughput volumes during the third quarter of 2021 compared to the third quarter of 2020;

• increased revenues for the El Dorado trucking due to higher volumes transported;

• increase in revenues for the Paline pipeline and Plains connection due to higher throughput volumes.

Net revenues for the pipelines and transportation segment increased by $28.7 million, or 15.7%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

• increased revenues associated with agreements executed in connection with the Big Spring Gathering Assets Acquisition and the Trucking Assets Acquisition, which were effective March 31, 2020 and May 1, 2020, respectively.

See Note 2 to the condensed consolidated financial statements in Item 1.

Financial Statements, for additional information;

• increased revenues at our BSR Crude Pipeline, as a result of new contracts executed in the second quarter of 2020, during the nine months ended September 30, 2021 when compared to the nine months ended September 30, 2020;

• partially offset by decreases in throughputs due to the impact of the severe freezing conditions that affected most of the regions where we operate resulting in lower volumes outside of contractual minimum volume commitments and decreases in throughputs at the Paline pipeline due to scheduled pipeline maintenance during the nine months ended September 30, 2021 when compared to the nine months ended September 30, 2020.

Comparison of the three months ended March 31, 2022 compared to the three months ended March 31, 2021

Net revenues for the pipelines and transportation segment increased by $10.8 million, or 16.7%, in the three months ended March 31, 2022 compared to the three months ended March 31, 2021, primarily driven by the following:

• increased revenues associated with the Slurry Clarifying Services Agreement, which was effective January 1, 2022;

• increases in throughputs due to the impact of the severe freezing conditions that affected most of the regions where we operate and increases in throughputs at the Paline Pipeline due to scheduled pipeline maintenance during three months ended March 31, 2021 compared to the three months ended March 31, 2022;

• increased revenues at our BSR Crude Pipeline, as a result of Luther Station becoming operational in 2021.

Cost of Materials and Other

Cost of materials and other for the pipelines and transportation segment increased $0.8 million, or 5.8%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• increases in transportation costs related to our trucking assets, including driver wages and benefits and fuel expenses proportionate to increase in fees, insurance, supplies and maintenance expenses.

Cost of materials and other for the pipelines and transportation segment increased by $11.0 million, or 34.7%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

• increases in transportation costs related to our Trucking Assets due to the Trucking Assets Acquisition, which was effective May 1, 2020;

Cost of materials and other for the pipelines and transportation segment increased by $6.5 million, or 49.9%, in the three months ended March 31, 2022 compared to the three months ended March 31, 2021, primarily driven by the following:

• increases in driver wages and benefits and fuel expense proportionate to increases in fees, insurance, supplies and maintenance expenses.

Operating Expenses

Operating expenses for the pipelines and transportation segment increased by $2.9 million, or 27.3%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• increase in employee and outside service costs compared to same period prior year when cost cutting measures were implemented to respond to the COVID-19 Pandemic including delaying non-essential projects;

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

• increase in utilities and other variable expenses due to higher throughputs.

Management's Discussion and Analysis

Operating expenses for the pipelines and transportation segment increased by $2.8 million, or 8.7%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

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

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

Operating expenses for the pipelines and transportation segment increased by $2.8 million, or 27.4%, in the three months ended March 31, 2022 compared to the three months ended March 31, 2021, primarily driven by the following:

• increases in employee and outside service costs.

Contribution Margin

Contribution margin for the pipelines and transportation segment increased by $1.0 million, or 2.1%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

Contribution margin for the pipelines and transportation segment increased by $1.5 million, or 3.6%, in the three months ended March 31, 2022 compared to the three months ended March 31, 2021, primarily driven by the following:

• increases in revenue due to higher throughput volumes as explained above;

• partially offset by increases in operating expenses.

Contribution margin for the pipelines and transportation segment increased by $15.0 million, or 12.6%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

• increases in revenues associated with agreements executed in connection with the Big Spring Gathering Assets Acquisition, the Trucking Assets Acquisition and the BSR Crude Pipeline;

• partially offset by the increase in cost of materials and other in connection with the Trucking Assets Acquisition and an increase in operating expenses.

Management's Discussion and Analysis

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We use our wholesale marketing and terminalling assets to generate revenue by providing wholesale marketing and terminalling services to Delek Holdings' refining operations and to independent third parties.

