What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-03-01 compared with 2022-02-25 · 389 added, 324 removed, 412 unchanged (63% of the section changed)

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and any of its subsidiaries, other than the Partnership and its subsidiaries and its general partner.

Effective December 20, 2021, Delek Holdings announced a program to sell certain common limited partner units representing limited partner interests in the Partnership.

See Note 12 to our consolidated financial statements Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, for additional information.

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.

See Note 11 to our consolidated financial statements Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, for additional information.

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

See "2021 Developments" for further details.

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 (@DelekLogistics).

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

Management's Discussion and Analysis

• the age and condition of our assets and operating hazards and other risks incidental to transporting, storing and gathering crude oil, intermediate and refined products, including, but not limited to, costs, penalties, regulatory or legal actions and other effects related to spills, releases and tank failures;

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• the possibility of inefficiencies, curtailments, or shutdowns in refinery operations or pipelines, whether due to infection in the workforce or in response to reductions in demand as a result of the COVID-19 Pandemic;

Management's Discussion and Analysis

• disruptions due to equipment interruption or failure, or other events, including terrorism, sabotage or cyber-attacks, at our facilities, Delek Holdings’ facilities or third-party facilities on which our business is dependent;

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In light of these risks, uncertainties and assumptions, our actual results of operations and execution of our business strategy could differ materially from those expressed in, or implied by, the forward-looking statements, and you should not place undue reliance upon them.

In addition, past financial and/or operating performance is not necessarily a reliable indicator of future performance,

Management's Discussion and Analysis

and you should not use our historical performance to anticipate results or future period trends.

In addition, past financial and/or operating performance is not necessarily a reliable indicator of future performance, and you should not use our historical performance to anticipate results or future period trends.

We can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them do, what impact they will have on our results of operations and financial condition.

All forward-looking statements included in this report are based on information available to us on the date of this report.

We undertake no obligation to revise or update any forward-looking statements as a result of new information, future events or otherwise.

Business Overview

The Partnership primarily owns and operates crude oil, intermediate and refined products logistics and marketing assets.

Executive Summary:

Management's View of Our Business and Strategic Overview

Management's View of Our Business

The Partnership primarily owns and operates crude oil, intermediate and refined products logistics and marketing assets as well as crude oil and natural gas gathering and water processing assets.

We gather, transport, offload and store crude oil and intermediate products and market, distribute, transport and store refined products primarily in select regions of the southeastern United States and Texas for Delek Holdings and third parties.

A substantial majority of our existing assets are both integral to and dependent upon the success of Delek Holdings' refining operations, as many of our assets are contracted exclusively to Delek Holdings in support of its Tyler, El Dorado and Big Spring refineries.

In June 2022, we acquired 100% of the interest in 3 Bear Delaware Holding – NM, LLC ("3 Bear"), which expands our third-party revenue and includes crude oil and natural gas gathering, processing and transportation businesses, as well as water disposal and recycling operations, in the Delaware Basin of New Mexico (the “Delaware Gathering” business).

As we continue the process of integrating these operations into our existing businesses and assessing the long-term impact to our business, management (including the designated Chief Operating Decision Maker or “CODM”) has changed the way that the business is managed and reviewed, including from a financial reporting perspective.

As a result, effective in the fourth quarter 2022, we have revised our reportable segments accordingly.

The new reportable

Management's Discussion and Analysis

segments consist of Gathering and Processing, Wholesale Marketing and Terminalling, Storage and Transportation, and Investments in Pipeline Joint Ventures.

The primary change in our segmentation as compared to prior presentations is that, now that we have substantially expanded our gathering activities, certain legacy gathering activities and operations are now managed as part of the Gathering and Processing segment.

Additionally, we are also now segregating out certain non-segment specific costs and expenses and, when applicable, immaterial operating segments that may not fit into our existing reportable segments as Corporate and Other activities.

A substantial portion of our existing assets are both integral to and dependent upon the success of Delek Holdings' refining operations, as many of our pipeline usage and gathered crude oil barrels are contracted either primarily or exclusively to Delek Holdings in support of its Tyler, El Dorado and Big Spring refineries.

The Partnership is not a taxable entity for federal income tax purposes or the income taxes of those states that follow the federal income tax treatment of partnerships.

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Business and Properties—Company Overview" for further details.

economic activity was on a recovery trend during the year ended December 31, 2021.

The spike in number of new cases due to new COVID-19 variants, with most recent cases related to the Omicron variant, dampened the expectations of some economists regarding economic recovery and increasing demand for oil.

For example, due to travel restrictions put in place as a result of Omicron, the global oil demand forecast for 2022 was originally revised down by analysts.

However, the wave of infections related to the Omicron variant appears to be less severe and potentially of shorter duration than prior waves.

Consequently, tailwinds in the midstream industry remained intact, with most industry players providing solid performance in 2021 supported by a macro recovery in the oil and gas industry and positive company-level developments.

oil production, crucial to midstream industry performance, has been steadily rising amid higher crude oil prices and positive general economic sentiments.

However, we remain subject to heightened levels of uncertainty and increased risks related to the on-going impact of the COVID-19 Pandemic, with possible increase in new infection rates and the spread of new variants of the virus, which could have a negative impact oil demand and production.

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.

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.

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 December 31, 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 corporate employees seconded by Delek Holdings to work for the Partnership are personally affected by the illness, both through direct infection and quarantine procedures.

Increasingly unstable environmental conditions and spontaneous extreme weather events are making it costlier and more difficult for oil and gas companies to operate in certain environments.

Consequently, climate-change, and related current and proposed regulations, is directly and indirectly hitting industry bottom lines globally and in specific geographic areas where we operate.

Current and proposed climate-change and environmental regulations, laws and government policies affect where and how companies invest, conduct their operations and formulate their products and, in some cases, limit their profits directly.

We remain committed to complying with all regulations, laws and government policies designed to curb the growing climate-change crisis.

The current and future impact of climate-change and compliance initiatives to our logistic operations remain uncertain.

During the year ended December 31, 2021, our West Texas wholesale marketing business, many of our pipeline and transportation customers, and customers of our joint venture entities, experienced an increase in demand and pricing due to the resumption of some economic activities as discussed above.

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 and revenue streams of our joint venture entities 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 and climate-change 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.

generally accepted accounting principles, we have considered them in the preparation of our consolidated financial statements for the year ended December 31, 2021, which are included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Business and Economic Environment Overview

During much of year ended December 31, 2022, domestic markets have experienced an elevated hydrocarbon pricing environment has resulted in a strong demand for hydrocarbons and presented an opportunity for the Partnership to leverage its extensive network of logistics assets, resulting in increased throughputs and higher utilization as compared to the prior year.

Additionally, the successful integration of Delek Delaware Gathering further diversifies our logistics customer base to include significantly more third-party customers, it allows us to provide comprehensive logistics services in the Delaware Basin, while also serving as a funnel into our existing midstream Permian activities.

As producers continue to ramp up production within the Permian, the Partnership is well positioned to continue to add value through our gathering and processing services as a result of integrating our Delaware Gathering operations which complement our existing Midland Gathering System assets.

Our positioning allows our customers the ability to control quality and adds optionality to place barrels in a variety of markets.

Through our joint venture projects, we have increased our supply network to take advantage of growth opportunities in expanding markets and added additional flexibility which has delivered realized value through the entire Delek Logistics system.

As a result, we saw an increase in EBITDA (as defined in "Non GAAP Measures" section below) of $46.8 million in 2022 as compared to 2021.

Our gathering and processing segment which had EBITDA of $175.3 million in 2022 compared to $126.8 million in 2021, benefited from additional EBITDA associated with the 3 Bear Acquisition.

Our wholesale marketing and terminalling segment saw a $3.5 million increase in EBITDA largely as a result of higher volumes of product sales in our West Texas wholesale operations partially offset by lower gross margin per barrel.

EBITDA for our investments in pipeline joint ventures increased $7.1 million as a result of strong throughputs particularly on the Red River Pipeline and Caddo Pipeline.

See the “Results of Operations” section below for further discussion.

Looking forward, concerns about inflation and a possible economic downturn as well as initiatives to reduce carbon footprints through energy transition to renewables have softened the forward demand expectations for hydrocarbons and natural gas.

That said, we are well positioned to manage through an economic downturn because of built-in recessionary protections which include minimum volume commitments on throughput and dedicated acreage agreements.

