What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-26 compared with 2024-02-28 · 262 added, 203 removed, 506 unchanged (48% 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 X (formerly known as Twitter) account (@DelekLogistics).

On September 11, 2024, the Partnership acquired 100% of the limited liability company interests in H2O Midstream Intermediate, LLC, H2O Midstream Permian LLC, and H2O Midstream LLC ("H2O Midstream") from H2O Midstream Holdings, LLC (the “Seller"), related to the Seller’s water disposal and recycling operations, in the Midland Basin in Texas (the “H2O Midstream Acquisition”).

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

On December 11, 2024, we entered into an agreement to acquire 100% of the limited liability company interests in Gravity Water Intermediate Holdings LLC ("Gravity") from Gravity Water Holdings LLC (the "Gravity Purchase Agreement") related to water disposal and recycling operations in the Permian Basin and the Bakken (the “Gravity Acquisition”).

The Gravity Acquisition closed on January 2, 2025.

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

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 (www.deleklogistics.com/overview), the news section of its website (www.deleklogistics.com/news-releases), and/or social media, including its X (formerly known as 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 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.

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, including the H2O Midstream and Gravity 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,” "forecasts", “predicts,” "strategy", “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.

Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved.

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• changes in insurance markets impacting costs and the level and types of coverage available;

• the timing and extent of changes in commodity prices and demand for refined products and the impact of the COVID-19 Pandemic on such demand;

Management's Discussion and Analysis of Financial Condition and Results of Operations

• the timing and extent of changes in commodity prices and demand for refined products, and the impact of events such as the conflicts in Ukraine and the Middle East, and the global response to such conflicts, and any future public health crisis on such demand;

• the wholesale marketing margins we are able to obtain and the number of barrels of product we are able to purchase and sell in our West Texas wholesale business;

• the shift from hydrocarbon energy sources to alternative energy sources;

• the suspension, reduction or termination of Delek Holdings' or its assignees' or third-party's obligations under our commercial agreements including the duration, fees or terms thereof;

• the ability to attract and retain key personnel;

• the results of our investments in joint ventures;

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

Management's Discussion and Analysis

• 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 a public health crisis;

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• 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;

• 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 a public heal;

• the timely receipt of required government approvals and permits;

• significant operational, investment or other changes required by existing or future environmental statutes and regulations, including international agreements and national or regional societal, legislation;

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

Management's Discussion and Analysis of Financial Condition and Results of Operations

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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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").

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 the Tyler Refinery, the El Dorado Refinery and the Big Spring Refinery.

Business and Economic Environment Overview

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.

During the year ended December 31, 2024, we made significant strides in our commitment to being a full suite crude, gas and water midstream services provider in the Permian Basin, in addition to diversifying our customer base to include more third-party customers.

We successfully closed the H2O Midstream Acquisition that expands our gathering footprint in the Midland sub-basin of the Permian, and extended our product offering of wastewater processing and disposal.

In addition, in January 2025, the Partnership closed the Gravity Acquisition which includes integrated full-cycle water systems in the Midland Basin, in addition to produced water gathering, and transportation assets in the Bakken, and along with our H2O Midstream Acquisition, provide a strong opportunity for integrated crude and water services to its customers.

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 we have expanded our dedicated crude acreage in our Midland Gathering system.

Additionally, in the Delaware Basin, we are expanding our natural gas processing capabilities by constructing a new natural gas processing plant and adding AGI and sour gas processing capabilities.

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

The Partnership also acquired from Delek Holdings a joint venture with an indirect interest in the Wink to Webster Pipeline.

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 Partnership system.

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.

As a result of these efforts, the Partnership saw a $16.4 million increase in net income during the year ended December 31, 2024, as compared to the prior year period.

Our EBITDA (as defined in "Non GAAP Measures" section below) decreased $23.4 million in 2024 as compared to 2023.

This decrease is largely attributable to a change in classification of certain of our commercial agreements with Delek, which meet the criteria to be classified as sales-type leases.

As such, certain throughput and storage fees that were previously recorded as revenue are now recorded as interest income under sales-type lease accounting.

Our gathering and processing segment saw a $7.7 million increase in segment EBITDA.

