What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-28 compared with 2023-03-01 · 283 added, 375 removed, 426 unchanged (61% of the section changed)

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

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).

The Partnership encourages investors and others to review the information it makes public in these locations, as such information could be deemed to be material information.

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These forward-looking statements reflect our current estimates, expectations and projections about our future results, performance, prospects and opportunities.

Forward-looking statements include, among other things, statements regarding the effect, impact, potential duration or other implications of, or expectations expressed with respect to, the COVID-19 Pandemic and the actions of members of the Organization of Petroleum Exporting Countries ("OPEC") and other leading oil producing countries (together with OPEC, "OPEC+") with respect to oil production and pricing, and statements regarding our efforts and plans in response to such events, the information concerning our possible future results of operations, business and growth strategies, financing plans, expectations that regulatory developments or other matters will not have a material adverse effect on our business or financial condition, our competitive position and the effects of competition, the projected growth of the industry in which we operate, the benefits and synergies to be obtained from our completed and any future acquisitions, statements of management’s goals and objectives, and other similar expressions concerning matters that are not historical facts.

Forward-looking statements include, among other things, statements regarding the effect, impact, potential duration or other implications of, or expectations expressed with respect to, the actions of members of the Organization of Petroleum Exporting Countries ("OPEC") and other leading oil producing countries (together with OPEC, "OPEC+") with respect to oil production and pricing, and statements regarding our efforts and plans in response to such events, the information concerning our possible future results of operations, business and growth strategies, financing plans, expectations that regulatory developments or other matters will not have a material adverse effect on our business or financial condition, our competitive position and the effects of competition, the projected growth of the industry in which we operate, the benefits and synergies to be obtained from our completed and any future acquisitions, statements of management’s goals and objectives, and other similar expressions concerning matters that are not historical facts.

Words such as “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “appears,” “projects” and similar expressions, as well as statements in future tense, identify forward-looking statements.

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• our future coverage, leverage, financial flexibility and growth, and our ability to improve performance and achieve distribution growth at any level or at all;

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

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

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

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• the ability to secure commercial agreements with Delek Holdings or third parties upon expiration of existing agreements;

• 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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• our reliance on information technology systems in our day-to-day operations;

• changes in general economic conditions, including uncertainty regarding the timing, pace and extent of economic recovery in the United States due to the COVID-19 Pandemic or future pandemics;

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

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

• changes in general economic conditions, including uncertainty regarding the timing, pace and extent of economic recovery in the United States due to governmental fiscal policy or a public health crisis;

and regulatory measures to limit or reduce greenhouse gas emissions;

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

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• inability to complete growth projects on time and on budget;

• our ability to successfully integrate acquired businesses;

• our ability to successfully complete acquisitions and integrate acquired businesses, and to achieve the anticipated benefits therefrom;

• disruptions due to acts of God, natural disasters, casualty losses, severe weather patterns, such as freezing conditions, cyber or other attacks on our electronic systems, and other matters beyond our control which might cause damage to our pipelines, terminal facilities and other assets and could impact our operating results through increased costs and/or loss of revenue;

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• other factors discussed elsewhere in this Annual Report on Form 10-K.

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

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

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.

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

Management's Discussion and Analysis

Executive Summary:

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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.

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.

See "Part 1—Items 1 and 2.

Business and Properties—Company Overview" for further details.

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 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, Texas (the "Tyler Refinery"), El Dorado, Arkansas (the "El Dorado Refinery") and Big Spring, Texas (the "Big Spring Refinery").

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.

During much of year ended December 31, 2023, domestic markets have experienced an elevated hydrocarbon pricing environment that 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 Delaware Gathering further diversifies our logistics customer base to include significantly more third-party customers, and 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 Basin, 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.

While we experienced a $32.8 million decrease in net income for the year ended December 31, 2023, our EBITDA (as defined in "Non GAAP Measures" section below) increased $58.3 million in 2023 as compared to 2022.

Our gathering and processing segment which had segment EBITDA of $199.5 million in 2023 compared to $175.3 million in 2022, benefited from additional EBITDA associated with the Delaware Gathering Acquisition as well as rate increases and new connections in our Midland Gathering operations.

Our wholesale marketing and terminalling segment saw a $23.4 million increase in segment EBITDA.

Segment EBITDA for our investments in pipeline joint ventures decreased by $0.3 million.

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

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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.

Furthermore, the Partnership benefited from inflationary-linked rate increases effective July 1, 2023, as discussed further below.

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

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Other 2023 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.

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 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.

Management's Discussion and Analysis

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.

DKL Credit Facility

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”) which among other things:

extended the maturity of the DKL Term Loan Facility to April 15, 2025, (ii) 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, (iii) 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 of $1.050 billion and (iv) 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.

Contractual Rate Adjustments to Keep Pace with Inflation

On July 1, 2023, 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 13.3%, 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.

The tariff on FERC regulated system acquired from Delaware Gathering (formerly 3 Bear) was adjusted as of January 1, 2023, but adjustments under agreements already in place will be capped at 3.0%.

