Delek Logistics Partners, LP 10-Q

Item 1. Financial Statements Delek Logistics Partners, LP Condensed Consolidated Balance Sheets (Unaudited) (in thousands, except unit and per unit data) September 30, 2023 December 31, 2022 ASSETS Current assets: Cash and cash equivalents $ 4,182 $ 7,970 Accounts receivable 41,271 53,314 Accounts receivable from related parties 67,089 — Inventory 4,137 1,483 Other current assets 962 2,463 Total current assets 117,641 65,230 Property, plant and equipment: Property, plant and equipment 1,306,172 1,240,684 Less: accumulated depreciation ( 369,476 ) ( 316,680 ) Property, plant and equipment, net 936,696 924,004 Equity method investments 241,937 257,022 Customer relationship intangible, net 185,862 199,440 Marketing contract intangible, net 103,958 109,366 Rights-of-way, net 58,047 55,990 Goodwill 27,051 27,051 Operating lease right-of-use assets 20,983 24,788 Other non-current assets 17,289 16,408 Total assets $ 1,709,464 $ 1,679,299 LIABILITIES AND DEFICIT Current liabilities: Accounts payable $ 27,989 $ 57,403 Accounts payable to related parties — 6,055 Current portion of long-term debt 15,000 15,000 Interest payable 16,889 5,308 Excise and other taxes payable 11,951 8,230 Current portion of operating lease liabilities 8,052 8,020 Accrued expenses and other current liabilities 5,483 6,202 Total current liabilities 85,364 106,218 Non-current liabilities: Long-term debt, net of current portion 1,726,429 1,646,567 Operating lease liabilities, net of current portion 9,228 12,114 Asset retirement obligations 9,862 9,333 Other non-current liabilities 17,733 15,767 Total non-current liabilities 1,763,252 1,683,781 Equity (Deficit): Common unitholders - public; 9,284,741 units issued and outstanding at September 30, 2023 ( 9,257,305 at December 31, 2022) 165,472 172,119 Common unitholders - Delek Holdings; 34,311,278 units issued and outstanding at September 30, 2023 ( 34,311,278 at December 31, 2022) ( 304,624 ) ( 282,819 ) Total deficit ( 139,152 ) ( 110,700 ) Total liabilities and deficit $ 1,709,464 $ 1,679,299 See accompanying notes to the condensed consolidated financial statements 3 | Financial Statements Delek Logistics Partners, LP Condensed Consolidated Statements of Comprehensive Income (Unaudited) (In thousands, except unit and per unit data) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net revenues Affiliate (1) $ 156,411 $ 127,150 $ 414,403 $ 375,270 Third Party 119,413 166,875 351,857 392,086 Net revenues 275,824 294,025 766,260 767,356 Cost of sales: Cost of materials and other - affiliate (1) 115,149 124,714 298,262 374,329 Cost of materials and other - third party 35,479 53,026 106,587 105,966 Operating expenses (excluding depreciation and amortization presented below) 32,611 25,065 85,302 62,892 Depreciation and amortization 23,261 19,067 65,494 41,876 Total cost of sales 206,500 221,872 555,645 585,063 Operating expenses related to wholesale business (excluding depreciation and amortization presented below) 392 836 1,397 2,105 General and administrative expenses 5,545 11,959 19,666 30,826 Depreciation and amortization 1,324 473 3,923 1,421 Gain on disposal of assets ( 491 ) ( 132 ) ( 804 ) ( 120 ) Total operating costs and expenses 213,270 235,008 579,827 619,295 Operating income 62,554 59,017 186,433 148,061 Interest expense, net 36,901 22,559 104,581 53,621 Income from equity method investments ( 9,296 ) ( 8,567 ) ( 22,897 ) ( 22,666 ) Other income, net ( 3 ) ( 36 ) ( 24 ) ( 39 ) Total non-operating expenses, net 27,602 13,956 81,660 30,916 Income before income tax expense 34,952 45,061 104,773 117,145 Income tax expense 127 387 685 793 Net income attributable to partners $ 34,825 $ 44,674 $ 104,088 $ 116,352 Comprehensive income attributable to partners $ 34,825 $ 44,674 $ 104,088 $ 116,352 Net income per limited partner unit: Basic $ 0.80 $ 1.03 $ 2.39 $ 2.68 Diluted $ 0.80 $ 1.03 $ 2.39 $ 2.67 Weighted average limited partner units outstanding: Basic 43,588,316 43,485,779 43,578,636 43,477,801 Diluted 43,604,791 43,515,960 43,598,547 43,499,837 Cash distributions per common limited partner unit $ 1.045 $ 0.990 $ 3.105 $ 2.955 (1) See Note 3 for a description of our material affiliate revenue and purchases transactions. See accompanying notes to the condensed consolidated financial statements 4 | Financial Statements Delek Logistics Partners, LP Condensed Consolidated Statements of Partners' Equity (Deficit) (Unaudited) (in thousands) Common - Public Common - Delek Holdings Total Balance as of June 30, 2023 $ 167,760 $ ( 297,262 ) $ ( 129,502 ) Cash distributions ( 9,757 ) ( 35,513 ) ( 45,270 ) Net income attributable to partners 7,412 27,413 34,825 Other 57 738 795 Balance as of September 30, 2023 $ 165,472 $ ( 304,624 ) $ ( 139,152 ) Common - Public Common - Delek Holdings Total Balance as of June 30, 2022 $ 168,611 $ ( 285,070 ) $ ( 116,459 ) Cash distributions ( 9,229 ) ( 33,797 ) ( 43,026 ) Net income attributable to partners 9,430 35,244 44,674 Other 99 455 554 Balance as of September 30, 2022 $ 168,911 $ ( 283,168 ) $ ( 114,257 ) Common - Public Common - Delek Holdings Total Balance as of December 31, 2022 $ 172,119 $ ( 282,819 ) $ ( 110,700 ) Cash distributions ( 28,695 ) ( 105,679 ) ( 134,374 ) Net income attributable to partners 22,135 81,953 104,088 Other ( 87 ) 1,921 1,834 Balance as of September 30, 2023 $ 165,472 $ ( 304,624 ) $ ( 139,152 ) Common - Public Common - Delek Holdings Total Balance as of December 31, 2021 $ 166,067 $ ( 270,059 ) $ ( 103,992 ) Cash distributions ( 26,779 ) ( 101,251 ) ( 128,030 ) Net income attributable to partners 24,543 91,809 116,352 Delek Holdings unit sale to public 5,110 ( 5,110 ) — Other ( 30 ) 1,443 1,413 Balance as of September 30, 2022 $ 168,911 $ ( 283,168 ) $ ( 114,257 ) See accompanying notes to the condensed consolidated financial statements 5 | Financial Statements Delek Logistics Partners, LP Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) Nine Months Ended September 30, 2023 2022 Cash flows from operating activities: Net income $ 104,088 $ 116,352 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 69,417 43,297 Non-cash lease expense 7,407 13,584 Amortization of customer contract intangible assets 5,408 5,408 Amortization of deferred revenue ( 1,331 ) ( 1,332 ) Amortization of deferred financing costs and debt discount 3,476 2,743 Income from equity method investments ( 22,897 ) ( 22,666 ) Dividends from equity method investments 24,118 22,954 Other non-cash adjustments 2,312 1,784 Changes in assets and liabilities: Accounts receivable 21,430 ( 9,108 ) Inventories and other current assets ( 2,290 ) 1,260 Accounts payable and other current liabilities ( 29,180 ) 18,875 Accounts