The tables and discussion below present the results of operations and certain operating statistics of the wholesale marketing and terminalling segment for the three and nine months ended September 30, 2021 and 2020 :

The tables and discussion below present the results of operations and certain operating statistics of the wholesale marketing and terminalling segment for the three months ended March 31, 2022 and 2021 :

Wholesale Marketing and Terminalling

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

2021 2020 2021 2020

Three Months Ended March 31,

Net Revenues:

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Operating Information

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

2021 2020 2021 2020

Three Months Ended March 31,

East Texas - Tyler Refinery sales volumes (average bpd) (1)

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Consists of terminalling throughputs at our Tyler, Big Spring, Big Sandy and Mount Pleasant, Texas, El Dorado and North Little Rock, Arkansas and Memphis and Nashville, Tennessee terminals.

Comparison of the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020

Net revenues for the wholesale marketing and terminalling segment increased by $42.6 million, or 60.2%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

◦ the average sales prices per gallon of gasoline and diesel sold increased $0.93 per gallon and $0.95 per gallon, respectively;

◦ the average volumes of gasoline sold increased by 2.9 million gallons, partially offset by a 0.5 million gallons decrease in the average volumes of diesel sold.

Net revenues for the wholesale marketing and terminalling segment increased by $59.0 million, or 24.5%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

Management's Discussion and Analysis

Comparison of the three months ended March 31, 2022 compared to the three months ended March 31, 2021

Net revenues for the wholesale marketing and terminalling segment increased by $42.8 million, or 48.7%, in the three months ended March 31, 2022 compared to the three months ended March 31, 2021, primarily driven by the following:

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

◦ the average sales prices per gallon of gasoline and diesel sold increased by $0.94 per gallon and $1.25 per gallon, respectively;

◦ the average volumes of gasoline and diesel sold decreased by 10.7 million gallons and 9.0 million gallons, respectively.

◦ the average volume of gasoline sold decreased by 3.4 million gallons and the average volume of diesel sold increased by 2.5 million gallons.

Management's Discussion and Analysis

The following charts show summaries of the average sales prices per gallon of gasoline and diesel and refined products volume impacting our West Texas operations.

Cost of Materials and Other

Cost of materials and other for our wholesale marketing and terminalling segment increased by $43.6 million, or 94.1%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

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

◦ the average cost per gallon of gasoline and diesel sold increased $1.01 per gallon and $0.96 per gallon, respectively;

◦ the average volumes of gasoline sold increased by 2.9 million gallons, partially offset by a 0.5 million gallons decrease in the average volumes of diesel sold.

Management's Discussion and Analysis

Cost of materials and other for our wholesale marketing and terminalling segment increased by $58.1 million, or 33.4%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

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

Cost of materials and other for our wholesale marketing and terminalling segment increased by $38.5 million, or 56.5%, in the three months ended March 31, 2022 compared to the three months ended March 31, 2021, primarily driven by the following:

◦ the average cost per gallon of gasoline and diesel sold increased by $0.97 per gallon and $1.25 per gallon, respectively;

◦ the average volumes of gasoline and diesel sold decreased by 10.7 million gallons and 9.0 million gallons, respectively.

The following chart shows a summary of the average prices per gallon of gasoline and diesel sold in our West Texas operations for the three and nine months ended September 30, 2021 and 2020.

◦ the average volume of gasoline sold decreased by 3.4 million gallons and the average volume of diesel sold increased by 2.5 million gallons.

The following chart shows a summary of the average prices per gallon of gasoline and diesel sold in our West Texas operations for the three months ended March 31, 2022 and 2021.

Refer to the Refined Products Volume chart above for a summary of volumes impacting our West Texas operations.

Management's Discussion and Analysis

Operating Expenses

Operating expenses increased by $0.2 million, or 5.3%, in the in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• increases in variable expenses such as utilities, maintenance and material costs;

• this increase was partially offset by lower operating costs associated with allocated contract services pertaining to certain of our assets.

Operating expenses increased by $2.7 million, or 28.9%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

• increases in variable expenses such as utilities, maintenance and material costs;

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

• this increase was partially offset by lower operating costs associated with allocated contract services pertaining to certain of our assets.

Changes in operating expenses for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 were immaterial.

Contribution Margin

Contribution margin for the wholesale marketing and terminalling segment decreased by $1.2 million, or 5.5%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

Management's Discussion and Analysis

• increase in cost of materials and other due to increases in average cost per gallon of diesel and gasoline sold as described above.

