Delek US Announces Agreement to Dropdown Logistic Assets to Delek Logistics

BRENTWOOD, Tenn., March 31, 2020 (GLOBE NEWSWIRE) -- Delek US Holdings, Inc. (NYSE: DK) (“Delek US”) and Delek Logistics Partners, LP (NYSE: DKL) (“Delek Logistics”) today announced an agreement for the dropdown of the Big Spring gathering system to Delek Logistics for total consideration of $100 million in cash and 5.0 million common units representing limited partnership interest in Delek Logistics. The transaction is effective March 31, 2020, and is expected to be immediately accretive to Delek Logistics' distributable cash flow per unit.

These assets and services are projected to generate incremental annual earnings before interest, taxes, depreciation and amortization (EBITDA) of approximately $30 to $32 million. Delek Logistics will finance the cash component of this dropdown through a combination of cash on hand and borrowings on the revolving credit facility.

"This adds the next step in growth for Delek Logistics,” said Uzi Yemin, Chairman, President and Chief Executive Officer of Delek US and Delek Logistics. “The Big Spring Gathering System is an integral piece of our expanding midstream footprint, which positions us uniquely among refiners with access to crude, in excess of our refining capabilities. Additionally, getting closer to the wellhead allows us to control crude quality and cost, providing improvement in our refining performance and cost structure.”

Asset and other information to consider:

• The Big Spring Gathering System is an approximately 200-mile crude oil gathering system with approximately 350,000 barrels per day throughput capacity located in Howard, Borden and Martin Counties, Texas and connecting to the Delek US terminal located near Big Spring, Texas and to a third party pipeline system.
   
• Minimum Volume Commitments: 120,000 barrels per day for the Big Spring Gathering System in addition to 50,000 barrels per day connection to a third party pipeline system.
   
• Limited IDR Waiver: Delek US will waive the incentive distribution rights (“IDRs”) associated with the equity consideration. This IDR waiver will automatically and permanently expire following the payment of distributions in respect of any period of four consecutive quarters ending on or after March 31, 2022, in which Delek Logistics has generated distributable cash flow resulting in total distribution coverage (on a pro forma basis without giving effect to the IDR wavier) of at least 1.1x over such period. In addition, in any sale or exchange of the IDRs to or with Delek Logistics (for example, an IDR simplification), the valuation of the IDRs in such transaction shall treat the IDR waiver as though it remained in effect in perpetuity even after the expiration.