Delek Logistics Partners, LP (the Partnership) provides gathering, pipeline and other transportation services primarily for crude oil and natural gas customers, storage, wholesale marketing and terminalling services primarily for intermediate and refined product customers, and water disposal and recycling services through its owned assets and joint ventures located primarily in the Permian Basin (including the Delaware sub-basin) and other select areas in the Gulf Coast region. Delek Logistics G...
Delek Logistics Partners, LP (the Partnership) provides gathering, pipeline and other transportation services primarily for crude oil and natural gas customers, storage, wholesale marketing and terminalling services primarily for intermediate and refined product customers, and water disposal and recycling services through its owned assets and joint ventures located primarily in the Permian Basin (including the Delaware sub-basin) and other select areas in the Gulf Coast region. Delek Logistics GP, LLC serves as the general partner of the company.
A majority of the company’s existing assets are both integral to and dependent upon the success of Delek Holdings' refining operations, as many of the company’s assets are contracted exclusively to Delek Holdings in the support of its Tyler, Texas (the ‘Tyler Refinery’), El Dorado, Arkansas (the ‘El Dorado Refinery’) and Big Spring, Texas (the ‘Big Spring Refinery’).
‘Delek Holdings’ refers collectively to Delek US Holdings, Inc. and any of its subsidiaries, other than the Partnership and its subsidiaries and its general partner.
Core Strategy
The company is positioned to be a full-suite service provider, delivering crude, gas, and water solutions to its customers in the Permian Basin. It is also well positioned to take advantage of several attractive growth opportunities seen in the Midland and Delaware basins. The company is continuing to strengthen its offering in the Midland Basin through the acquisitions of H2O Midstream and Gravity. On the Delaware side, the company's gas processing plant expansion, including adding acid gas injection (AGI) and sour gas treating capabilities, is setting it up for multiple years of growth in the basin.
Acquisition
On August 5, 2024, the Partnership acquired Permian Pipeline Holdings, LLC, which holds 50% equity interests in W2W Holdings, from a wholly owned subsidiary of Delek Holdings.
On September 11, 2024, the company completed the acquisition in which it acquired 100% of the limited liability company interests in H2O Midstream Intermediate, LLC, H2O Midstream Permian LLC, and H2O Midstream LLC (H2O Midstream Acquisition) from H2O Midstream Holdings, LLC.
On December 11, 2024, the company entered into an agreement (the Gravity Purchase Agreement) to acquire 100% of the limited liability company interests in Gravity Water Intermediate Holdings LLC from Gravity Water Holdings LLC (the Seller), related to the Seller's water disposal and recycling operations in the Permian Basin and the Bakken (the Gravity Acquisition).
Reportable Operating Segments
The company aggregates its operating segments into four segments: Gathering and Processing; Wholesale Marketing and Terminalling; Storage and Transportation; and Investment in Pipeline Joint Ventures.
Gathering and Processing
This segment consists of the company's pipeline assets, Midland Gathering Assets, Midland Water Gathering Assets, and Delaware Gathering Assets. The Midland Gathering Assets support the company's crude oil gathering activities, which primarily serve Delek Holdings' refining needs throughout the Permian Basin. The Midland Water Gathering Assets support the company's water disposal and recycling operations, primarily in the Midland Basin in Texas. The Delaware Gathering Assets support the company's crude oil and natural gas gathering, processing, and transportation businesses, as well as water disposal and recycling operations, located in the Delaware Basin of New Mexico. Finally, the company's gathering and processing assets are integrated with the company's pipeline assets, which it uses to transport gathered crude oil, as well as provide other crude oil, intermediate, and refined products transportation, mainly in support of Delek Holdings' refining operations in Tyler, Texas, El Dorado, Arkansas, and Big Spring, Texas, as well as to certain third parties.
Revenue Streams and Customers
With respect to the company’s Gathering and Processing segment, the company generates three principal types of revenues:
Product sales - consisted of residual products as a result of the company’s gathering services where Delaware Gathering meets the definition of the principal rather than an agent, and where such revenue is recognized upon satisfaction of the performance obligation, which is generally upon delivery.
