What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-08 compared with 2023-11-08 · 149 added, 320 removed, 364 unchanged (56% of the section changed)

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

Securities and Exchange Commission (''SEC'') on March 1, 2023 (the ''Annual Report on Form 10-K'').

Securities and Exchange Commission (''SEC'') on February 28, 2024 (the ''Annual Report on Form 10-K'').

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

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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, our DKL Delaware Gathering, LLC subsidiary ("Delaware Gathering") acquired 100% of the interest in 3 Bear Delaware Holding – NM, LLC ("3 Bear") (subsequently renamed to DKL Delaware Holding - NM, LLC), 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 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.

Instead, for purposes of such income taxes, each partner of the Partnership is required to take into account its share of items of income, gain, loss and deduction in computing its federal and state income tax liabilities, regardless of whether cash distributions are made to such partner by the Partnership.

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

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 refineries in 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 nine months ended September 30, 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.

During the three months ended March 31, 2024, 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, 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 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.

While we experienced a $12.3 million decrease in net income for the nine months ended September 30, 2023, our EBITDA (as defined in "Non GAAP Measures" section below) increased $64.7 million in 2023 as compared to 2022.

Our gathering and processing segment which had segment EBITDA of $161.0 million in 2023 compared to $127.1 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.

While we experienced a $4.7 million decrease in net income for the three months ended March 31, 2024, our EBITDA (as defined in "Non GAAP Measures" section below) increased $8.3 million in 2024 as compared to 2023.

Our gathering and processing segment saw a $2.3 million increase in segment EBITDA.

Our wholesale marketing and terminalling segment saw a $3.3 million increase in segment EBITDA.

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

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

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

See further discussion on macroeconomic factors and market trends, including the impact on 2024, in the ‘Market Trends’ section below.

Other 2024 Developments

Equity Offering

On March 12, 2024, we completed a public offering of its common units in which it sold 3,584,416 common units (including an overallotment option of 467,532 common units) to the underwriters of the offering at a price to the public of $38.50 per unit.

The proceeds received from this offering (net of underwriting discounts, commissions and expenses) were $132.3 million and were used to repay a portion of the outstanding borrowings under the DKL Revolving Facility.

Underwriting discounts totaled $5.5 million.

On March 13, 2024, the Partnership sold $650.0 million in aggregate principal amount of 8.625% Senior Notes due 2029 (the “2029 Notes”), at par.

Net proceeds were used to redeem the 2025 Notes including accrued interest, pay off the DKL Term Loan Facility including accrued interest and to repay a portion of the outstanding borrowings under the DKL Revolving Facility.

On April 17, 2024, the Issuers sold $200.0 million in aggregate principal amount of additional 8.625% senior notes due 2029 (the “Additional 2029 Notes”), at 101.25%.

The Additional 2029 Notes were issued under the same indenture as the 2029 Notes and formed a part of the same series of notes as the 2029 Notes.

The net proceeds were used to repay a portion of the outstanding borrowings under the DKL Revolving Facility.

Management's Discussion and Analysis

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 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%.

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

DKL Revolving Credit Facility

On March 29, 2024, the Partnership entered into a Fourth Amendment to the fourth amended and restated senior secured revolving credit agreement (the "DKL Revolving Facility") which among other things increased the U.S.

Revolving Credit Commitments (as defined in the DKL Credit Facility) by an amount equal to $100.0 million resulting in aggregate lender commitments under the DKL Revolving Credit Facility in an amount of $1,150.0 million, including up to $146.9 million for letters of credit and $31.9 million in swing line loans.

This facility has a maturity date of October 13, 2027.

As a result of these transactions, our liquidity significantly improved, with an increase from approximately $300.0 million as of December 31, 2023, to approximately $800.0 million.

The improvement in liquidity demonstrates the success of our financial strategies and the positive impact of our transactions, positioning us for future growth and strengthening our financial stability.

Management's Discussion and Analysis

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 8 to our condensed consolidated statements of income in Item 1.

to this Quarterly Report on Form 10-Q.

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 Delaware Gathering 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.

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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

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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

2024 Strategic Focus Areas

In service to these overarching Long-Term Strategic Objectives, as we began 2023, we focused on the following Strategic Focus Areas :

We continue to believe that our strategic focus areas are the right ones.

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

To that end, our 2024 Strategic Focus Areas are as follows:

• Generate Stable Cash Flow.

