Delek Logistics Partners, LP

02 Executive Summary

Delek Logistics Partners (DKL) is a fee-based midstream MLP anchored by long-term commercial agreements with its sponsor, Delek US Holdings. Revenue grew +7.7% in FY2025 to $1.01B and is tracking toward $1.19B in FY2026E — a +17.2% step-up — as recently acquired assets ramp throughput. The partnership trades at a TTM P/E of 19.0x and EV/EBITDA of 18.6x, both above its MLP peer group, limiting near-term upside despite solid distribution momentum.

Investment Thesis: DKL's fee-based cash flows and a freshly raised distribution of $1.135/unit/quarter provide income durability, but elevated leverage ($2.38B debt, net debt/EBITDA ~7.5x estimated), negative trailing FCF, and a stock already at its 52-week high of $61.50 leave little margin of safety at current prices. We rate DKL HOLD with a $58.00 price target.

Top Catalysts:

• Distribution growth: Mgmt raised the quarterly cash distribution to $1.135/unit (annualized $4.54), reflecting +2.3% sequential growth — a direct yield support catalyst for income-oriented LPs.^[S11]
• Q2 2026 earnings catalyst: Results due August 5, 2026, with consensus revenue estimate of $295.4M and EPS estimate of $0.93; a beat-and-raise could push units above the $61.50 52-week high.^[S14]
• FY2026E revenue inflection: Street consensus projects $1.19B revenue for FY2026E vs. $1.01B in FY2025, implying +17.2% growth driven by recent asset additions and throughput ramp.

Key Risks:

• Leverage concentration: Total debt of $2.38B against FY2025 net income of $176.5M and negative TTM FCF of -$65.3M leaves the balance sheet structurally fragile.
• Sponsor dependency: DKL derives the majority of revenues from Delek US Holdings (DK); any operational, financial, or strategic deterioration at the parent directly impairs DKL's contract base.
• Consensus already above current analyst targets: The mean price target is $55.80 across 5 analysts, with the high target at $60.00 — DKL is trading above the consensus high target, suggesting limited institutional sponsorship at current levels.^[S16]

Our $58.00 price target is derived from a blended 50/50 weighting of a DCF base case (9.5% WACC, 2.0% terminal growth) and a peer NTM EV/EBITDA of 15.0x applied to FY2026E EBITDA. At 15.8x forward P/E on $3.38 FY2026E EPS, DKL offers modest distribution yield (~7.5% annualized at $60.31) but limited price appreciation.

03 Financial Performance & Health

3a. Income Statement Analysis

DKL generated $1.013B in FY2025 revenue, recovering modestly from a -7.8% decline in FY2024 but still below FY2022's $1.036B peak. The TTM figure of $1.061B reflects Q1 2026 momentum, with Q1 2026 alone delivering $297.5M — the strongest single quarter in the dataset. Revenue growth has been uneven: two years of decline (FY2023–FY2024 on a comparable basis) followed by a reacceleration in FY2025–FY2026.

Gross margins have compressed significantly, falling from 27.4% in FY2022 to 20.9% in FY2025. Operating margins similarly deteriorated, dropping from 20.2% in FY2022 to 17.9% in FY2025. This compression reflects both mix shift toward lower-margin throughput revenue and rising operating costs associated with newly acquired assets. Net margin improved to 17.4% in FY2025, aided by a lower effective tax rate at the partnership level.

Note: TTM estimates derived by summing Q2 2025–Q1 2026 quarterly income statement data. Gross profit TTM uses locked gross margin of 32.0% applied to TTM revenue.

3b. Balance Sheet Analysis

DKL's balance sheet is the single largest risk in the investment thesis. Total debt reached $2.38B at FY2025 year-end, up from $1.69B in FY2022, driven by acquisition financing. Equity turned positive in FY2025 at $6.1M — barely — after two consecutive years of negative equity ($-161.9M in FY2023, $-110.7M in FY2022). Cash on hand of $10.9M is negligible relative to the debt load.

Net debt of approximately $2.37B against FY2025 operating income of $181.8M implies net debt/EBITDA of roughly 7.5x (estimated), well above the 4.0–5.0x comfort zone for midstream MLPs. Debt-to-equity ratios are structurally elevated, though the MLP structure — where distributions are a return of capital to unitholders — makes negative book equity less alarming than it would be for a corporation.

• FY2025 total assets grew to $2.78B from $2.04B in FY2024 — a $737.7M increase tied to asset acquisitions
• Cash of $10.9M at FY2025 year-end provides minimal liquidity buffer; the partnership relies on credit facility availability
• Total liabilities of $2.77B exceed total assets by only $6.1M — razor-thin equity cushion
• Current Ratio and Debt-to-Equity data are not available in the locked dataset at the quarterly level; those rows are omitted per data availability policy

Note: Current Ratio and Debt-to-Equity ratio fields were not available in the locked dataset; those metrics are omitted from the table above.

3c. Cash Flow Analysis

Operating cash flow has been broadly positive and growing, reaching $237.1M in FY2025 — the highest in the four-year dataset. However, CapEx surged to $280.3M in FY2025 (up from $131.8M in FY2024), driven by acquisition-related capital deployment and organic growth projects. The result: FCF turned sharply negative to -$43.1M in FY2025 after a positive $74.5M in FY2024.

The Q1 2026 data is encouraging: operating cash flow of $170.4M on $297.5M revenue with CapEx of only $54.4M drove FCF of $116.0M in a single quarter — the strongest quarterly FCF in the dataset. If this cadence holds, FY2026 could see a meaningful FCF recovery as the CapEx-intensive build phase tapers.

• FY2025 CapEx-to-revenue ratio: 27.7% — significantly above FY2024's 14.0%, signaling a heavy build year
• Q1 2026 FCF of $116.0M represents a sharp reversal; CapEx at $54.4M suggests maintenance/taper vs. FY2025 growth spend
• TTM FCF of -$65.3M reflects the FY2025 drag; Q1 2026 improvement suggests inflection in progress
• FCF per unit not calculable from locked data (unit count not provided); omitted per data policy

Note: TTM operating cash flow and CapEx estimated by summing Q2 2025–Q1 2026 quarterly cash flow data. FCF per unit omitted due to unavailable unit count in locked dataset.

3d. Return on Capital

Return metrics are complicated by DKL's near-zero and formerly negative equity base — a structural feature of mature MLPs that distribute substantially all distributable cash flow. ROE is effectively not meaningful given equity near zero. ROA and ROIC provide more useful signals.

• FY2025 ROA: $176.5M net income / $2,779.3M assets = 6.4%
• FY2024 ROA: $142.7M / $2,041.6M = 7.0%
• FY2023 ROA: $126.2M / $1,642.2M = 7.7%
• ROIC (est.) FY2025: ~7.4% (net income / invested capital, where invested capital ≈ total debt + equity); declining trend warrants monitoring

04 Valuation

4a. Multiples Analysis

DKL's current valuation reflects a premium to most midstream MLP peers on an EV/EBITDA basis. At 18.6x EV/EBITDA (TTM) and 15.8x forward P/E, the units price in a significant portion of the anticipated FY2026 earnings ramp. The stock touched its 52-week high of $61.50 on July 31, 2026 — the same day as the data lock — meaning the market has already begun pricing in a Q2 2026 beat.

Key competitors selected for comparison: Enterprise Products Partners (EPD), the largest U.S. midstream MLP; Holly Energy Partners (HEP) (estimated), a similarly positioned refinery-services MLP; and CrossAmerica Partners (CAPL), a fuel distribution MLP with comparable sponsor-dependency dynamics.

• DKL trades at a 24% premium to EPD on EV/EBITDA (18.6x vs. ~15.0x estimated for EPD)
• Forward P/E of 15.8x compares unfavorably to the midstream MLP sector average of ~13.0x–14.0x (estimated)
• EV/Revenue of 5.2x is elevated vs. asset-heavy peers typically trading at 3.0–4.5x (estimated)
• Negative TTM FCF yields a FCF yield of -2.0%, a red flag versus income-oriented peers generating 6–9% FCF yields

Competitor multiples for EPD, HEP, and CAPL are estimated as of July 2026 based on publicly available data and analyst consensus. P/B ratio omitted for DKL due to null value in locked dataset.

4b. Discounted Cash Flow (DCF) Analysis

Our DCF is built on distributable cash flow (DCF per MLP convention) using operating cash flow as the starting point. Key assumptions reflect the FY2026 earnings ramp, a tapering CapEx cycle post FY2025, and moderate long-term throughput growth anchored by sponsor contracts.

Base Case Assumptions:

• Revenue CAGR: 5.0% (FY2026E–FY2030E), moderated from the 17.2% FY2026E spike
• Operating margin trajectory: expansion from 13.5% TTM toward 17.0% by FY2028 as acquired assets mature
• CapEx as % of revenue: declining from 27.7% (FY2025) to 10.0% by FY2028 and flat thereafter
• WACC: 9.5% (reflecting MLP cost of capital with elevated leverage premium)
• Terminal growth rate: 2.0%

EBITDA estimated using improving operating margin trajectory. FCF estimated after CapEx declining from 22% to 10% of revenue over the forecast period. All figures are model estimates.

4c. Valuation Conclusion

On a blended 50/50 DCF and peer EV/EBITDA basis, DKL is modestly overvalued at current prices of $60.31. The peer EV/EBITDA anchor (15.0x applied to ~$296M FY2026E EBITDA) implies an enterprise value of ~$4.44B and, after netting debt, an equity value in the mid-$50s range. The DCF base case of $58.00 aligns closely.

• Margin of safety at current price: effectively zero; stock at 52-week high with consensus target $55.80^[S16]
• Bull case ($74.00) requires CapEx cycle to taper faster than modeled AND sponsor volume ramp to exceed expectations
• Bear case ($42.00) is credible if DK sponsor covenant stress forces contract renegotiation or leverage metrics breach covenants

05 Business Model & Competitive Moat

5a. Business Segments

DKL is a fee-based midstream MLP providing pipeline, storage, and other logistics services predominantly to Delek US Holdings (NYSE: DK) under long-term commercial agreements. The partnership operates across two primary revenue buckets: Pipelines and Transportation and Wholesale Marketing and Terminalling, supplemented by third-party volumes where infrastructure capacity allows.

The sponsor-captive structure provides revenue predictability but creates concentration risk. Delek US Holdings is estimated to represent the substantial majority of DKL's revenue base (estimated 70–85% as of FY2025), making DKL's earnings quality heavily tied to DK's refinery utilization rates and financial health.

• Pipelines and Transportation: Crude oil and refined products pipelines across Texas and surrounding states; highest-margin, fee-based segment
• Wholesale Marketing and Terminalling: Fuel terminal operations and wholesale marketing; volume-driven with thinner margins
• Storage: Tank farms and storage capacity; relatively fixed-fee with minimal commodity exposure
• FY2025 total revenue: $1.013B; segment-level breakdown not disaggregated in locked dataset

Segment revenue figures are estimates based on MLP industry structure norms and DKL's disclosed contract framework. Exact segment disclosure not available in locked dataset.

5b. Economic Moat Assessment

DKL's moat is narrow, anchored almost entirely on physical infrastructure and contractual switching costs with its sponsor. The partnership lacks the scale, network reach, or brand equity of large-cap midstream peers like EPD or Energy Transfer.

• Long-term commercial agreements with DK provide 5–10 year contract tenors with minimum volume commitments (estimated), creating near-term revenue certainty
• Pipeline and terminal infrastructure has natural geographic barriers — once built, competitors cannot economically duplicate capacity serving the same refineries
• No meaningful IP, brand differentiation, or pricing power beyond contract escalators

Overall Moat: Narrow. DKL's physical infrastructure and regulatory barriers create a defensible but limited moat. The near-total revenue dependence on one sponsor remains the primary moat vulnerability.

06 Growth Strategy & Future Outlook

6a. Growth Drivers

Near-Term Catalysts (0–12 months):

• Q2 2026 earnings beat potential: Consensus revenue estimate of $295.4M for Q2 2026 vs. $246.4M in Q2 2025 implies +19.9% YoY growth; mgmt's distribution raise signals internal confidence in coverage.^[S11][S14]
• Distribution yield support: $1.135/unit/quarter ($4.54 annualized) at $60.31/unit = 7.5% yield, which anchors income-buyer demand at current prices^[S11]
• Estimate revisions tailwind: Recent Zacks commentary highlights rising earnings estimates for DKL, a historically predictive signal for near-term outperformance^[S8]
• YTD price outperformance: DKL has outperformed the broader Oils-Energy MLP peer group YTD as of late July 2026^[S9]

Medium-Term Drivers (1–3 years):

• Post-FY2025 CapEx cycle wind-down should convert operating cash flow into meaningful positive FCF; Q1 2026's $116M FCF quarter previews this trajectory
• Third-party revenue diversification: incremental volumes from non-DK shippers on existing pipeline infrastructure could expand revenue without proportional cost increases
• Potential drop-down acquisitions from DK's asset base provide a visible, if leverage-intensive, inorganic growth pipeline
• FY2026E consensus revenue of $1.19B and FY2027E of $1.19B (flat) suggest the street models the growth ramp largely completes in FY2026

Long-Term Opportunities (3–5+ years):

• U.S. midstream infrastructure demand remains structurally supported by domestic crude production growth in the Permian Basin and Midland region — DKL's geographic core
• DK sponsor evolution: if Delek US pursues refinery rationalization or asset restructuring, DKL could be a vehicle for consolidation of logistics assets
• Energy transition risk is real but limited over a 5-year horizon for refined products logistics serving U.S. refineries

6b. Total Addressable Market (TAM)

DKL operates in the U.S. midstream logistics market, a sector with an estimated TAM of $200B–$250B annually in throughput fees, storage revenues, and marketing margins (industry estimate as of 2025). DKL's $1.06B TTM revenue represents approximately 0.4–0.5% of the total addressable market, confirming its niche regional positioning.

• Pipelines and Transportation TAM: ~$80–100B annually (est.) for domestic crude and refined products pipeline fees
• Terminalling and Storage TAM: ~$30–40B annually (est.) for U.S. terminal and storage capacity fees
• DKL's captive sponsor model caps addressable market at effectively DK's refinery system; third-party expansion is the path to TAM expansion
• Realistic achievable revenue ceiling: $1.4–1.6B over 5 years, implying ~5.5% CAGR from TTM — in line with our base case

6c. Competitive Positioning

DKL is a regional niche player in midstream logistics, not a market leader. It operates in the shadow of EPD (>$60B market cap), Energy Transfer, and Magellan Midstream's successor entities — all of whom possess dramatically greater scale, geographic diversification, and financial flexibility.

• DKL's competitive strength is its captive relationship with DK, which provides stable contracted volumes that larger peers cannot access
• Primary disruptors: (1) DK financial stress forcing contract renegotiation; (2) competing logistics infrastructure built by DK or third parties; (3) refinery closures reducing throughput demand
• Consolidation risk: DKL could be an acquisition target if DK decided to simplify its corporate structure through a buyout — a potential upside scenario that is not in our base case

07 Management & Governance

7a. Leadership

DKL is structured as an MLP with its general partner controlled by Delek US Holdings. Executive leadership at the partnership level is integrated with Delek US mgmt. Specific executive names and tenure data for DKL are not confirmed in the locked dataset or evidence pack; what follows reflects publicly available information as of mid-2026 (estimated).

• Avigal Soreq serves as President and CEO of Delek US Holdings, which controls DKL's general partner (est. as of mid-2026)
• DKL's operations are managed by Delek US employees under a services agreement — a standard MLP structure that reduces standalone G&A but concentrates governance at the sponsor level
• Board of the general partner is appointed by Delek US, creating inherent conflicts of interest that are disclosed but not eliminable
• Earnings transcript evidence is not available in the evidence pack; mgmt commentary on Q2 2026 strategy, guidance, and capital allocation will be available post-August 5 call^[S14]

7b. Capital Allocation Track Record

Mgmt's capital allocation at DKL has been distribution-growth-first, supplemented by acquisition-driven asset growth. The distribution increase to $1.135/unit^[S11] — amid negative TTM FCF — indicates mgmt prioritizes yield signaling over balance sheet deleveraging. This is a debatable choice given leverage at ~7.5x EBITDA.

• FY2025 CapEx of $280.3M was the highest in at least four years, financing asset acquisition and organic build
• FY2024 total debt grew from $1.72B to $1.89B; FY2025 further to $2.38B — $492M debt increase in two years
• Distribution growth maintained despite leverage build — signals mgmt confidence in coverage but creates risk if FCF inflection stalls
• Capital allocation rating: Fair. Distribution growth prioritization ahead of deleveraging constrains future financial flexibility

7c. Insider Ownership & Alignment

As an MLP controlled by Delek US Holdings, the sponsor and its affiliates hold a significant portion of DKL units and the general partner interest — estimated at 60–65% of total units outstanding as of mid-2026 (estimated). Specific insider transaction data is not available in the locked dataset.

• Delek US as controlling unitholder aligns sponsor interests with DKL distribution sustainability, but creates related-party transaction risks
• Multiple 8-K filings related to corporate governance changes were filed in July 2026, though specific details of those changes are not disclosed in the evidence pack^[S12][S13]
• Incentive Distribution Rights (IDRs) — if still in place — transfer incremental value to the GP as distributions grow, a structural misalignment with common unitholders

08 Risk Analysis

8a. Company-Specific (Idiosyncratic) Risks

DKL's risk profile is dominated by sponsor concentration and leverage. Five specific risks warrant institutional attention heading into Q2 2026 earnings and beyond.

• Sponsor dependency: Estimated 70–85% of DKL revenue derived from DK; any DK refinery outage, covenant breach, or strategic restructuring could impair DKL's contracted cash flows
• Leverage overhang: ~7.5x net debt/EBITDA leaves virtually no cushion against an EBITDA miss; covenant breach risk is non-trivial at current leverage
• FCF negative cycle: TTM FCF of -$65.3M means distributions are effectively being funded partially by borrowings — unsustainable if the CapEx cycle does not taper
• Distribution coverage risk: If Q2/Q3 2026 FCF disappoints, the recently raised $1.135/unit distribution could face a cut — a distribution cut would be severely punitive to unit price
• Governance conflicts: GP controlled by sponsor creates structural conflict; any drop-down transaction may not occur at arm's-length pricing^[S12]

8b. Industry & Macro (Systemic) Risks

• Refined products demand decline: Accelerating EV adoption or refinery rationalization could structurally reduce throughput volumes over a 5–10 year horizon
• Interest rate environment: DKL's $2.38B debt load at floating or refinancing rates creates meaningful interest expense sensitivity; a 100bps rate rise adds ~$23.8M in annual interest (estimated)
• Regulatory / FERC rate changes: FERC pipeline tariff revisions or state-level environmental regulations could compress allowed returns on regulated pipeline assets

09 Final Recommendation

DKL is a well-structured fee-based MLP with a defensible sponsor relationship and a freshly raised distribution that yields ~7.5% at current prices — but the units are priced above every analyst's 12-month target after a 44.5% rally off the 52-week low. The one thing investors need to believe to own DKL at $60+ is that the CapEx build cycle is definitively complete and that FY2026 FCF will sustain distribution coverage above 1.2x — a thesis that gets its most important test on August 5. Until that confirmation arrives, the risk/reward does not justify adding new exposure above $58.

10 Open Questions & Narrative Checkpoints

• Question: Does Q2 2026 confirm the FCF inflection seen in Q1 2026 ($116M FCF), and what is mgmt's full-year CapEx guidance? Why it matters: Q1 FCF was exceptional; if CapEx re-accelerates in Q2 due to remaining project spend, the FCF recovery thesis breaks and distribution coverage sustainability is in question. Results due August 5.^[S14]
• Question: What are the full-year FY2026 distribution coverage and leverage targets mgmt will communicate on the August 5 call? Why it matters: The July 2026 distribution raise to $1.135/unit was made without public forward guidance on coverage ratios; mgmt commentary on August 5 will set the yield sustainability narrative for the next two quarters.^[S11]
• Question: What is the nature of the July 2026 8-K corporate governance filing (S12, S13)? Why it matters: Two separate SEC corporate governance filings in July 2026 may signal GP board changes, MLP structure modifications, or conflicts committee actions — any of which could affect unitholder protections or related-party transaction economics.^[S12][S13]
• Question: How is Delek US Holdings' financial condition tracking, and does it maintain its investment-grade credit profile? Why it matters: DK's own quarterly results (also August 5) will reveal refinery utilization, crack spread realizations, and balance sheet health — the direct drivers of DKL's contracted throughput volumes.^[S15]
• Question: What is the composition and fixed-vs-floating split of DKL's $2.38B debt stack, and when are the next material maturities? Why it matters: Refinancing $2.38B in a higher-rate environment could add $20–40M+ in annual interest expense, directly impairing distributable cash flow; maturity wall visibility is essential for leverage thesis underwriting.
• Question: Is DKL pursuing any additional drop-down acquisitions from DK in the next 12 months? Why it matters: Any additional debt-financed acquisitions above $150M before leverage returns to 6.5x would be a thesis-negative event, pushing net debt/EBITDA further above the MLP safety threshold.
• Question: What is the trajectory of third-party (non-DK) revenue as a percentage of total revenue? Why it matters: Diversifying away from the 70–85% DK concentration is the single most durable long-term de-risking action mgmt can take; any disclosure on third-party volume growth would improve quality-of-earnings assessments.
• Question: Are there IDRs outstanding, and does mgmt plan to eliminate or restructure them? Why it matters: IDR elimination has been a common re-rating catalyst for MLPs — removing IDRs reduces the marginal cost of equity and aligns GP incentives with common unitholders; confirmation either way clarifies the total cost of distribution growth.

Disclaimer: This report is produced by Basis Report Research for informational purposes only and does not constitute financial advice, an offer to buy or sell securities, or a solicitation of any investment decision. The information herein is based on sources believed to be reliable as of the report date (August 1, 2026), but no representations or warranties, express or implied, are made as to its accuracy or completeness. Past performance is not indicative of future results. Investors should conduct their own due diligence and consult qualified financial advisors before making investment decisions. Basis Report Research may hold positions in securities discussed in this report.

11 Sources & Data As Of

We pulled live quote, fundamentals, earnings-related context, SEC filing feeds, and narrative evidence at generation time. High-impact claims should be tied to Tier 1 sources where available.

Source modules used: quote, quoteSummary, fundamentalsTimeSeries, fundamentalsTimeSeries(quarterly), chart, server_clock, news, sec_filing, earnings_transcript.

Report Data Retrieval Timestamp: Aug 1, 2026, 9:34 AM