Under certain of our agreements with Delek Holdings and third parties, the fees that are subject to adjustments using the consumer price index increased 17.6% and the fees that are subject to adjustments using the producer price index increased approximately 18.9%.

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Segment Overview

We aggregate our operating segments into four reportable segments:

We review operating results in four reportable segments:

(i) gathering and processing;

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(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.

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 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 13 to our accompanying consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

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 operational assets in our gathering and processing segment consist of Midland Gathering Assets and 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.

The Delaware Gathering 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.

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

While we do not take ownership of gas that is gathered, we sell the processed gas at a market price which we remit to the producer, net of our fees.

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

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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

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.

The Partnership’s Long-Term Strategic Objectives have 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 continue 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.

Management's Discussion and Analysis

2023 Strategic Focus Areas

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Expand our ESG Consciousness and Lower our Carbon Footprint

Since acquiring Delaware Gathering in 2022, the Partnership has been dedicated to achieving organic growth in our operations.

This strategy has proven to be successful, as we have seen substantial growth from new connections in our Midland Gathering operations, as well as continued growth in our Delaware Gathering operations.

We continue to be focused on growth opportunities in the Permian Basin given its prime acreage and extensive production history and believe that opportunities exist in crude, natural gas and water which could enhance our gathering and process segment.

The Partnership prioritizes safe and reliable operation of its assets to maintain financial stability and growth.

We have successfully avoided lost time injuries for four years, demonstrating our strong safety protocols and adherence to regulations.

This commitment protects employees, assets, and operations, minimizing financial losses and maintaining stakeholder trust.

Additionally, we have prioritized reducing our leverage ratio, providing us with more financial flexibility to pursue opportunities and expand operations.

By reducing our debt profile and maintaining a strong financial position, we are better equipped to navigate challenges that may arise.

This financial stability also allows us to seize emerging opportunities that align with our strategic goals, ensuring that we can continue to deliver value to our unitholders.

2023 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

Integration and expansion of Delaware Gathering operations ü ü ü ü

Implemented measures to reduce our overall debt profile ü ü ü ü

Expansion of our Midland operations ü ü ü

Zero lost time injuries ü

Continue in Co-Developing our ESG Strategy with our General Partner ü

Looking Forward:

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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.

Leverage our current asset base, and our knowledge of the regional markets in which we operate, to target and complete attractive third-party acquisitions, which will enhance our third-party revenues and margin, further diversifying our customer and product mix.

Management's Discussion and Analysis

◦ Investments in Joint Ventures.

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.

Delek Holdings has granted us a right of first offer on certain logistics assets.

We intend to review our right to purchase any such assets as they are offered to us under the terms of the right of first offer, from time to time.

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, 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.

Delek Holdings is 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 will 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.

As certain of our commercial agreements with Delek Holdings have expired or are set to expire soon, we are currently engaged in negotiations to renew these contracts and ensure continued value for both ourselves and our sponsor.

• Pursue Attractive Expansion and Construction Opportunities.

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

Commercial Agreements with Delek Holdings

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, crude oil, intermediate and refined products transportation and storage services, and marketing, terminalling and offloading services to Delek Holdings, and Delek Holdings commits to provide us with minimum monthly throughput volumes of crude oil, intermediate and refined products.

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

See Note 4 to the consolidated financial statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for a discussion of our material commercial agreements with Delek Holdings.

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 "Delek Permian Gathering Project").

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

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

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

How We Evaluate Our Operations

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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.

Management's Discussion and Analysis

Operating and Maintenance Expenses

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

The Partnership paid a cash distribution to its unitholders at a distribution rate of $1.02 per unit for the quarter ended December 31, 2022 ($4.08 per unit on an annualized basis).

The Partnership anticipates paying a cash distribution to its unitholders at a distribution rate of $1.055 per unit for the quarter ended December 31, 2023 ($4.22 per unit on an annualized basis).

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

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

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

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

It also has additional expansion optionality.

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.

Fluctuations in crude oil, natural gas and NGL 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.

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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.

Management's Discussion and Analysis

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.

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Management's Discussion and Analysis

Non-GAAP Measures

Our management uses certain "non-GAAP" operational measures to evaluate our operating segment performance and non-GAAP financial measures to evaluate past performance and prospects for the future to supplement our GAAP financial information presented in accordance with U.S.

Our management uses certain "non-GAAP" operational measures to evaluate our operating segment performance and non-GAAP financial measures to evaluate past performance and prospects for the future to supplement our financial information presented in accordance with United States Generally Accepted Accounting Principles ("GAAP").

These financial and operational non-GAAP measures include:

• Earnings before interest, taxes, depreciation and amortization ("EBITDA") - calculated as net income 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.

• Earnings before interest, taxes, depreciation and amortization ("EBITDA") - calculated as net income before net interest expense, income tax expense, depreciation and amortization expense, including amortization of marketing contract intangible, which is included as a component of net revenues in our accompanying consolidated statements of income.

