DKL Q3 2025 Earnings Call Summary

1Key Financial Results and Metrics

Adjusted EBITDA: Approximately $136 million for Q3 2025, up from $107 million in Q3 2024.

Distributable Cash Flow (DCF): Adjusted total of $74 million, with a coverage ratio of approximately 1.24x.

Segment Performance:

Gathering and Processing: Adjusted EBITDA of $83 million, up from $55 million year-over-year.

Wholesale Marketing and Terminalling: Adjusted EBITDA decreased to $21 million from $25 million.

Storage and Transportation: Adjusted EBITDA remained steady at $19 million.

Investments in Pipeline Joint Ventures: Contributed $22 million, up from $16 million in the prior year.

Capital Expenditures: Approximately $50 million, with $44 million allocated to growth projects.

2Strategic Updates and Business Highlights

DKL successfully commissioned the Libby 2 gas plant, enhancing its sour gas handling and acid gas injection capabilities.

The company completed acquisitions of H2O Midstream and Gravity Water Midstream, expanding its service offerings in the Permian Basin.

Record volumes reported in both crude and water gathering segments, with strong operational performance expected to continue.

The company is focused on optimizing synergies from recent acquisitions to enhance EBITDA.

3Forward Guidance and Outlook

DKL raised its full-year EBITDA guidance to a range of $500 million to $520 million, reflecting confidence in ongoing operational strength and growth.

The management anticipates continued improvement in DCF coverage ratio as new projects contribute to financial performance.

4Bad News, Challenges, or Points of Concern

Wholesale Marketing and Terminalling: Experienced a decline in adjusted EBITDA, which may indicate challenges in this segment.

Market Conditions: While the company is positioned well, there are ongoing concerns about the competitive landscape, particularly regarding permitting challenges for new water disposal wells in the Delaware Basin.

Future Capital Expenditures: While expansion opportunities are being explored, the management has not provided specific guidance on CapEx for 2026, indicating uncertainty in future spending plans.

5Notable Q&A Insights

Management noted that producers are increasing activity on acreage due to the commissioning of Libby 2, with expectations for a ramp-up in treating capacity.

The company is confident in the sustainability of strong performance from joint ventures, particularly the Wink to Webster project.

There is a recognition of emerging competition in the water landscape, but DKL's strategic acquisitions have positioned it advantageously compared to market trends.

Future expansions, including Libby 3, may occur sooner than previously expected due to market demand for sour gas capabilities. Overall, DKL reported a strong quarter with significant growth in key financial metrics and strategic initiatives, while also acknowledging some challenges in specific segments and the competitive environment.