Gathering and processing services - consisted of fees charged for one or more of the following services under dedicated acreage and other long-term fee-based contracts: gathering, processing and transportation of natural gas; gathering, transportation and storage of NGLs; gathering, recycling and disposal of wastewater; and transportation, storage and distribution of crude oil, and other hydrocarbon-based products. The contractual fees are generally related to the volume of natural gas, NGLs, water, crude oil that is gathered, transported, stored or processed and therefore is not directly impacted by commodity prices.
Pipeline throughput fees - consisted of fees to customers, generally based on throughput or other relevant volumetric measures, for transporting crude oil and refined products via the company’s pipeline assets. A substantial majority of these revenues is derived from commercial agreements with Delek Holdings with initial terms ranging from five to ten years, which gives the company a contractual revenue base. These commercial agreements with Delek Holdings typically include minimum volume or throughput commitments by Delek Holdings, which provides protection from market volatility related to commodity prices. The majority of the company’s commercial agreements with Delek Holdings are deemed to be leases.
Midland Gathering Assets
The Midland Gathering System is a system of pipelines that primarily gathers and transports crude oil, located primarily near the Big Spring Refinery in Texas, which provide access to hydrocarbons directly from wellheads located in the Midland Basin. These assets consist of approximately 240 miles of gathering assets, approximately 65 tank battery connections, terminals with total storage capacity of approximately 400,000 barrels and applicable rights-of-way assets.
Delaware Gathering Assets
Delaware Gathering Assets is anchored by a high-quality diversified customer base, which has integrated crude, gas and water infrastructure concentrated in the central Lea County, New Mexico core.
El Dorado Assets
The Partnership owns a system of common carrier pipelines that primarily gathers and transports crude oil and condensate that is purchased from various crude oil producers in Arkansas, Texas and Louisiana by Delek Holdings or a third party to whom Delek Holdings has assigned certain of its rights (the ‘El Dorado Gathering System’). The El Dorado Gathering System transports small volumes of crude oil that are received from other sources and condensate that is purchased from a third party in east Texas. All such crude oil and other products are ultimately transported to the El Dorado Refinery for processing. In addition, a pipeline within the El Dorado Gathering System transports minimal crude oil for third party shippers pursuant to a common carrier tariff.
The pipelines in the El Dorado Assets have injection points where crude oil gathered from the El Dorado Gathering System can be injected and then transported to the El Dorado Refinery. The El Dorado Assets also have crude oil storage tanks and facilities ancillary to the operation of the pipeline system. Tankage assets include approximately 150 crude oil storage tanks, breakout tanks and certain ancillary assets (such as pumps and piping) located at and adjacent to the El Dorado Refinery with an aggregate shell capacity of approximately 2.5 million barrels (the ‘El Dorado Tank Assets’) (including Tank 120 and Tank 192). In addition, these assets include 17 truck receipt locations, approximately 500 pipeline gathering and receiving stations and 17 relay stations to deliver crude oil to the Magnolia Station, the El Dorado Pipeline System or directly to the El Dorado Refinery. The El Dorado Assets are capable of transporting crude oil offloaded from rail cars at or near the El Dorado Refinery, including two crude oil rail offloading racks, which are designed to receive up to 25,000 bpd of light crude oil or 12,000 bpd of heavy crude oil, or any combination of the two and are located on property leased from third parties and Delek Holdings. The company also has approximately 0.6 million barrels of combined shell capacity that is currently not in service.
East Texas Crude Logistics System
The company’s East Texas Crude Logistics System includes five owned or leased crude oil storage terminals, at which it stores crude oil owned by Delek Holdings for the Tyler Refinery.
The company has a pipelines and tankage agreement with Delek Holdings to provide throughput on the East Texas Crude Logistics System. Delek Holdings has a 5-year agreement with third parties to transport a substantial majority of the Tyler Refinery's crude oil requirements on this pipeline system. As a result of the third parties' ability to transport crude oil on the pipeline system directly to the Tyler Refinery, the crude oil supplied through the Nettleton and McMurrey Pipelines is generally below the minimum aggregate throughput requirements of the company's pipelines and tankage agreement with Delek Holdings. However, under its commercial agreement with the company, Delek Holdings is required to pay throughput fees in an amount equal to the fees it would pay were the company to throughput 35,000 bpd, based on the per barrel fees in the agreement. The current term of this agreement expires in June 2036.