Such decreases were offset by:

• increase in revenue due to increases in average price per gallon of diesel and gasoline as described above.

The decrease of $1.9 million, or 3.4%, in contribution margin for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 was due to increases in cost of materials and other and operating expenses offset by increases in revenue as described above.

The increase of $3.8 million, or 25.2%, in contribution margin for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was due to the following:

• increases in revenue due to increases in average sales prices per gallon of diesel and gasoline sold;

• partially offset by increases in cost of materials and other due to increases in average cost per gallon of diesel and gasoline sold and increases in operating expenses.

Investments in Pipeline Joint Ventures Segment

The Investments in Pipeline Joint Venture segment relates to equity method accounted strategic Joint Venture investments which support the Delek Holdings operations in terms of offering connection to takeaway pipelines, alternative crude supply sources and flow of high quality crude oil to the Delek Holdings refining system.

As a result, Delek Holdings is a major shipper and customer on certain of the Joint Venture pipelines, with minimum volume commitment ("MVC") agreements, which cushion the Joint Venture entities during periods of low activity as recently experienced due to the impact of COVID-19 Pandemic and impact of the extreme weather events.

The other Joint Venture owners are usually major shippers on the pipelines resulting in a majority of the revenue of the Joint Venture entities coming from MVC agreements with related entities.

Investments in pipeline joint ventures segment include the Partnership's joint ventures investments described in Note 9 to our accompanying condensed consolidated financial statements.

Refer to Consolidated Results of Operations above for details and discussion of the investments in pipeline joint ventures segment for the quarter ended March 31, 2022.

Liquidity and Capital Resources

Source of Capital

We consider the following when assessing our liquidity and capital resources:

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(iv) potential issuance of additional debt securities.

At September 30, 2021 our total liquidity amounted to $594.0 million, comprised of $589.1 million in unused credit commitments under the DKL Credit Facility and $4.9 million in cash and cash equivalents.

At March 31, 2022 our total liquidity amounted to $588.6 million, comprised of $585.9 million in unused credit commitments under the DKL Credit Facility and $2.7 million in cash and cash equivalents.

We have the ability to increase the DKL Credit Facility to $1.0 billion subject to receiving increased or new commitments from lenders and meeting certain requirements under the credit facility.

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We believe we have sufficient financial resources from the above sources to meet our funding requirements in the next 12 months, including working capital requirements, quarterly cash distributions and capital expenditures.

Nevertheless, our ability to satisfy working capital requirements, to service our debt obligations, to fund planned capital expenditures, or to pay distributions will depend upon future operating performance, which will be affected by prevailing economic conditions in the oil industry and other financial and business factors, including the current COVID-19 Pandemic and crude oil prices, some of which are beyond our control.

Nevertheless, our ability to satisfy working capital requirements, to service our debt obligations, to fund planned capital expenditures, or to pay distributions will depend upon future

Management's Discussion and Analysis

operating performance, which will be affected by prevailing economic conditions in the oil industry and other financial and business factors, including the current COVID-19 Pandemic and crude oil prices, some of which are beyond our control.

If market conditions were to change, for instance due to the uncertainty created by the COVID-19 Pandemic or the Russia - Ukraine War, and our revenue was reduced significantly or operating costs were to increase significantly, our cash flows and liquidity could be unfavorably impacted.

Our largest customer is Delek Holdings, a related party, with whom we have various commercial agreements.

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Refer to the Business Overview section of this MD&A for a complete discussion of the uncertainties identified by management and the actions taken to respond to the COVID-19 Pandemic.

We believe we were in compliance with the covenants in all our debt facilities as of September 30, 2021.

We believe we were in compliance with the covenants in all our debt facilities as of March 31, 2022.

After considering the potential effect of the uncertainty created by the COVID-19 Pandemic on our operations, we currently expect to remain in compliance with our debt covenants.

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Cash Distributions

On October 26, 2021, the board of directors of our general partner declared a distribution of $0.950 per common unit (the "Distribution"), which equates to approximately $41.3 million per quarter, based on the number of common units expected to be outstanding as of November 5, 2021.

The Distribution is expected to be paid on November 10, 2021 to common unitholders of record on November 5, 2021

Management's Discussion and Analysis

and represents a 5.0% increase over the third quarter 2020 distribution.