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• 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 our Annual Report on Form 10-K filed with the SEC on March 1, 2023 for a discussion of our material commercial agreements with Delek Holdings.

Management's Discussion and Analysis

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

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

See Note 3 to our accompanying condensed consolidated financial statements for additional information on the DPG Management Agreement.

How We Evaluate Our Operations

We use a variety of financial and operating metrics to analyze our segment performance.

These metrics are significant factors in assessing our operating results and profitability and include:

■ volumes (including pipeline throughput and terminal volumes)

■ operating and maintenance expenses

■ cost of materials and other

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

■ net income of joint ventures

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

These volumes are primarily affected by the supply of and demand for crude oil, intermediate and refined products in the markets served directly or indirectly by our assets.

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:

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

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

• our ability to increase throughput volumes at our refined products terminals and provide additional ancillary services at those terminals;

• our ability to identify and serve new customers in our marketing and trucking operations;

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

Operating and Maintenance Expenses

We seek to maximize the profitability of our operations by effectively managing operating and maintenance expenses.

These expenses include the costs associated with the operation of owned terminals and pipelines and terminalling expenses at third-party locations, excluding depreciation and amortization.

These costs primarily include outside services, allocated employee costs, repairs and maintenance costs and energy and utility costs.

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

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

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

We will seek to manage our maintenance expenditures on our pipelines and terminals by scheduling maintenance over time to avoid significant variability in our maintenance expenditures and minimize their impact on our cash flow.

Cost of Materials and Other

These costs include:

(i) all costs of purchased refined products in our wholesale marketing and terminalling segment, as well as additives and related transportation of such products;

(ii) costs associated with the operation of our trucking assets, which primarily include allocated employee costs and other costs related to fuel, truck leases and repairs and maintenance;

(iii) the cost of pipeline capacity leased from any third parties;

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

The Partnership anticipates paying a cash distribution to its unitholders at a distribution rate of $1.045 per unit for the quarter ended September 30, 2023 ($4.180 per unit on an annualized basis).

Our Partnership Agreement requires that the Partnership distribute all of its available cash

Management's Discussion and Analysis

(as defined in the Partnership Agreement) to its unitholders quarterly.

As a result, the Partnership expects to fund future capital expenditures primarily from operating cash flows, borrowings under our revolving credit facility and any potential future issuances of equity and debt securities.

See Note 7 to the accompanying condensed consolidated financial statements for further discussion.

How We Evaluate Our Investments in Pipeline Joint Ventures

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

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

The strategic benefit for each is described below:

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

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

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

It also has additional expansion optionality.

Market Trends

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

Management's Discussion and Analysis

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

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Management's Discussion and Analysis

Non-GAAP Measures

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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 condensed consolidated statements of income in Item 1.

to this Quarterly Report on Form 10-Q.

• 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-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 condensed 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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Reconciliation of net income to EBITDA (in thousands)

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

2023 2022 2023 2022

Three Months Ended March 31,

Net income $ 32,648 $ 37,367

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Depreciation and amortization 26,495 21,105

Amortization of customer contract intangible assets 1,803 1,802 5,408 5,408

Amortization of marketing contract intangible 1,803 1,803

Interest expense, net 40,229 32,581

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

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

2023 2022 2023 2022

Three Months Ended March 31,

Net cash provided by operating activities $ 43,858 $ 29,190

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Non-cash lease expense (1,939) (2,200)

Regulatory capital expenditures (1)

(2,069) (2,143) (5,924) (3,183)

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

Regulatory and sustaining capital expenditures not distributable (1)

(1,279) (4,246)

Reimbursement from Delek Holdings for capital expenditures (2)

Accretion of asset retirement obligations (187) (176)

Deferred income taxes (101) (111)

Gain on disposal of assets 491 132 804 120

Loss on disposal of assets (567) (142)

Distributable cash flow $ 67,991 $ 61,762

Management's Discussion and Analysis

(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.

(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 three and nine months ended September 30, 2023 and 2022, Delek Holdings reimbursed us for certain capital expenditures pursuant to the terms of the Omnibus Agreement (as defined in Note 3 to our accompanying condensed consolidated financial statements).

(2) 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 2 to our condensed consolidated financial statements in Item 1.

Financial Statements, of this Quarterly Report on Form 10-Q).