receivable/payable to related parties ( 73,144 ) 108,747 Non-current assets and liabilities, net 1,816 ( 4,416 ) Net cash provided by operating activities 110,630 297,482 Cash flows from investing activities: Purchases of property, plant and equipment ( 58,564 ) ( 76,852 ) Proceeds from sales of property, plant and equipment 1,036 143 Purchases of intangible assets ( 2,583 ) ( 4,702 ) Business Combination, net of cash acquired — ( 625,413 ) Distributions from equity method investments 4,477 1,737 Net cash used in investing activities ( 55,634 ) ( 705,087 ) Cash flows from financing activities: Distributions to common unitholders - public ( 28,695 ) ( 26,779 ) Distributions to common unitholders - Delek Holdings ( 105,679 ) ( 101,251 ) Proceeds from revolving facility 304,500 966,300 Payments on revolving facility ( 213,800 ) ( 417,400 ) Payments on term loan debt ( 11,250 ) — Deferred financing costs paid ( 1,669 ) ( 701 ) Payments on financing lease liabilities ( 2,191 ) ( 1,911 ) Net cash (used in) provided by financing activities ( 58,784 ) 418,258 Net (decrease) increase in cash and cash equivalents ( 3,788 ) 10,653 Cash and cash equivalents at the beginning of the period 7,970 4,292 Cash and cash equivalents at the end of the period 4,182 14,945 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 89,524 $ 37,890 Income taxes $ 20 $ 43 Non-cash investing activities: Increase (decrease) in accrued capital expenditures and other $ 10,084 $ ( 1,019 ) Non-cash financing activities: Non-cash lease liability arising from obtaining right of use assets during the period $ 4,764 $ 9,553 See accompanying notes to the condensed consolidated financial statements 6 | Notes to Condensed Consolidated Financial Statements (Unaudited) Delek Logistics Partners, LP Notes to the Condensed Consolidated Financial Statements (Unaudited) 1. Organization and Basis of Presentation As used in this report, the terms "Delek Logistics Partners, LP," the "Partnership," "we," "us," or "our" may refer to Delek Logistics Partners, LP, one or more of its consolidated subsidiaries or all of them taken as a whole. The Partnership is a Delaware limited partnership formed in April 2012 by Delek US Holdings, Inc. ("Delek Holdings") and its subsidiary Delek Logistics GP, LLC, our general partner (our "general partner"). On April 8, 2022, DKL Delaware Gathering, LLC, a subsidiary of the Partnership ("Delaware Gathering"), entered into a Membership Interest Purchase Agreement (the “3 Bear Purchase Agreement”) with 3 Bear Energy – New Mexico LLC (the “Seller”) to purchase 100 % of the limited liability company interests in 3 Bear Delaware Holding – NM, LLC (“3 Bear”) (subsequently renamed to DKL Delaware Holding - NM, LLC), related to the Seller’s 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 Acquisition”). The Delaware Gathering Acquisition was completed on June 1, 2022 (the "Acquisition Date"). The Partnership provides gathering, pipeline and other transportation services primarily for crude oil and natural gas customers, storage, wholesale marketing and terminalling services primarily for intermediate and refined product customers, and water disposal and recycling services through its owned assets and joint ventures located primarily in the Permian Basin (including the Delaware sub-basin) and other select areas in the Gulf Coast region. 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. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with United States Generally Accepted Accounting Principles ("GAAP") have been condensed or omitted, although management believes that the disclosures herein are adequate to make the financial information presented not misleading. Our unaudited condensed consolidated financial statements have been prepared in conformity with GAAP applied on a consistent basis with those of the annual audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 (our "Annual Report on Form 10-K"), filed with the U.S. Securities and Exchange Commission (the "SEC") on March 1, 2023 and in accordance with the rules and regulations of the SEC. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2022 included in our Annual Report on Form 10-K. All adjustments necessary for a fair presentation of the financial position and the results of operations for the interim periods presented have been included. All intercompany accounts and transactions have been eliminated. Such intercompany transactions do not include those with Delek Holdings or our general partner, which are presented as related parties in these accompanying condensed consolidated financial statements. All adjustments are of a normal, recurring nature. Operating results for the interim period should not be viewed as representative of results that may be expected for any future interim period or for the full year. Reclassifications Certain prior period amounts have been reclassified in order to conform to the current period presentation . New Accounting Pronouncements Adopted During 2023 ASU 2023-03 , Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718) In July 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-03, Presentation of Financial Statements (Topic 205), Income Statement-Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation-Stock Compensation (Topic 718) (“ASU 2023-03”). This ASU amends or supersedes various SEC paragraphs within the FASB Accounting Standards Codification to conform to past SEC announcements and guidance issued by the SEC. ASU 2023-03 does not provide any new guidance, so there is no transition or effective date. We adopted ASU 2023-03 in July 2023. There was no material impact on our condensed consolidated financial statements. 7 | Notes to Condensed Consolidated Financial Statements (Unaudited) Accounting Pronouncements Not Yet Adopted ASU 2023-06, Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative In October 2023, the FASB issued ASU 2023-06 Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative ("ASU 2023-06"). The main provision of ASU 2023-06 is to clarify or improve disclosure and presentation requirements of a variety of topics, which will allow users to more easily compare entities subject to the SEC's existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the FASB accounting standard codification with the SEC's regulations. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Partnership is currently evaluating the provisions of the amendments and the impact on its future consolidated statements, but does not currently expect adopting this new guidance will have a material impact on its consolidated financial statements and related disclosures. 