Wholesale Marketing and Terminalling
This segment provides wholesale marketing and terminalling services to Delek Holdings' refining operations and to independent third parties, from whom it receives fees for marketing, transporting, storing, and terminalling refined products, and to whom it wholesales market refined products. In providing certain of these services, the company takes ownership of the products and is therefore exposed to market risks related to the volatility of commodity and refined product prices in the company's West Texas operations, which depend on many factors, including demand and supply of refined products in the West Texas market, the timing of refined product deliveries, and downtime at refineries in the surrounding area.
Revenue Streams and Customers
The company generates revenue in its wholesale marketing and terminalling segment by providing marketing services for the refined products output of the Tyler Refinery, (ii) engaging in wholesale activity at its Abilene and San Angelo, Texas terminals, as well as at terminals owned by third parties, whereby the company purchases light products for sale and exchange to third parties, and providing terminalling services to independent third parties and Delek Holdings.
Wholesale Marketing
East Texas
Pursuant to a marketing agreement with Delek Holdings, the company markets 100% of the refined products output of the Tyler Refinery, other than jet fuel and petroleum coke.
West Texas
In the company’s West Texas marketing operations, the company generates revenue by purchasing refined products from independent third-party suppliers and from Delek Holdings for sale and exchange to Delek Holdings and third parties at the company’s Abilene and San Angelo, Texas terminals and at third-party terminals located elsewhere in Texas.
The company owns approximately 100 miles of product pipelines in West Texas that connect its Abilene and San Angelo, Texas terminals to the Magellan Orion Pipeline. It purchases products from Delek Holdings and third parties at its Abilene and San Angelo terminals. To facilitate these purchases, the company constructed a pipeline into its Abilene Terminal to receive product from the pipeline owned by Holly Energy Partners, L.P. (NYSE: HEP), through which Delek Holdings shipped product that was produced at the Big Spring Refinery. The company completed constructing a connection to a Magellan Midstream Partners, L.P. (Magellan) pipeline that allows Magellan to supply its Abilene and San Angelo terminals with product transported from the Gulf Coast. The company also has active connections to the Magellan Orion Pipeline that enable it to ship product to its terminals and to acquire product from other shippers. The table below provides the number of tanks, their storage capacities, number of truck loading lanes, and maximum daily available truck loading capacity for the year ended December 31, 2024, at the Abilene and San Angelo terminals associated with the company's marketing activities.
Terminalling
The company provides terminalling services for products to third parties and Delek Holdings through light products terminals the company owns in Nashville, Tennessee and to Delek Holdings, or certain third parties to whom Delek Holdings has assigned its rights, through the company’s light products terminals in Memphis, Tennessee; Tyler, Texas; Big Sandy, Texas; Mount Pleasant, Texas; El Dorado, Arkansas; and North Little Rock, Arkansas.
Storage and Transportation
The operational assets in the company's storage and transportation segment consist of tanks, offloading facilities, trucks, and ancillary assets, which provide crude oil, intermediate, and refined products transportation and storage services, primarily in support of Delek Holdings' refining operations in Tyler, Texas, El Dorado, Arkansas, and Big Spring, Texas. Additionally, the assets in this segment provide crude oil transportation services to certain third parties.
Other Transportation Assets
The company owns assets or lease capacity on assets that are used to support Delek Holdings' refineries or that are used in the company’s operations but may not be adjacent to or directly on the properties owned by such refineries. These include tankage assets and trucking assets listed below:
eight tanks with an aggregate active shell capacity of approximately 257,000 barrels at a terminal in North Little Rock, Arkansas; and
161 tractors and 306 trailers, which are owned or leased, and used to haul primarily crude oil and other products for related and third parties.
Revenue Streams and Customers
The Partnership generates revenue in its Storage and Transportation segment by charging fees to customers, generally based on throughput or other relevant volumetric measures, for services associated with transporting, offloading and storing crude oil and refined products.