Management's Discussion and Analysis

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Summary Statement of Operations Data (1)

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

2023 2022 2023 2022

Three Months Ended March 31,

Net revenues:

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Depreciation and amortization 26,495 21,105

Gain on disposal of assets (491) (132) (804) (120)

Impairment of goodwill — —

Loss on disposal of assets 567 142

Operating income $ 64,542 $ 63,932

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

See the Condensed Consolidated Statements of Income in Item 1.

to this Quarterly Report on Form 10-Q for more detail regarding our results of operations.

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

See the Condensed Consolidated Statements of Income for more detail regarding our results of operations.

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

We report operating results in four reportable segments:

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Management measures the operating performance of each of its reportable segments based on the segment EBITDA.

Effective in the fourth quarter 2022, we revised our reportable segments.

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

Management's Discussion and Analysis

Results of Operations

Consolidated Results of Operations — Comparison of the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022

Net revenues decreased by $18.2 million, or 6.2%, in the third quarter of 2023 compared to the third quarter of 2022, primarily driven by the following:

• decrease in revenue in our Delek Delaware Gathering operations of $17.2 million primarily due to a decrease in natural gas prices which declined from an average of $8.20 MMBtu during the third quarter of 2022 to $2.54 MMBtu in the third quarter of 2023, slightly offset by increases in water, crude oil and natural gas volumes;

• decreased revenue of $3.6 million in our West Texas marketing operations primarily driven by decreases in the average diesel sales prices per gallon, partially offset by an increase in the volumes sold:

◦ the average sales prices per gallon of diesel sold decreased by $0.56 per gallon;

◦ the volumes of gasoline sold increased by 5.3 million gallons, partially offset by a 1.2 million decrease of diesel gallons sold.

Such decreases were partially offset by the following:

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

Net revenues decreased by $1.1 million, or 0.1%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

The decrease was primarily driven by the following:

• decreased revenue of $66.7 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 $0.39 per gallon and $0.71, respectively;

◦ the volumes of diesel sold decreased by 3.6 million gallons, partially offset by a 1.9 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.

Consolidated Results of Operations — Comparison of the three months ended March 31, 2024 compared to the three months ended March 31, 2023

Net revenues increased by $8.6 million, or 3.5%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

The increase was primarily driven by the following:

• increase in terminalling and marketing fees due to rate increases as well as higher volumes associated with Tyler Refinery operations which were negatively impacted in prior year as a result of turnaround activities.

Such increases were partially offset by the following:

• decreased revenue of $0.6 million in our West Texas marketing operations primarily driven by decreases in RIN prices.

Cost of Materials and Other

Cost of materials and other decreased by $27.1 million, or 15.3%, in the third quarter of 2023 compared to the third quarter of 2022, primarily driven by the following:

• decrease of $16.9 million primarily as a result of a decrease in natural gas prices impacting our Delaware Gathering operations;

• decrease of $4.3 million primarily due to a decrease in trucking activity;

• decrease in costs of materials and other of $7.3 million in our West Texas marketing operations primarily driven by decreases in the average cost per gallon, partially offset by an increase in the gasoline volumes sold:

◦ the average cost per gallon of gasoline and diesel sold decreased by $0.41 per gallon and $0.52 per gallon, respectively;

◦ the volumes of gasoline sold increased by 5.3 million gallons, partially offset by a 1.2 million decrease of diesel gallons sold.

Cost of materials and other decreased by $75.4 million, or 15.7%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily driven by the following:

• decrease in costs of materials and other of $78.4 million in our West Texas marketing operations primarily driven by decreases in the average cost per gallon and the volumes of diesel sold:

Cost of materials and other decreased by $2.4 million, or 1.9%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily driven by

• decrease of $5.2 million in our gathering and processing segment driven primarily by lower natural gas costs.

Such decrease was partially offset by the following:

• increase in costs of materials and other of $1.8 million in our West Texas marketing operations primarily driven by increases in the average volumes of gasoline and diesel sold, partially offset by decreases in the average cost per gallon:

◦ the volumes of gasoline and diesel sold increased by 4.0 million and 0.5 million gallons, respectively;

◦ the average cost per gallon of gasoline and diesel sold decreased by $0.28 per gallon and $0.22 per gallon, respectively.

◦ the volumes of diesel sold decreased by 3.6 million gallons, partially offset by a 1.9 million increase in gallons of gasoline sold.

Management's Discussion and Analysis

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 $7.1 million, or 27.4%, in the third quarter of 2023 compared to the third quarter of 2022, primarily driven by the following:

• increase in variable expenses due to higher throughput;

• increase in operating expenses due to one time credit received in the third quarter of 2022.