• Distributable cash flow - calculated as net cash flow from operating activities plus or minus changes in assets and liabilities, less maintenance capital expenditures net of reimbursements and other adjustments not expected to settle in cash.

The Partnership believes this is an appropriate reflection of a liquidity measure by which users of its financial statements can assess its ability to generate cash.

EBITDA and distributable cash flow are non-U.S.

GAAP supplemental financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:

EBITDA and distributable cash flow are non-GAAP supplemental financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:

• our operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or, in the case of EBITDA, financing methods;

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

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

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

Additionally, because EBITDA and distributable cash flow may be defined differently by other partnerships in our industry, our definitions of EBITDA and distributable cash flow may not be comparable to similarly titled measures of other partnerships, thereby diminishing their utility.

See below for a reconciliation of EBITDA and distributable cash flow to their most directly comparable U.S.

GAAP financial measures.

See below for a reconciliation of EBITDA and distributable cash flow to their most directly comparable GAAP financial measures.

Non-GAAP Reconciliations

The following table provides a reconciliation of EBITDA and distributable cash flow (which are defined above) to the most directly comparable U.S.

GAAP measure, or net income and net cash from operating activities, respectively.

Reconciliation of net income to EBITDA (in thousands) Year Ended December 31,

The following table provides a reconciliation of EBITDA and distributable cash flow (which are defined above) to the most directly comparable GAAP measure, or net income and net cash from operating activities, respectively.

Reconciliation of net income to EBITDA (in thousands)

Year Ended December 31,

Net income $ 126,236 $ 159,052

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Depreciation and amortization 92,384 62,988

Amortization of customer contract intangible assets 7,211 7,211

Amortization of marketing contract intangible 7,211 7,211

Interest expense, net 143,244 82,304

EBITDA $ 311,937 $ 265,177

Reconciliation of net cash from operating activities to distributable cash flow (in thousands) Year Ended December 31,

$ 370,280 $ 311,937

(1) EBITDA includes $14.8 million of goodwill impairment expense for the year ended December 31, 2023.

Refer to Note 8 - Goodwill to our accompanying consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for further information.

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

Year Ended December 31,

Net cash provided by operating activities $ 225,319 $ 192,168

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Non-cash lease expense (9,549) (16,254)

Regulatory capital expenditures (1)

Regulatory and sustaining capital expenditures not distributable (1)

(7,272) (9,684)

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Deferred income taxes (638) (5)

Gain on sale of assets 114 59

Gain on disposal of assets 1,266 114

Distributable cash flow $ 248,177 $ 218,079

(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.

Management's Discussion and Analysis

(1) Regulatory and sustaining 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.

(2) For the years ended December 31, 2022 and 2021, Delek Holdings reimbursed us for certain capital expenditures pursuant to the terms of the Omnibus Agreement (as defined in Note 4 to our accompanying consolidated financial statements).

(2) Reimbursement from Delek Holdings for capital expenditures represents amounts for certain capital expenditures reimbursable to us from Delek Holdings pursuant to the terms of the Omnibus Agreement (as defined in Note 4 to our accompanying consolidated financial statements).

Management's Discussion and Analysis

Results of Operations

Summary of Financial and Other Information

A discussion and analysis of the factors contributing to our results of operations is presented below.

A detailed discussion of the fiscal year 2022 compared to year-over-year changes from fiscal year 2021 can be found in Part II, Item 7.

Management's Discussion and Analysis, "Results of Operations", of our 2022 Annual Report on Form 10-K, filed on March 1, 2023.

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, 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.

The following table provides summary financial data (in thousands, except unit and per unit amounts):

Summary Statement of Operations Data (1)

Year Ended December 31,

2022 2021 2020

Net revenues:

Affiliate $ 479,411 $ 418,826 $ 382,666

Third-Party 556,996 282,076 180,752

Total Consolidated 1,036,407 700,902 563,418

Gathering and Processing $ 371,110 $ 305,427

Wholesale marketing and terminalling 505,701 588,884

Storage and transportation 143,598 142,096

Total 1,020,409 1,036,407

Cost of materials and other 532,627 641,363

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Depreciation and amortization 92,384 62,988

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

Impairment of goodwill 14,848 —

Gain on disposal of assets (1,266) (114)

Operating income $ 238,949 $ 209,682

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Income from equity method investments (31,433) (31,683)

Other (income) expense, net (373) (119) 133

Other income, net (303) (373)

Total non-operating expenses, net 111,508 50,248

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Net income attributable to partners $ 126,236 $ 159,052

Net revenues increased by $335.5 million, or 47.9%, in the year ended December 31, 2022 compared to the year ended December 31, 2021.

The increase was primarily driven 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 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,

Comprehensive income attributable to partners $ 126,236 $ 159,052

EBITDA (2) (3)

$ 370,280 $ 311,937

Net income per limited partner unit:

Basic $ 2.90 $ 3.66

Diluted $ 2.89 $ 3.66

Weighted average limited partner units outstanding:

Basic 43,583,938 43,487,910

Diluted 43,611,314 43,511,650

(1)This information is presented at a summary level for your reference.

