Delek Logistics Partners, LP (NYSE: DKL) has announced significant developments in its operations, including the implementation of permitted acid gas injection (AGI) capabilities at its under-construction Libby 2 gas processing plant. The company's president, Avigal Soreq, highlighted that these developments align with their strategy of being the preferred oil, gas, and water midstream services provider in the Permian Basin.
One noteworthy aspect is that following these announcements, DKL will be approaching over 70% of its EBITDA coming from third-party sources. The company's current liquidity stands at over $700 million, enabling it to pursue opportunities without the need for incremental external capital while prudently managing leverage and distribution coverage.
The addition of AGI capabilities at the Libby 2 gas processing plant is a strategic move that positions DKL as a leading logistics provider in the northern Delaware Basin. This expansion is expected to allow new and existing customers to access all six benches of the Delaware Basin without the liability of hydrogen sulfide and carbon dioxide. The AGI capabilities are projected to be in place in the second half of 2025.
Moreover, DKL has also announced the acquisition of Gravity Water Midstream for a total consideration of $285 million, consisting of $200 million in cash and $85 million in DKL units. This acquisition is anticipated to be immediately accretive to DKL's free cash flow, EBITDA, and leverage, with substantial synergy opportunities.
Additionally, the company has secured an additional ~34,000 acreage dedication, incremental to the previously announced ~50,000 acreage dedication in the Midland Basin, bringing the total acreage dedication to DKL in the Midland Basin to approximately ~400,000 acres. This dedication is supported by DKL’s Delek Permian Gathering System (DPG) located in West Texas.
These developments underscore DKL’s commitment to enhancing its "full suite" strategy and strengthening its presence and capabilities in key areas, such as the Permian Basin and Gulf Coast region, where it provides gathering, pipeline, transportation, and other services for its customers in crude oil, intermediates, refined products, natural gas, storage, wholesale marketing, terminalling water disposal, and recycling. As a result of these announcements, the company's shares have moved 0.0% on the market, and are now trading at a price of $39.18. For the full picture, make sure to review Delek Logistics's 8-K report.