Our wholesale marketing and terminalling segment saw a $14.8 million decrease in segment EBITDA.

Our storage and transportation segment saw a $15.5 million decrease in segment EBITDA.

Segment EBITDA for our investments in pipeline joint ventures increased by $11.9 million with the acquisition of the W2W Investment from Delek Holdings.

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

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

The near term economic outlook still has some uncertainty with geopolitical instability and commodity market volatility.

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 2024, 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 2023 and the outlook for 2024, in the ‘Market Trends’ section below.

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 below in 'Other 2024 Developments' detailing the strategic initiatives the Partnership has implemented in order to position ourselves as a premier, full-service midstream provider in the Permian Basin.

These actions not only enhance our standing in the market but also move to align us as an independent, largely third-party cash flow company with a robust growth profile.

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

Management's Discussion and Analysis of Financial Condition and Results of Operations

Other 2024 Developments

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

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.

Gravity Acquisition

On December 11, 2024, we entered into the Gravity Purchase Agreement related to water disposal and recycling operations in the Permian Basin and the Bakken for total consideration of $301.2 million.

The purchase price was comprised of $209.3 million in cash and 2,175,209 of common units.

Upon execution of the Gravity Purchase Agreement, we made a cash deposit of $22.8 million, recorded in other current assets on the consolidated balance sheets, which was credited to the sale upon a successful closing.

The Gravity Acquisition closed on January 2, 2025.

H2O Midstream Acquisition

On September 11, 2024, the Partnership closed the H2O Midstream Acquisition, in which we acquired water disposal and recycling operations, in the Midland Basin in Texas (the "Midland Water Gathering System") for total consideration of $229.7 million, subject to customary adjustments under the Purchase Agreement for net working capital and indebtedness.

The purchase price is comprised of approximately $159.7 million in cash and $70.0 million of preferred equity.

Wink to Webster Pipeline Investment Acquisition

On August 5, 2024, the Partnership acquired Permian Pipeline Holdings, LLC, which holds 50% equity interests in Wink to Webster Holdings, LLC ("W2W Holdings"), (the "W2W Investment") from a wholly owned subsidiary of Delek Holdings.

W2W Holdings includes a 15.6% indirect interest in the Wink to Webster Pipeline, LLC joint venture ("Wink to Webster"), and related joint venture indebtedness.

Wink to Webster owns and operates a long-haul crude oil pipeline system with origin points at Wink and Midland in the Permian Basin and delivery points at multiple Houston area locations.

Total consideration was comprised of $83.9 million in cash (including $2.7 million post-closing adjustment), forgiveness of a $60.0 million receivable from Delek Holdings and 2,300,000 of common units representing limited partnership interest in us.

Commercial Agreements with Delek Holdings

On August 5, 2024, the Partnership amended and extended expired, or soon to be expired, commercial agreements with subsidiaries of Delek Holdings under which we provide various services, including crude oil gathering and crude oil, intermediate and refined products transportation and storage services, and marketing, terminalling and offloading services to Delek Holdings.

These agreements have an initial term of five to seven years, with the ability to extend for an additional five years at Delek Holdings' option.

In addition, certain of these contracts have rate adjustments to be phased in over 2025 and 2026.

The amendments required the embedded leases within these agreements to be reassessed under Accounting Standards Codification 842, Leases .

As a result of these lease assessments, certain leases were reclassified from operating leases to sales-type leases.

In addition, the Partnership entered into an assignment agreement with Delek Holdings.

As a result of these agreements with Delek Holdings, we redeemed 2,500,000 common units representing limited partnership interest in us held by Delek Holdings to assign the Big Spring Refinery Marketing Agreement to Delek Holdings.

We also entered into an amended and restated Omnibus Agreement with Delek Holdings that provides Delek Holdings an option to purchase certain critical assets from us at market value during the period beginning upon any change in control or sale of substantially all assets involving us and extending (i) in the case of a transaction involving a third party, for six months following closing, and (ii) for any other transaction for four years following closing.

Natural Gas Plant

In the second quarter of 2024, the Partnership made the final investment decision to build a new natural gas processing plant adjacent to its plant in the Permian Basin.