Investments in Joint Ventures
The company owns a portion of four joint ventures (accounted for as equity method investments) that have constructed separate crude oil pipeline systems and related ancillary assets, primarily in the Permian Basin and Gulf Coast regions, with strategic connections to Cushing, Midland, and connections from Wink, Texas, to Webster, Texas, and other key exchange points which provide crude oil and refined product pipeline transportation to third parties and subsidiaries of Delek Holdings.
Revenue Streams and Customers
The company does not directly earn revenues from its joint venture investments.
Seasonality
The volume and throughput of crude oil and refined products transported through the company’s pipelines, including those in which the company owns a joint venture interest, are directly affected by the level of supply and demand for all of such products in the markets served directly or indirectly by the company’s assets. Supply and demand for such products fluctuates during the calendar year (year ended December 2024). Demand for gasoline, for example, is generally higher during the summer months than during the winter months due to seasonal increases in motor vehicle traffic. In addition, the company’s refining customers, such as Delek Holdings, occasionally reduce or suspend operations to perform planned maintenance, which is more typically scheduled during the winter, when demand for their products is lower.
Commercial Agreements
Commercial Agreements with Delek Holdings
The Partnership has a number of long-term, fee-based commercial agreements with Delek Holdings under which the company provides various services, including crude oil gathering and crude oil, intermediate and refined products transportation and storage services, and marketing, terminalling and offloading services to Delek Holdings. Most of these agreements have an initial term ranging from five to ten years.
In addition, on August 5, 2024, the Partnership entered into an assignment agreement with Delek Holdings to assign its rights and obligations under the Big Spring Refinery Marketing Agreement to Delek Holdings.
Other Agreements with Delek Holdings
In addition to the commercial agreements described above, the Partnership has entered into the following agreements with Delek Holdings:
Omnibus Agreement
The Partnership entered into an omnibus agreement with Delek Holdings, Delek Logistics Operating, LLC, Lion Oil Company, LLC and certain of the Partnership's and Delek Holdings' other subsidiaries on November 7, 2012, which has been amended and restated from time to time in connection with acquisitions from Delek Holdings (collectively, as amended, the ‘Omnibus Agreement’). The Omnibus Agreement governs the provision of certain operational services and reimbursement obligations, among other matters, between the Partnership and Delek Holdings.
Other Transactions
The Partnership manages long-term capital projects on behalf of Delek Holdings pursuant to a construction management and operating agreement (the DPG Management Agreement) for the construction of gathering systems in the Permian Basin. The majority of the gathering systems have been constructed, however, additional costs pertaining to a pipeline connection that was not acquired by the Partnership continue to be incurred and are still subject to the terms of the DPG Management Agreement. The Partnership is also considered the operator for the project and is responsible for oversight of the project design, procurement and construction of project segments and provides other related services. Pursuant to the terms of the DPG Management Agreement, the Partnership receives a monthly operating services fee and a construction services fee, which includes the Partnership's direct costs of managing the project plus an additional percentage fee of the construction costs of each project segment. The agreement extends through December 2025.
The company executed a series of agreements, effective January 1, 2022, with DK Trading & Supply, LLC (DKT&S) and Alon Refining Krotz Springs, Inc., whereby the company will operate and maintain a facility located within the Krotz Springs, Louisiana refinery, to process slurry for DKT&S. Using a process that incorporates horizontal and vertical centrifuges, the company will remove metals, ash, and other solids from the slurry. The clarified product can then be sold to DKT&S or one of its affiliates. As consideration for the processing services, the company will receive a fixed rate per barrel processing fee in addition to a margin-based payment. The company and DKT&S have agreed to a minimum delivery commitment volume to be processed in the facility. This agreement was terminated on December 31, 2024.
Other Agreements with Third Parties
West Texas
In its West Texas marketing operations, the company generates revenue by purchasing refined products from independent third-party suppliers and Delek Holdings for sale and exchange to Delek Holdings and third parties at its Abilene and San Angelo, Texas terminals and at third-party terminals located elsewhere in Texas. Substantially all of the company’s product sales in West Texas are on a wholesale basis. Product purchased from Delek Holdings is produced by the Big Spring Refinery.
