Another Record Quarter for Delek Logistics
Even though President Donald Trump has paused his global tariffs for 90 days (except for China), oil and gas prices remain depressed, with West Texas Intermediate trading at $59.58 per barrel, its lowest level in four years. Higher risks of a recession and an unexpected production increase from the Organization of the Petroleum Exporting Countries Plus (OPEC+), including Russia, and its partners, have forced Goldman Sachs to cut its 2026 oil price forecast to $55.00 per barrel. (Source: “Goldman Sachs lowers 2026 oil price forecasts again,” Reuters, April 6, 2025.)
There is a chance that oil prices could rise from where they are right now, though that’s contingent on the U.S. president either continuing to pause tariffs, cutting back on them, or backing down from them entirely.
Because of the unknowns, the sentiment for oil and gas will remain bearish. As a result, the current environment will probably make it tougher for smaller oil and gas companies to perform well. On the other hand, well-established energy plays like Delek Logistics Partners LP (NYSE:DKL) should be able to weather the storm.
With market cap of just $2.0 billion, Delek Logistics is on the smaller side. With that said, it’s firing on all cylinders right now. The company is reporting record results, including strong revenue and earnings growth. Thanks to that reliable free cash flow, Delek Logistics has also been able to grow its dividend for 48 consecutive quarters.
Delek Logistics Partners LP is a midstream energy master limited partnership (MLP) that provides gathering, pipeline, transportation, and other services for crude oil, intermediates, refined products, natural gas, storage, wholesale marketing, terminalling, water disposal, and recycling customers in the U.S. (Source: “Investor Update,” Delek Logistics Partners LP, April 1, 2025.)
The MLP’s infrastructure includes 850 miles of crude and product transportation pipelines and a 700-mile crude oil gathering system.
Delek’s key areas of operations are in/around the Permian Basin, Delaware Basin, and other regions in the Gulf Coast area. This includes Texas, Tennessee, Arkansas, and Oklahoma.
Record Q4 2024 Results
For the fourth quarter ended December 31, 2024, Delek reported fourth-quarter net income of $35.3 million, up 60% from $22.1 million in the fourth quarter of 2023. (Source: “Delek Logistics Reports Record Fourth Quarter 2024 Results,” Delek Logistics Partners LP, February 25, 2025.)
Its net income attributable to limited partners was up 56% at $34.5 million, or $0.68 per unit. Net cash provided by operating activities was $49.9 million, down from $114.7 million in the fourth quarter of 2023.
Delek’s distributable cash flow as adjusted was $69.5 million, compared to $64.6 million in the fourth quarter of 2023.
The MLP’s fourth-quarter earnings before interest, taxes, depreciation, and amortization (EBITDA) were $73.8 million, compared to $86.1 million in the fourth quarter of 2023. Adjusted EBITDA hit a record $107.2 million.
Its full-year net income advanced 13% to $142.6 million. Delek’s net income attributable to limited partners grew 12% to $141.9 million, or $2.99 per unit. Its net cash provided by operating activities was $206.3 million, down from $225.3 million in 2023.
The company’s distributable cash flow as adjusted was $267.2 million, up from $248.1 million in 2023.
Delek’s full-year EBITDA came in at $346.9 million, compared to $370.2 million in 2023. Adjusted EBITDA increased 8.5% to $417.9 million.
During the year, the MLP:
- Completed the acquisition of Delek US‘ interest in the Wink to Webster pipeline
- Amended and extended agreements with Delek US for a period of up to seven years
- Closed the acquisition of H2O Midstream
- Increased its dedicated acres in the Midland basin to around 400,000 acres
- Raised $298.0 million from two separate primary offerings to fund its accretive growth projects
Since the start of 2025, Delek has:
- Closed the acquisition of Gravity Water Midstream
- Announced strong full-year adjusted EBITDA guidance of $480.0 to $520.0 million
- Announced a unit buyback authorization of $150.0 million
Commenting on the results, Avigal Soreqi, the company’s president, said, “Delek Logistics made great strides in 2024 in becoming a premier midstream provider in the Permian basin. It provides the best combination of yield and growth in the midstream sector with a long runway of growth driven by its advantageous position in the Midland and Delaware basins.
“The completion of the acquisition of Gravity Water Midstream in January 2025 pushes third party cash flow contribution at Delek Logistics to ~70%, a significant step in increasing our economic separation from our sponsor Delek US.”
DKL Units: Payout Upped for 48th Quarter
Thanks to the MLP’s strong distributable cash flow, DKL units are able to provide investors with a very reliably, growing distribution. In January, Delek increased its quarterly cash distribution from $1.10 per unit to $1.105 per common unit, or $4.42 per unit on an annual basis. This works out to a forward annual yield of 11.12%. (Source: “Delek Logistics Partners, LP Increases Quarterly Cash Distribution to $1.105 per Common Limited Partner Unit,” Delek Logistics Partners LP, January 24, 2025.)
By all accounts, more quarterly increases are on the way. In prepared remarks in the company’s fourth-quarter results, Sereq, said, “We are proud of the 48th consecutive increase in our distribution and we expect to continue to increase our distribution in the future.”
34% Upside Potential with DKL Units?
In addition to a growing dividend, DKL units have great potential…it just might not look like it if you only consider the stock chart. DKL units have taken a nosedive over the last few trading days. But so too has the entire stock market, both here in the U.S. and globally. Fears of a global recession will do that.
But this, too, shall pass.
As of this writing (April 8, 2025), DKL units are down nine percent year to date but up seven percent on an annual basis. That’s far better than the broader markets are doing, with the S&P 500 down 13% in 2025 and 2.1%, respectively, over the last 12 months.
Despite the apparent bloodbath, the outlook for DKL units remains solid. At least for now. Wall Street analysts have provided a 12-month share price target of $44.75 to $50.00. This points to potential gains of 20% to 34%.
Chart courtesy of StockCharts.com
The Lowdown on DKL Units
The current economic environment has not been kind to the stock market or energy plays like Delek Logistics Partners LP. But there’s a lot of reason to remain bullish on DKL units.
Delek’s a financially robust oil and gas play reporting record financial results and expanding its operations. The MLP has raised its dividend for 48 consecutive quarters, with management expecting to continue raising its dividend going forward.