The plant is expected to have a capacity of approximately 110 MMcf/d (as defined below) and aims to meet the rising demand for natural gas in the region.

We have engaged specialists to oversee the process, including permits, equipment procurement, and construction.

Financial projections estimate an annual EBITDA of approximately $40 million, considering increased production, cost savings, and market conditions.

Additionally, in December 2024, the Partnership announced the development of permitted AGI capabilities at the new plant.

The sour natural gas treating and acid gas injection capability is enabled by our two existing AGI well permits and amine unit currently under construction.

We expect these projects will be completed in the second half of 2025.

Contractual Rate Adjustments to Keep Pace with Inflation

On July 1, 2024, 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 1.3%, 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%.

The tariff on FERC regulated system acquired from Delaware Gathering was adjusted as of January 1, 2024, 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 3.3% and the fees that are subject to adjustments using the producer price index increased approximately 0.8%.

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

Management's Discussion and Analysis

Management's Discussion and Analysis of Financial Condition and Results of Operations

DKL Revolving Credit Facility

On March 29, 2024, the Partnership entered into a Fourth Amendment to the 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.

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 Partnership sold $200.0 million in aggregate principal amount of additional 8.625% senior notes due 2029 at 101.25% and on August 16, 2024, the Partnership sold $200.0 million in aggregate principal amount of additional 8.625% senior notes due 2029, at 103.25% (collectively, 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.

Equity Offerings

On March 12, 2024, the Partnership 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 $132.2 million and were used to repay a portion of the outstanding borrowings under the DKL Revolving Facility.

Underwriting discounts totaled $5.5 million.

On October 10, 2024, the Partnership completed a public offering of its common units in which it sold 4,423,075 common units (including an overallotment option of 576,922 common units) to the underwriters of the offering at a price to the public of $39.00 per unit.

The net proceeds received from this offering (net of underwriting discounts, commissions and expenses) were $165.6 million and were used to redeem the Preferred Units and repay a portion of the outstanding borrowings under the DKL Revolving Facility.

Underwriting discounts totaled $6.6 million.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Segment Overview

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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.

Segment reporting is discussed in more detail in Note 14 to our 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 Midland Gathering Assets and Delaware Gathering Assets.

The operational assets in our gathering and processing segment consist of our pipeline assets, Midland Gathering Assets, Midland Water 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 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.

The Midland Water Gathering Assets support our water disposal and recycling operations primarily in the Midland Basin in Texas.

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 mainly 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 refined products or crude oil that we transport.

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Investments in Pipeline Joint Ventures

The Partnership owns a portion of three joint ventures (accounted for as equity method investments) that have constructed separate crude oil pipeline systems and related ancillary assets primarily in the Permian Basin and Gulf Coast regions and with strategic connections to Cushing, Midland and other key exchange points, which provide crude oil and refined product pipeline transportation to third parties and subsidiaries of Delek Holdings.

The Partnership owns a portion of four joint ventures (accounted for as equity method investments) that have constructed separate crude oil pipeline systems and related ancillary assets primarily in the Permian Basin and Gulf Coast regions and with strategic connections to Cushing, Midland and connections from Wink, Texas to Webster, Texas and other key exchange points, which provide crude oil and refined product pipeline transportation to third parties and subsidiaries of Delek Holdings.

Corporate and Other

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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 of Financial Condition and Results of Operations

Strategic Overview

Long-Term Strategic Objectives

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

The Partnership’s Long-Term Strategic Objectives have been focused on providing a competitive yield and growing our distribution while maintaining healthy coverage and leverage ratios.

To that end, we are focused on growing our asset base through a slew of accretive growth opportunities we are seeing in our areas of operation.

We are supplementing our organic growth opportunities by accretive bolt-on acquisitions which enhance our full suite services offering to our customers.

A secondary benefit of growing our contribution of third-party cash flows is to continue to increase our economic separation with our sponsor Delek USA and to progress deconsolidation.

2024 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.

We continue to be focused on growth opportunities in the Permian Basin given our advantageous location in the Midland and the Delaware Basins.

We believe that opportunities exist in crude, natural gas and water which will continue to enhance our gathering and processing segment.

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

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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.

By reducing our leverage 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.

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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

Integration and expansion of Delaware Gathering operations ü ü ü ü

Acquisition of Gravity and H2O Midstream ü ü ü ü

Acquisition of indirect interest in Wink to Webster ü ü ü ü

Expansion of natural gas processing plant and sour gas processing capabilities ü ü ü

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

Expansion of our Midland operations ü ü ü

Amended and extended commercial agreements with Delek Holdings ü ü

Expansion of dedicated crude acreage in our gathering operations ü ü ü

Zero lost time injuries ü

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

Management's Discussion and Analysis of Financial Condition and Results of Operations

Looking Forward:

2025 Strategic Focus Areas

As we look to 2024, we continue to believe that our strategic focus areas are the right ones.

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 2025 Strategic Focus Areas are as follows:

• Generate Stable Cash Flow.

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

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

• Focus on Growing Our Business.

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

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

• Achieve Strong Cash Flow Growth.

2025 is likely to be a transformational year for Delek Logistics as it completes the expansion of the Libby gas processing plant and integrates two free cash flow accretive acquisitions in H2O Midstream and Gravity.

The plant expansion and combined crude and water offerings in the Midland Basin are going to increase the Partnership's overall cash flow and improve our distribution coverage ratio.

• Pursue Attractive Expansion Opportunities.

Continue to evaluate and pursue opportunities to grow our business through several organic growth opportunities and bolt-on acquisitions

◦ Organic growth opportunities.

The partnership is in the middle of pursuing several attractive organic growth opportunities enabled by its advantageous position in the prolific Permian Basin.

The gas plant expansion and addition of AGI and sour gas processing capabilities is enabling several additional growth options for the Partnership in the Delaware Basin.

In the Midland Basin combined crude and water offering is appealing for our customers and bringing additional growth opportunities to our system.

◦ Pursue Acquisitions.

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

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

Delek logistics will also continue to look for attractive bolt-on acquisitions which are accretive to its free cash flow, EBITDA and leverage profiles.

• Engage in Mutually Beneficial Transactions with Delek Holdings.

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.

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

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

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

A key tenet of the Partnership's strategy is to continue to increase its economic separation from Delek Holdings and increase the contribution of third-party cash flows in its overall profile.

We will continue to evaluate our commercial agreements with Delek Holdings to engage in mutually beneficial negotiations to create incremental value for both ourselves and our sponsor.

• Optimize Our Existing Assets and Expand Our Customer Base.

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

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

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

Additionally, we are seeking opportunities to further diversify our customer base by increasing third-party throughput volumes utilizing certain of our existing systems and expanding our existing asset portfolio to service more third-party customers.

• Expand our ESG Consciousness and Lower Our Carbon Footprint.

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

Management's Discussion and Analysis

Management's Discussion and Analysis of Financial Condition and Results of Operations

Operating and Maintenance Expenses

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(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 $1.105 per unit for the quarter ended December 31, 2024 ($4.420 per unit on an annualized basis).

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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 11 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 historic cash distributions.

See Note 11 to the accompanying consolidated financial statements for a discussion of historic cash distributions.

How We Evaluate Our Investments in Pipeline Joint Ventures

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It also has additional expansion optionality;

• The W2W Pipeline is positioned in the Permian Basin with origin points from Wink to Midland and delivery points at multiple Houston, Texas area locations.

Market Trends

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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.

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 of Financial Condition and Results of Operations

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

Management's Discussion and Analysis

Management's Discussion and Analysis of Financial Condition and Results of Operations

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 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.

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

• Distributable cash flow - calculated as net cash flow from operating activities adjusted for changes in assets and liabilities, maintenance capital expenditures net of reimbursements, sales-type lease receipts, net of income recognized 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.

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Interest expense, net 103,168 143,244

$ 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.