See the Consolidated Statements of Income included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for more detail regarding our results of operations.

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

(3) EBITDA includes $14.8 million of goodwill impairment expense for the year ended December 31, 2023.

Refer to Note 8 - Goodwill to our accompanying consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for further information.

We report operating results in four reportable segments:

• Gathering and Processing

• Wholesale Marketing and Terminalling

• Storage and Transportation

• 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 of its reportable segments based on the segment EBITDA.

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;

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

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

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

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

Such increases were partially offset by the following:

• decreases in throughputs due to the impact of the severe freezing conditions that affected most of the regions where we operate resulting in lower volumes outside of contractual minimum volume commitments during the year ended December 31, 2021 when compared to the year ended December 31, 2020;

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

Results of Operations

Consolidated Results of Operations - Comparison of the Year Ended December 31, 2023 versus the Year Ended December 31, 2022

Net revenues decreased by $16.0 million, or 1.5%, in the year ended December 31, 2023 compared to the year ended December 31, 2022.

The decrease was primarily driven by the following:

• decreased revenue of $99.6 million in our West Texas marketing operations primarily driven by decreases in the average sales prices per gallon and the volumes of gasoline and diesel sold:

◦ the average sales prices per gallon of gasoline and diesel sold decreased by $0.46 per gallon and $0.73, respectively;

◦ the volumes of diesel sold decreased by 3.6 million gallons, partially offset by a 0.6 million increase in gallons of gasoline sold.

Such decreases were partially offset by the following:

• increase in revenue as a result of our Delaware Gathering operations, which began in June 2022;

• increase in volumes associated with Midland Gathering operations primarily due to new connections finalized during 2022.

Cost of Materials and Other

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:

◦ 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.

Cost of materials and other decreased by $108.7 million, or 17.0%, in the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily driven by the following:

• decrease in costs of materials and other of $101.9 million in our West Texas marketing operations primarily driven by decreases in the average cost per gallon and the volumes of diesel sold:

◦ the average cost per gallon of gasoline and diesel sold decreased by $0.49 per gallon and $0.74 per gallon, respectively;

◦ the volumes of diesel sold decreased by 3.6 million gallons, partially offset by a 0.6 million increase in gallons of gasoline sold.

Such decreases were partially offset by the following:

• increase in cost of materials and other as a result of our Delaware Gathering operations, which began in June 2022.

Operating Expenses

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;

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

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

Management's Discussion and Analysis

Operating expenses increased by $29.8 million, or 33.7%, in the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily driven by incremental expenses associated with our Delaware Gathering operations which began in June 2022.

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.

General and administrative expenses decreased by $9.4 million, or 27.5%, in the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily driven by the following:

• higher outside services associated with the Delaware Gathering Acquisition in the prior year;

• partially offset by lower allocated employee related expenses.

Management's Discussion and Analysis

Depreciation and Amortization

Depreciation and amortization increased by $29.4 million, or 46.7%, in the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily driven by the following:

• 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.

• the acquisition of property, plant and equipment and customer relationship intangible as part of the Delaware Gathering Acquisition;

• depreciation associated with new projects in-serviced during the period.

Impairment of Goodwill

Impairment of goodwill was $14.8 million for the year ended December 31, 2023.

The goodwill impairment is related to our Delaware Gathering reporting unit due to significant increases in interest rates and timing of system connections with our producer customers.

The Partnership's long-term outlook of its Delaware Gathering system remains unchanged.

Refer to Note 8 to our accompanying consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for further information.

There was no asset impairment in the year ended December 31, 2022.

Interest Expense

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 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.

Interest expense increased by $60.9 million, or 74.0%, in the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily driven by the following:

• increased borrowings under the DKL Credit Facility to fund the Delaware Gathering Acquisition;

• higher floating interest rates applicable to the DKL Credit Facility.

Results from Equity Method Investments

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;

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

The Rio equity method investment income was also impacted by a major customer contract termination during the third quarter of 2021, resulting in lower revenues for the year.

Income from equity method investments decreased by $0.3 million, or 0.8%, in the year ended December 31, 2023 compared to the year ended December 31, 2022.

Management's Discussion and Analysis

Operating Segments

We review operating results in four reportable segments:

(i) gathering and processing;

(ii) wholesale marketing and terminalling;

(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.

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

Gathering and Processing Segment

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

These assets include:

• the pipeline assets used to support Delek Holdings' El Dorado refinery (the "El Dorado Assets")

• the gathering system that supports transportation of crude oil to the El Dorado Refinery (the "El Dorado Gathering System")

• the Paline Pipeline System

• the East Texas Crude Logistics System

• the Tyler-Big Sandy Pipeline

• 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 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, 2023 and 2022:

1 unchanged sentence

Year Ended December 31,

2022 2021 2020

Net Revenues $ 371,110 $ 305,427

2 unchanged sentences

Segment EBITDA (1)

$ 199,463 $ 175,250

(1) EBITDA includes $14.8 million of goodwill impairment expense for the year ended December 31, 2023.