Operating expenses increased by $21.7 million, or 33.4%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily driven by incremental expenses associated with our Delaware Gathering operations which began in June 2022.

Operating expenses increased by $7.2 million, or 29.0%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily driven by an increase in contract services.

General and Administrative Expenses

General and administrative expenses decreased by $6.4 million, or 53.6%, in the third quarter of 2023 compared to the third quarter of 2022 primarily due to higher outside services associated with the Delaware Gathering Acquisition in the prior year.

General and administrative expenses decreased by $11.2 million, or 36.2%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 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.

General and administrative expenses decreased by $2.6 million, or 35.2%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily driven by a decrease in contract services.

Depreciation and Amortization

Depreciation and amortization increased by $5.0 million, or 25.8%, in the third quarter of 2023 compared to the third quarter of 2022, primarily driven by the following:

• depreciation amortization associated with assets acquired as part of the Delaware Gathering Acquisition;

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

Depreciation and amortization increased by $26.1 million, or 60.3%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily driven by the following:

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

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

Interest Expense

Interest expense increased by $14.3 million, or 63.6%, in the third quarter of 2023 compared to the third quarter of 2022, primarily driven by the following:

• increased borrowings under the DKL Credit Facility;

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

Interest expense increased by $51.0 million, or 95.0%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily driven by the following:

Depreciation and amortization increased by $5.4 million, or 25.5%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily driven by the following:

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

Management's Discussion and Analysis

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

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

Interest Expense

Interest expense increased by $7.6 million, or 23.5%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily driven by the following:

• debt extinguishment costs of $3.6 million associated with the payoff of the DKL Term Loan Facility and the 2025 Notes with proceeds from the 2029 Notes issued in March 2024;

• interest of $2.8 million associated with the 2029 Notes;

• an increase in interest rates associated with the DKL Revolving Facility.

Results from Equity Method Investments

Income from equity method investments increased by $0.7 million, or 8.5%, in the third quarter of 2023 compared to the third quarter of 2022.

Income from equity method investments increased by $0.2 million, or 1.0%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

Income from equity method investments increased by $2.2 million, or 34.4%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to increases in throughput at two of our joint ventures that were negatively impacted by the turnaround at the Tyler Refinery in prior year.

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 9 to our accompanying condensed 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 Delaware Gathering Acquisition

The following tables and discussion present the results of operations and certain operating statistics of the gathering and processing segment for the three and nine months ended September 30, 2023 and 2022:

The following tables and discussion present the results of operations and certain operating statistics of the gathering and processing segment for the three months ended March 31, 2024 and 2023:

Gathering and Processing

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

2023 2022 2023 2022

Three Months Ended March 31,

Net Revenues $ 95,883 $ 92,432

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Throughputs (average bpd)

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

2023 2022 2023 2022

Three Months Ended March 31,

El Dorado Assets:

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Delaware Gathering Assets Volumes

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

2023 2022 2023 2022 (1)

Three Months Ended March 31,

Natural Gas Gathering and Processing (Mcfd (1) )

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120,269 88,182

(1) Volumes for the nine months ended September 30, 2022 are for period from June 1 through September 30, 2022 we owned Delaware Gathering Assets.

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

(2) bpd - average barrels per day.

Management's Discussion and Analysis

Comparison of the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022

Net revenues for the gathering and processing segment decreased by $13.8 million, or 12.7%, in the third quarter of 2023 compared to the third quarter of 2022, driven primarily by the following:

• decrease in revenue our Delek Delaware Gathering operations of $17.2 million primarily due to decrease in natural gas prices which declined from an average of $8.20 MMBtu during the third quarter of 2022 to $2.54 MMBtu in the third quarter of 2023, slightly offset by increases in water, crude oil and natural gas volumes;

• such decrease was partially offset by increase in throughput associated with Midland Gathering operations primarily due to new connections finalized during 2022.

Net revenues for the gathering and processing segment increased by $65.0 million, or 30.2%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, driven primarily by the following:

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

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

Operational comparison of the three months ended March 31, 2024 compared to the three months ended March 31, 2023:

Net revenues for the gathering and processing segment increased by $3.5 million, or 3.7%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Cost of Materials and Other

Cost of materials and other for the gathering and processing segment decreased by $15.9 million, or 43.5%, in the third quarter of 2023 compared to the third quarter of 2022, driven primarily by the following:

• decrease in cost of materials and other primarily as a result of decrease in natural gas prices impacting our Delaware Gathering operations.

