Delek Logistics Partners, LP (NYSE: DKL)

Delek Logistics Partners, LP is a midstream energy company specializing in the gathering, transportation, storage, and marketing of crude oil, natural gas, and refined products. Operating primarily in the Permian Basin and select areas of the Gulf Coast region, the company provides integrated midstream services, including pipeline transportation, terminalling, water disposal, and wholesale marketing. Its assets are strategically positioned to support both third-party customers and the refining operations of its sponsor, Delek US Holdings, Inc., ensuring a steady flow of hydrocarbons through its network.

The company generates revenue through fee-based contracts, wholesale marketing, and terminalling services. Its gathering and processing segment earns fees from transporting crude oil and natural gas, while the wholesale marketing and terminalling segment profits from the storage, transportation, and sale of refined products. The storage and transportation segment provides logistics services for crude oil and refined products, and the investments in pipeline joint ventures segment contributes earnings through equity stakes in strategic crude oil pipeline systems. A significant portion of revenue is derived from long-term contracts with minimum volume commitments, which mitigate exposure to commodity price volatility.

The company operates through the following segments:

• Gathering and Processing: This segment manages pipeline assets, crude oil gathering systems, water disposal and recycling operations, and natural gas processing plants. It supports crude oil and natural gas transportation, treatment, and processing, primarily in the Permian Basin, including the Delaware and Midland sub-basins. The segment also provides acid gas injection and sour gas processing capabilities, enhancing its service offerings to producers.

• Wholesale Marketing and Terminalling: This segment focuses on the marketing, transportation, storage, and terminalling of refined products. It serves both Delek Holdings’ refining operations and third-party customers, generating revenue through fees and wholesale margins. The segment is exposed to commodity price fluctuations in its West Texas operations but benefits from long-term contracts that stabilize cash flows.

• Storage and Transportation: This segment operates tanks, offloading facilities, trucks, and ancillary assets to provide crude oil, intermediate, and refined product transportation and storage services. It primarily supports Delek Holdings’ refineries in Tyler, Texas, El Dorado, Arkansas, and Big Spring, Texas, while also serving third-party customers. Revenue is generated through transportation and storage fees, with minimal direct exposure to commodity price risks.

• Investments in Pipeline Joint Ventures: This segment includes equity stakes in four joint ventures that own and operate crude oil pipeline systems in the Permian Basin and Gulf Coast regions. These investments provide strategic connections to key hubs, such as Cushing and Midland, and generate revenue through minimum volume commitments from shippers, including Delek Holdings.

Delek Logistics Partners, LP holds a competitive position in the midstream energy sector, particularly in the Permian Basin, where it benefits from strategic asset locations and long-term contractual protections. Its integrated service offerings—spanning crude oil, natural gas, and water midstream solutions—differentiate it from peers by providing a full-suite of services to producers and refiners. The company’s fee-based revenue model, supported by minimum volume commitments and dedicated acreage agreements, reduces exposure to commodity price volatility and economic downturns. Key competitive advantages include its sour gas processing capabilities, which few midstream companies offer, and its strategic joint venture investments that enhance connectivity to critical markets. While the midstream sector faces challenges from regulatory pressures and the energy transition, Delek Logistics’ focus on operational efficiency, cost control, and third-party revenue diversification strengthens its resilience.

The company’s customer base includes a mix of affiliated and third-party entities. Its primary customer is Delek US Holdings, Inc., which accounts for a significant portion of its revenue through long-term contracts supporting refining operations in Tyler, El Dorado, and Big Spring. Additionally, the company serves independent producers in the Permian Basin, as well as third-party refiners and marketers through its wholesale and terminalling services. Its joint venture pipelines also attract major shippers, further diversifying its revenue streams.