Additionally, the Partnership has embraced opportunities to enhance our environmental stewardship.

It is expected that renewables, other than hydrocarbons, will continue to grow as a percentage of total energy consumption;

however, a material reduction in the reliance on oil and gas for energy consumption is unlikely in the near term.

Therefore, as we look forward to 2023, we expect that liquid transportation fuels will continue to be in high demand, and we expect to continue to leverage the strength of our cash flows and balance sheet in order to continue maximizing unitholder returns and the long-term prospects for return on investment.

See further discussion on macroeconomic factors and market trends, including the impact on 2022 and the outlook for 2023, in the ‘Market Trends’ section below.

Other 2022 Developments

Increasing Unitholder Value and Long-term Sustainability Through Acquisitions:

3 Bear Acquisition

On June 1, 2022, the Partnership, through its subsidiary DKL Delaware Gathering, LLC, acquired 100% of the limited liability company interests in 3 Bear related to the Seller’s crude oil and natural gas gathering, processing and transportation businesses, as well as water disposal and recycling operations, located in the Delaware Basin of New Mexico (the "3 Bear Acquisition").

The purchase price for 3 Bear was $628.3 million.

The 3 Bear Acquisition was financed through a combination of cash on hand and borrowings under the Partnership's existing credit agreement.

Through this strategic transaction, the Partnership expects to significantly increase its third-party revenue and further diversify its customer and product mix, expand its footprint into the Delaware sub-basin of the Permian, and provide immediate accretion to Distributable Cash Flow.

Additionally, we believe the addition of 3 Bear may provide access to expanded carbon capture opportunities.

Management's Discussion and Analysis

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.

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 corporate employees seconded by Delek Holdings to work for the Partnership 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 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.

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

of this Annual Report on Form 10-K for further discussion of risks associated with the COVID-19 Pandemic and climate-change.

Our Reporting Segments and Assets

Our business consists of three reportable segments:

Pipelines and Transportation

The assets and investments in our pipelines and transportation segment consist of pipelines, tanks, offloading facilities, trucks and ancillary assets, which provide crude oil gathering and crude oil, intermediate and refined products transportation and storage services primarily in support of Delek Holdings' refining operations in Tyler, Texas, El Dorado, Arkansas and Big Spring, Texas.

Additionally, the assets in this segment provide crude oil transportation services to certain third parties.

In providing these services, we typically do not take ownership of the products or crude oil that we transport or store.

Right-sizing Leverage to Achieve Strategic Growth Objectives:

Amendments to DKL Credit Facility

In May 2022, we entered into Second and Third Amendments to our DKL Credit Facility (as defined in Note 11 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on form 10-K), which provided for the transition from a LIBOR benchmark to a term Secured Overnight Financing Rate benchmark (“Term SOFR”) and also amended certain financial covenant calculations in order to provide flexibility in connection with the timing of the 3 Bear Acquisition.

Additionally, on May 26, 2022, we entered into a Fourth Amendment to our DKL Credit Facility to, among other things, increase the U.S.

Revolving Credit Commitments (as defined in the Credit Agreement) by an amount equal to $150 million under an existing accordion feature, for an aggregate amount of commitments under our Existing Credit Agreement of $1.0 billion.

The exercise of the accordion feature gave us the flexibility to utilize borrowings under the Credit Agreement to help fund the 3 Bear Acquisition while continuing to maintain sufficient availability to continue to effectively manage our working capital needs and liquidity risk, and to evaluate longer term capitalization strategies.

On October 13, 2022, we entered into a fourth amended and restated credit agreement with Fifth Third, as administrative agent and a syndicate of lenders (the "2022 DKL Credit Facility").

The 2022 DKL Credit Facility, among other things, (i) increased total aggregate commitments to $1.2 billion, comprised of (A) senior secured revolving commitments of $900.0 million in aggregate (eliminating the Canadian dollar tranche), with sublimit of up to $115.0 million for letters of credit and $25.0 million for swing line loans (the “DKL Revolving Facility”) with an extended maturity date of October 13, 2027, and (B) a new senior secured term loan in the original principal amount of $300.0 million (the “DKL Term Facility”), (ii) reset the accordion feature under the DKL Revolving Facility, such that aggregate revolving commitments can be increased to up to $1.15 billion upon the agreement of the Partnership and one or more existing or new lenders and (ii) provided for the DKL Term Facility be drawn in full on October 13, 2022, with a maturity date of October 13, 2024, and with a prepayment requirement for the proceeds obtained from certain senior unsecured notes issuances.

Expanding Innovation Through Diversification:

Slurry Clarifying Services Agreement

We executed a series of agreements with DK Trading & Supply, LLC (“DKT&S”) and Alon Refining Krotz Springs, Inc.

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.

Continued Investment in Logistics Footprint:

Connectors Expansion Project

In connection with the Midland Gathering Assets Acquisition (formerly known as the Permian Gathering Assets Acquisition), we agreed to expend $33.8 million to construct additional receipt points to our gathering pipeline, at the request of Delek Holdings for producers with which they have dedicated acreage agreements, to be owned and operated by the Partnership.

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

Additionally, both Delek Holdings and the Partnership identified and secured dedicated acreage and producer agreements that required construction of receipt points and also provided the opportunity for additional pipeline volumes, but that were not required under the original commitment.

Related to these incremental agreements, the Partnership has completed construction of these receipt points as of December 31, 2022.

Contractual Rate Adjustments to Keep Pace with Inflation

On July 1, 2022, 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 increased by approximately 8.7%, which was the amount of the change in the FERC oil pipeline index.

The tariff on FERC regulated system acquired from 3 Bear has been adjusted as of January 1, 2023.

Under certain of our agreements with Delek Holdings and third parties, the fees that are subject to adjustments using the consumer price index increased 7.1% and the fees that are subject to adjustments using the producer price index increased approximately 10.8%.

These adjustments allow us to maintain compliance with FERC regulations as well as to ensure that our results are reflective of current market conditions.

Management's Discussion and Analysis

Segment Overview

We aggregate our operating segments into four reportable segments:

(i) gathering and processing;

(ii) wholesale marketing and terminalling;

(iii) storage and transportation;

and (iv) investment in pipeline joint ventures.

Operations that are not specifically included in the reportable segments are included in Corporate and other, consisting primarily of general and administrative expenses, interest expense and depreciation and amortization.

Gathering and Processing

The operational assets in our gathering and processing segment, consist of assets acquired in connection with the Midland Gathering Assets Acquisition, including approximately 200 miles of gathering assets, approximately 65 tank battery connections, terminals with total storage capacity of approximately 650,000 barrels and applicable rights-of-way assets, as well as operational assets we acquired in connection with the 3 Bear Acquisition, consist of approximately 485 miles of pipelines, 88 million cubic feet ("MMCf") per day ("MMCf/d") of cryogenic natural gas processing capacity, 140 thousand barrels ("MBbl") per day ("MBbl/d") of crude gathering capacity, 120 MBbl of crude storage capacity and 200 MBbl/d of water disposal capacity located primarily in the Delaware Basin (“Delaware Gathering Assets”).

The Midland Gathering Assets support our crude oil gathering activities which primarily serves Delek Holdings refining needs throughout the Permian Basin.

The 3 Bear assets support our crude oil and natural gas gathering, processing and transportation businesses, as well as water disposal and recycling operations, located in the Delaware Basin of New Mexico, and serving primarily third-party producers and customers.

Finally, our gathering and processing assets are integrated with our pipeline assets, which we use to transport gathered crude oil as well as provide other crude oil, intermediate and refined products transportation in support of Delek Holdings' refining operations in Tyler, Texas, El Dorado, Arkansas and Big Spring, Texas, as well as to certain third parties.

In providing these services, we do not take ownership of the products or crude oil that we transport.

Therefore, we are not directly exposed to changes in commodity prices with respect to this operating segment.

The combination of these operational assets provides a comprehensive, integrated midstream service offering to producers and customers.

Wholesale Marketing and Terminalling

The assets in our wholesale marketing and terminalling segment consist of refined products terminals and pipelines in Texas, Tennessee, Arkansas and Oklahoma.

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.

Our wholesale marketing and terminalling segment provides wholesale marketing and terminalling services to Delek Holdings’ refining operations and to independent third parties from whom we receive fees for marketing, transporting, storing and terminalling refined products and to whom we wholesale market refined products.