Cost of materials and other for the gathering and processing segment increased by $12.5 million, or 23.5%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, driven primarily by the following:

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

Cost of materials and other for the gathering and processing segment decreased by $5.2 million, or 22.4%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023, driven primarily by lower natural gas costs.

Operating Expenses

Operating expenses for the gathering and processing segment increased by $6.0 million, or 40.3%, in the third quarter of 2023 compared to the third quarter of 2022, driven primarily by the following:

• increase in variable expenses due to higher throughput;

• increase in operating expenses due to one time credit received in the third quarter of 2022.

Operating expenses for the gathering and processing segment increased by $21.1 million, or 61.2%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily driven by the following:

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

EBITDA decreased by $3.6 million, or 6.4%, in the third quarter of 2023 compared to the third quarter of 2022, primarily driven by the following:

• increase in operating expenses due to a one time credit received in the third quarter of 2022.

Operating expenses for the gathering and processing segment increased by $5.5 million, or 38.5%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily driven by increase in contract services.

Management's Discussion and Analysis

EBITDA increased by $33.9 million, or 26.7%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily driven by the following:

• 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.

EBITDA increased by $2.3 million, or 4.2%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

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 following tables and discussion present the results of operations and certain operating statistics of the wholesale marketing and terminalling segment for the three and nine months ended September 30, 2023 and 2022:

The following tables and discussion present the results of operations and certain operating statistics of the wholesale marketing and terminalling segment for the three months ended March 31, 2024 and 2023:

Wholesale Marketing and Terminalling

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

2023 2022 2023 2022

Three Months Ended March 31,

Net Revenues $ 119,270 $ 112,309

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Operating Information

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

2023 2022 2023 2022

Three Months Ended March 31,

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

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

Comparison of the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022

Net revenues for the wholesale marketing and terminalling segment decreased by $0.8 million, or 0.5%, in the third quarter of 2023 compared to the third quarter of 2022, driven primarily by the following:

• decreased revenue of $3.6 million in our West Texas marketing operations primarily driven by decreases in the average sales prices per gallon of diesel, partially offset by an increase in the volumes sold:

◦ the average sales prices per gallon of diesel sold decreased by $0.56 per gallon;

◦ the volumes of gasoline increased by 5.3 million gallons, partially offset by a 1.2 million decrease of diesel gallons sold.

Such decreases were partially offset by the following:

• increase in terminalling and marketing revenue primarily due to rate increases.

Net revenues for the wholesale marketing and terminalling segment decreased by $65.9 million, or 14.8%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily driven by the following:

• decreased revenue of $66.7 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 $0.39 per gallon and $0.71 per gallon, respectively;

◦ the average volumes of diesel sold decreased by 3.6 million gallons, partially offset by a 1.9 million increase in gallons of gasoline sold.

Such decreases were partially offset by the following:

• increase in gross margin per barrel associated with our West Texas operations;

Operational comparison of the three months ended March 31, 2024 compared to the three months ended March 31, 2023:

Net revenues for the wholesale marketing and terminalling segment increased by $7.0 million, or 6.2%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily driven by the following:

Such increases were partially offset by the following:

• decreased revenue of $0.6 million in our West Texas marketing operations primarily driven by decrease in RIN prices.

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 three months ended March 31, 2024 and 2023.

Management's Discussion and Analysis

• increase in terminalling and marketing revenue primarily due to rate increases.

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 three and nine months ended September 30, 2023 and 2022.

Cost of Materials and Other

Cost of materials and other for the wholesale marketing and terminalling segment decreased by $6.9 million, or 5.6%, in the third quarter of 2023 compared to the third quarter of 2022, driven primarily by the following:

• decreased costs of materials and other of $7.3 million in our West Texas marketing operations primarily driven by decreases in the average cost per gallon, partially offset by the volumes of gasoline and diesel sold:

◦ the average cost per gallon of gasoline and diesel sold decreased by $0.41 per gallon and $0.52 per gallon, respectively;

◦ the volumes of gasoline sold increased by 5.3 million gallons, partially offset by a 1.2 million decrease of diesel gallons sold.