EBITDA $ 346,913 $ 370,280

Management's Discussion and Analysis of Financial Condition and Results of Operations

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

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(12,658) (7,272)

Reimbursement from Delek Holdings for capital expenditures (2)

Accretion of asset retirement obligations (705) (596)

Reimbursement from (refund to) Delek Holdings for capital expenditures (2)

Sales-type lease receipts, net of income recognized 11,843 —

Accretion (920) (705)

Deferred income taxes (479) (638)

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Distributable cash flow $ 255,804 $ 248,177

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) 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

Management's Discussion and Analysis of Financial Condition and Results of Operations

Summary of Financial and Other Information

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A detailed discussion of the fiscal year 2023 compared to year-over-year changes from fiscal year 2022 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.

Management's Discussion and Analysis, "Results of Operations", of our 2023 Annual Report on Form 10-K, filed on February 28, 2024.

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.

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Impairment of goodwill — 14,848

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

Other operating income, net (978) (1,266)

Operating income $ 202,826 $ 238,949

Interest expense, net 143,244 82,304

Interest income (47,792) —

Interest expense 150,960 143,244

Income from equity method investments (43,301) (31,433)

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Income tax expense 479 1,205

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

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

Net income 142,685 126,236

Comprehensive income 142,685 126,236

Preferred unitholder's interest in net income 768 —

Net income attributable to limited partners $ 141,917 $ 126,236

EBITDA (2) (3)

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

See the Consolidated Statements of Income included in Item 8.

See the Consolidated Statements of Income and Comprehensive 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.

(3) EBITDA includes $14.8 million of goodwill impairment 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.

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.

Management's Discussion and Analysis

Management's Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

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

Consolidated Results of Operations - Comparison of the Year Ended December 31, 2024 versus the Year Ended December 31, 2023 and the Year Ended December 31, 2023 versus the Year Ended December 31, 2022

Net revenues decreased by $79.8 million, or 7.8%, in the year ended December 31, 2024 compared to the year ended December 31, 2023.

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.

• decreased revenue of $47.3 million in our West Texas marketing operations primarily driven by a decrease in average sales prices per gallon and decrease in RINs revenue:

◦ the average sales prices per gallon of gasoline and diesel sold decreased by $0.19 and $0.40 per gallon, respectively;

◦ RINs revenue decreased from $11.0 million in the year ended December 31, 2023 to $5.0 million in the year ended December 31, 2024, due to decrease in RINs prices.

• decreased revenue in our gathering and processing and storage and transportation segments due to recording certain throughput and storage fees as interest income under sales-type lease accounting that were previously recorded as revenue in the prior year period;

• partially offset by increase in revenue associated with H20 Midstream operations of $19.5 million which began in the third quarter of 2024.

Cost of Materials and Other

Cost of materials and other decreased by $48.9 million, or 9.2%, in the year ended December 31, 2024 compared to the year ended December 31, 2023, 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:

• decreased costs of materials and other of $40.1 million in our West Texas marketing operations primarily driven by decreased costs per gallon:

◦ the average cost per gallon of gasoline and diesel sold decreased by $0.20 per gallon and $0.36 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.

• decrease of $6.1 million in our gathering and processing segment driven primarily by lower natural gas costs.

Operating Expenses

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.

Operating expenses increased by $4.6 million, or 3.9%, in the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily driven by the following:

• incremental costs of $6.1 million associated with H20 Midstream operations which began in the third quarter of 2024;

• partially offset by a decrease in repairs and maintenance expenses.

General and Administrative Expenses

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

General and administrative expenses increased by $11.2 million, or 45.1%, in the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily driven by transaction costs associated with the Gravity and H2O Midstream acquisitions, the W2W Investment acquisition, and amendments of certain agreements with Delek Holdings of $11.4 million.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Depreciation and Amortization

Depreciation and amortization increased by $4.0 million, or 4.3%, in the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily driven by the following:

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

• increase of $3.7 million associated with the H20 Midstream assets acquired in the third quarter of 2024;

• 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.

• partially offset by the derecognition of fixed assets in connection with the recognition of sales-type leases in the third quarter of 2024.

Other operating income, net

Other operating income, net decreased by $0.3 million, or 22.7%, in the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily driven by the following:

• a decrease of $5.4 million related to a settlement of a dispute;

• partially offset by increase in gain on disposal of assets of $5.1 million, predominantly due to $8.3 million in condemnation proceeds received in the second quarter of 2024.

Interest Income

Interest income increased by $47.8 million, or 100.0%, in the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily driven by income from certain of our commercial agreements with Delek Holdings that met the criteria to be accounted for as sales-type leases during the third quarter of 2024.

Interest Expense

Interest expense increased by $7.7 million, or 5.4%, in the year ended December 31, 2024 compared to the year ended December 31, 2023, 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.

• 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 associated with the 2029 Notes issued in the first quarter of 2024;

• partially offset by a decrease in interest associated with the DKL Revolving Facility due to lower average outstanding borrowings.

Results from Equity Method Investments

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

Income from equity method investments increased by $11.9 million, or 37.8%, in the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to the W2W Investment, which was acquired on August 5, 2024, and contributed income of $9.2 million during the period and increases in throughput at two of our joint ventures which had been negatively impacted by the turnaround at the Tyler Refinery in prior year.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Operating Segments

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Segment EBITDA $ 207,150 $ 199,463

$ 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)

Throughputs (bpd (1) )

Year Ended December 31,

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Year Ended December 31,

2023 2022 (1)

Natural Gas Gathering and Processing (Mcfd (2) )

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128,539 108,907

(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.

Midland Water Gathering System Volumes

Year Ended December 31,

Water Disposal and Recycling (bpd (1) ) (3)

(1) bpd - average barrels per day.

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

(3) 2024 volumes include volumes from September 11, 2024, through December 31, 2024.

Operational Comparison of the Year Ended December 31, 2024 versus the Year Ended December 31, 2023:

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:

• 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

Net revenues for the gathering and processing segment decreased by $6.4 million, or 1.7%, in the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to the following:

• recording certain throughput fees as interest income under sales-type lease accounting that were previously recorded as revenue in the prior year period;

• partially offset by an increase in revenue associated with the H20 Midstream operations of $19.5 million which began in the third quarter of 2024.

Management's Discussion and Analysis of Financial Condition and Results of Operations

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:

• 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.

Cost of materials and other for the gathering and processing segment decreased by $6.1 million, or 7.3%, in the year ended December 31, 2024 compared to the year ended December 31, 2023, driven primarily by the following:

• lower natural gas costs;

• partially offset by incremental costs of $1.2 million associated with H20 Midstream operations which began in the third quarter of 2024.

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 our Delaware Gathering operations, which began in June 2022;

• increase in outside services associated with Midland Gathering operations.

Operating expenses for the gathering and processing segment increased by $5.2 million, or 6.9%, in the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily driven by incremental costs of $6.1 million associated with H20 Midstream operations which began in the third quarter of 2024.

EBITDA increased by $7.7 million, or 3.9%, in the year ended December 31, 2024 compared to the year ended December 31, 2023 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;

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

Management's Discussion and Analysis

• incremental EBITDA of $12.1 million associated with H20 Midstream operations which began in the third quarter of 2024;

• impairment of $14.8 million taken in prior year associated with Delaware Gathering reporting unit;

• partially offset by lower revenue related to sales-type lease accounting.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Wholesale Marketing and Terminalling Segment

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Cost of materials and other $ 349,049 $ 388,536

Operating expenses (excluding depreciation and amortization presented below) $ 17,796 $ 19,458

Operating expenses (excluding depreciation and amortization) $ 14,820 $ 17,796

Segment EBITDA $ 91,729 $ 106,512

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Net revenues for the wholesale marketing and terminalling segment decreased by $54.2 million, or 10.7%, in the year ended December 31, 2024 compared to the year ended December 31, 2023, 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

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, 2023, 2022:

• decreased revenue of $47.3 million in our West Texas marketing operations primarily driven by a decrease in average sales prices per gallon and decrease in RINs revenue:

◦ the average sales prices per gallon of gasoline and diesel sold decreased by $0.19 and $0.40 per gallon, respectively;

◦ RINs revenue decreased from $11.0 million in the year ended December 31, 2023 to $5.0 million in the year ended December 31, 2024, due to decrease in RINs prices.

• decrease due to recording certain throughput fees as interest income under sales-type lease accounting that were previously recorded as revenue in the prior year period.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Cost of Materials and Other

Cost of materials and other for the wholesale marketing and terminalling segment decreased by $39.5 million, or 10.2% , in the year ended December 31, 2024 compared to the year ended December 31, 2023, 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:

• decreased costs of materials and other of $40.1 million in our West Texas marketing operations primarily driven by decreased costs per gallon:

◦ the average cost per gallon of gasoline and diesel sold decreased by $0.20 per gallon and $0.36 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, 2024 and 2023.

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

Management's Discussion and Analysis

Management's Discussion and Analysis of Financial Condition and Results of Operations

Operating Expenses

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

Operating expenses for the wholesale marketing and terminalling segment decreased by $3.0 million, or 16.7%, in the year ended December 31, 2024 compared to the year ended December 31, 2023, driven primarily by a decrease in outside service costs.

EBITDA decreased by $14.8 million, or 13.9%, in the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily driven by the following:

• a decline in wholesale margins partially due to lower RINs prices;

• lower revenue related to sales-type lease accounting;

• partially offset by decrease in operating expenses.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Storage and Transportation Segment

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Cost of materials and other $ 57,539 $ 63,710

Operating expenses (excluding depreciation and amortization presented below) $ 18,104 $ 17,843

Operating expenses (excluding depreciation and amortization) $ 18,299 $ 18,104

Segment EBITDA $ 48,325 $ 63,850

Operational Comparison of the Year Ended December 31, 2024 versus the Year Ended December 31, 2023:

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.

Net revenues for the storage and transportation segment decreased by $19.2 million, or 13.4%, in the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to recording certain storage fees as interest income under sales-type lease accounting that were previously recorded as revenue in the prior year period.

Cost of Materials and Other

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.

Cost of materials and other for the storage and transportation segment decreased by $6.2 million, or 9.7%, in the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to decrease in trucking activity.

Operating Expenses

Operating expenses for the storage and transportation segment increased by $0.2 million, or 1.1%, in the year ended December 31, 2024 compared to the year ended December 31, 2023.

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

EBITDA decreased by $15.5 million, or 24.3%, in the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to decrease in revenue associated with sales-type lease accounting, partially offset by lower cost associated with decrease in trucking activity.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Investments in Pipeline Joint Ventures Segment

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

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

Investments in pipeline joint ventures segment include the Partnership's joint ventures investments described in Note 13 of our 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, 2024.

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(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.

At December 31, 2024, our total liquidity amounted to $720.0 million comprised of $714.6 million in unused credit commitments under our third-party revolving credit facility (as discussed in Note 10 of our consolidated financial statements included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K), and $5.4 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.

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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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 December 31, 2023.

Management's Discussion and Analysis

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 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.

On January 24, 2025, the board of directors of our general partner declared a distribution of $1.105 per common unit (the "Distribution"), which equates to an estimated amount of approximately $59.3 million per quarter, or approximately $237.2 million per year, based on the number of common units outstanding as of December 31, 2024.

The Distribution was paid on February 11, 2025 to common unitholders of record on February 4, 2025 and represents a 4.7% increase over the fourth quarter 2023 distribution.

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

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

Management's Discussion and Analysis of Financial Condition and Results of Operations

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

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December 31, 2024 $1.105 $59,302

Equity Offerings

Underwriting discounts totaled $5.5 million.

Underwriting discounts totaled $6.6 million.

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

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Net cash used in investing activities (384,579) (89,629)

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

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

Net cash provided by (used in) financing activities 179,869 (139,905)

Net increase (decrease) in cash and cash equivalents $ 1,629 $ (4,215)

Operating Activities

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.

Net cash provided by operating activities decreased by $19.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023.

The cash receipts from customer activities decreased by $49.9 million and cash payments to suppliers and for allocations to Delek Holdings for salaries increased by $2.5 million.

In addition, cash dividends received from equity method investments increased by $14.2 million and cash paid for debt interest decreased by $19.1 million.

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 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.

Net cash used in investing activities increased by $295.0 million during the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to acquisitions of W2W investment for $83.9 million, H2O Midstream for $159.7 million and deposit for Gravity Acquisition of $22.8 million.

Additionally, purchases of property, plant and equipment increased $32.9 million, primarily associated with growth projects in our gathering and processing segment.

Partially offsetting these increases was an increase in proceeds from sale of property, plant and equipment predominantly due to $8.3 million of condemnation proceeds received from eminent domain proceedings in Texas in the current period.

Financing Activities

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.

Net cash provided by financing activities increased by $319.8 million for the year ended December 31, 2024 compared to the year ended December 31, 2023.

This increase was primarily driven by increase in net proceeds from term loans of $546.5 million due to issuance of 2029 Notes net of the extinguishment of 2025 Notes and term facility, partially offset by net payments under our revolving credit facility which increased by $405.1 million due to paydown in conjunction with the issuance of the 2029 Notes.

Additionally contributing to this increase was $297.9 million of proceeds received from the equity issuances in October and March 2024.

Partially offsetting these increases was the redemption of preferred units issued in as part of consideration for the H20 Midstream acquisition in the amount of $70.8 million, an increase in deferred financing costs paid of $13.7 million associated with the 2029 Note issuances, an increase in distributions paid of $24.7 million and a $6.2 million increase in payments on other financing arrangements.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Debt Overview

As of December 31, 2024, we had total indebtedness of $1,885.4 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.

The increase of $173.7 million in our long-term debt balance compared to the balance at December 31, 2023 resulted from the issuance of the 2029 Notes during the year ended December 31, 2024, which was partially offset by the payments under the DKL Credit Facility and the 2025 Notes.

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

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 $435.4 million under the DKL Revolving Facility, due on October 13, 2027, with an average borrowing rate of 7.27%.

• 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 7.38%.

• An aggregate principal amount of $1,050.0 million, under the 2029 Notes (8.625% senior notes), due in 2029, with an effective interest rate of 8.82%.

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, 2024.

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.

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 third-party indebtedness.

Agreements Governing Certain Indebtedness of Delek Holdings

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

Management's Discussion and Analysis

Management's Discussion and Analysis of Financial Condition and Results of Operations

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, 2024:

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Total Capital Spending $ 235,310 $ 44,539

(1) 2024 excludes capital spending of $95.5 million related to the new gas processing plant.

Refer to 'Other 2024 Developments' section of Item 7.

Management's Discussion and Analysis, of this Annual Report on Form 10-K for further information.

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

See additional information on asset retirement obligations and environmental liabilities in Notes 2 and 14, respectively, to our consolidated financial statements in Item 8.

See additional information on asset retirement obligations and environmental liabilities in Notes 2 and 15, respectively, to our consolidated financial statements included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Other Cash Requirements

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Refer to the capital spending section for our capital expenditures for 2024 and our planned capital expenditures for 2025.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements through the date of the filing of this Annual Report on Form 10-K.

Management's Discussion and Analysis

Critical Accounting Estimates

The fundamental objective of financial reporting is to provide useful information that allows a reader to comprehend our business activities.

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

When accounting for leases, we evaluate any new or modified leases to determine their classification.

This classification depends on several factors, including the estimated lease term and the fair value of the leased assets.

Estimating the lease term, including potential renewals or terminations, is crucial in lease accounting as it affects the recognition and measurement of lease assets and liabilities.

Management must consider factors like economic incentives, strategic importance, and significant leasehold improvements.

This estimation impacts lease payments, expense recognition, amortization schedules, and interest expenses.

Significant assumptions used to estimate the leased assets’ fair value include market information for comparable assets and cost estimates to replace the service capacity of an asset.

For newly classified sales-type leases, the net investment in the lease is recorded at the estimated fair value of the underlying leased assets.

Leases must be separated into lease and non-lease components if the components are distinct and can be accounted for separately.

If there is no clear allocation between lease and service components, we may estimate the fair value of the service component based on historical costs or market benchmarks.

Business Combinations

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

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

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

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

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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.

Critical Accounting Estimates

At December 31, 2024, we had two reporting units with goodwill totaling approximately $12.2 million.

For our 2024 annual goodwill impairment testing, 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.

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

For our 2023 annual goodwill impairment testing, 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.

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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.

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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.

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See Note 2 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 new accounting pronouncements applicable to us.

Quantitative and Qualitative Disclosures about Market Risk

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-K

Item 7. Management’s Discussion and Analysis