In providing certain of these services, we take ownership of the products and are therefore exposed to market risks related to the volatility of commodity and refined product prices in our West Texas operations, which depend on many factors, including demand and supply of refined products in the West Texas market, the timing of refined product deliveries and downtime at refineries in the surrounding area.

Storage and Transportation

The operational assets in our storage and transportation segment consist of tanks, offloading facilities, trucks and ancillary assets, which provide crude oil, intermediate and refined products transportation and storage services primarily in support of Delek Holdings' refining operations in Tyler, Texas, El Dorado, Arkansas and Big Spring, Texas.

Additionally, the assets in this segment provide crude oil transportation services to certain third parties.

In providing these services, we do not take ownership of the products or crude oil that we transport or store.

Therefore, we are not directly exposed to changes in commodity prices with respect to this operating segment.

Investments in Pipeline Joint Ventures

2021 Developments

Sale of Common Units by Delek Holdings

On December 22, 2021, Delek Holdings issued a press release regarding a program to sell up to 434,590 of its common limited partner units, representing limited partner interests in the Partnership, over the next three months in open market transactions.

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

See Note 4 to our accompanying consolidated financial statements for additional details.

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.

On January 20, 2022 the FERC reduced the index by approximately 1%

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 primarily in the Permian Basin and Gulf Coast regions and with strategic connections to Cushing, Midland and other key exchange points, which provide crude oil and refined product pipeline transportation to third parties and subsidiaries of Delek Holdings.

Corporate and Other

The corporate and other segment primarily consists of general and administrative expenses not allocated to a reportable segment, interest expense and depreciation and amortization.

When applicable, it may also contain operating segments that are not reportable and do not meet the criteria for aggregation with any of our existing reportable segments.

Management's Discussion and Analysis

and ordered affected operators to file new tariffs consistent with the reduction to be effective from and after March 1, 2022.

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%.

See "Part 1—Items 1 and 2.

Business and Properties—Company Overview—2021 Developments" for further details.

High Yield Debt - 7.125% Senior Notes due 2028

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

We used the net proceeds from the sale of the 2028 Notes to repay a portion of the outstanding borrowings under our revolving credit facility.

See Note 11 to the consolidated financial statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for further 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.

Business Strategies

Our objectives are to maintain stable cash flows and to grow the quarterly distributions paid to our unitholders over time.

We are focused on growing our asset base within our geographic area through acquisitions, project development, joint ventures, enhancing our existing systems and lowering our carbon footprint.

While we will continue to evaluate ways to provide Delek Holdings with logistics services, our emphasis will be to increase the logistics services that we offer to third parties.

We intend to achieve these objectives through the following business strategies:

Strategic Overview

Long-Term Strategic Objectives

The Partnership’s Long-Term Strategic Objectives have long been focused on maintaining stable cash flows and to grow the quarterly distributions paid to our unitholders over time.

To that end, we have been focused on growing our asset base within our geographic area through acquisitions, project development, joint ventures, enhancing our existing systems and lowering our carbon footprint, as we continued to evaluate ways to provide Delek Holdings with logistics services and look for ways to reduce our reliance on Delek Holdings as our primary customer.

2022 Strategic Focus Areas

In service to these overarching Long-Term Strategic Objectives, as we began 2022, we focused on the following Strategic Focus Areas :

Generate Stable Cash Flow

We will continue to pursue opportunities to provide logistics, marketing and other services to Delek Holdings and third parties pursuant to long-term, fee-based contracts.

In new service contracts, we will endeavor to include minimum volume throughput or other commitments, similar to those included in our current commercial agreements with Delek Holdings.

Focus on Growing Our Business through Acquisitions and Investments in Joint Ventures

Engage in Mutually Beneficial Transactions with Delek Holdings

Pursue Attractive Expansion and Construction Opportunities

Optimize Our Existing Assets and Expand Our Customer Base

Expand our ESG Consciousness and Lower our Carbon Footprint

2022 Strategic Scorecard

Description of Strategic Success Generate Stable Cash Flow Focus on Growing Our Business through Acquisitions and Investments in Joint Ventures Engage in Mutually Beneficial Transactions with Delek Holdings Pursue Attractive Expansion and Construction Opportunities Optimize Our Existing Assets and Expand Our Customer Base Expand our ESG Consciousness and Lower our Carbon Footprint

Acquisition of Delaware Gathering X X X X

Slurry Clarifying Services Agreement X X X

Connectors Expansion Project X X X

Co-Developing our ESG Strategy with our General Partner and Issuing our First ESG Assessment Report X

Looking Forward:

2023 Strategic Focus Areas

As we look to 2023, we continue to believe that our strategic focus areas are the right ones.

As such, we continue to refine our processes for evaluating risks and returns while maintaining a keen eye on our overarching Long-Term Strategic Objectives and our desire to create long-term operational sustainability.

To that end, our 2023 Strategic Focus Areas are as follows:

• Generate Stable Cash Flow.

Continue to pursue opportunities to provide logistics, marketing and other services to Delek Holdings and third parties pursuant to long-term, fee-based contracts.

In new service contracts, endeavor to include minimum volume throughput or other commitments, similar to those included in our current commercial agreements with Delek Holdings.

• Focus on Growing Our Business.

We intend to evaluate and pursue opportunities to grow our business through both strategic acquisitions and expansion and construction projects, both internally funded or in combination with potential external partners and through investments in joint ventures.

Additionally, we believe that our strong relationship with Delek Holdings will enhance our opportunities to grow our business.

Continue to evaluate and pursue opportunities to grow our business through both strategic acquisitions and expansion and construction projects, both internally funded or in combination with potential external partners and through investments in joint ventures.

Additionally, where possible, leverage our strong relationship with Delek Holdings to enhance our opportunities to grow our business.

◦ Pursue Acquisitions .

We plan to pursue strategic acquisitions that both complement our existing assets and provide attractive returns for our unitholders.

As we continue to grow through acquisitions, we believe we will be able to increase our third party business.

In addition to those opportunities to acquire assets from Delek Holdings described below, we believe that our current asset base, and our knowledge of the regional markets in which we operate, will enable us to target and complete attractive third-party acquisitions.

Pursue strategic acquisitions that both complement our existing assets and provide attractive returns for our unitholders, with a focus on expanding our third-party business.

Leverage our current asset base, and our knowledge of the regional markets in which we operate, to target and complete attractive third-party acquisitions.

◦ Investments in Joint Ventures.

We have grown our asset base to include investments in joint ventures, which have contributed to our initiative to grow our midstream business, while increasing our crude oil sourcing flexibility.

We intend to continue evaluating growth opportunities through these investments.

Continue to focus on leveraging and, when appropriate, expanding our investments in joint ventures, which have contributed to our initiative to grow our midstream business while increasing our crude oil sourcing flexibility.

Management's Discussion and Analysis

• Engage in Mutually Beneficial Transactions with Delek Holdings.

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Delek Holdings is also required, under certain circumstances, to offer us the opportunity to purchase additional logistics assets that Delek Holdings may acquire or construct in the future.

Further, we anticipate additional growth opportunities through subsequent dropdowns of logistics assets acquired or developed by Delek Holdings.

For example, Delek Holdings anticipates offering us certain gathering and logistics assets.

However, there can be no assurance as to the timing of any such transaction or whether or on what terms dropdowns will be offered to us by Delek Holdings.

We continue to evaluate options with respect to dropdown transactions, which may include changes in capital structure.

Further, continue to evaluate additional growth opportunities through subsequent dropdowns of logistics assets acquired or developed by Delek Holdings, while factoring in associated impact on our capital structure and critically evaluating anticipated return on investment.

• Pursue Attractive Expansion and Construction Opportunities.

We intend to pursue organic growth opportunities that complement our existing businesses or that provide attractive returns within or outside our current geographic footprint.

We plan to evaluate potential opportunities to make capital investments that will be used to expand our existing asset base through the expansion and construction of new logistics assets to support growth of any of our customers', including Delek Holdings', businesses and from increased third-party activity.

Continue to evaluate, and when appropriate in the context of our return on investment and risk assessment criteria, pursue organic growth opportunities that complement our existing businesses or that provide attractive returns within or outside our current geographic footprint.

Continue to evaluate potential opportunities to make capital investments that will be used to expand our existing asset base through the expansion and construction of new logistics assets to support growth of any of our customers', including Delek Holdings', businesses and from increased third-party activity.

These construction projects may be developed either through joint venture relationships or by us acting independently, depending on size and scale.

• Optimize Our Existing Assets and Expand Our Customer Base.

We seek to enhance the profitability of our existing assets by adding incremental throughput volumes, improving operating efficiencies and increasing system-wide utilization.

We also expect to further diversify our customer base by increasing third-party throughput volumes running through certain of our existing systems and expanding our existing asset portfolio to service more third-party customers.

Management's Discussion and Analysis

• Lowering Our Carbon Footprint.

We seek to grow our business whilst staying conscious of and minimizing the negative environmental impact.

We will continue investing in cutting edge technologies that will reduce our carbon emissions as we achieve our growth objectives and sustainably improve unitholder returns.

Continue seeking to enhance the profitability of our existing assets by adding incremental throughput volumes, improving operating efficiencies and increasing system-wide utilization.

Additionally, continue to seek opportunities to further diversify our customer base by increasing third-party throughput volumes running through certain of our existing systems and expanding our existing asset portfolio to service more third-party customers.

• Expand our ESG Consciousness and Lower Our Carbon Footprint.

Continue to look for ways to grow our business whilst staying conscious of and minimizing the negative environmental impact, while also seeking opportunities to invest in innovative technologies that will reduce our carbon emissions as we achieve our growth objectives and sustainably improve unitholder returns.

We expect to achieve this objective through ESG-Conscious Investments with Clear Value Propositions and Sustainable Returns.

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■ volumes (including pipeline throughput and terminal volumes)

■ contribution margin per barrel

■ operating and maintenance expenses

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Although Delek Holdings has committed to minimum volumes under certain of the commercial agreements, as described above, our results of operations will be impacted by:

Management's Discussion and Analysis

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

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• our ability to make connections to third-party facilities and pipelines.

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, 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.

For our wholesale marketing and terminalling segment, we also measure gross margin per barrel.

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 Renewable Identification Numbers ("RINs").

Historically, the profitability of our wholesale

Management's Discussion and Analysis

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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It also has additional expansion optionality.

Market Trends

Business Environment

Fluctuations in crude oil prices and the prices of related refined products impact our operations and the operations of other master limited partnerships in the midstream energy sector.

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 months and year ended December 31, 2021, 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 months and year ended December 31, 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 months and year ended December 31, 2021 were steadily increasing.

Management's Discussion and Analysis

The price of oil (WTI Cushing) closed at $76.99 per barrel on December 31, 2021, $28.47 per barrel higher than on December 31, 2020.

The opening January 2021 price of oil (WTI Cushing) was $47.62, increased to $61.45 beginning April 2021 and reached a high of $84.65 per barrel on October 26, 2021.

Due to the sustained increase in oil prices, during the three months and year ended December 31, 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.

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.

West Texas Marketing Operations

Overall demand for gathering and terminalling services in a particular area is generally driven by crude oil production in the area, which can be impacted by crude oil prices, refining economics and access to alternate delivery and transportation infrastructure.

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 year ended December 31, 2021 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.

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 year ended December 31, 2021 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 chart below for the high, low and average price per barrel of WTI crude oil for each of the quarterly periods during the years ended December 31, 2021 and 2020.

Also, 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 below for the range of prices per gallon of gasoline and diesel for each of the quarterly periods during the years ended December 31, 2021 and 2020.

Management's Discussion and Analysis

Market Trends

Fluctuations in crude oil, natural gas and NGLs prices and the prices of related refined and other hydrocarbon products impact operations in the midstream energy sector.

For example, the prices of each of these 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.

Exploration and production activities have a direct impact on volumes transported through our gathering assets in the geologic basins in which we operate.

Additionally, the demand for hydrocarbon-based refined products and related crack spreads significantly impact production decisions of our refining customers and likewise throughputs on our pipelines and other logistics assets.

Finally, fluctuations in demand and commodity prices for refined products, as well as the value attributable to RINs, directly impacts our wholesale marketing operations, where we are subject to short-term commodity price fluctuations at the rack.

Most of the logistics services we provide (including transportation, gathering and processing services) are subject to long-term fee-based contracts with minimum volume commitments or long-term dedicated acreage agreements which mitigate most of our short-term financial risk to price and demand volatility.

However, sustained depressed demand/prices over the longer term could not only curb exploration and production expansion opportunities under our agreements, it could also impact our customers' willingness or ability to renew commercial agreements or result in liquidity or credit constraints that could impact our longer term relationship with them.

That said, our recent expansion of our gas processing capabilities have improved both our customer and geographic diversification which lowers concentration risk in those areas, in addition to adding service offerings to our portfolio.

Furthermore, our dedicated acreage agreements provide significant growth opportunities in strong economic conditions (e.g., high demand/high commodity prices) without incremental customer acquisition cost.

Given all of these factors, we believe that we continue to be strategically positioned, even in tougher market conditions, to sustain positive operating results and cash flows and to continue developing profitable growth projects that are needed to support future distribution growth.

The charts on the following page provide historical commodity pricing statistics for crude oil, refined product and natural gas.

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 $10.3 million and $3.4 million of RINs to Delek Holdings during the years ended December 31, 2021 and 2020, respectively.

See below for the high, low and average prices of RINs for each of the quarterly periods during the years ended December 31, 2021 and 2020.

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.

Non-GAAP Measures

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Non-cash lease expense (16,254) (9,652)

Maintenance and regulatory capital expenditures (1)

Regulatory capital expenditures (1)

(9,684) (8,232)

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Deferred income taxes (5) (353)

Other operating income, net 59 66

Gain on sale of assets 114 59

Distributable cash flow $ 218,079 $ 215,781

(1) Maintenance and regulatory capital expenditures represent cash expenditures (including 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.

(1) Regulatory capital expenditures represent cash expenditures (including 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.

Examples include 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.

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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.

Consolidated Results of Operations - Comparison of the Year Ended December 31, 2021 versus the Year Ended December 31, 2020

The following table presents a summary of our consolidated results of operations and our segment operating performance for the years ended December 31, 2021 and December 31, 2020 (in thousands).

The discussion of the year-over-year changes immediately following presents the consolidated results of operations for the year ended December 31, 2021.

A detailed discussion of the fiscal 2020 year-over-year changes can be found in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of the Annual Report on Form 10-K filed on March 1, 2021.

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

The following table presents a summary of our consolidated results of operations and our segment operating performance for the years ended December 31, 2022, December 31, 2021 and December 31, 2020 (in thousands).

The discussion immediately following presents the consolidated results of operations.

Year Ended December 31,

2022 2021 2020

Net revenues:

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Operating expenses (excluding depreciation and amortization presented below) 88,307 61,820 56,279

Contribution margin 255,758 238,045

General and administrative expenses 34,181 21,460 22,587

Depreciation and amortization 62,988 42,770 35,731

Other operating expense, net (59) (66)

Other operating income, net (114) (59) (66)

Operating income $ 209,682 $ 190,502 $ 179,793

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The increase was primarily driven by the following:

• increased revenues associated with agreements executed in connection with the Permian Gathering Assets (formerly referred to as the Big Spring Gathering Assets Acquisition) and the Trucking Assets acquisitions, which were effective March 31, 2020 and May 1, 2020, respectively.

• increased revenues of $123.7 million as a result of the 3 Bear Acquisition, which was completed on June 1, 2022;

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

◦ the average sales prices per gallon of gasoline and diesel sold increased by $0.74 per gallon and $1.43 per gallon, respectively;

◦ the volume of gasoline and diesel sold increased by 2.0 million gallons and 1.0 million gallons, respectively.

• increases in pipeline throughputs, where the year ended December 31, 2021 was negatively impacted by the COVID-19 Pandemic as well as severe weather events.

Net revenues increased by $137.5 million, or 24%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, driven primarily by the following:

• increased revenues associated with agreements executed in connection with the Midland Gathering Assets (formerly referred to as the Permian Gathering Assets Acquisition) and the Trucking Assets acquisitions, which were effective March 31, 2020 and May 1, 2020,

Management's Discussion and Analysis

respectively.

See Note 3 to the consolidated financial statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, for additional information;

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• 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 year ended December 31, 2021 when compared to the year ended December 31, 2020;

Management's Discussion and Analysis

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

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Cost of materials and other increased by $257.0 million, or 66.8%, in the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily driven by the following:

• increase in cost of materials and other totaling $73.0 million as a result of 3 Bear Acquisition, which was completed on June 1, 2022;

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

◦ the average cost per gallon of gasoline and diesel sold increased by $0.74 per gallon and $1.43 per gallon, respectively;

◦ the average volumes of gasoline and diesel sold increased by 2.0 million gallons and 1.0 million gallons, respectively.