2. Acquisitions Delaware Gathering (formerly 3 Bear) We completed the Delaware Gathering Acquisition on June 1, 2022, in which we acquired crude oil and natural gas gathering, processing, and transportation and storage operations, as well as water disposal and recycling operations, located in the Delaware Basin of New Mexico. The purchase price for the Delaware Gathering Acquisition was $ 628.3 million. The Delaware Gathering Acquisition was financed through a combination of cash on hand and borrowings under the DKL Credit Facility. For the three and nine months ended September 30, 2023, we incurred no incremental direct acquisition and integration costs. For the three and nine months ended September 30, 2022, we incurred $ 4.2 million and $ 10.6 million, respectively, in incremental direct acquisition and integration costs that principally consist of legal, advisory and other professional fees. Such costs are included in general and administrative expenses in the accompanying condensed consolidated statements of income for these periods. The Delaware Gathering Acquisition was accounted for using the acquisition method of accounting, whereby the purchase price was allocated to the tangible and intangible assets acquired and the liabilities assumed based on their fair values. The excess of the consideration paid over the fair value of the net assets acquired was recorded as goodwill. Determination of Purchase Price The table below presents the purchase price (in thousands): Base purchase price: $ 624,700 Add: closing net working capital (as defined in the 3 Bear Purchase Agreement) 3,600 Less: closing indebtedness (as defined in the 3 Bear Purchase Agreement) ( 80,618 ) Cash paid for the adjusted purchase price 547,682 Cash paid to payoff 3 Bear credit agreement (as defined in the 3 Bear Purchase Agreement) 80,618 Purchase price $ 628,300 8 | Notes to Condensed Consolidated Financial Statements (Unaudited) Purchase Price Allocation The following table summarizes the final fair values of assets acquired and liabilities assumed in the Delaware Gathering Acquisition as of June 1, 2022 (in thousands): Assets acquired: Cash and cash equivalents $ 2,678 Accounts receivables, net 28,859 Inventories 1,836 Other current assets 986 Property, plant and equipment 382,799 Operating lease right-of-use assets 7,427 Goodwill 14,848 Customer relationship intangible, net 210,000 Rights-of-way 13,490 Other non-current assets 500 Total assets acquired 663,423 Liabilities assumed: Accounts payable 8,020 Accrued expenses and other current liabilities 22,382 Current portion of operating lease liabilities 1,029 Asset retirement obligations 2,261 Operating lease liabilities, net of current portion 1,431 Total liabilities assumed 35,123 Fair value of net assets acquired $ 628,300 The fair value of property, plant and equipment was based on the combination of the cost and market approaches. Key assumptions in the cost approach include determining the replacement cost by evaluating recently published data and adjusting replacement cost for physical deterioration, functional and economic obsolescence. We used the market approach to measure the value of certain assets through an analysis of recent sales or offerings of comparable properties. The fair value of customer relationships was based on the income approach. Key assumptions in the income approach include projected revenue attributable to customer relationships, attrition rate, operating margins and discount rates. The fair values discussed above were based on significant inputs that are not observable in the market and, therefore, represent Level 3 measurements. The fair values of all other current assets and payables were equivalent to their carrying values due to their short-term nature. The goodwill recognized in the Delaware Gathering Acquisition is primarily attributable to enhancing our third party revenues, further diversification of our customer and product mix, expanding our footprint into the Delaware basin and bolstering our Environmental, Social and Governance ("ESG") optionality through furthering carbon capture opportunities and greenhouse gas reduction projects currently underway. This goodwill is deductible for income tax purposes. Goodwill related to the Delaware Gathering Acquisition is included in the Gathering and Processing segment. Unaudited Pro Forma Financial Information The following table summarizes the unaudited pro forma financial information of the Partnership assuming the Delaware Gathering Acquisition had occurred on January 1, 2021. The unaudited pro forma financial information has been adjusted to give effect to certain pro forma adjustments that are directly related to the Delaware Gathering Acquisition based on available information and certain assumptions that management believes are factually supportable. The most significant pro forma adjustments relate to (i) incremental interest expense and amortization of deferred financing costs associated with revolving credit facility borrowings incurred in connection with the Delaware Gathering Acquisition, (ii) incremental depreciation resulting from the estimated fair values of acquired property, plant and equipment, (iii) incremental amortization resulting from the estimated fair value of the acquired customer relationship intangibles, (iv) accounting policy alignment and (v) transaction costs. The unaudited pro forma financial information excludes any expected cost savings or other synergies as a result of the Delaware Gathering Acquisition. The unaudited pro forma financial information is not necessarily indicative of the results of operations that would have been achieved had the Delaware Gathering Acquisition been effective as of the date presented, nor is it indicative of future operating results of the combined company. Actual results may differ significantly from the unaudited pro forma financial information. 