Refer to Note 8 - Goodwill to our accompanying consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for further information.

Throughputs (average bpd)

Year Ended December 31,

2022 2021 2020

El Dorado Assets:

4 unchanged sentences

Midland Gathering System 230,471 128,725

128,725 80,285 82,817

Plains Connection System 250,140 183,827

183,827 124,025 104,770

(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

Year Ended December 31,

2023 2022 (1)

Natural Gas Gathering and Processing (Mcfd (2) )

71,239 60,971

Crude Oil Gathering (bpd (3) )

111,335 87,519

Water Disposal and Recycling (bpd (3) )

102,340 72,056

(1) Volumes for the year ended December 31, 2022 are for the period from June 1, through December 31, 2022, for which we owned the Delaware Gathering Assets.

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

(3) bpd - average barrels per day.

Management's Discussion and Analysis

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.

Operational Comparison of the Year Ended December 31, 2023 versus the Year Ended December 31, 2022:

Net revenues for the gathering and processing segment increased by $65.7 million, or 21.5%, in the year ended December 31, 2023 compared to the year ended December 31, 2022, 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;

• increased revenues at our BSR Crude Pipeline, as a result of new contracts executed in the second quarter of 2020, during the year ended December 31, 2021 when compared to the year ended December 31, 2020;

• partially offset by decreases in throughputs due to the impact of the severe freezing conditions that affected most of the regions where we operate resulting in lower volumes outside of contractual minimum volume commitments and decreases in throughputs at the Paline Pipeline due to scheduled pipeline maintenance during the year ended December 31, 2021 when compared to the year ended December 31, 2020.

• incremental revenues as a result of our Delaware Gathering operations, which began in June 2022, partially offset by lower natural gas prices;

• increase in throughput associated with Midland Gathering operations primarily due to new connections finalized during 2022.

Management's Discussion and Analysis

Cost of Materials and Other

Cost of materials and other for the gathering and processing segment increased by $1.6 million, or 2.0%, in the year ended December 31, 2023 compared to the year ended December 31, 2022, 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.

• incremental cost of materials and other as a result of our Delaware Gathering operations which began in June 2022;

• partially offset by lower natural gas costs.

Operating Expenses

Operating expenses for the gathering and processing segment increased by $26.9 million, or 55.8%, in the year ended December 31, 2023 compared to the year ended December 31, 2022, 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.

Management's Discussion and Analysis

• increase due to additional expenses associated with our Delaware Gathering operations, which began in June 2022;

• increase in outside services associated with Midland Gathering operations.

EBITDA increased by $24.2 million, or 13.8%, in the year ended December 31, 2023 compared to the year ended December 31, 2022, 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.

• additional EBITDA associated with the Delaware Gathering operations, which began in June 2022;

• increase in throughput associated with new connections in our Midland Gathering operations;

• partially offset by the impairment of goodwill associated the Delaware Gathering Acquisition.

Management's Discussion and Analysis

Wholesale Marketing and Terminalling Segment

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

The 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, 2023 and 2022:

1 unchanged sentence

Year Ended December 31,

2022 2021 2020

Net Revenues $ 505,701 $ 588,884

4 unchanged sentences

Year Ended December 31,

2022 2021 2020

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

7 unchanged sentences

(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, 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:

◦ 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:

◦ 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.

The following charts show summaries of the average sales prices per gallon of gasoline and diesel and refined products volume impacting our West Texas operations for the years ended December 31, 2022, 2021 and 2020.

Operational Comparison of the Year Ended December 31, 2023 versus the Year Ended December 31, 2022:

Net revenues for the wholesale marketing and terminalling segment decreased by $83.2 million, or 14.1%, in the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily driven by the following:

• decreased revenue of $99.6 million in our West Texas marketing operations primarily driven by decreases in the average sales prices per gallon and the volumes of diesel sold in our West Texas marketing operations:

◦ the average sales prices per gallon of gasoline and diesel sold decreased by $0.46 per gallon and $0.73 per gallon, respectively;

◦ the average volumes of diesel sold decreased by 3.6 million gallons, partially offset by a 0.6 million increase in gallons of gasoline sold.

Such decreases were partially offset by the following:

• increase in terminalling and marketing revenue primarily due to increased volume and rates associated with Big Spring marketing operations.

Management's Discussion and Analysis

Cost of Materials and Other

Cost of materials and other for the wholesale marketing and terminalling segment increased by $168.1 million, or 52.0% , in the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily driven by the following:

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

◦ 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.

Cost of materials and other for the wholesale marketing and terminalling segment decreased by $102.9 million, or 20.9% , in the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily driven by the following:

• decreased costs of materials and other of $101.9 million in our West Texas marketing operations primarily driven by decreases in the average cost per gallon and the volumes of gasoline and diesel sold:

◦ the average cost per gallon of gasoline and diesel sold decreased by $0.49 per gallon and $0.74 per gallon, respectively;

◦ the volumes of diesel sold decreased by 3.6 million gallons, partially offset by a 0.6 million increase in gallons of gasoline sold.