Cost of materials and other increased by $115.3 million, or 42.9%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, driven primarily 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:

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Operating expenses increased by $26.5 million, or 42.8%, in the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily driven by the following:

• increase due to additional expenses associated with 3 Bear, which was acquired on June 1, 2022;

• increases in employee and outside service costs;

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

Operating expenses increased by $5.5 million, or 9.8%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, driven primarily 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;

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

Management's Discussion and Analysis

General and Administrative Expenses

General and administrative expenses increased $12.7 million, or 59.3%, in the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily driven by transaction costs incurred in connection with the 3 Bear Acquisition.

The changes in general and administrative expenses for the year ended December 31, 2021 compared to the year ended December 31, 2020 were immaterial.

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Depreciation and amortization increased by $20.2 million, or 47.3%, in the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily driven by the following:

• addition of assets to our asset base as a result of the Trucking Assets Acquisition and the Permian Gathering Assets Acquisition;

• the acquisition of property, plant and equipment and customer relationship intangible as part of the 3 Bear Acquisition.

Depreciation and amortization increased by $7.0 million, or 19.7%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, driven primarily by the following:

• addition of assets to our asset base as a result of the Trucking Assets Acquisition and the Midland Gathering Assets Acquisition;

• higher asset additions in the current year compared to prior year as some projects which had been temporarily suspended when COVID-19 induced liquidity conservation were commenced.

Interest Expense

Interest expense increased by $7.3 million, or 17.1%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the following:

During the year ended December 31, 2022 we incurred $82.3 million of interest expense, compared to $50.2 million during the year ended December 31, 2021, an increase of $32.1 million, or 63.9%.

This increase was primarily driven by the following:

• increased borrowings under the DKL Credit Facility to fund 3 Bear Acquisition;

• increase in floating interest rates applicable to the DKL Credit Facility and DKL Term Facility due to dramatic market rate increases in 2020.

During the year ended December 31, 2021 we incurred $50.2 million on interest expense, compared to $42.9 million during the year ended December 31, 2020, an increase of $7.3 million, or 17.1%.

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 Permian Gathering Assets Acquisition, the Trucking Assets Acquisition and the IDR Restructuring Transaction;

• increased borrowings under the DKL Credit Facility as a result of our Midland 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.

Results from Equity Method Investments

Income from equity method investments increased by $1.9 million, or 8.3%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the following:

During the year ended December 31, 2022 we recognized income of $31.7 million from equity method investments, compared to $24.6 million during the year ended December 31, 2021, an increase of $7.1 million, or 28.9%.

This increase was primarily driven by the following:

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

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

Management's Discussion and Analysis

During the year ended December 31, 2021 we recognized income of $24.6 million from equity method investments, compared to $22.7 million during year ended December 31, 2020, an increase of $1.9 million, or 8%.

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;

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Operating Segments

We review operating results in three reportable segments:

(i) pipelines and transportation;

We review operating results in four reportable segments:

(i) gathering and processing;

(ii) wholesale marketing and terminalling;

and (iii) investments in pipeline joint ventures.

(iii) storage and transportation;

and (iv) investments in pipeline joint ventures.

Decisions concerning the allocation of resources and assessment of operating performance are made based on this segmentation.

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

Management measures the operating performance of each reportable segment based on the segment EBITDA, except for the investments in pipeline joint ventures segment, which is measured based on net income.

Segment reporting is discussed in more detail in Note 15 to our accompanying consolidated financial statements.

Segment contribution margin is defined as follows:

Segment contribution margin = Net revenues - Cost of materials and other - Operating expenses, excluding depreciation and amortization

Pipelines and Transportation Segment

Our pipelines and transportation segment assets provide crude oil gathering and crude oil, intermediate and refined products transportation and storage services to Delek Holdings and third parties.

Gathering and Processing Segment

Our gathering and processing segment assets provide crude oil gathering services to Delek Holdings and third parties.

These assets include:

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• the Tyler-Big Sandy Pipeline

• the El Dorado Tank Assets and El Dorado Rail Offloading Racks

• the Tyler Tank Assets and Tyler Crude Tank

• the Greenville-Mount Pleasant Pipeline and Greenville Storage Facility

• the Greenville-Mount Pleasant Pipeline

• 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 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 table and discussion present the results of operations and certain operating statistics of the pipelines and transportation segment for the years ended December 31, 2021 and 2020.

A detailed discussion of the fiscal 2020 year-over-year changes can be found in Item 7, Managements' Discussion and Analysis of Financial Condition and Results of Operations, of the Annual Report on Form 10-K filed on March 1, 2021.

Pipelines and Transportation

• pipelines acquired in the Big Spring Logistics Assets Acquisition

• assets acquired in the Midland Gathering Assets Acquisition

• assets acquired in the 3 Bear Acquisition

The following table and discussion present the results of operations and certain operating statistics of the gathering and processing segment for the years ended December 31, 2022, 2021 and 2020.

Gathering and Processing

Year Ended December 31,

2022 2021 2020

Net Revenues $ 305,427 $ 161,852 $ 140,288

Affiliate $ 271,033 $ 233,873

Third-Party 16,612 17,596

Total Pipelines and Transportation 287,645 251,469

Cost of materials and other $ 81,525 $ 5,139 $ 5,065

Operating expenses (excluding depreciation and amortization) $ 48,211 $ 29,830 $ 26,213

Segment contribution margin $ 184,006 $ 163,268

Segment EBITDA $ 175,250 $ 126,818 $ 108,752

Throughputs (average bpd)

Year Ended December 31,

2022 2021 2020

El Dorado Assets:

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East Texas Crude Logistics System 21,310 22,647 15,960

Permian Gathering System (1)

Midland Gathering System (1)

128,725 80,285 82,817

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183,827 124,025 104,770

(1) Throughputs for the Permian Gathering System (formerly known as the Big Spring Gathering System) and the Plains Connection System are for approximately 275 days we owned the assets following the Permian Gathering Assets Acquisition effective March 31, 2020.

(1) Throughputs for the Midland Gathering System (formerly known as the Permian Gathering System) and the Plains Connection System are for approximately 275 days we owned the assets following the Midland Gathering Assets Acquisition effective March 31, 2020.

Delaware Gathering Assets Volumes

Period from June 1 through December 31, 2022

Natural Gas Gathering and Processing (Mcfd (1) )

Crude Oil Gathering (bpd (2) )

Water Disposal and Recycling (bpd (2) )

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

(2) bpd - average barrels per day.

Management's Discussion and Analysis

Operational Comparison of the Year Ended December 31, 2021 versus the Year Ended December 31, 2020

Net revenues for the pipelines and transportation segment increased by $36.2 million, or 14.4%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, driven primarily by the following:

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

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

Net revenues for the gathering and processing segment increased by $143.6 million, or 88.7%, in the year ended December 31, 2022 compared to the year ended December 31, 2021, driven primarily by the following:

• increased revenues of $123.7 million as a result of the 3 Bear Acquisition, which was completed on June 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 year ended December 31, 2021 compared to the year ended December 31, 2022;

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

Net revenues for the gathering and processing segment increased by $21.6 million, or 15.4%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, driven primarily by the following:

• increased revenues associated with agreements executed in connection with the Midland Gathering Assets Acquisition, which was effective March 31, 2020.

See Note 3 to the consolidated financial statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, for additional information;

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Cost of Materials and Other

Cost of materials and other for the pipelines and transportation segment increased by $13.9 million, or 30.2%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, driven primarily by the following:

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

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

Cost of materials and other for the gathering and processing segment increased by $76.4 million, or 1,486.4%, in the year ended December 31, 2022 compared to the year ended December 31, 2021, driven primarily by the following:

• increase in cost of materials and other totaling $73.0 million as a result of 3 Bear Acquisition, which was completed on June 1, 2022.

Cost of materials and other for the gathering and processing segment increased by $0.1 million, or 1.5%, in the year ended December 31, 2021 compared to the year ended December 31, 2020.

Operating Expenses

Operating expenses for the pipelines and transportation segment increased by $1.6 million, or 3.7%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the following:

Operating expenses for the gathering and processing segment increased by $18.4 million, or 61.6%, in the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily driven by the following:

• increase due to additional expenses associated with 3 Bear, which was acquired on June 1, 2022;

• increases in employee and outside service costs.

Operating expenses for the gathering and processing segment increased by $3.6 million, or 13.8%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, driven primarily by the following:

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

• 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.

Contribution Margin

Contribution margin for the pipelines and transportation segment increased by $20.7 million, or 12.7%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the following:

• increases in revenues associated with agreements executed in connection with the Permian 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

EBITDA increased by $48.4 million or 38.2%, in the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily driven by the following:

• Additional EBITDA associated with the 3 Bear acquisition;

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

• partially offset by increases in operating expenses.

EBITDA increased by $18.1 million or 16.6%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, driven primarily by the following:

• increases in revenues associated with agreements executed in connection with the Midland Gathering Assets Acquisition and the BSR Crude Pipeline;

• partially offset by the increase in operating expenses.

Management's Discussion and Analysis

Wholesale Marketing and Terminalling Segment

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The table and discussion below present the results of operations and certain operating statistics of the wholesale marketing and terminalling segment for the years ended December 31, 2022, 2021 and 2020.

Wholesale Marketing and Terminalling

Year Ended December 31,

2022 2021 2020

Net Revenues $ 588,884 $ 413,257 $ 312,891

Affiliate $ 147,793 $ 148,793

Third-Party 265,464 163,156

Total Wholesale Marketing and Terminalling 413,257 311,949

Cost of materials and other $ 491,452 $ 323,350 $ 226,223

Operating expenses (excluding depreciation and amortization presented below) $ 19,458 $ 16,357 $ 13,117

Segment contribution margin $ 71,752 $ 74,777

Segment EBITDA $ 83,098 $ 79,597 $ 79,602

Operating Information

Year Ended December 31,

2022 2021 2020

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

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

Operational Comparison of the Year Ended December 31, 2021 versus the Year Ended December 31, 2020

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

Net revenues for the wholesale marketing and terminalling segment increased by $175.6 million, or 42.5%, in the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily driven by the following:

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◦ the average sales prices per gallon of gasoline and diesel sold increased by $0.74 per gallon and $1.43 per gallon, respectively;

◦ the average volumes of gasoline and diesel sold increased by 2.0 million gallons and 1.0 million gallons, respectively.

Net revenues for the wholesale marketing and terminalling segment increased by $100.4 million, or 32.1%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, driven primarily by the following:

• 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:

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

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

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◦ the average cost per gallon of gasoline and diesel sold increased by $0.74 per gallon and $1.43 per gallon, respectively;

◦ the average volumes of gasoline and diesel sold increased by 2.0 million gallons and 1.0 million gallons, respectively.

Cost of materials and other for the wholesale marketing and terminalling segment increased by $97.1 million, or 42.9% , in the year ended December 31, 2021 compared to the year ended December 31, 2020, driven primarily 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:

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

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

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Operating Expenses

Operating expenses increased by $2.9 million, or 20.7%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the following:

Operating expenses for the wholesale marketing and terminalling segment increased by $3.1 million, or 19.0%, in the year ended December 31, 2022 compared to the year ended December 31, 2021, 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.

Contribution Margin

Contribution margin for the wholesale marketing and terminalling segment decreased by $3.0 million, or 4.0%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the following:

• increases in cost of materials and other due to increases in average cost per gallon of diesel and gasoline sold;

• increases in operating expenses;

• partially offset by increases in revenue due to increases in average sales price per gallon of diesel and gasoline sold.

Operating expenses for the wholesale marketing and terminalling segment increased by $3.2 million, or 24.7%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, driven primarily 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.

EBITDA for the wholesale marketing and terminalling segment increased by $3.5 million, or 4.4%, in the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily driven by the following:

• Increase in volume of gasoline and diesel sold in our West Texas marketing operations;

• this increase was partially offset by lower West Texas gross margin per barrel.

The change in EBITDA for the year ended December 31, 2021 compared to the year ended December 31, 2020, was immaterial.

Management's Discussion and Analysis

Storage and Transportation Segment

Our storage and transportation segment assets provide transportation and storage services to Delek Holdings and third parties.

These assets include:

• El Dorado Rail Offloading Racks

• the El Dorado Tank Assets

• the Tyler Tank Assets and Tyler Crude Tank

• storage assets acquired in the Big Spring Logistics Assets Acquisition

• assets acquired in the Trucking Assets Acquisition

• Greenville Storage Facility

Additionally, we own or lease 264 tractors and 353 trailers used to haul primarily crude oil and other products for related and third parties.

The table and discussion below present the results of operations and certain operating statistics of the storage and transportation segment for the years ended December 31, 2022, 2021 and 2020.

Storage and Transportation

Year Ended December 31,

2022 2021 2020

Net revenues $ 142,096 $ 125,793 $ 110,239

Cost of materials and other $ 66,953 $ 54,682 $ 40,869

Operating expenses (excluding depreciation and amortization presented below) $ 17,843 $ 13,987 $ 15,988

Segment EBITDA $ 56,269 $ 56,929 $ 51,704

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

Net revenues for the storage and transportation segment increased by $16.3 million, or 13.0%, in the year ended December 31, 2022 compared to the year ended December 31, 2021, driven primarily by the following:

• increased trucking transportation associated with higher refinery volumes.

Net revenues for the storage and transportation segment increased by $15.6 million, or 14.1%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, driven primarily by the following:

• increased revenues associated with agreements executed in connection with the Trucking Assets Acquisition which was effective May 1, 2020.

See Note 3 to the consolidated financial statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, for additional information.

Cost of Materials and Other

Cost of materials and other for the storage and transportation segment increased by $12.3 million, or 22.4%, in the year ended December 31, 2022 compared to the year ended December 31, 2021, driven primarily by the following:

• increased trucking transportation associated with higher refinery volumes;

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

Management's Discussion and Analysis

Cost of materials and other for the storage and transportation segment increased by $13.8 million, or 33.8%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, driven primarily by the following:

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

• 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 storage and transportation segment increased by $3.9 million, or 27.6%, in the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily driven by the following:

• increases in employee and outside service costs.

Operating expenses for the storage and transportation segment decreased by $2.0 million, or 12.5%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, driven primarily by the following:

• decrease in contract services.

The change in EBITDA for the year ended December 31, 2022 compared to the year ended December 31, 2021, was immaterial.

EBITDA for the storage and transportation segment increased by $5.2 million, or 10.1%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, driven primarily by the following:

• increased EBITDA associated with the Trucking Assets Acquisition.

Management's Discussion and Analysis

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 Investments in Pipeline Joint Ventures segment relates to strategic Joint Venture investments, accounted for as equity method investments, to 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.

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.

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Historically, we have generated adequate cash from operations to fund ongoing working capital requirements, pay quarterly cash distributions and operational capital expenditures, and we expect the same to continue in the foreseeable future.

Other funding sources, including the issuance of additional debt securities, have been utilized to fund growth capital projects such as dropdowns.

Other funding sources, including the issuance of additional debt securities, have been utilized to fund growth capital projects such as dropdowns and other acquisitions.

In addition, we have historically been able to source funding at rates that reflect market conditions, our financial position and our credit ratings.

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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.

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

Delek Holdings has initiated several steps as part of a strategic plan to navigate the current volatile markets and preserve or enhance its liquidity, including re-negotiating and extending financing arrangements, temporary suspension of growth and non-essential projects, reductions in capital and operating expenditures, divesting of non-strategic and underperforming assets, suspension of its stock repurchases and dividends, and exploring other potential financing opportunities.

We believe such actions will allow Delek Holdings to continue to honor its commercial agreements with us.

In addition, we eliminated the IDRs which helped lower our cost of capital and preserve our liquidity.

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 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.

We continuously review our liquidity and capital resources.

If market conditions were to change, for instance due to a significant decline in crude oil prices or uncertainty created by the COVID-19 Pandemic, and our revenue was reduced significantly or operating costs were to increase significantly, our cash flows and liquidity could be reduced.

If market conditions were to change, for instance due to a significant decline in crude oil prices, and our revenue was reduced significantly or operating costs were to increase significantly, our cash flows and liquidity could be reduced.

Additionally, it could cause the rating agencies to lower our credit ratings.

There are no ratings triggers that would accelerate the maturity of any borrowings under our debt agreements.

Management continues to actively respond to the impact of the COVID-19 Pandemic to enhance our liquidity position.

Such actions include seeking alternative financing solutions and enacting cost reduction measures.

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.

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 these uncertainties.

We believe we were in compliance with the covenants in all our debt facilities as of December 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.

See Note 11 to our consolidated financial statements for a complete discussion of our third-party indebtedness.

Amendments to DKL Credit Facility

In May 2022, we entered into Second and Third Amendments to our Third Amended and Restated Credit Agreement, which provided for the transition from a LIBOR benchmark to a term Secured Overnight Financing Rate benchmark (“Term SOFR”) and also amended certain financial covenant calculations in order to provide flexibility in connection with the timing of the 3 Bear Acquisition.

Additionally, on May 26, 2022, we entered into a Fourth Amendment to Third Amended and Restated Credit Agreement to, among other things, increase the U.S.

The exercise of the accordion feature gave us the flexibility to utilize

Management's Discussion and Analysis

borrowings under the Credit Agreement to help fund the acquisition of 3 Bear while continuing to maintain sufficient availability to continue to effectively manage our working capital needs and liquidity risk, and to evaluate longer term capitalization strategies.

On October 13, 2022, we entered into a Fourth Amended and Restated Credit Agreement with Fifth Third, as administrative agent and a syndicate of lenders (the "2022 DKL Credit Facility").

The DKL Credit Facility, among other things, (i) increased total aggregate commitments to $1.2 billion, comprised of (A) senior secured revolving commitments of $900.0 million in aggregate (eliminating the Canadian dollar tranche), with sublimit of up to $115.0 million for letters of credit and $25.0 million for swing line loans (the “DKL Revolving Facility”) with an extended maturity date of October 13, 2027, and (B) a new senior secured term loan in the original principal amount of $300.0 million (the “DKL Term Facility”), (ii) reset the accordion feature under the DKL Revolving Facility, such that aggregate revolving commitments can be increased to up to $1.15 billion upon the agreement of the Partnership and one or more existing or new lenders and (ii) provided for the DKL Term Facility be drawn in full on October 13, 2022, with a maturity date of October 13, 2024, and with a prepayment requirement for the proceeds obtained from certain senior unsecured notes issuances.

Cash Distributions

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The table below summarizes the quarterly distributions related to our 2022 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 (in thousands) Date of Distribution Unitholders Record Date

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, 2022 $0.980 $3.92 $42,604 May 12, 2022 May 5, 2022

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December 31, 2022 $1.020 $4.08 $44,440 February 9, 2023 February 2, 2023

The following table sets forth a summary of our consolidated cash flows for the years ended December 31, 2021 and 2020 (in thousands):

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

Year Ended December 31,

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Net cash used in investing activities (770,437) (16,360)

Net cash used in by financing activities (258,753) (71,180)

Net increase (decrease) in cash and cash equivalents $ 49 $ (1,302)

Net cash provided by (used in) financing activities 581,947 (258,753)

Net increase in cash and cash equivalents $ 3,678 $ 49

Operating Activities

Net cash provided by operating activities increased by $82.1 million for the year ended December 31, 2021 compared to the year ended December 31, 2020.

The increase in cash provided by operations was primarily due to higher net cash receipts from customers and cash dividends from the Equity Method Investments during the year ended December 31, 2021 compared to the year ended December 31, 2020 driven by the increase in revenue for the operations.

These cash flow increases were offset by higher cash paid out to suppliers for inventory during the year ended December 31, 2021 compared to the year ended December 31, 2020 as a result of a increase in cost per barrel for the marketing operations and increases in operational expenses.

Net cash provided by operating activities decreased by $83.0 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.

The cash receipts from customer activities increased by $326.3 million and cash payments to suppliers and for allocations to Delek Holdings for salaries increased by $377.9 million.

In addition, cash dividends received from equity method investments increased by $2.1 million and cash paid for debt interest increased by $33.5 million.

Investing Activities

Net cash used in investing activities decreased by $106.8 million during the year ended December 31, 2021 compared to the year ended December 31, 2020.

There were no asset acquisitions during the year ended December 31, 2021 compared to the acquisition of the Permian Gathering Assets and Trucking Assets during the year ended December 31, 2020.

Additionally, there were lower contributions to equity method investments during the year ended December 31, 2021 compared to the year ended December 31, 2020.

The Permian Gathering Assets Acquisition was partially financed with cash from drawdown of the DKL Credit Facility amounting to $100.0 million and the Trucking Assets Acquisition was financed with cash from drawdown of the DKL Credit Facility amounting to $48.0 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 general partner unitholders pursuant to the asset acquisitions under common control guidance.

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

We disbursed $1.4 million in additional contributions to our equity method investments during the year ended December 31, 2021 compared to $12.2 million during the year ended December 31, 2020.

These decreases were offset by additions to property, plant and equipment amounting to $24.0 million and distributions from equity method investments amounting $8.8 million during the year ended December 31, 2021 compared to additions to property, plant and equipment amounting to $13.3 million and distributions from equity method investments amounting to $2.7 million during the year ended December 31, 2020.

Financing Activities

Net cash used in financing activities increased by $187.6 million for the year ended December 31, 2021 compared to the year ended December 31, 2020.

We repaid $488.6 million under the revolving credit facility during the year ended December 31, 2021, compared to net proceeds of $158.2 million under the revolving credit facility during the year ended December 31, 2020.

In addition, we paid quarterly cash distributions

Net cash used in investing activities increased by $754.1 million during the year ended December 31, 2022 compared to the year ended December 31, 2021.

The 3 Bear Acquisition, which closed on June 1, 2022, was partially financed through borrowings under the DKL Credit Facility amount to $625.6 million, which was recorded in investing activities.

There were no acquisitions during the year ended December 31, 2021.

In addition, there were purchases of property, plant and equipment amounting to $141.1 million, purchases of intangibles assets amounting to $5.6 million and distributions from equity method investments amounting to $1.7 million during the year ended December 31, 2022, compared to additions to property, plant and equipment amounting to $23.1 million, purchases of intangible assets amounting to $1.0 million and distributions from equity method investments amounting to $8.8 million during the year ended December 31, 2021.

Additionally,

Management's Discussion and Analysis

totaling $161.7 million during the year ended December 31, 2021, compared to quarterly cash distributions totaling $136.8 million during the year ended December 31, 2020.

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 millions were received and deferred financing costs amounting to $(6.2) millions 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.

During the year ended December 31, 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, whilst there were no such payments during the year ended December 31, 2021.

The sources of cash to finance the asset acquisitions from Delek Holdings during the year ended December 31, 2020 primarily consisted of the $100.0 million drawdown under the DKL Credit Facility to part-finance the Permian Gathering Assets Acquisition and $48.0 million drawdown to finance the Trucking Asset Acquisition.

The Permian 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 US Holdings, Inc.).

there were no contributions to our equity method investments during the year ended December 31, 2022 compared to $1.4 million during the year ended December 31, 2021.

Financing Activities

Net cash provided by (used in) financing activities decreased by $840.7 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.

We had net borrowings of $462.5 million under the revolving credit facility during the year ended December 31, 2022, compared to net repayments of $488.6 million under the revolving credit facility during the year ended December 31, 2021.

We had no proceeds from senior notes during the year ended December 31, 2022 compared to proceeds of $400.0 million during the year ended December 31, 2021.

We paid quarterly cash distributions totaling $171.1 million during the year ended December 31, 2022, compared to quarterly cash distributions totaling $161.7 million during the year ended December 31, 2021.

In addition, we made payments on finances lease liability in the amount of $2.9 million during the year ended December 31, 2022, compared to payments on finance lease liability in the amount of $2.2 million during the year ended December 31, 2021.

Debt Overview

As of December 31, 2021, we had total indebtedness of $899.0 million comprised of $394.3 million of 7.125% senior notes due 2028 (the "2028 Notes"), net of deferred financing costs, $258.0 million under the amended and restated senior secured revolving agreement (the "DKL Credit Facility") and $246.7 million of 6.75% senior notes due 2025 (the “2025 Notes”), the latter net of deferred financing costs and original issue discount.

Deferred financing costs amounted to $5.7 million on the 2028 Notes.

Deferred financing costs and original issue discount on the 2025 Notes amounted to $2.5 million and $0.8 million, respectively.

The decrease of $93.3 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 year ended December 31, 2021, partially offset by the amortization of the deferred financing costs and original issuance discount under our 2025 and 2028 Notes.

As of December 31, 2022, we had total indebtedness of $1,661.6 million, net of deferred financing costs and debt discount of $7.0 million and $2.0 million, respectively.

The increase of $764.0 million in our long-term debt balance compared to the balance at December 31, 2021 resulted from the borrowings under the DKL Credit Facility during the year ended December 31, 2022.

As of December 31, 2022, our total indebtedness consisted of:

• An aggregate principal amount of $258.0 million under the Delek Logistics Credit Facility ("revolving credit facility"), due on September 28, 2023, with average borrowing rate of 2.46%.

• An aggregate principal amount of $720.5 million under the DKL Revolving Facility ("revolving credit facility"), due on October 13, 2027, with an average borrowing rate of 7.55%, which was amended and restated on October 13, 2022.

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

• An aggregate principal amount of $250.0 million, under the Delek Logistics Notes (6.75% senior notes), due in 2025, with an effective interest rate of 7.21%.

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Equity Units Overview

On December 20, 2021, Delek Holdings announced a program to sell up to 434,590 common limited partner units over the next three months in open market transactions.

See Note 4 to our accompanying consolidated financial statements for additional details.

On November 14, 2022, we entered into an Equity Distribution Agreement with RBC Capital Markets, LLC (the “Manager”) under which we may issue and sell, from time to time, to or through the Manager, as sales agent and/or principal, as applicable, common units representing limited partner interests, having an aggregate offering price of up to $100.0 million.

The Equity Distribution Agreement provides us the right, but not the obligation, to sell common units in the future, at prices we deem appropriate.

The net proceeds from any sales under this agreement will be used for general partnership purposes.

For the year ended December 31, 2022, we sold 59,192 common units under the Equity Distribution Agreement for net proceeds of $3.1 million.

Underwriting discounts were immaterial.

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.

On December 20, 2021, Delek Holdings announced a program to sell up to 434,590 common limited partner units representing limited partner interests in the Partnership in open market transactions.

For the years ended December 31, 2022 and 2021, Delek Holdings sold 385,522 and 49,068 units, respectively, for gross proceeds of $16.4 million ($13.6 million, net of taxes) and $2.1 million ($1.7 million, net of taxes).

See Note 4 to our consolidated financial statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, for additional details.

Management's Discussion and Analysis

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

To effect this transaction, our Partnership Agreement was amended and restated.

See Note 4 to our accompanying consolidated financial statements for additional details.

See Note 4 to our consolidated financial statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, for additional details.

In August 2020, we filed a shelf registration statement, which subsequently became effective, with the U.S.

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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.

On March 31, 2020, we issued 5.0 million common limited partner units to Delek Holdings as part of the consideration for the Permian Gathering Assets Acquisition.

On March 31, 2020, we issued 5.0 million common limited partner units to Delek Holdings as part of the consideration for the Midland 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.

Management's Discussion and Analysis

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").

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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 year ended December 31, 2021 and planned capital expenditures for the full year 2022 by segment and by major category:

A key component of our long-term strategy is our capital expenditure program, which includes strategic consideration and planning for the timing and extent of regulatory maintenance, sustaining maintenance, and discretionary capital projects.

These categories are described below:

• Regulatory maintenance projects in the gathering and processing segment are those expenditures expected to be spent on certain of our pipelines to maintain their operational integrity pursuant to applicable environmental and other regulatory requirements.

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 in order to maintain environmental and other regulatory compliance.

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

• Sustaining capital expenditures represent capitalizable 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.

Examples of sustaining capital expenditures are expenditures for the repair, refurbishment and replacement of pipelines, tanks and terminals, to maintain equipment reliability, integrity and safety and to maintain compliance with environmental laws and regulations.

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 4 to our accompanying consolidated financial statements).

When not provided for under reimbursement agreements, such activities are generally funded by cash generated from operations.

• Growth projects include those projects that do not fall into one of the two categories above, and could include committed expansion projects under contracts with customers as well as other incremental growth projects, but are generally expected to produce incremental cash flows in accordance with our internal return on invested capital policy.

Depending on the magnitude, funding for such projects may include cash generated from operations, borrowings under existing credit facilities, or issuances of additional debt or equity securities.

Management's Discussion and Analysis

The following table summarizes our actual capital expenditures, including any material capital expenditure payments made or forecasted to be made in advance of receipt of goods and materials, for the year ended December 31, 2022 and planned capital expenditures for the full year 2023 by segment and by major category:

(in thousands) Full Year 2023 Forecast Year Ended December 31, 2022

Pipelines and Transportation

Gathering and Processing

Regulatory $ 2,857 $ 2,855

$ 5,919 $ 1,897

Maintenance (1)

Discretionary (2)

58,739 16,814

Pipelines and Transportation Segment Total (4)

Sustaining 61 1,455

Growth 66,156 118,284

Gathering and Processing Segment Total (1)

$ 69,074 $ 122,594

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Regulatory $ 7,575 $ 156

$ 2,135 $ 663

Maintenance (1)

Discretionary 214 3,347

Sustaining — 24

Growth — 1,368

Wholesale Marketing and Terminalling Segment Total (1)

$ 7,575 $ 1,548

Storage and Transportation

Regulatory 2,625 —

Sustaining 2,066 6,528

Storage and Transportation Segment Total (1)

$ 4,691 $ 6,528

Total Capital Spending (1)

$ 81,340 $ 130,670

(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.

Examples of maintenance 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) The majority of the $58.7 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 Permian Gathering Assets.

The $5.9 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.

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

(3) The majority of the $2.1 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) Capital spending for the year ended December 31, 2021 excludes contributions to equity method investments amounting to $1.4 million.

There are no scheduled contributions to equity method investments for 2022.

(1) There were no capital contributions for the year ended December 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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With the exception of amounts classified as current, there is uncertainty as to the timing of future cash flows related to these obligations.

As such, we have excluded the future

Management's Discussion and Analysis

cash flows from the contractual commitments table above.

As such, we have excluded the future cash flows from the contractual commitments table above.

See additional information on asset retirement obligations and environmental liabilities in Notes 2 and 17, respectively, to our consolidated financial statements in Item 8.

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Refer to the capital spending section for our capital expenditures for 2022 and our planned capital expenditures for 2023.

Management's Discussion and Analysis

Off-Balance Sheet Arrangements

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Actual results may differ based on the accuracy of the information utilized and subsequent events, some over which we may have little or no control.

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 carrying value of each equity method investment is evaluated for impairment when conditions exist that indicate it is more likely than not that an impairment may have occurred, which may include the loss of a key contract, lack of sustained earnings or a deterioration of market conditions, among others.

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 year ended December 31, 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 indicator requiring that we perform an impairment assessment on our equity method investment.

No indicators were identified on our equity method investments in Red River and Caddo.

The fair value of our Andeavor Logistics 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 December 31, 2021.

We performed a sensitivity analysis on our impairment test as of December 31, 2021, noting the following:

Equity Method Investment Balance at December 31, 2021 Stress Testing Range of Estimated Fair Values % Estimated Fair Value exceeds Carrying Value (1)

Increase in WACC that could cause impairment (2)

Percentage decrease in tariff rates that could cause impairment (2)

Andeavor Logistics $44,319 $44,224 - $71,556 > 20% 6.5% (30.0)%

(1) Carrying Value compared to our selected Fair Value Point Estimate

(2) Assumes no other changes in any of the key assumptions related to the selected Point Estimate.

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

Business Combinations

We recognize and measure the assets acquired and liabilities assumed in a business combination based on their estimated fair values at the acquisition date.

Any excess or surplus of the purchase consideration when compared to the fair value of the net tangible assets acquired, if any, is recorded as goodwill or gain from a bargain purchase.

The fair value of assets and liabilities as of the acquisition date are often estimated using a combination of approaches, including the income approach, which requires us to project future cash flows and apply an appropriate discount rate;

the cost approach, which requires estimates of replacement costs and depreciation and obsolescence estimates;

and the market approach which uses market data and adjusts for entity-specific differences.

We use all available information to make these fair value determinations and engage third-party consultants for valuation assistance.

The estimates used in determining fair values are based on assumptions believed to be reasonable but which are inherently uncertain.

Accordingly, actual results may differ materially from the projected results used to determine fair value.

New Accounting Pronouncements

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What changed 10-K

Item 7. Management’s Discussion and Analysis