Delek Holdings' Crude Oil and Refined Products Intermediation Agreement
Pursuant to financing arrangements between Delek Holdings and its subsidiaries, Lion Oil Company, LLC, DK Trading & Supply, LLC, and Alon USA, LP (all hereinafter referred to together as Delek Holdings), to which the company is not a party, and Citigroup Energy (Citi), Delek Holdings assigned to Citi certain of its rights under the company's specific terminalling agreements, pipelines, storage and throughput facilities agreements, and asphalt services agreements. This is a financing arrangement for Delek Holdings, whereby Citi holds crude oil and product for Delek Holdings. Citi retains these storage and transportation rights for the term of the financing arrangement, which expires on January 31, 2027.
Major Customers
The company is dependent upon Delek Holdings as its primary customer, and the loss of Delek Holdings as a customer would have a material adverse effect on the company’s operating segments. The company derives a majority of its revenue from fee-based commercial agreements with Delek Holdings or as a direct result of its operations. Delek Holdings, directly or indirectly, accounted for 55.0% of the company’s total revenues for the year ended December 31, 2024. The company’s other customers include major oil companies, independent refiners and marketers, jobbers, distributors, utility and transportation companies and independent retail fuel operators.
Governmental Regulation and Environmental Matters
The rates, terms and conditions of service on certain of its pipelines are subject to regulation by the Federal Energy Regulatory Commission (the FERC) under the Interstate Commerce Act (the ICA) and by state regulatory commissions in the states in which it transports crude oil, intermediate and refined products, including the Texas Railroad Commission, the Louisiana Public Service Commission, the Arkansas Public Service Commission and the New Mexico Public Regulation Commission. The FERC regulates interstate transportation under the ICA, the Energy Policy Act of 1992 and the rules and regulations promulgated under those laws. The ICA and its implementing regulations require that tariff rates for interstate service on oil pipelines, including pipelines that transport crude oil, intermediate and refined products in interstate commerce (collectively referred to as petroleum pipelines), be just and reasonable and non-discriminatory and that such rates and terms and conditions of service be filed with the FERC.
The Pipeline and Hazardous Materials Safety Administration (‘PHMSA’) of the United States Department of Transportation (‘DOT’) regulates the design, construction, testing, operation, maintenance, safety and reporting and emergency response of crude oil, petroleum products and other hazardous liquids pipelines and other facilities, including certain tank facilities used in the transportation of such liquids.
Environmental, Health and Safety
The company is subject to extensive federal, state and local environmental and safety laws and regulations enforced by various agencies, including, but not limited to, the Environmental Protection Agency (the ‘EPA’), the United States Department of Transportation, the Occupational Safety and Health Administration, as well as numerous state, regional and local environmental, safety and pipeline agencies. These laws and regulations govern the discharge, release, and spillage of materials into the environment, waste management practices, pollution prevention measures, as well as the safe operation of the company’s pipelines and the safety of the company’s workers and the public.
A number of the company’s operations are subject to the Clean Air Act (the ‘CAA’) and its regulations and comparable state and local statutes.
The company also generates small quantities of solid wastes, including solid wastes that are also considered hazardous wastes, that are subject to the requirements of the federal Resource Conservation and Recovery Act (‘RCRA’), and comparable state laws.
In the course of the company’s ordinary operations, the company generates waste that falls within CERCLA’s (Comprehensive Environmental Response, Compensation and Liability Act) definition of a ‘hazardous substance’.
The transportation and storage of crude oil and refined products over and adjacent to water involves risk and subjects the company to the provisions of the Oil Pollution Act of 1990 (the ‘OPA’), the Water Pollution Control Act of 1972 (the ‘Clean Water Act’), and related state requirements.
Regulations under the Clean Water Act, the OPA and state laws also impose additional regulatory burdens on the company’s operations. For example, the Clean Water Act requires the company to maintain spill prevention control and countermeasure plans at many of the company’s facilities. The company maintains such plans, and where required have submitted plans and received federal and state approvals necessary to comply with the OPA, the Clean Water Act and related regulations.
History
Delek Logistics Partners, LP was founded in 2012. The company was incorporated in 2012.