The following chart shows a summary of the average prices per gallon of gasoline and diesel purchased in our West Texas operations for the years ended December 31, 2023 and 2022.

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Operating Expenses

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.

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.

Operating expenses for the wholesale marketing and terminalling segment decreased by $1.7 million, or 8.5%, in the year ended December 31, 2023 compared to the year ended December 31, 2022.

EBITDA increased by $23.4 million, or 28.2%, in the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily driven by the following:

• increases in terminalling utilization and improved wholesale margins.

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, 2023 and 2022:

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Year Ended December 31,

2022 2021 2020

Net revenues $ 143,598 $ 142,096

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Segment EBITDA $ 63,850 $ 56,269

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.

Operational Comparison of the Year Ended December 31, 2023 versus the Year Ended December 31, 2022:

Net revenues for the storage and transportation segment increased by $1.5 million, or 1.1%, in the year ended December 31, 2023 compared to the year ended December 31, 2022.

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.

Cost of materials and other for the storage and transportation segment decreased by $3.2 million, or 4.8%, in the year ended December 31, 2023 compared to the year ended December 31, 2022.

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.

Operating expenses for the storage and transportation segment increased by $0.3 million, or 1.5%, in the year ended December 31, 2023 compared to the year ended December 31, 2022.

EBITDA increased by $7.6 million, or 13.5%, in the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily driven by an increase in storage and transportation rates.

Management's Discussion and Analysis

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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.

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 the extreme weather events.

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

Investments in pipeline joint ventures segment include the Partnership's joint ventures investments described in Note 14 to our accompanying consolidated financial statements.

Investments in pipeline joint ventures segment include the Partnership's joint ventures investments described in Note 12 to our accompanying consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Refer to Consolidated Results of Operations above for details and discussion of the investments in pipeline joint ventures segment for the year ended December 31, 2023.

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(i) cash generated from operations;

(iii) potential issuance of additional equity;

(ii) borrowings under our revolving credit facility;

(iv) potential issuance of additional debt securities;

At December 31, 2022 our total liquidity amounted to $187.5 million comprised of $179.5 million in unused credit commitments under the DKL Credit Facility and $8.0 million in cash and cash equivalents.

(ii) borrowings under our revolving credit facility;

(v) potential sale of assets.

(iii) potential issuance of additional equity;

At December 31, 2023, our total liquidity amounted to $343.3 million comprised of $269.5 million and $70.0 million in unused credit commitments under the DKL Credit Facility and the Related Party Revolving Credit Facility, respectively, and $3.8 million in cash and cash equivalents.

We have the ability to increase the DKL Credit Facility to $1.15 billion subject to receiving increased or new commitments from lenders and meeting certain requirements under the credit facility.

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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.

At December 31, 2023, the DKL Credit Facility was classified as long-term in the accompanying consolidated balance sheets in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K as we currently have the ability and intent to refinance the 2025 Notes on a long-term basis through available capacity under the DKL Revolving Facility, Related Party Revolving Credit Facility or new funding sources.

We continuously review our liquidity and capital resources.

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We believe we were in compliance with the covenants in all our debt facilities as of December 31, 2023.

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

On January 24, 2024, the board of directors of our general partner declared a distribution of 1.055 per common unit (the "Distribution"), which equates to approximately $46.0 million per quarter, or approximately $184.0 million per year, based on the number of common units outstanding as of February 5, 2024.

The Distribution was paid on February 9, 2023 to common unitholders of record on February 2, 2023 and represents a 4.6% increase over the fourth quarter 2021 distribution.

We have set a distribution growth guidance of 5% for the full year 2023.

The Distribution will be paid on February 12, 2024 to common unitholders of record on February 5, 2024 and represents a 3.4% increase over the fourth quarter 2022 distribution.

This increase in the distribution is consistent with our intent to maintain an attractive distribution growth profile over the long term.

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

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

March 31, 2022 $0.980 $3.92 $42,604 May 12, 2022 May 5, 2022

June 30, 2022 $0.985 $3.94 $42,832 August 11, 2022 August 4, 2022

September 30, 2022 $0.990 $3.96 $43,057 November 10, 2022 November 4, 2022

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

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

December 31, 2022 $1.020 $44,440

March 31, 2023 $1.025 $44,664

June 30, 2023 $1.035 $45,112

September 30, 2023 $1.045 $45,558

December 31, 2023 $1.055 $46,010

The following table sets forth a summary of our consolidated cash flows for the year ended December 31, 2023 and 2022 (in thousands):

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Net cash used in investing activities (89,629) (770,437)

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

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

Net cash (used in) provided by financing activities (139,905) 581,947

Net (decrease) increase in cash and cash equivalents $ (4,215) $ 3,678

Operating Activities

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.

Net cash provided by operating activities increased by $33.2 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.