Cost of materials and other for the wholesale marketing and terminalling segment decreased by $80.5 million, or 21.6% , in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily driven by the following:

• decreased costs of materials and other of $78.4 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:

Cost of materials and other for the wholesale marketing and terminalling segment increased by $4.4 million, or 5.1% , in the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily driven by the following:

• increased costs of materials and other of $1.8 million in our West Texas marketing operations primarily driven by increases in the average volumes of gasoline and diesel sold, partially offset by decreased costs per gallon:

◦ the volumes of gasoline and diesel sold increased by 4.0 million and 0.5 million gallons, respectively;

◦ the average cost per gallon of gasoline and diesel sold decreased by $0.28 per gallon and $0.22 per gallon, respectively.

◦ the volumes of diesel sold decreased by 3.6 million gallons, partially offset by a 1.9 million increase in gallons of gasoline sold.

Management's Discussion and Analysis

The following chart shows a summary of the average prices per gallon of gasoline and diesel purchased in our West Texas operations for the three and nine months ended September 30, 2023 and 2022.

The following chart shows a summary of the average prices per gallon of gasoline and diesel purchased in our West Texas operations for the three months ended March 31, 2024 and 2023.

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

Operating Expenses

Operating expenses for the wholesale marketing and terminalling segment decreased by $0.8 million, or 13.2%, in the third quarter of 2023 compared to the third quarter of 2022, driven primarily by the following:

• decrease in outside service costs.

Operating expenses for the wholesale marketing and terminalling segment decreased by $1.7 million, or 11.2%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, driven primarily by the following:

• decrease in outside service costs;

• decrease in allocated employee related costs.

EBITDA increased by $7.9 million, or 38.8%, in the third quarter of 2023 compared to the third quarter of 2022, driven primarily by the following:

• increase in terminalling utilization and improved wholesale margins.

EBITDA increased by $18.3 million, or 30.5%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily driven by the following:

• increases in terminalling utilization and improved wholesale margins.

Operating expenses for the wholesale marketing and terminalling segment decreased by $0.8 million, or 16.9%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

EBITDA increased by $3.3 million, or 15.1%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily driven by the following:

• increases in terminalling and marketing revenue, partially offset by lower 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 following tables and discussion present the results of operations and certain operating statistics of the storage and transportation segment for the three and nine months ended September 30, 2023 and 2022:

The following tables and discussion present the results of operations and certain operating statistics of the storage and transportation segment for the three months ended March 31, 2024 and 2023:

Storage and Transportation

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

2023 2022 2023 2022

Three Months Ended March 31,

Net revenues $ 36,922 $ 38,784

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Segment EBITDA $ 18,127 $ 13,422

Comparison of the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022

Net revenues for the storage and transportation segment decreased by $3.7 million, or 9.7%, in the third quarter of 2023 compared to the third quarter of 2022, primarily driven by the following:

• decrease in trucking activity;

• partially offset by an increase in storage revenue primarily due to rate increases.

Net revenues for the storage and transportation segment decreased by $0.2 million, or 0.2%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

Operation comparison of the three months ended March 31, 2024 compared to the three months ended March 31, 2023

Net revenues for the storage and transportation segment decreased by $1.9 million, or 4.8%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Cost of Materials and Other

Cost of materials and other for the storage and transportation segment decreased by $4.3 million, or 23.1%, in the third quarter of 2023 compared to the third quarter of 2022 primarily due to decrease in trucking activity.

Cost of materials and other for the storage and transportation segment decreased by $3.9 million, or 7.2%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily due to decrease in trucking activity.

Management's Discussion and Analysis

Cost of materials and other for the storage and transportation segment decreased by $4.7 million, or 25.3%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Operating Expenses

Operating expenses for the storage and transportation segment decreased by $1.1 million, or 25.8%, in the third quarter of 2023 compared to the third quarter of 2022.

Operating expenses for the storage and transportation segment decreased by $0.4 million, or 2.7%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

EBITDA increased by $3.3 million, or 22.9%, in the third quarter of 2023 compared to the third quarter of 2022, primarily due to storage and transportation rate increases.

EBITDA increased by $6.1 million, or 15.2%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily driven by an increase in storage and transportation rates.

Operating expenses for the storage and transportation segment decreased by $0.5 million, or 9.7%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

EBITDA increased by $4.7 million, or 35.1%, in the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily driven by a decrease in operating costs.

Management's Discussion and Analysis

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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 8 to our accompanying condensed consolidated financial statements.

