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Delek Q3 Loss Narrower Than Expected, Revenues Lag Estimates
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Delek US Holdings, Inc. (DK - Free Report) reported a third-quarter 2024 adjusted net loss of $1.45 per share, narrower than the Zacks Consensus Estimate of a loss of $1.71, owing to lower year-over-year operating costs. The figure also deteriorated from the year-ago quarter’s profit of $2.02 per share. The loss was due to the Refining segment's weak year-on-year contributions.
Net revenues decreased 35.9% year over year to $3 billion. The figure also missed the Zacks Consensus Estimate by $48 million.
Delek US Holdings, Inc. Price, Consensus and EPS Surprise
The diversified downstream energy company’s adjusted EBITDA was $70.6 million compared with $345.1 million in the year-ago period.
DK’s board of directors approved the regular quarterly dividend of 25.5 cents per share. The dividend will be paid on Nov. 18, 2024, to its shareholders of record as of Nov 12.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
In this quarter, the company introduced the Enterprise Optimization Plan, designed to increase overall profitability by at least $100 million.
DK’s Segmental Performances
Refining: The segment's adjusted EBITDA was $10.2 million, indicating a decline from the prior-year quarter's profit of $296.1 million. This significant’s year-over-year decline was due to lower refining crack spreads. In the third quarter of 2024, DK's benchmark crack spreads fell by an average of 49.1% from prior-year levels. Additionally, the reported figure missed our estimate of $76.9 million.
Logistics: This unit represents Delek’s majority interest in Delek Logistics Partners, L.P.—a publicly traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets.
In the third quarter, the segment registered an adjusted EBITDA of $106.1 million compared with $96.5 million in the year-ago quarter. The figure also beat our estimate of $100.1 million. This year-over-year growth is driven by robust contributions from the Delaware Gathering systems, annual rate increases and the impact of the Wink to Webster (W2W) pipeline dropdown.
DK’s Financials
Total operating expenses in the third quarter decreased about 29.6% year over year to $3.1 billion. Delek spent $128.5 million on capital programs in the same time frame.
As of Sept. 30, 2024, the company had cash and cash equivalents worth $1 billion and long-term debt of $2.8 billion, with debt to total capital ratio of about 76.1%.
DK’s Key Transactions: Acquisition, Divestiture and Investment
H2O Midstream Acquisition: On Sept. 11, 2024, Delek Logistics completed the 100% acquisition of the membership interests in H2O Midstream Intermediate, LLC, H2O Midstream Permian LLC and H2O Midstream LLC (collectively, the “H2O Midstream Entities”) from H2O Midstream Holdings, LLC.
This transaction, valued at $229.5 million, includes water disposal and recycling operations in the Midland Basin of Texas and is subject to final working capital adjustments. The deal also incorporates $70 million in preferred units. In connection with the acquisition, Delek Logistics incurred $6.1 million in transaction-related costs ($4.7 million after-tax) for the three months ended Sept. 30, 2024.
Retail Divestiture: On Sept. 30, 2024, Delek US finalized the sale of its retail operations, transferring 100% of the equity interests in four wholly owned subsidiaries that operate 249 retail fuel and convenience stores under the Delek US Retail brand. The buyer is a subsidiary of Fomento Económico Mexicano, S.A.B. de C.V.
The sale generated approximately $390.2 million in net cash proceeds before taxes. Delek US recognized a pre-tax gain of $98.4 million from the transaction. In accordance with ASC 205-20 and ASC 360, the results of the retail operations have been classified as discontinued operations, with the associated assets and liabilities also reclassified accordingly.
Wink to Webster Pipeline: On Aug. 1, 2024, the company increased its indirect investment in Wink to Webster Pipeline LLC by 0.6%, acquiring the additional stake for $18.6 million. This raised the total indirect ownership in the pipeline joint venture to 15.6%.