The cash receipts from customer activities increased by $14.7 million and cash payments to suppliers and for allocations to Delek Holdings for salaries decreased by $71.0 million.

In addition, cash dividends received from equity method investments increased by $5.8 million and cash paid for debt interest increased by $58.3 million.

Investing Activities

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.

Net cash used in investing activities decreased by $680.8 million during the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to the Delaware Gathering Acquisition, effective June 1, 2022, which was partially financed through borrowings under the DKL Credit Facility amounting to $625.6 million.

There were no acquisitions during the year ended December 31, 2023 .

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

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.

In addition, there was a $45.0 million decrease in purchases of property, plant and equipment primarily associated with growth projects in our gathering and processing segment, and a $7.3 million increase in distributions from equity method investments.

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.

Net cash provided by financing activities decreased by $721.9 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.

This decrease was primarily driven by net borrowings under the revolving credit facility which decreased by $402.5 million, primarily associated with financing of the Delaware Gathering Acquisition in the prior year.

Also contributing to the decrease was a decrease in net borrowings on the term loan of $317.3 million and a $8.9 million increase in cash distributions paid.

Debt Overview

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.

As of December 31, 2023, we had total indebtedness of $1,711.8 million.

The increase of $41.3 million in our long-term debt balance compared to the balance at December 31, 2022 resulted from the borrowings under the DKL Credit Facility during the year ended December 31, 2023.

As of December 31, 2023, our total indebtedness consisted of:

• 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%.

Management's Discussion and Analysis

• An aggregate principal amount of $780.5 million under the DKL Revolving Facility, due on 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), with an average borrowing rate of 8.46%.

• An aggregate principal amount of $281.3 million, under the DKL Term Facility, due on April 15, 2025 (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), with an average borrowing rate of 9.46%.

• An aggregate principal amount of $250.0 million, under the 2025 Notes (6.75% senior notes), due in 2025, with an effective interest rate of 7.19%.

• An aggregate principal amount of $400.0 million, under the 2028 Notes (7.125% senior notes), due in 2028, with an effective interest rate of 7.39%.

As of December 31, 2023, the DKL Revolving Facility and DKL Term Facility were classified as long-term in the accompanying consolidated balance sheets in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K as we currently have the ability and intent to refinance the 2025 Notes on a long-term basis through available capacity under the DKL Revolving Facility, Related Party Revolving Credit Facility or new funding sources.

We believe we were in compliance with the covenants in all debt facilities as of December 31, 2023.

See Note 11 to our consolidated financial statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for a complete discussion of our third-party indebtedness.

See Note 10 to our consolidated financial statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for a complete discussion of our indebtedness.

Agreements Governing Certain Indebtedness of Delek Holdings

Although we are not contractually bound by and are not liable for Delek Holdings' debt under its credit arrangements, we are indirectly affected by certain prohibitions and limitations contained therein.

Specifically, certain of Delek Holdings' credit arrangements require that Delek Holdings meet certain minimum covenant levels for (i) consolidated shareholders’ equity and (ii) a ratio of consolidated shareholders' equity to adjusted total assets.

Delek Holdings, due to its majority ownership and control of our general partner, has the ability to prevent us from taking actions that would cause Delek Holdings to violate these and any other covenants in its credit arrangements or otherwise be in default under any of its credit arrangements.

As a result, we cannot assure you that such covenants will not impact our ability to use the full capacity under our revolving credit facility in the future.

Please read Item 1A.

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

Equity Units Overview

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 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.

Securities and Exchange Commission for the proposed re-sale or disposition from time to time by Delek Holdings of up to 14.0 million common limited partner units.

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 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.

Contemporaneous with the above issuance, the Board of the general partner waived distributions in respect of the IDRs associated with the 5.0 million Additional Units for at least two years, through at least the distribution for the quarter ending March 31, 2022 ("IDR Waiver").

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

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

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

See Note 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.

Capital Spending

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:

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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 2024 Forecast Year Ended December 31, 2023

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Gathering and Processing Segment Total $ 54,150 $ 74,683

$ 69,074 $ 122,594

Wholesale Marketing and Terminalling

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Wholesale Marketing and Terminalling Segment Total $ 5,679 $ 2,111

$ 7,575 $ 1,548

Storage and Transportation

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Storage and Transportation Segment Total $ 10,000 $ 4,548

$ 4,691 $ 6,528

Total Capital Spending $ 69,829 $ 81,342

$ 81,340 $ 130,670

(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.

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

For example, we may experience increases in the cost of and/or timing to obtain necessary equipment required for our continued compliance with government regulations or to complete improvement projects.

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Other Cash Requirements

Our other cash requirements consisted of operating activities, cash distributions to unitholders, contributions to investments in joint ventures and capital expenditures.

Our other cash requirements consisted of operating activities and cash distributions to unitholders.

Operating activities included cash outflows related to payments to suppliers for crude and other materials and payments for services.

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Refer to the capital spending section for our capital expenditures for 2023 and our planned capital expenditures for 2024.

Management's Discussion and Analysis

Off-Balance Sheet Arrangements

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

Goodwill in an acquisition represents the excess of the aggregate purchase price over the fair value of the identifiable net assets.

Goodwill is reviewed at least annually for impairment, or more frequently if indicators of impairment exist, such as disruptions in our business, unexpected significant declines in operating results or a sustained market capitalization decline.

Goodwill is evaluated for impairment by comparing the carrying amount of the reporting unit to its estimated fair value.

In assessing the recoverability of goodwill, assumptions are made with respect to future business conditions and estimated expected future cash flows to determine the fair value of a reporting unit.

We may consider inputs such as a market participant weighted average cost of capital ("WACC"), forecasted operating performance, volumes and capital expenditures, all of which are subject to significant judgment and estimates.

We may also consider a market approach in determining or corroborating the fair values of the reporting units using a multiple of expected future cash flows, such as those used by third-party analysts.

The market approach involves significant judgment, including selection of an appropriate peer group, selection of valuation multiples, and determination of the appropriate weighting in our valuation model.

If these estimates and assumptions change in the future, due to factors such as a decline in general economic conditions, sustained decrease in the crack spreads, competitive pressures on sales and margins and other economic and industry factors beyond management's control, an impairment charge may be required.

The most significant risks to our valuation and the potential future impairment of goodwill are the WACC and the volatility of volumes, which is based on internal forecasts and depend, in part, on assumptions about our customers’ drilling activity which is inherently subjective and contingent upon a number of variable factors (including future or expected pricing considerations).

We may also elect to perform a qualitative impairment assessment of goodwill balances.

The qualitative assessment permits companies to assess whether it is more likely than not (i.e., a likelihood of greater than 50%) that the fair value of a reporting unit is less than its carrying amount.

If a company concludes that, based on the qualitative assessment, it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the company is required to perform the quantitative impairment test.

Alternatively, if a company concludes based on the qualitative assessment that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it has completed its goodwill impairment test and does not need to perform the quantitative impairment test.

At December 31, 2023, we had three reporting units with goodwill totaling approximately $12.2 million.

Our annual goodwill impairment testing was performed on a quantitative basis for our Delaware Gathering reporting unit during the fourth quarter of 2023.

As part of our annual assessment, we recorded a $14.8 million impairment charge in the fourth quarter of 2023 related to our Delaware Gathering reporting unit within the gathering and processing segment, which brought the amount of goodwill recorded within this reporting unit to zero.

The impairment was primarily driven by the significant increases in interest rates and timing of system connections with our producer customers.

The estimated fair value of our Delaware Gathering reporting unit was derived using a combination of both income and market approaches.

The income approach reflects expected future cash flows based on anticipated gross margins, operating costs, and capital expenditures.

The market approach includes both the guideline public company and guideline transaction methods.

Both market approach methods use pricing multiples derived from historical market transactions of other like-kind assets.

These fair value measurements involve significant unobservable inputs (Level 3 inputs).

Management's Discussion and Analysis

Significant judgment is involved in performing these fair value estimates since the results are based on forecasted assumptions.

Significant assumptions include:

• Future volumes .

Our estimates of future throughput of crude oil, natural gas, and water volumes are based on internal forecasts and depend, in part, on assumptions about our customers’ drilling activity which is inherently subjective and contingent upon a number of variable factors (including future or expected pricing considerations), many of which are difficult to forecast.

Management considers these volume forecasts and other factors when developing our forecasted cash flows.

• Discount rate.

We apply a discount rate to our cash flows based on a variety of factors, including market and economic conditions, operational risk, regulatory risk and political risk.

This discount rate is also compared to recent observable market transactions, if possible.

A higher discount rate decreases the net present value of cash flows.

• Future capital requirements .

These are based on authorized spending and internal forecasts.

If estimates for future cash flows, which are impacted primarily by future volumes and EBITDA projections, were to decline, the overall reporting units’ fair value would decrease, resulting in potential goodwill impairment charges.

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors.

As a result, there can be no assurance that the estimates and assumptions made for purposes of the impairment tests will prove to be an accurate prediction of the future.

For our other reporting units in 2023, we assessed qualitative factors such as macroeconomic conditions, industry considerations, cost factors, and reporting unit financial performance and determined it was not more likely than not that the fair value of our reporting units were less than the respective carrying value.

For the 2022 annual impairment assessment, we performed a qualitative assessment on all reporting units, as we determined it was more likely than not that the fair value of the reporting units exceeded the carrying value.

Therefore, in accordance with GAAP, further testing was not required.

An estimate of the sensitivity to net income resulting from impairment calculations is not practicable, given the numerous assumptions (e.g., pricing, volumes and discount rates) that can materially affect our estimates.

That is, unfavorable adjustments to some of the above listed assumptions may be offset by favorable adjustments in other assumptions.

New Accounting Pronouncements

1 unchanged sentence

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What changed 10-K

Item 7. Management’s Discussion and Analysis