Refer to Consolidated Results of Operations above for details and discussion of the investments in pipeline joint ventures segment for the three and nine months ended September 30, 2023.

Investments in pipeline joint ventures segment include the Partnership's joint ventures investments described in Note 7 of our condensed consolidated financial statements in Item 1.

Financial Statements, of this Quarterly Report on Form 10-Q.

Refer to Consolidated Results of Operations above for details and discussion of the investments in pipeline joint ventures segment for the three months ended March 31, 2024.

Liquidity and Capital Resources

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(iii) potential issuance of additional equity;

At September 30, 2023 our total liquidity amounted to $93.2 million comprised of $89.0 million in unused credit commitments under the DKL Credit Facility and $4.2 million in cash and cash equivalents.

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

At March 31, 2024, our total liquidity amounted to $594.5 million comprised of $584.8 million in unused credit commitments under our third-party revolving credit facility (as discussed in Note 5 of our condensed consolidated financial statements in Item 1.

Financial Statements, of this Quarterly Report on Form 10-Q), and $9.7 million in cash and cash equivalents.

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

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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 Russia-Ukraine War, and our revenue was reduced significantly or operating costs were to increase significantly, our cash flows and liquidity could be unfavorably impacted.

We continuously review our liquidity and capital resources.

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

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

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

We believe we were in compliance with the covenants in all our debt facilities as of September 30, 2023.

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

We believe we were in compliance with the covenants in all our debt facilities as of March 31, 2024.

Cash Distributions

On October 25, 2023, the board of directors of our general partner declared a distribution of $1.045 per common unit (the "Distribution"), which equates to approximately $45,558 per quarter, or approximately $182.2 million per year, based on the number of common units outstanding as of November 6, 2023.

The Distribution will be paid on November 13, 2023 to common unitholders of record on November 6, 2023 and represents a 5.6% increase over the third quarter 2022 distribution.

On April 25, 2024, the board of directors of our general partner declared a distribution of $1.070 per common unit (the "Distribution"), which equates to approximately $50.5 million per quarter, or approximately $202,056 per year, based on the number of common units outstanding as of May 8, 2024.

The Distribution will be paid on May 15, 2024 to common unitholders of record on May 8, 2024 and represents a 4.4% increase over the first quarter 2023 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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September 30, 2023 $1.045 $45,558

December 31, 2023 $1.055 $46,010

March 31, 2024 $1.070 $50,514

June 30, 2023 $1.035 $45,112

September 30, 2023 $1.045 $45,558

The following table sets forth a summary of our consolidated cash flows for the nine months ended September 30, 2023 and 2022 (in thousands):

Nine Months Ended September 30,

Equity Offering

Underwriting discounts totaled $5.5 million.

The following table sets forth a summary of our condensed consolidated cash flows for the three months ended March 31, 2024 and 2023 (in thousands):

Three Months Ended March 31,

Net cash provided by operating activities $ 43,858 $ 29,190

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Net cash (used in) provided by financing activities (28,080) 783

Net (decrease) increase in cash and cash equivalents $ (3,788) $ 10,653

Net increase in cash and cash equivalents $ 5,917 $ 2,994

Operating Activities

Net cash provided by operating activities decreased by $186.9 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

The cash receipts from customer activities increased by $29.4 million and cash payments to suppliers and for allocations to Delek Holdings for salaries increased by $165.8 million.

Net cash provided by operating activities increased by $14.7 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

The cash receipts from customer activities decreased by $9.6 million and cash payments to suppliers and for allocations to Delek Holdings for salaries decreased by $32.3 million.

In addition, cash dividends received from equity method investments increased by $0.3 million and cash paid for debt interest increased by $8.3 million.

Investing Activities

Net cash used in investing activities decreased by $649.5 million during the nine months ended September 30, 2023 compared to the nine months ended September 30, 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 $625.4 million.

There were no acquisitions during the nine months ended September 30, 2023 .

In addition, there was a $2.1 million decrease in purchases of intangibles, $18.3 million decrease in purchases of property, plant and equipment primarily associated with growth projects in our gathering and processing segment, and a $2.7 million increase in distributions from equity method investments.

Net cash used in investing activities decreased by $17.1 million during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to decrease of $16.6 million in purchases of property, plant and equipment primarily associated with growth projects in our gathering and processing segment, a nd a $0.7 million increase in distributions from equity method investments.