Subsequently, on Aug. 5, 2024, the company contributed its entire 50% interest in W2W Holdings LLC (“HoldCo”), which includes the 15.6% indirect stake in Wink to Webster Pipeline LLC and the related joint venture debt, to a subsidiary of Delek Logistics. The total consideration for this transaction amounted to $83.9 million, including post-close adjustments, as well as the forgiveness of a $60 million payable to Delek Logistics and the issuance of 2,300,000 Delek Logistics common units.
The transaction was described as an asset acquisition between entities under common control, and therefore, no gain or loss was recognized. As of Aug. 5, 2024, the operating results of HoldCo are now reported within the company's Logistics segment, a change from its previous classification under corporate, other and eliminations.
DK’s Q4 and 2024 Guidance
For 2024, the integrated downstream energy company expects capital expenditures of $330 million as it plans to spend $220 million on Refining, $70 million on Logistics (Delek Logistics Partners), $15 million on Discontinued Operations (Retail) and $25 million on Corporate & Other.
For the fourth quarter, the company anticipates operating costs in the band of $177-$188 million, general and administrative expenses in the range of $53-$58 million and depreciation and amortization costs between $95 million and $105 million. It also expects net interest expenses in the $75-$80 million range.
The company anticipates a total crude throughput of 255,000-269,000 barrels per day and a total throughput of 265,000-276,000 barrels per day in the same time frame.
DK expects to process 67,000-69,000 barrels of crude oil per day (bpd) at its Tyler, TX, refinery in the fourth quarter. The El Dorado, AR, refinery is expected to process 77,000-80,000 bpd. The Big Spring, TX, refinery is expected to process 71,000 bpd to 74,000 bpd and the Krotz Springs, LA, refinery is expected to process 50,000 bpd to 53,000 barrels per day (bpd).
Right in the middle of earnings season, there have been a few key energy releases so far. Let us glance through a couple of them.
Liberty Energy (LBRT - Free Report) , the Denver-CO-based oil and gas equipment company, announced an adjusted net income of 45 cents per share, which missed the Zacks Consensus Estimate of 55 cents. This was primarily due to poor equipment and services execution and lower activity in the reported quarter. Additionally, the bottom line declined from the year-ago quarter’s reported figure of 86 cents due to a year-over-year increase in costs and expenses.
Ahead of the earnings release, LBRT’s board of directors announced a dividend of 8 cents per common share payable on Dec. 20, to its stockholders of record as of Dec. 6. This dividend represents a 14% increase from the prior regular quarterly dividend of 7 cents per share. In the quarter, Liberty returned $51 million to its shareholders through a combination of share repurchases and cash dividends.
Energy infrastructure provider, Kinder Morgan, Inc. (KMI - Free Report) reported third-quarter adjusted earnings per share of 25 cents, which missed the Zacks Consensus Estimate of 27 cents. The bottom line was flat year over year. The weakness in quarterly results was caused by lower contributions from the Products Pipelines and CO2 business segments.
KMI also announced a quarterly cash dividend of 28.75 cents per share for the third quarter of 2024 (annualized dividend of $1.15), implying a 2% increase from the third-quarter 2023 level. The dividend is payable on Nov. 15, 2024, to its shareholders of record as of Oct. 31.
Schlumberger Limited (SLB - Free Report) , a Houston, TX-based oil and gas equipment and services provider announced third-quarter earnings of 89 cents per share (excluding charges and credits), which beat the Zacks Consensus Estimate of 88 cents. The bottom line also increased from the year-ago quarter’s 78 cents. The strong quarterly earnings were primarily driven by broad-based earnings growth and margin expansion, especially in the Middle East, Asia and offshore North America. Additionally, cost optimization, greater adoption of digital solutions and contributions from long-cycle deepwater and gas projects played significant roles.
SLB reported a free cash flow of $1.81 billion in the third quarter. As of Sept. 30, the company had approximately $4.46 billion in cash and short-term investments. At the end of the quarter, it registered a long-term debt of $11.86 billion.