9 | Notes to Condensed Consolidated Financial Statements (Unaudited) (in thousands, except per unit data) Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022 Net sales $ 294,025 $ 865,874 Net income attributable to partners $ 48,708 $ 114,100 Net income per limited partner unit: Basic income per unit $ 1.12 $ 2.62 Diluted income per unit $ 1.12 $ 2.62 3. Related Party Transactions Commercial Agreements The Partnership has a number of long-term, fee-based commercial agreements with Delek Holdings under which we provide various services, including crude oil gathering and crude oil, intermediate and refined products transportation and storage services, and marketing, terminalling and offloading services to Delek Holdings. Most of these agreements have an initial term ranging from five to ten years , which may be extended for various renewal terms at the option of Delek Holdings. The fees under each agreement are payable to us monthly by Delek Holdings or certain third parties to whom Delek Holdings has assigned certain of its rights and are generally subject to increase or decrease on July 1 of each year, by the amount of any change in various inflation-based indices, however, in no event will the fees be adjusted below the amount initially set forth in the applicable agreement. Under each of these agreements, we are required to maintain the capabilities of our pipelines and terminals, such that Delek Holdings may throughput and/or store, as the case may be, specified volumes of crude oil, intermediate and refined products. See our Annual Report on Form 10-K for a more complete description of our material commercial agreements and other agreements with Delek Holdings. Other Agreements with Delek Holdings In addition to the commercial agreements described above, the Partnership has entered into the following agreements with Delek Holdings: Omnibus Agreement The Partnership entered into an omnibus agreement with Delek Holdings, our general partner, Delek Logistics Operating, LLC, Lion Oil Company, LLC and certain of the Partnership’s and Delek Holdings' other subsidiaries on November 7, 2012, which has been amended and restated from time to time in connection with acquisitions from Delek Holdings (collectively, as amended and restated, the "Omnibus Agreement"). The Omnibus Agreement governs the provision of certain operational services and reimbursement obligations, among other matters, between the Partnership and Delek Holdings, and obligates us to pay an annual fee of $ 4.3 million to Delek Holdings for its provision of centralized corporate services to the Partnership. Pursuant to the terms of the Omnibus Agreement, we are reimbursed by Delek Holdings for certain capital expenditures. These amounts are recorded in other long-term liabilities and are amortized to revenue over the life of the underlying revenue agreement corresponding to the asset. There was no reimbursement by Delek Holdings during the three and nine months ended September 30, 2023. We were reimbursed a nominal amount by Delek Holdings during the nine months ended September 30, 2022, with no such reimbursements during the three months ended September 30, 2022. Additionally, we are reimbursed or indemnified, as the case may be, for costs incurred in excess of certain amounts related to certain asset failures, pursuant to the terms of the Omnibus Agreement. As of September 30, 2023 and December 31, 2022, there was no receivable from related parties for these matters. These reimbursements are recorded as reductions to operating expenses. There were no reimbursements for these matters in each of the three and nine month periods ended September 30, 2023 and 2022. Other Transactions The Partnership manages long-term capital projects on behalf of Delek Holdings pursuant to a construction management and operating agreement (the "DPG Management Agreement") for the construction of gathering systems in the Permian Basin. The majority of the gathering systems have been constructed, however, additional costs pertaining to a pipeline connection that was not acquired by the Partnership continue to be incurred and are still subject to the terms of the DPG Management Agreement. The Partnership is also considered the operator for the project and is responsible for oversight of the project design, procurement and construction of project segments and provides other related services. Pursuant to the terms of the DPG Management Agreement, the Partnership receives a monthly operating services fee and a construction services fee, which includes the Partnership's direct costs of managing the project plus an additional percentage fee of the construction costs of each project segment. The agreement extends through December 2023. Total fees paid to the Partnership were $ 0.4 million for both the three months ended September 30, 2023 and 2022, respectively, and $ 1.2 million for both the nine months ended September 30, 2023 and 2022, respectively, which are recorded in affiliate revenue in our condensed consolidated statements of income. Additionally, the Partnership incurs the costs in connection with the construction of the assets and is subsequently reimbursed by Delek Holdings. Amounts reimbursable by Delek Holdings are recorded in accounts receivable from related parties. 10 | Notes to Condensed Consolidated Financial Statements (Unaudited) Related Party Revolving Credit Facility On November 6, 2023, the Partnership and certain of its subsidiaries, as guarantors, entered into the Related Party Revolving Credit Facility (as defined below) with Delek Holdings. See Note 6 - Long-Term Obligations for further information. Summary of Transactions Revenues from affiliates consist primarily of revenues from gathering, transportation, storage, offloading, Renewable Identification Numbers, wholesale marketing and products terminalling services provided primarily to Delek Holdings based on regulated tariff rates or contractually based fees and product sales. Affiliate operating expenses are primarily comprised of amounts we reimburse Delek Holdings, or our general partner, as the case may be, for the services provided to us under the Partnership Agreement. These expenses could also include reimbursement and indemnification amounts from Delek Holdings, as provided under the Omnibus Agreement. Additionally, the Partnership is required to reimburse Delek Holdings for direct or allocated costs and expenses incurred by Delek Holdings on behalf of the Partnership and for charges Delek Holdings incurred for the management and operation of our logistics assets, including an annual fee for various centralized corporate services, which are included in general and administrative expenses. In addition to these transactions, we purchase refined products and bulk biofuels from Delek Holdings, the costs of which are included in cost of materials and other-affiliate. A summary of revenue, purchases and expense transactions with Delek Holdings and its affiliates are as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Revenues $ 156,411 $ 127,150 $ 414,403 $ 375,270 Purchases $ 115,149 $ 124,714 $ 298,262 $ 374,329 Operating and maintenance expenses $ 15,944 $ 16,478 $ 47,742 $ 39,741 General and administrative expenses $ 3,233 $ 4,556 $ 11,112 $ 10,708 Quarterly Cash Distributions Date of Distribution Distributions paid to Delek Holdings (in thousands) February 9, 2023 $ 34,998 May 15, 2023 $ 35,169 August 14, 2023 $ 35,512 November 13, 2023 (1) $ 35,855 Total $ 141,534 February 8, 2022 $ 33,829 May 12, 2022 $ 33,625 August 11, 2022 $ 33,797 November 10, 2022 $ 33,968 Total $ 135,219 (1) On October 25, 2023, the board of directors of our general partner declared this quarterly cash distribution based on the available cash as of the date of determination. 11 | Notes to Condensed Consolidated Financial Statements (Unaudited) 4. Revenues The following table represents a disaggregation of revenue for the gathering and processing, wholesale marketing and terminalling, and storage and transportation segments for the periods indicated (in thousands): Three Months Ended September 30, 2023 Gathering and Processing Wholesale Marketing and Terminalling Storage and Transportation Consolidated Service Revenue - Third Party $ 14,929 $ — $ 3,507 $ 18,436 Service Revenue - Affiliate (1) 1,743 13,975 9,723 25,441 Product Revenue - Third Party 24,477 76,500 — 100,977 Product Revenue - Affiliate 3,776 43,475 — 47,251 Lease Revenue - Affiliate 49,900 13,160 20,659 83,719 Total Revenue $ 94,825 $ 147,110 $ 33,889 $ 275,824 Three Months Ended September 30, 2022 Gathering and Processing Wholesale Marketing and Terminalling Storage and Transportation Consolidated Service Revenue - Third Party $ 17,401 $ — $ 3,939 $ 21,340 Service Revenue - Affiliate (1) 4,050 9,076 — 13,126 Product Revenue - Third Party 42,832 102,703 — 145,535 Product Revenue - Affiliate 2,592 24,185 — 26,777 Lease Revenue - Affiliate 41,735 11,901 33,611 87,247 Total Revenue $ 108,610 $ 147,865 $ 37,550 $ 294,025 Nine Months Ended September 30, 2023 Gathering and Processing Wholesale Marketing and Terminalling Storage and Transportation Consolidated Service Revenue - Third Party $ 45,378 $ — $ 6,916 $ 52,294 Service Revenue - Affiliate (1) 8,165 34,132 44,667 86,964 Product Revenue - Third Party 77,754 221,809 — 299,563 Product Revenue - Affiliate 12,119 86,625 — 98,744 Lease Revenue - Affiliate 137,078 35,680 55,937 228,695 Total Revenue $ 280,494 $ 378,246 $ 107,520 $ 766,260 Nine Months Ended September 30, 2022 Gathering and Processing Wholesale Marketing and Terminalling Storage and Transportation Consolidated Service Revenue - Third Party $ 20,691 $ — $ 10,744 $ 31,435 Service Revenue - Affiliate (1) 12,065 25,863 — 37,928 Product Revenue - Third Party 60,474 300,177 — 360,651 Product Revenue - Affiliate 5,555 82,774 — 88,329 Lease Revenue - Affiliate 116,695 35,367 96,951 249,013 Total Revenue $ 215,480 $ 444,181 $ 107,695 $ 767,356 (1) Net of $ 1.8 million of amortization expense for both the three months ended September 30, 2023 and 2022 and $ 5.4 million for the nine months ended September 30, 2023 and 2022, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment. As of September 30, 2023, we expect to recognize approximately $ 1.2 billion in lease revenues related to our unfulfilled performance obligations pertaining to the minimum volume commitments and capacity utilization under the non-cancelable terms of our commercial agreements with Delek Holdings. Most of these agreements have an initial term ranging from five to ten years , which may be extended for various renewal terms. We disclose information about remaining performance obligations that have original expected durations of greater than one year. 12 | Notes to Condensed Consolidated Financial Statements (Unaudited) Our unfulfilled performance obligations as of September 30, 2023 were as follows (in thousands): Remainder of 2023 $ 81,164 2024 234,385 2025 205,116 2026 196,025 2027 and thereafter 464,925 Total expected revenue on remaining performance obligations $ 1,181,615 5. Net Income per Unit Basic net income per unit applicable to limited partners is computed by dividing limited partners' interest in net income by the weighted-average number of outstanding common units. Diluted net income per unit applicable to common limited partners includes the effects of potentially dilutive units on our common units. As of September 30, 2023, the only potentially dilutive units outstanding consist of unvested phantom units. The table below represents total cash distributions applicable to the period in which the distributions are earned. Payments made to our unitholders are determined in relation to actual distributions declared and are not based on the net income allocations used in the calculation of net income per unit. The calculation of net income per unit is as follows (dollars in thousands, except units and per unit amounts): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net income attributable to partners $ 34,825 $ 44,674 $ 104,088 $ 116,352 Less: Limited partners' distribution 45,558 43,057 135,334 128,493 Earnings in (deficit) excess of distributions $ ( 10,733 ) $ 1,617 $ ( 31,246 ) $ ( 12,141 ) Limited partners' earnings on common units: Distributions $ 45,558 $ 43,057 $ 135,334 $ 128,493 Allocation of earnings in (deficit) excess of distributions ( 10,733 ) 1,617 ( 31,246 ) ( 12,141 ) Total limited partners' earnings on common units $ 34,825 $ 44,674 $ 104,088 $ 116,352 Weighted average limited partner units outstanding: Basic 43,588,316 43,485,779 43,578,636 43,477,801 Diluted 43,604,791 43,515,960 43,598,547 43,499,837 Net income per limited partner unit: Basic $ 0.80 $ 1.03 $ 2.39 $ 2.68 Diluted (1) $ 0.80 $ 1.03 $ 2.39 $ 2.67 (1) Outstanding common units totaling 48,597 and 35,519 were excluded from the diluted earnings per unit calculation for the three and nine months ended September 30, 2023, respectively. There were no outstanding common units excluded from the diluted earnings per unit calculation for the three months ended September 30, 2022. Outstanding common units totaling 3,862 were excluded from the diluted earnings per unit calculation for the nine months ended September 30, 2022. 13 | Notes to Condensed Consolidated Financial Statements (Unaudited) 6. Long-Term Obligations Outstanding borrowings under the Partnership’s debt instruments are as follows (in thousands): September 30, 2023 December 31, 2022 DKL Revolving Facility $ 811,200 $ 720,500 DKL Term Facility 288,750 300,000 2028 Notes 400,000 400,000 2025 Notes 250,000 250,000 Principal amount of long-term debt 1,749,950 1,670,500 Less: Unamortized discount and deferred financing costs 8,521 8,933 Total debt, net of unamortized discount and deferred financing costs 1,741,429 1,661,567 Less: Current portion of long-term debt and notes payable 15,000 15,000 Long-term debt, net of current portion $ 1,726,429 $ 1,646,567 DKL Credit Facility The DKL Term Facility principal of $ 300.0 million was drawn on October 13, 2022. On November 6, 2023, the Partnership entered into a First Amendment, a Second Amendment and a Third Amendment to the DKL Credit Facility (together, the “Amendments” ) to the DKL Credit Facility to extend the maturity of the Term Loan Facility to April 15, 2025. In addition, the Amendments added a maturity acceleration clause which will accelerate the maturity of the DKL Term Loan Facility to 180 days prior to the stated maturity date of the 2025 Notes if any of the 2025 Notes remain outstanding on that date. This senior secured facility requires four quarterly amortization payments of $ 3.8 million in 2023, four quarterly amortization payments of $ 7.5 million in 2024 and one quarterly amortization payment of $ 7.5 million in 2025 with final maturity and principal due on April 15, 2025. At the Partnership's option, borrowings bear interest at either the Adjusted Term Secured Overnight Financing Rate benchmark (“SOFR”) or U.S. dollar prime rate, plus an applicable margin. The applicable margin is 2.50 % for the first year of the DKL Term Facility and 3.00 % for the second year for U.S. dollar prime rate borrowings. SOFR rate borrowings include a credit spread adjustment of 0.10 % to 0.25 % plus an applicable margin of 3.50 % for the first year and 4.00 % for the second year. At September 30, 2023 and December 31, 2022, the weighted average borrowing rate was approximately 8.92 % and 7.92 %, respectively. The effective interest rate was 9.48 % as of September 30, 2023. The DKL Revolving Facility has a total capacity of $ 900.0 million, including up to $ 115.0 million for letters of credit and $ 25.0 million in swing line loans. This facility has a maturity date of October 13, 2027 which will accelerate to 180 days prior to the stated maturity date of the Delek Logistics 2025 Notes if any of the Delek Logistics 2025 Notes remain outstanding on that date. On November 6, 2023, the Partnership entered into the Amendments which among other things: (i) increased the U.S. Revolving Credit Commitments (as defined in the DKL Credit Facility) by an amount equal to $ 150.0 million, resulting in aggregate lender commitments under the DKL Revolving Credit Facility in an amount of $ 1.050 billion and (ii) increased the limit allowed for general unsecured debt (as defined in the DKL Credit Facility) by an amount equal to $ 95.0 million, resulting in an unsecured general debt limit of $ 150.0 million. The DKL Revolving Facility requires a quarterly unused commitment fee based on average commitment usage, currently at 0.50 % per annum. Interest is measured at either the U.S. dollar prime rate plus an applicable margin of 1.00 % to 2.00 % depending on the Partnership’s Total Leverage Ratio (as defined in the DKL Credit Agreement), or a SOFR rate plus a credit spread adjustment of 0.10 % or 0.25 % and an applicable margin ranging from 2.00 % to 3.00 % depending on the Partnership’s Total Leverage Ratio. As of September 30, 2023 and December 31, 2022, the weighted average interest rate was 8.45 % and 7.55 %, respectively. There were no letters of credit outstanding as of September 30, 2023 or December 31, 2022. The obligations under the 2022 DKL Credit Facility are secured by first priority liens on substantially all of the Partnership’s and its subsidiaries’ tangible and intangible assets. The carrying values of outstanding borrowings under the 2022 DKL Credit Facility as of September 30, 2023 and December 31, 2022 approximate their fair values. Our debt facilities contain affirmative and negative covenants and events of default the Partnership considers usual and customary. As of September 30, 2023, we were in compliance with covenants on all of our debt instruments. Related Party Revolving Credit Facility On November 6, 2023, the Partnership and certain of its subsidiaries, as guarantors, entered into a certain Promissory Note (the “Related Party Revolving Credit Facility”) with Delek Holdings. The Related Party Revolving Credit Facility provides for revolving borrowings with aggregate commitments of $ 70.0 million comprised of a (i) $ 55.0 million senior tranche and a (ii) $ 15.0 million subordinated tranche (the “Subordinated Tranche”), with the initial borrowings under the Subordinated Tranche conditioned upon the Partnership and Delek Holdings reaching an agreement with Fifth Third Bank, National Association, as administrative agent under the DKL Credit Facility, on subordination provisions and other material terms related to the Subordinated Tranche. The Related Party Revolving Credit Facility will bear interest at Term SOFR (as defined in the Related Party Revolving Credit Facility) plus 3.00 %. The Related Party Revolving Credit Facility proceeds will be used for the Partnership’s working capital purposes and other general corporate purposes. The Related Party Revolving Credit Facility will mature on June 30, 2028. The Related Party Revolving Credit Facility contains certain affirmative covenants, mandatory prepayments and events of 14 | Notes to Condensed Consolidated Financial Statements (Unaudited) default that the Partnership considers to be customary for an arrangement of this sort. The obligations under the Related Party Revolving Credit Facility are unsecured. 2028 Notes Our 2028 Notes are general unsecured senior obligations comprised of $ 400.0 million in aggregate principal of 7.125 % senior notes maturing June 1, 2028. The 2028 Notes are unconditionally guaranteed jointly and severally on a senior unsecured basis by the Partnership's existing subsidiaries (other than Delek Logistics Finance Corp.) and will be unconditionally guaranteed on the same basis by certain of the Partnership's future subsidiaries. As of September 30, 2023, the effective interest rate was 7.39 %. The estimated fair value of the 2028 Notes was $ 365.5 million and $ 359.7 million as of September 30, 2023 and December 31, 2022, respectively, measured based upon quoted market prices in an active market, defined as Level 1 in the fair value hierarchy. 2025 Notes Our 2025 Notes are general unsecured senior obligations comprised of $ 250.0 million in aggregate principal of 6.75 % senior notes maturing on May 15, 2025. The 2025 Notes are unconditionally guaranteed jointly and severally on a senior unsecured basis by the Partnership's existing subsidiaries (other than Delek Logistics Finance Corp.) and will be unconditionally guaranteed on the same basis by certain of the Partnership's future subsidiaries. As of September 30, 2023, the effective interest rate was 7.18 %. The estimated fair value of the 2025 Notes was $ 245.6 million and $ 243.4 million as of September 30, 2023 and December 31, 2022, respectively, measured based upon quoted market prices in an active market, defined as Level 1 in the fair value hierarchy. 7. Equity Equity Activity The table below summarizes the changes in the number of limited partner units outstanding from December 31, 2022 through September 30, 2023. Common - Public Common - Delek Holdings (1) Total Balance at December 31, 2022 9,257,305 34,311,278 43,568,583 Unit-based compensation awards (2) 27,436 — 27,436 Balance at September 30, 2023 9,284,741 34,311,278 43,596,019 (1) As of September 30, 2023, Delek Holdings owned a 78.7 % limited partner interest in us. (2) Unit-based compensation awards are presented net of 10,714 units withheld for taxes as of September 30, 2023. Our Partnership Agreement sets forth the calculation to be used to determine the amount and priority of available cash distributions that our limited partner unitholders will receive. Our distributions earned with respect to a given period are declared subsequent to quarter end. The table below summarizes the quarterly distributions related to our quarterly financial results: Quarter Ended Total Quarterly Distribution Per Limited Partner Unit Total Cash Distribution (in thousands) March 31, 2022 $ 0.980 $ 42,604 June 30, 2022 $ 0.985 $ 42,832 September 30, 2022 $ 0.990 $ 43,057 March 31, 2023 $ 1.025 $ 44,664 June 30, 2023 $ 1.035 $ 45,112 September 30, 2023 $ 1.045 $ 45,558 8. Equity Method Investments The Partnership owns a 33 % membership interest in Red River Pipeline Company LLC ("Red River"), a joint venture operated with Plains Pipeline, L.P. Red River owns a 16-inch crude oil pipeline running from Cushing, Oklahoma to Longview, Texas with capacity of 235,000 bpd. Summarized financial information for Red River on a 100% basis is shown below (in thousands): 15 | Notes to Condensed Consolidated Financial Statements (Unaudited) As of September 30, 2023 As of December 31, 2022 Current Assets $ 35,187 $ 33,365 Non-current Assets $ 388,231 $ 394,267 Current liabilities $ 8,544 $ 5,144 Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Revenues $ 26,892 $ 25,340 $ 65,299 $ 69,475 Gross profit $ 17,745 $ 17,210 $ 41,468 $ 46,476 Operating income $ 17,564 $ 15,469 $ 40,912 $ 44,381 Net income $ 17,748 $ 15,509 $ 41,441 $ 44,386 We have two additional joint ventures that have constructed separate crude oil pipeline systems and related ancillary assets, which are serving third parties and subsidiaries of Delek Holdings. We own a 50 % membership interest in the entity formed with an affiliate of Plains All American Pipeline, L.P. ("CP LLC") to operate one of these pipeline systems and a 33 % membership interest in the entity formed with Andeavor Logistics RIO Pipeline LLC ("Andeavor Logistics"), formerly known as Rangeland Energy II, LLC ("Rangeland Energy") to operate the other pipeline system. Combined summarized financial information for these two equity method investees on a 100% basis is shown below (in thousands): As of September 30, 2023 As of December 31, 2022 Current assets $ 22,421 $ 18,888 Non-current assets $ 223,532 $ 231,898 Current liabilities $ 2,855 $ 1,973 Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Revenues $ 14,330 $ 11,949 $ 39,501 $ 32,402 Gross profit $ 9,275 $ 7,014 $ 25,219 $ 18,472 Operating income $ 8,331 $ 6,284 $ 22,255 $ 16,474 Net Income $ 8,486 $ 6,306 $ 22,637 $ 16,501 The Partnership's investments in these three entities were financed through a combination of cash from operations and borrowings under the DKL Credit Facility. The Partnership's investment balances in these joint ventures were as follows (in thousands): As of September 30, 2023 As of December 31, 2022 Red River $ 140,939 $ 149,635 CP LLC 60,112 64,056 Andeavor Logistics 40,886 43,331 Total Equity Method Investments $ 241,937 $ 257,022 We do not consolidate any part of the assets or liabilities or operating results of our equity method investees. Our share of net income or loss of the investees will increase or decrease, as applicable, the carrying value of our investments in unconsolidated affiliates. With respect to our equity method investments, we determined that these entities do not represent variable interest entities and consolidation is not required. We have the ability to exercise significant influence over each of these joint ventures through our participation in the management committees, which make all significant decisions. However, since all significant decisions require the consent of the other investor(s) without regard to economic interest, we have determined that we have joint control and have applied the equity method of accounting. Our investment in these joint ventures is reflected in our investments in pipeline joint ventures segment. 16 | Notes to Condensed Consolidated Financial Statements (Unaudited) 9. Segment Data 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 segment. During the fourth quarter 2022, we realigned our reportable segments for financial reporting purposes to reflect changes in the manner in which our Chief Operating Decision Maker ("CODM") uses financial information to make key operating decisions and assess performance. The changes primarily represent reporting the operating results of our pipeline operations and legacy gathering assets and the operating results of the Delaware Gathering operations within a new reportable segment called gathering and processing. Prior to this change, the pipeline operations and legacy gathering assets were reported as part of the pipelines and transportation segment. The remaining operations of the former pipelines and transportation reportable segment was renamed to storage and transportation. Unallocated corporate costs, including general and administrative expenses, interest expense and depreciation and amortization, are now presented in corporate and other. Additionally, the CODM determined that Segment EBITDA is the key performance measure for planning and forecasting purposes and discontinued the use of Contribution Margin as a measure of performance. While this reporting change did not change our consolidated results, segment data for previous years has been restated and is consistent with the current year presentation throughout the financial statements and the accompanying notes. EBITDA is an important measure used by management to evaluate the financial performance of our core operations. EBITDA is not a GAAP measure, but the components of EBITDA are computed using amounts that are determined in accordance with GAAP. A reconciliation of EBITDA to Net Income is included in the tables below. We define EBITDA as net income (loss) before net interest expense, income tax expense, depreciation and amortization expense, including amortization of customer contract intangible assets, which is included as a component of net revenues in our accompanying condensed consolidated statements of income. Assets by segment is not a measure used to assess the performance of the Partnership by the CODM and thus is not disclosed. 17 | Notes to Condensed Consolidated Financial Statements (Unaudited) The following is a summary of business segment operating performance as measured by EBITDA for the periods indicated (in thousands): Three Months Ended September 30, 2023 (In thousands) Gathering and Processing Wholesale Marketing and Terminalling Storage and Transportation Investments in Pipeline Joint Ventures Corporate and Other Consolidated Net revenues: Affiliate $ 55,419 $ 70,610 $ 30,382 $ — $ — $ 156,411 Third party 39,406 76,500 3,507 — — 119,413 Total revenue $ 94,825 $ 147,110 $ 33,889 $ — $ — $ 275,824 Segment EBITDA $ 52,906 $ 28,135 $ 17,914 $ 9,288 $ ( 10,002 ) $ 98,241 Depreciation and amortization 19,263 1,769 2,704 — 849 24,585 Amortization of customer contract intangible — 1,803 — — — 1,803 Interest expense, net — — — — 36,901 36,901 Income tax expense 127 Net income $ 34,825 Capital spending $ 12,002 $ 2,123 $ 522 $ — $ — $ 14,647 Three Months Ended September 30, 2022 (In thousands) Gathering and Processing Wholesale Marketing and Terminalling Storage and Transportation Investments in Pipeline Joint Ventures Corporate and Other Consolidated Net revenues: Affiliate $ 48,377 $ 45,162 $ 33,611 $ 127,150 Third party 60,233 102,703 3,939 — — 166,875 Total revenue $ 108,610 $ 147,865 $ 37,550 $ — $ — $ 294,025 Segment EBITDA $ 56,551 $ 20,272 $ 14,575 $ 8,567 $ ( 11,003 ) $ 88,962 Depreciation and amortization 17,779 1,628 2,087 — ( 1,954 ) 19,540 Amortization of customer contract intangible — 1,802 — — — 1,802 Interest expense, net — — — — 22,559 22,559 Income tax expense 387 Net income $ 44,674 Capital spending $ 30,895 $ 1,065 $ — $ — $ — $ 31,960 Nine Months Ended September 30, 2023 (In thousands) Gathering and Processing Wholesale Marketing and Terminalling Storage and Transportation Investments in Pipeline Joint Ventures Corporate and Other Consolidated Net revenues: Affiliate $ 157,362 $ 156,437 $ 100,604 $ — $ — $ 414,403 Third party 123,132 221,809 6,916 — — 351,857 Total revenue $ 280,494 $ 378,246 $ 107,520 $ — $ — $ 766,260 Segment EBITDA $ 161,014 $ 78,071 $ 46,316 $ 22,889 $ ( 24,111 ) $ 284,179 Depreciation and amortization 54,511 5,338 7,109 — 2,459 69,417 Amortization of customer contract intangible — 5,408 — — — 5,408 Interest expense, net — — — — 104,581 104,581 Income tax expense 685 Net income $ 104,088 Capital spending $ 62,168 $ 2,527 $ 3,933 $ — $ — $ 68,628 18 | Notes to Condensed Consolidated Financial Statements (Unaudited) Nine Months Ended September 30, 2022 (In thousands) Gathering and Processing Wholesale Marketing and Terminalling Storage and Transportation Investments in Pipeline Joint Ventures Corporate and Other Consolidated Net revenues: Affiliate $ 134,315 $ 144,004 $ 96,951 $ — $ — $ 375,270 Third party 81,165 300,177 10,744 — — 392,086 Total revenue $ 215,480 $ 444,181 $ 107,695 $ — $ — $ 767,356 Segment EBITDA $ 127,129 $ 59,813 $ 40,212 $ 22,666 $ ( 30,349 ) $ 219,471 Depreciation and amortization 32,260 4,674 6,363 — — 43,297 Amortization of customer contract intangible — 5,408 — — — 5,408 Interest expense, net — — — — 53,621 53,621 Income tax expense 793 Net income $ 116,352 Capital spending $ 66,388 $ 1,384 $ — $ — $ — $ 67,772 10. Commitments and Contingencies Litigation In the ordinary conduct of our business, we are from time to time subject to lawsuits, investigations and claims, including environmental claims and employee-related matters. Although we cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against us, including civil penalties or other enforcement actions, we do not believe that any currently pending legal proceeding or proceedings to which we are a party will have a material adverse effect on our financial statements. Environmental, Health and Safety We are subject to extensive federal, state and local environmental and safety laws and regulations enforced by various agencies, including the Environmental Protection Agency (the "EPA"), the United States Department of Transportation, the Occupational Safety and Health Administration, as well as numerous state, regional and local environmental, safety and pipeline agencies. These laws and regulations govern the discharge of materials into the environment, waste management practices and pollution prevention measures, as well as the safe operation of our pipelines and the safety of our workers and the public. Numerous permits or other authorizations are required under these laws and regulations for the operation of our terminals, pipelines, saltwells, trucks and related operations, and may be subject to revocation, modification and renewal. These laws and permits raise potential exposure to future claims and lawsuits involving environmental and safety matters, which could include soil, surface water and groundwater contamination, air pollution, personal injury and property damage allegedly caused by substances which we may have handled, used, released or disposed of, transported, or that relate to pre-existing conditions for which we may have assumed responsibility. We believe that our current operations are in substantial compliance with existing environmental and safety requirements. However, there have been and we expect that there will continue to be ongoing discussions about environmental and safety matters between us and federal and state authorities, including the receipt and response to notices of violations, citations and other enforcement actions, some of which have resulted or may result in changes to operating procedures and in capital expenditures. While it is often difficult to quantify future environmental or safety related expenditures, we anticipate that continuing capital investments and changes in operating procedures will be required to comply with existing and new requirements, as well as evolving interpretations and enforcement of existing laws and regulations. Releases of hydrocarbons or hazardous substances into the environment could, to the extent the event is not insured, or is not a reimbursable event under the Omnibus Agreement, subject us to substantial expenses, including costs to respond to, contain and remediate a release, to comply with applicable laws and regulations and to resolve claims by governmental agencies or other persons for personal injury, property damage, response costs, or natural resources damages. 11. Subsequent Events Distribution Declaration On October 25, 2023, our general partner's board of directors declared a quarterly cash distribution of $ 1.045 per unit, payable on November 13, 2023, to unitholders of record on November 6, 2023. 19 | Management's Discussion and Analysis