Financing Activities

Net cash provided by financing activities decreased by $477.0 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

This decrease was primarily driven by net borrowings under the revolving credit facility which decreased by $458.2 million, primarily associated with financing of the Delaware Gathering Acquisition in the prior year.

Also contributing to the decrease was an increase in net payments on the term loan of $11.3 million and a $6.3 million increase in cash distributions paid.

Net cash provided by financing activities decreased by $28.9 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

This decrease was primarily driven by net payments under our revolving credit facility which increased by $265.4 million due to paydown in conjunction with the issuance of the 2029 Notes.

Additionally contributing to this decrease was an increase in deferred financing costs paid of $10.5 million associated with the 2029 Note issuance and a $6.2 million increase in payments on other financing arrangements.

Partially offsetting these decreases was an increase of $132.3 million due to proceeds from the equity issuance in March 2024, and an increase of $122.5 million in net proceeds from term debt primarily due to the issuance of the 2029 Notes.

Debt Overview

As of September 30, 2023, we had total indebtedness of $1,750.0 million.

The increase of $79.5 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 nine months ended September 30, 2023.

As of September 30, 2023, our total indebtedness consisted of:

• An aggregate principal amount of $811.2 million under the DKL Revolving Facility ("revolving credit 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 8.45%, which was amended and restated on October 13, 2022.

• An aggregate principal amount of $288.8 million, under the DKL Term Facility, due on April 15, 2025, with an average borrowing rate of 8.92%.

As of March 31, 2024, we had total indebtedness of $1,615.2 million.

The decrease of $96.6 million in our long-term debt balance compared to the balance at December 31, 2023 resulted from the payments under the DKL Credit Facility and the 2025 Notes, which was partially offset by the issuance of the 2029 Notes during the three months ended March 31, 2024.

As of March 31, 2024, our total indebtedness consisted of:

• An aggregate principal amount of $565.2 million under the DKL Revolving Facility, due on October 13, 2027, with an average borrowing rate of 8.18%.

• 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%.

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Management's Discussion and Analysis

On November 6, 2023, the Partnership entered into a First Amendment, a Second Amendment and a Third Amendment to the Delek Logistics Credit Facility (together, the “Amendments”).

The Amendments, (i) increased the DKL Revolving Credit Facility's Revolving Credit Commitments (as defined in the Delek Logistics Credit Facility) by an amount equal to $150.0 million to provide for an aggregate Revolving Credit Commitments amount of $1.050 billion, (ii) increased Delek Logistics' ability to incur certain indebtedness and (iii) extended the DKL Term Loan maturity date from October 13, 2024, to the earlier of (i) April 15, 2025, and (ii) six months prior to the earliest maturity date of any outstanding Permitted Note Indebtedness (as defined in the DKL 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.

We believe we were in compliance with the covenants in all debt facilities as of September 30, 2023.

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

On April 17, 2024, the Issuers sold $200.0 million in aggregate principal amount of additional 8.625% senior notes due 2029 at 101.25% (the "Additional 2029 Notes").

The Additional 2029 Notes were issued under the same indenture as the 2029 Notes and formed a part of the same series of notes as the 2029 Notes.

The net proceeds were used to repay a portion of the outstanding borrowings under the DKL Revolving Facility.

On May 2, 2024, the Boards of Directors of Delek Holdings and our general partner authorized the termination of the intercompany loan agreement between Delek Holdings and the Partnership, with the termination expected to be effective on or around May 31, 2024.

We believe we were in compliance with the covenants in all debt facilities as of March 31, 2024.

See Note 5 of our condensed consolidated financial statements in Item 1.

Financial Statements, of this Quarterly Report on Form 10-Q for a complete discussion of our third-party indebtedness.

Agreements Governing Certain Indebtedness of Delek Holdings

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

Delek Holdings has agreed to reimburse us with respect to certain assets it has transferred to us pursuant to the terms of the Omnibus Agreement (as defined in Note 4 to our accompanying consolidated financial statements).

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

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

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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 nine months ended September 30, 2023 and planned capital expenditures for the full year 2023 by segment and by major category:

(in thousands) Nine Months Ended September 30, 2023

(in thousands) Full Year 2024 Forecast Three Months Ended March 31, 2024

Gathering and Processing

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Total Capital Spending $ 69,829 $ 15,165

The capital expenditure 2023 full year forecast is expected to be between $85.0 million to $90.0 million.

In addtion, we expect to receive up to $10.0 million of other proceeds in 2023 that are not reflected in the full year forecast.

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.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis