This article first appeared on GuruFocus .
-
Adjusted EBITDA:$144 million in Q2 2026, a quarterly record, up from $127 million in Q2 2025.
-
Full-Year Adjusted EBITDA Guidance:Reaffirmed at $520 million to $560 million for 2026.
-
Distributable Cash Flow (DCF):Approximately $81 million as adjusted for the quarter.
-
DCF Coverage Ratio:Held steady at approximately 1.33 times.
-
Leverage Ratio:4.23 times at quarter-end, up modestly from Q1.
-
Liquidity:Approximately $1.1 billion.
-
Quarterly Distribution:Increased to $1.135 per unit, marking the 54th consecutive quarterly increase.
-
Gathering and Processing Segment Adjusted EBITDA:$104 million, up from $78 million in Q2 2025.
-
Wholesale Marketing and Terminalling Adjusted EBITDA:Approximately $13 million, down from $23 million a year ago.
-
Storage and Transportation Adjusted EBITDA:$16 million, compared with $17 million in the prior period.
-
Investments in Pipeline Joint Ventures Adjusted EBITDA:$21 million, up from $17 million in Q2 2025.
-
Total Capital Spending:Approximately $61 million in Q2, with $51 million for growth capital.
-
Growth Capital Program:Expected to generate up to $75 million of run rate EBITDA from a $180 million to $190 million program for the year.
-
Debt Refinancing:Issued new $800 million senior notes due 2034, fully retiring 2028 notes and partially redeeming 2029 notes to reduce annual interest costs.
Release Date: August 05, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
-
Delek Logistics Partners LP ( NYSE:DKL ) reported a record quarterly adjusted EBITDA of $144 million, up from $127 million in the same period last year, and reaffirmed full-year 2026 guidance of $520 million to $560 million.
-
The company announced its 54th consecutive quarterly distribution increase, raising the distribution to $1.135 per unit, reflecting strong financial discipline and commitment to unitholder returns.
-
The Delaware crude gathering business achieved record volumes of over 157,000 barrels per day in Q2, up from 129,000 in Q1, and produced water volumes increased to over 687,000 barrels per day, up from 557,000 in Q1.
-
The Libby Gas Complex is nearing completion, with gas volumes ramping to over 80 million cubic feet per day in Q2, up from 64 million in Q1, and a step change in utilization is expected as the sour gas solution comes online later this year.
-
The company proactively refinanced its high-yield debt, issuing $800 million in senior notes due 2034, reducing annual interest costs and extending its maturity profile, while maintaining robust liquidity of approximately $1.1 billion.
-
Growth capital investments of $180 million to $190 million are expected to generate up to $75 million in run-rate EBITDA, with a highly attractive return, and the company expects to manage leverage down as this EBITDA is realized.
Negative Points
-
Leverage ratio increased to 4.23 times in Q2, up modestly from Q1, due to capital investments, which is above the long-term target of 3.5 times.
-
Wholesale Marketing and Terminalling segment adjusted EBITDA declined to $13 million from $23 million a year ago, largely due to the effects of the 2024 amend and extend agreement with Delek.
-
Storage and Transportation segment adjusted EBITDA decreased to $16 million from $17 million in the prior period, reflecting the January 2026 related party transaction.
-
The company faces uncertainty from commodity price fluctuations, though higher crude prices and strengthening Waha prices are expected to drive demand, but these are subject to market volatility.
-
The company's growth is heavily dependent on the successful completion and ramp-up of the Libby Gas Complex and sour gas infrastructure, which carries execution and timing risks.
-
Despite strong performance, the company's guidance range suggests potential conservatism, and management did not provide specific upside scenarios, leaving some uncertainty about future earnings growth.
Q & A Highlights
Q: Can you unpack the drivers behind the stronger margins in the Gathering and Processing segment, and how durable is that strength? A: Avigal Soreq (President and Chairman) expressed high confidence in the second-quarter results, noting strong performance across the board. Mark Hobbs (EVP - Logistics) detailed record volumes, including Delaware crude gathering at over 157,000 barrels per day (up from 129,000 in Q1), produced water volumes at over 687,000 barrels per day (up from 557,000), and gas volumes exceeding 80 million cubic feet per day (up from 64 million). He attributed the strength to strategically positioned infrastructure and expects a step change in gas volumes as the sour gas solution nears completion.
Q: Given the strong Q2 results, is the midpoint of the full-year guidance potentially conservative, and what could drive upside? A: Avigal Soreq (President and Chairman) acknowledged the math points to the high end of the range. He stated the company is very happy with the results and the strategy's execution. He indicated they will follow the same sequence as last year, potentially upgrading guidance in Q3 if warranted, and advised to "stay tight" for more news.
Q: How are higher commodity prices and strengthening Waha prices impacting customer conversations and volumes heading into 2027? A: Avigal Soreq (President and Chairman) noted close daily contact with customers who are excited about their business, with increased rig forecasts in their acreage. Mohit Bhardwaj (EVP - New Energy, Strategy & IR) highlighted two positive effects: stronger commodity prices driving incremental production and higher forecasts for 2026 and 2027, and strengthening Waha prices, which is a minor positive for results but a much bigger positive for volumes. He reiterated the $185 million growth CapEx program expected to yield $75 million in EBITDA.
Q: What is the contracting strategy behind the water assets, and is there any shift between volumetric and take-or-pay contracts? A: Mohit Bhardwaj (EVP - New Energy, Strategy & IR) declined to share specific contracting details but expressed excitement about the produced water gathering business. He noted the 3-stream service (gas, water, crude) is reaping results, and even in the Midland with just 2 streams, they are seeing incremental positive results. He indicated more details will be shared when ready.
Q: How is the company thinking about capitalizing on sour gas treating and AGI demand long-term, and what would trigger a possible expansion at Libby? A: Avigal Soreq (President and Chairman) emphasized the unique competitive advantage from the combination of location, sour gas coming out of the ground, and infrastructure. Mark Hobbs (EVP - Logistics) added that they are seeing increasingly more sour gas production from customers and have added capacity, including Libby 2 and the first AGI well. They are near completion of sour gas gathering and compression, which positions them extremely well for future growth and a step change in gas volumes.
Q: How is the company working toward its long-term leverage and coverage targets? A: Avigal Soreq (President and Chairman) emphasized discipline around capital deployment, citing M&A done at 5-6 times that now trades at 9-10 times. Robert Wright (EVP and CFO) confirmed comfort with the long-term leverage target of 3.5 times, noting they will manage around 4 times while growing. He highlighted the attractive return on growth spend ($75 million EBITDA on $180-190 million CapEx) and expects leverage to decrease as EBITDA is realized. Liquidity remains robust at approximately $1.1 billion.
Q: How should we think about well connects on the gas side and the ramp of Libby 2 in the back half of the year? A: Avigal Soreq (President and Chairman) stated connections are going very well on both the compressor side and the plant, with a close relationship with producers. Mark Hobbs (EVP - Logistics) noted the shift from sweet to sour gas and that they are optimizing the system around compression. He expects a step change in volumes as they move through completions in Q3 and into Q4, increasing plant utilization.
Q: What are you seeing on the inorganic opportunity front, and is that still attractive given the organic growth pipeline? A: Avigal Soreq (President and Chairman) stated they keep their eyes open for inorganic opportunities but require them to be accretive to leverage, coverage, and free cash flow. He highlighted the intrinsic value created, noting assets bought at 5-6 times now trade around 10 times, and recent gas deals in the market traded at mid-low to mid-teens. He emphasized the company's commitment to creating value, citing 15% year-over-year growth and 54 consecutive distribution increases.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