On April 25, 2022, the board of directors of our general partner declared a distribution of $0.98 per common unit (the "Distribution"), which equates to approximately $42,604 per quarter, based on the number of common units expected to be outstanding as of May 5, 2022.

The Distribution is expected to be paid on May 12, 2022 to common unitholders of record on May 5, 2022 and represents a 6.5% increase over the first quarter 2021 distribution.

We have set a distribution growth guidance of 5% for the full year 2022.

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Although our Partnership Agreement requires that we distribute all of our available cash each quarter, we do not otherwise have a legal obligation to distribute any particular amount per common unit.

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

Quarter Ended Total Quarterly Distribution Per Limited Partner Unit Total Quarterly Distribution Per Limited Partner Unit, Annualized Total Cash Distribution, including general partner interest and IDRs (in thousands) Date of Distribution Unitholders Record Date

September 30, 2020 $ 0.905 $ 3.62 $ 39,308 November 12, 2020 November 6, 2020

December 31, 2020 $ 0.910 $ 3.64 $ 39,533 February 9, 2021 February 2, 2021

The table below summarizes the quarterly distributions related to the periods indicated:

Quarter Ended Total Quarterly Distribution Per Limited Partner Unit Total Quarterly Distribution Per Limited Partner Unit, Annualized Total Cash Distribution (in thousands) Date of Distribution Unitholders Record Date

March 31, 2021 $ 0.920 $ 3.68 $ 39,968 May 14, 2021 May 10, 2021

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August 5, 2021

September 30, 2021 $ 0.950 $ 3.80 $ 41,286 November 10, 2021 (1)

November 5, 2021

September 30, 2021 $ 0.950 $ 3.80 $ 41,286 November 10, 2021 November 5, 2021

December 31, 2021 $ 0.975 $ 3.90 $ 42,384 February 8, 2022 February 1, 2022

March 31, 2022 $ 0.980 $ 3.92 $ 42,604 May 12, 2022 (1)

(1) Expected date of distribution.

The following table sets forth a summary of our consolidated cash flows for the nine months ended September 30, 2021 and 2020 (in thousands):

Nine Months Ended September 30,

The following table sets forth a summary of our consolidated cash flows for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31,

Net cash provided by operating activities $ 47,920 $ 61,732

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

Management's Discussion and Analysis

Operating Activities

Net cash provided by operating activities was $222.3 million for the nine months ended September 30, 2021, compared to $134.7 million for the nine months ended September 30, 2020, resulting in a $87.6 million increase in net cash provided by operating activities.

Net cash provided by operating activities was $47.9 million for the three months ended March 31, 2022, compared to $61.7 million for the three months ended March 31, 2021, resulting in a $13.8 million decrease in net cash provided by operating activities.

The cash receipts from customer activities increased by $45.5 million and cash payments to suppliers and for allocations from Delek Holdings for salaries increased by $65.0 million.

In addition, cash dividends received from equity method investments decreased by $2.7 million and cash paid for debt interest decreased by $7.7 million.

In addition, cash dividends received from equity method investments increased by $2.9 million and cash paid for debt interest decreased by $2.8 million.

Investing Activities

Net cash used in investing activities decreased by $108.4 million during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The decrease in cash used in investing activities was primarily due to lower contributions to equity method investments and no acquisitions during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

We disbursed $1.4 million in additional contributions to our equity method investments during the nine months ended September 30, 2021 compared to $11.8 million during the nine months ended September 30, 2020.

The Big Spring Gathering Assets Acquisition, effective on March 31, 2020, was partially financed with cash from a drawdown of the DKL Credit Facility amounting to $100.0 million which was recorded in investing activities and the Trucking Assets Acquisition was financed with cash from drawdowns of the DKL Credit Facility amounting to $48 million of which $0.5 million was recorded as investing activity with $47.6 million recorded in financing activities as a distribution to Delek Holdings and the other owners of our general partner prior to the IDR Restructuring Transaction pursuant to the asset acquisitions under common control guidance.

Transaction costs paid amounting to $1.0 million were capitalized for the Big Spring Gathering Assets Acquisition and the Trucking Assets Acquisition.

There was no asset acquisition during the nine months ended September 30, 2021.

In addition there were additions to property, plant and equipment amounting to $12.4 million, additions to intangible assets amounting to $0.7 million and distributions from equity method investments amounting $6.2 million during the nine months ended September 30, 2021 compared to additions to property, plant and equipment amounting to $6.9 million and distributions from equity method investments amounting to $2.7 million during the nine months ended September 30, 2020.

