Delek Logistics’ Record Year Anchors Optimistic Outlook

Delek Logistics Partners ((DKL)) has held its Q4 earnings call. Read on for the main highlights of the call.

Delek Logistics Partners’ latest earnings call struck an upbeat tone, as management highlighted record 2025 results and a standout fourth quarter while acknowledging some execution risks around sour gas projects. Executives emphasized that strong segment performance, successful acquisitions, and ample liquidity more than offset concerns about project timing and a flat wholesale business.

Record Annual Adjusted EBITDA

Delek Logistics reported record adjusted EBITDA of $536 million for 2025, underscoring strong execution across its midstream portfolio. Management credited the performance to organic growth and the successful integration of the H2O and Gravity acquisitions, which broadened the company’s footprint and earnings base.

Quarterly EBITDA Growth and Record Q4

The partnership posted record Q4 adjusted EBITDA of about $142 million, up from $114 million a year earlier and $6 million above the prior quarterly record. This 24.6% year‑over‑year jump reinforced the company’s momentum exiting 2025 and demonstrated operating leverage across its key assets.

Strong Segment Performance

Gathering and Processing delivered $71 million of EBITDA in Q4, up from $66 million, while Storage and Transportation nearly doubled to $35 million versus $18 million a year ago. Investments in the pipeline joint venture rose to $26 million from $18 million, though Wholesale Marketing and Terminalling remained flat at $21 million, signaling no growth in that segment.

Libby 2 Plant Commissioned — Capacity Expanded

Management highlighted the commissioning of the Libby 2 processing plant, which lifted the Libby Complex capacity to roughly 160 million scf per day. The expanded capacity is designed to handle sour gas and support acid gas injection, positioning the Delaware Basin assets for long‑term volume growth once the full infrastructure is in place.

Water Business Integration and Expanded Offering

The integration of H2O and Gravity is largely complete, creating a combined crude, gas, and water platform in the Permian. Executives said this broader service offering strengthens Delek Logistics’ competitive position with producers and opens the door to incremental growth opportunities across the basin.

Strong Liquidity and Capital Deployment

The partnership ended 2025 with about $940 million of available liquidity under its credit facilities, providing flexibility for growth projects and capital returns. Q4 capital spending totaled roughly $32 million, including about $26 million of growth capex focused mainly on building out sour gas handling capabilities.

Unitholder Returns — Distribution Increase

Delek Logistics’ board approved its 52nd consecutive quarterly distribution increase, raising the payout to $1.125 per unit. This marks 13 straight years of distribution growth, underscoring management’s commitment to returning cash to unitholders while funding expansion.

Increased Third‑Party Revenue and Economic Separation

Management emphasized a growing share of earnings from third‑party customers, with about 82% of EBITDA now effectively third‑party after recent transactions. They expect roughly 80% of run‑rate EBITDA in 2026 to come from third parties, signaling greater economic independence from the sponsor and a more diversified revenue base.

Sour Gas Ramp Slower Than Expected

Despite the capacity enhancements, the ramp‑up of sour gas processing has been slower than initially anticipated, adding some uncertainty to near‑term growth. The full EBITDA uplift from these investments depends on completing the AGI well and related sour gas gathering infrastructure, making timing a key swing factor.

Wholesale Segment Stagnation

While most segments delivered solid growth, Wholesale Marketing and Terminalling EBITDA held steady at $21 million year‑over‑year. Management did not signal immediate catalysts for acceleration, suggesting this business may remain more of a steady contributor than a growth driver in the near term.

Dependence on Near‑Term Project Completion

The company acknowledged that realizing a step‑change in utilization and earnings hinges on finishing key near‑term projects, including AGI, sour gathering, and compression. Any delays or slower‑than‑expected ramp in these initiatives could materially impact the expected incremental EBITDA from the upgraded Libby Complex.

Guidance and Forward‑Looking Outlook

Management reiterated 2026 adjusted EBITDA guidance of $520 million to $560 million, bracketing the 2025 record and reflecting sensitivity to project execution and G&P performance. With strong Q4 distributable cash flow, a coverage ratio around 1.22x, robust liquidity, and expanded processing capacity, the company framed the coming year as a balanced mix of execution risk and upside potential.

Delek Logistics’ earnings call painted a picture of a midstream operator delivering record results while methodically investing for future growth. Investors will be watching the pace of sour gas ramp and project completion, but for now, solid segment gains, rising third‑party exposure, and consistent distribution growth support a generally positive outlook for the partnership.