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Delek Q3 Loss Narrower Than Expected, Revenues Lag Estimates
Delek US Holdings, Inc. (DK - Free Report) reported a third-quarter 2024 adjusted net loss of $1.45 per share, narrower than the Zacks Consensus Estimate of a loss of $1.71, owing to lower year-over-year operating costs. The figure also deteriorated from the year-ago quarter’s profit of $2.02 per share. The loss was due to the Refining segment's weak year-on-year contributions.
Net revenues decreased 35.9% year over year to $3 billion. The figure also missed the Zacks Consensus Estimate by $48 million.
Delek US Holdings, Inc. Price, Consensus and EPS Surprise
Delek US Holdings, Inc. price-consensus-eps-surprise-chart | Delek US Holdings, Inc. Quote
The diversified downstream energy company’s adjusted EBITDA was $70.6 million compared with $345.1 million in the year-ago period.
DK’s board of directors approved the regular quarterly dividend of 25.5 cents per share. The dividend will be paid on Nov. 18, 2024, to its shareholders of record as of Nov 12.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
In this quarter, the company introduced the Enterprise Optimization Plan, designed to increase overall profitability by at least $100 million.
DK’s Segmental Performances
Refining: The segment's adjusted EBITDA was $10.2 million, indicating a decline from the prior-year quarter's profit of $296.1 million. This significant’s year-over-year decline was due to lower refining crack spreads. In the third quarter of 2024, DK's benchmark crack spreads fell by an average of 49.1% from prior-year levels. Additionally, the reported figure missed our estimate of $76.9 million.
Logistics: This unit represents Delek’s majority interest in Delek Logistics Partners, L.P.—a publicly traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets.
In the third quarter, the segment registered an adjusted EBITDA of $106.1 million compared with $96.5 million in the year-ago quarter. The figure also beat our estimate of $100.1 million. This year-over-year growth is driven by robust contributions from the Delaware Gathering systems, annual rate increases and the impact of the Wink to Webster (W2W) pipeline dropdown.
DK’s Financials
Total operating expenses in the third quarter decreased about 29.6% year over year to $3.1 billion. Delek spent $128.5 million on capital programs in the same time frame.
As of Sept. 30, 2024, the company had cash and cash equivalents worth $1 billion and long-term debt of $2.8 billion, with debt to total capital ratio of about 76.1%.
DK’s Key Transactions: Acquisition, Divestiture and Investment
H2O Midstream Acquisition: On Sept. 11, 2024, Delek Logistics completed the 100% acquisition of the membership interests in H2O Midstream Intermediate, LLC, H2O Midstream Permian LLC and H2O Midstream LLC (collectively, the “H2O Midstream Entities”) from H2O Midstream Holdings, LLC.
This transaction, valued at $229.5 million, includes water disposal and recycling operations in the Midland Basin of Texas and is subject to final working capital adjustments. The deal also incorporates $70 million in preferred units. In connection with the acquisition, Delek Logistics incurred $6.1 million in transaction-related costs ($4.7 million after-tax) for the three months ended Sept. 30, 2024.
Retail Divestiture: On Sept. 30, 2024, Delek US finalized the sale of its retail operations, transferring 100% of the equity interests in four wholly owned subsidiaries that operate 249 retail fuel and convenience stores under the Delek US Retail brand. The buyer is a subsidiary of Fomento Económico Mexicano, S.A.B. de C.V.
The sale generated approximately $390.2 million in net cash proceeds before taxes. Delek US recognized a pre-tax gain of $98.4 million from the transaction. In accordance with ASC 205-20 and ASC 360, the results of the retail operations have been classified as discontinued operations, with the associated assets and liabilities also reclassified accordingly.
Wink to Webster Pipeline: On Aug. 1, 2024, the company increased its indirect investment in Wink to Webster Pipeline LLC by 0.6%, acquiring the additional stake for $18.6 million. This raised the total indirect ownership in the pipeline joint venture to 15.6%.
Subsequently, on Aug. 5, 2024, the company contributed its entire 50% interest in W2W Holdings LLC (“HoldCo”), which includes the 15.6% indirect stake in Wink to Webster Pipeline LLC and the related joint venture debt, to a subsidiary of Delek Logistics. The total consideration for this transaction amounted to $83.9 million, including post-close adjustments, as well as the forgiveness of a $60 million payable to Delek Logistics and the issuance of 2,300,000 Delek Logistics common units.
The transaction was described as an asset acquisition between entities under common control, and therefore, no gain or loss was recognized. As of Aug. 5, 2024, the operating results of HoldCo are now reported within the company's Logistics segment, a change from its previous classification under corporate, other and eliminations.
DK’s Q4 and 2024 Guidance
For 2024, the integrated downstream energy company expects capital expenditures of $330 million as it plans to spend $220 million on Refining, $70 million on Logistics (Delek Logistics Partners), $15 million on Discontinued Operations (Retail) and $25 million on Corporate & Other.
For the fourth quarter, the company anticipates operating costs in the band of $177-$188 million, general and administrative expenses in the range of $53-$58 million and depreciation and amortization costs between $95 million and $105 million. It also expects net interest expenses in the $75-$80 million range.
The company anticipates a total crude throughput of 255,000-269,000 barrels per day and a total throughput of 265,000-276,000 barrels per day in the same time frame.
DK expects to process 67,000-69,000 barrels of crude oil per day (bpd) at its Tyler, TX, refinery in the fourth quarter. The El Dorado, AR, refinery is expected to process 77,000-80,000 bpd. The Big Spring, TX, refinery is expected to process 71,000 bpd to 74,000 bpd and the Krotz Springs, LA, refinery is expected to process 50,000 bpd to 53,000 barrels per day (bpd).
DK currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Important Energy Earnings So Far
Right in the middle of earnings season, there have been a few key energy releases so far. Let us glance through a couple of them.
Liberty Energy (LBRT - Free Report) , the Denver-CO-based oil and gas equipment company, announced an adjusted net income of 45 cents per share, which missed the Zacks Consensus Estimate of 55 cents. This was primarily due to poor equipment and services execution and lower activity in the reported quarter. Additionally, the bottom line declined from the year-ago quarter’s reported figure of 86 cents due to a year-over-year increase in costs and expenses.
Ahead of the earnings release, LBRT’s board of directors announced a dividend of 8 cents per common share payable on Dec. 20, to its stockholders of record as of Dec. 6. This dividend represents a 14% increase from the prior regular quarterly dividend of 7 cents per share. In the quarter, Liberty returned $51 million to its shareholders through a combination of share repurchases and cash dividends.
Energy infrastructure provider, Kinder Morgan, Inc. (KMI - Free Report) reported third-quarter adjusted earnings per share of 25 cents, which missed the Zacks Consensus Estimate of 27 cents. The bottom line was flat year over year. The weakness in quarterly results was caused by lower contributions from the Products Pipelines and CO2 business segments.
KMI also announced a quarterly cash dividend of 28.75 cents per share for the third quarter of 2024 (annualized dividend of $1.15), implying a 2% increase from the third-quarter 2023 level. The dividend is payable on Nov. 15, 2024, to its shareholders of record as of Oct. 31.
Schlumberger Limited (SLB - Free Report) , a Houston, TX-based oil and gas equipment and services provider announced third-quarter earnings of 89 cents per share (excluding charges and credits), which beat the Zacks Consensus Estimate of 88 cents. The bottom line also increased from the year-ago quarter’s 78 cents. The strong quarterly earnings were primarily driven by broad-based earnings growth and margin expansion, especially in the Middle East, Asia and offshore North America. Additionally, cost optimization, greater adoption of digital solutions and contributions from long-cycle deepwater and gas projects played significant roles.
SLB reported a free cash flow of $1.81 billion in the third quarter. As of Sept. 30, the company had approximately $4.46 billion in cash and short-term investments. At the end of the quarter, it registered a long-term debt of $11.86 billion.