Management's Discussion and Analysis

Net cash used in investing activities increased by $8.5 million during the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

There were additions to property, plant and equipment amounting to $10.6 million, purchases of intangible assets amounting to $2.4 million and distributions from equity method investments amounting $0.6 million during the three months ended March 31, 2022 compared to additions to property, plant and equipment amounting to $6.1 million, purchases of intangible assets amounting to $0.5 million and distributions from equity method investments amounting to $3.9 million during the three months ended March 31, 2021.

Additionally, there were no contributions to our equity method investments during the three months ended March 31, 2022 compared to $1.4 million during the three months ended March 31, 2021.

Financing Activities

Net cash used in financing activities amounted to $213.7 million during the nine months ended September 30, 2021 compared to $17.8 million net cash provided by financing activities during the nine months ended September 30, 2020.

We repaid $485.7 million under the revolving credit facility during the nine months ended September 30, 2021, compared to net proceeds of $172.3 million under the revolving credit facility during the nine months ended September 30, 2020.

In addition, we paid quarterly cash distributions totaling $120.4 million during the nine months ended September 30, 2021, compared to quarterly cash distributions totaling $97.5 million during the nine months ended September 30, 2020.

Payments to Delek Holdings unitholders related to Trucking Assets Acquisition amounting to $47.6 million and payments to our general partner for conversion of its interest and elimination of IDR amounting to $45.0 million were recorded in financing activities during the nine months ended September 30, 2020 and there were no such payments during the nine months ended September 30, 2021.

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

("Finance Corp." and together with the Partnership, the "Issuers") issued $400.0 million in aggregate principal amount of 7.125% senior notes due 2028 (the "2028 Notes").

Proceeds of $400.0 million were received and deferred financing costs amounting to $6.2 million were paid.

The Partnership used the net proceeds received from the sale of the 2028 Notes to repay portion of the outstanding borrowings under the revolving credit facility.

The sources of cash during the nine months ended September 30, 2020 primarily consisted of the $100.0 million drawdown under the DKL Credit Facility to part-finance the Big Spring Gathering Assets Acquisition.

The Big Spring Gathering Assets Acquisition was also financed by the issuance of 5.0 million units to Delek US Energy, Inc.

(a wholly owned subsidiary of Delek Holdings).

Net cash used in financing activities amounted to $37.0 million during the three months ended March 31, 2022 compared to $48.6 million net cash provided by financing activities during the three months ended March 31, 2021.

We borrowed $6.1 million under the revolving credit facility during the three months ended March 31, 2022, compared to repayments of $9.1 million under the revolving credit facility during the three months ended March 31, 2021.

We paid quarterly cash distributions totaling $42.4 million during the three months ended March 31, 2022, compared to quarterly cash distributions totaling $39.5 million during the three months ended March 31, 2021.

In addition, we made payments on finance lease liability in the amount of $0.7 million during the three months ended March 31, 2022 with no comparable activity during the three months ended March 31, 2021.

Debt Overview

As of September 30, 2021, we had total indebtedness of $901.4 million comprised of $260.9 million under the amended and restated senior secured revolving agreement (the "DKL Credit Facility"), $246.4 million of 6.75% senior notes due 2025 (the “2025 Notes”), the latter net of deferred financing costs and original issue discount, and $394.1 million of the 2028 Notes, net of deferred financing costs.

As of March 31, 2022, we had total indebtedness of $905.5 million comprised of $264.1 million under the amended and restated senior secured revolving agreement (the "DKL Credit Facility"), $246.9 million of 6.75% senior notes due 2025 (the “2025 Notes”), net of deferred financing costs and original issue discount, and $394.5 million of the 2028 Notes, net of deferred financing costs.

Deferred financing costs and original issue discount on the 2025 Notes amounted to $2.3 million and $0.7 million, respectively.

Deferred financing costs on the 2028 Notes amounted to $5.5 million.

The decrease of $90.9 million in our long-term debt balance compared to the balance at December 31, 2020 resulted from the payments under the DKL Credit Facility during the nine months ended September 30, 2021, partially offset by the amortization of the deferred financing costs and original issuance discount under our 2025 and 2028 Notes and by the incurrence of the new 2028 Notes.

As of September 30, 2021, our total indebtedness consisted of:

The increase of $6.1 million in our long-term debt balance compared to the balance at December 31, 2021 resulted primarily from the borrowings under the DKL Credit Facility during the three months ended March 31, 2022:

• An aggregate principal amount of $264.1 million under the DKL Credit Facility ("revolving credit facility"), due on September 28, 2023, with an average borrowing rate of 2.67%.

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• An aggregate principal amount of $394.5 million, under the 2028 Notes (7.125% senior notes), due in 2028, with an effective interest rate of 7.05%.

We believe we were in compliance with the covenants in all our debt facilities as of September 30, 2021.

We believe we were in compliance with the covenants in all of our debt facilities as of March 31, 2022.

See Note 6 to our accompanying condensed consolidated financial statements for a complete discussion of our third-party indebtedness.

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Our current and future credit ratings may also be affected by Delek Holdings' level of indebtedness, financial performance and credit ratings.

Equity Units Overview

On August 13, 2020, we closed the IDR Restructuring Transaction.

To effect this transaction, our partnership agreement was amended and restated.

See Note 3 to our accompanying condensed consolidated financial statements for additional details.

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

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

Management's Discussion and Analysis

On March 31, 2020, we issued 5.0 million units to Delek Holdings as part of the consideration for the Big Spring Gathering Assets Acquisition.

In connection with the issuance of these units and in accordance with the Partnership Agreement, we issued additional general partner units in an amount necessary to maintain the 2% general partner interest as defined in the Partnership Agreement.

Contemporaneous with the above issuance, the Board of the general partner waived 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 ("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.

The IDR Restructuring Transaction on August 13, 2020 permanently eliminated all of the IDRs.

See Note 3 to our accompanying condensed consolidated financial statements for additional details.

Equity Units Overview

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.

Capital Spending

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

The following table summarizes our actual capital expenditures for the nine months ended September 30, 2021 and planned capital expenditures for the full year 2021 by segment and by major category (in thousands):

Full Year 2021 Forecast Nine Months Ended September 30, 2021

The following table summarizes our actual capital expenditures for the three months ended March 31, 2022 and planned capital expenditures for the full year 2022 by segment and by major category (in thousands):

Full Year 2022 Forecast Three Months Ended March 31, 2022

Pipelines and Transportation

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Pipelines and transportation segment total (4)

$ 69,868 $ 8,149

Wholesale Marketing and Terminalling

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Wholesale marketing and terminalling segment total (4)

$ 2,732 $ 937

Total capital spending (4)

$ 72,600 $ 9,086

(1) Maintenance capital expenditures represent cash expenditures (including expenditures for the addition or improvement to, or the replacement of, our capital assets, and for the acquisition of existing, or the construction or development of new, capital assets) made to maintain our long-term operating income or operating capacity.

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Delek Holdings has agreed to reimburse us with respect to certain assets it has transferred to us pursuant to the terms of the Omnibus Agreement (as defined in Note 2 to our accompanying condensed consolidated financial statements).

(2) The majority of the $2.2 million budgeted for regulatory projects in the pipelines and transportation segment is expected to be spent on certain of our pipelines to maintain their operational integrity.

The majority of the $16.0 million for discretionary projects in the pipelines and transportation segment is expected to be spent on scheduled maintenance and improvements to certain of our tanks and development of our DPG assets.

(2) The majority of the $5.3 million and $5.8 million budgeted for regulatory and maintenance projects in the pipelines and transportation segment is expected to be spent on certain of our pipelines to maintain their operational integrity and scheduled maintenance and improvements on our assets.

The majority of the $58.8 million for discretionary projects in the pipelines and transportation segment is expected to be spent on development of our DPG assets.

These expenditures have historically been and will continue to be financed through cash generated from operations.

(3) The majority of the $1.3 million and $3.6 million budgeted for regulatory and discretionary projects in the wholesale marketing and terminalling segment relates to scheduled maintenance and improvements on our terminalling tanks and racks at certain of our terminals.

(3) The majority of the $2.3 million budgeted for regulatory projects in the wholesale marketing and terminalling segment relates to scheduled maintenance and improvements on our terminalling tanks and racks at certain of our terminals.

These expenditures have historically been and will continue to be financed through cash generated from operations.

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

The amount of our capital expenditure budget is subject to change due to unanticipated increases in the cost, scope and completion time for our capital projects.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis