About Delek US Holdings

Delek US Holdings, Inc. (Delek) engages in the integrated downstream energy business. The company’s business focuses on petroleum refining (‘Refining’ or its ‘refining segment’), the transportation, storage and wholesale distribution of crude oil, intermediate and refined products (‘Logistics’ or its ‘logistics segment’) and convenience store retailing (‘Retail’ or its ‘retail segment’). The company operates through its consolidated subsidiaries, such as Delek US Energy, Inc. (and its subsidiaries) (Delek Energy) and Alon USA Energy, Inc. (Alon) (and its subsidiaries). Segments The company operates through three segments: Refining, Logistics, and Retail. Refining segment The company owns and operates four independent refineries located in Tyler, Texas, El Dorado, Arkansas, Big Spring, Texas and Krotz Springs, Louisiana, representing a combined 302,000 barrels per day (bpd) of crude throughput capacity. The company’s refining system produces a variety of petroleum-based products used in transportation and industrial markets, which are sold to a wide range of customers located principally in inland, domestic markets and which comply with Environmental Protection Agency (EPA) clean fuels standards. All four of these refineries are located in the Gulf Coast Region (PADD III), which is one of the five Petroleum Administration for Defense District (PADD) regional zones established by the U.S. Department of Energy where refined products are produced and sold. The company’s Refining segment also includes three biodiesel facilities it owns and operates that are engaged in the production of biodiesel fuels and related activities, located in Crossett, Arkansas, Cleburne, Texas and New Albany, Mississippi. In addition, the Refining segment includes the company’s wholesale crude operations. Refining System Feedstock Purchases The company purchases more crude oil than its refineries process, generally through a combination of long-term acreage dedication agreements and short-term crude oil purchase agreements. The majority of the crude oil the company purchases is sourced from inland domestic sources, primarily in areas of Texas, Arkansas, and Louisiana, although it can also purchase crude delivered via rail from other regions, including Oklahoma and Canada. Existing agreements with third-party pipelines and Delek Logistics allow it to deliver approximately 200,000 bpd of crude oil from West Texas (principally Midland) directly to its refineries. Typically, approximately 228,000 bpd of the crude oil the company delivers to its four operating refineries is priced as a differential to the price of West Texas Intermediate (WTI) crude oil. Refining System Production Slate The company’s refining system processes a combination of light sweet and medium sour crude oil, which, when refined, results in a product mix consisting principally of higher-value transportation fuels, such as gasoline, distillate and jet fuel. A lesser portion of the company’s overall production consists of residual products, including paving asphalt, roofing flux and other products with industrial applications. Refined Product Sales and Distribution The company’s refineries sell products on a wholesale and branded basis to inter-company and third-party customers located in Texas, Oklahoma, New Mexico, Arizona, Arkansas, Tennessee and the Ohio River Valley, including Gulf Coast markets and areas along the Enterprise Pipeline System and the Colonial Pipeline System, through terminals and exchanges. Seasonality Demand for gasoline and asphalt products is generally higher during the summer months than during the winter months due to seasonal increases in motor vehicle traffic and road and home construction. Varying vapor pressure requirements between the summer and winter months also tighten summer gasoline supply. As a result, the operating results of the company’s Refining segment are generally lower for the first and fourth quarters of the calendar year (year ended December 2022). Tyler Refinery segment The company’s Tyler refinery (Tyler, Texas refinery) has a nameplate crude throughput capacity of 75,000 bpd, and is designed to process mainly light, sweet crude oil, which is typically a higher quality of crude than heavier sour crude. Its property consists of approximately 600 contiguous acres of land that the company owns in Tyler, Texas and adjacent areas, of which the main plant and associated tank farms adjacent to the refinery sit on approximately 100 acres. Additionally, it has access to crude oil pipeline systems that allow the company access to East Texas, West Texas and, to a limited extent, the Gulf of Mexico and foreign crude oil. Most of the crude supplied to the Tyler refinery is delivered by third-party pipelines and through pipelines owned by the company’s Logistics segment. Major processes at the company’s Tyler refinery include crude distillation, vacuum distillation, naphtha reforming, naphtha and diesel hydrotreating, fluid catalytic cracking, alkylation, and delayed coking. The Tyler refinery primarily produces two grades of gasoline (E10 premium 93 and E10 regular 87), as well as aviation gasoline, and also offers both E-10 and biodiesel blended products. Diesel and jet fuel products produced at the Tyler refinery include military specification jet fuel, commercial jet fuel and ultra-low sulfur diesel. In addition to higher-value gasoline and distillate fuels, the Tyler refinery produces small quantities of propane, refinery grade propylene and butanes, petroleum coke, slurry oil, sulfur and other blendstocks. The Tyler refinery produces both low-sulfur gasoline and ultra-low sulfur diesel fuel, both on-road and off-road, pursuant to the EPA clean fuels standards. The Tyler refinery is the major distributor of a full range of refined petroleum products within a radius of approximately 100 miles of its location. The majority of the company’s transportation fuels and other products produced at the Tyler refinery are sold directly from a refined products terminal owned by Delek Logistics and located at the refinery. The company’s customers include major oil companies, independent refiners and marketers, jobbers, distributors in the U.S. and Mexico, utility and transportation companies, the U.S. government and independent retail fuel operators. El Dorado Refinery The company’s El Dorado refinery has a nameplate crude throughput capacity of 80,000 bpd, and is designed to process a wide variety of crude oil, ranging from light sweet to heavy sour. The refinery site consists of approximately 460 acres of land that the company owns in El Dorado, Arkansas, of which the main plant and associated tank farms adjacent to the refinery sit on approximately 335 acres. The refinery receives crude by several delivery points, including from local sources, as well as other third-party pipelines that connect directly into Delek Logistics' El Dorado Pipeline System, which runs from Magnolia, Arkansas, to the El Dorado refinery (the El Dorado Pipeline System), and rail at third-party terminals. The company also purchases crude oil for the El Dorado refinery from inland sources in East and West Texas, as well as in south Arkansas and north Louisiana through a crude oil gathering system owned and operated by Delek Logistics (the SALA Gathering System). Major processes at company’s El Dorado refinery include crude distillation, vacuum distillation, naphtha isomerization and reforming, naphtha and diesel hydrotreating, gas oil hydrotreating, fluid catalytic cracking and alkylation. The El Dorado refinery produces a wide range of refined products, including multiple grades (E-10 premium 93 and E-10 regular 87) of gasoline and ultra-low sulfur diesel fuels, LPG, refinery grade propylene and a variety of asphalt products, including paving grade asphalt and roofing flux. The El Dorado refinery offers both E-10 and biodiesel blended products. The El Dorado refinery produces both low-sulfur gasoline and ultra-low sulfur diesel fuel, both on-road and off-road, pursuant to the EPA clean fuels standards. Products manufactured at the El Dorado refinery are sold to wholesalers and retailers through spot sales, commercial sales contracts and exchange agreements in markets in Arkansas, Memphis, Tennessee and north into the Ohio River Valley region, as well as in Mexico. The El Dorado refinery connection via the logistics segment to the Enterprise Pipeline System is a key means of product distribution for the refinery, because it provides access to third-party terminals in multiple Mid-Continent markets located adjacent to the system, including Shreveport, Louisiana, North Little Rock, Arkansas, Memphis, Tennessee, and Cape Girardeau, Missouri. The El Dorado refinery also supplies products to these markets through product exchanges on the Colonial Pipeline (a pipeline owned and operated by the Colonial Pipeline Company that originates near Houston, Texas and terminates near New York, New York, connecting the U.S. refinery region of the Gulf Coast with customers throughout the southern and eastern United States). Big Spring Refinery The company’s Big Spring refinery has a nameplate crude throughput capacity of 73,000 bpd and is located on 1,306 acres of land that it owns in the Permian Basin in West Texas. The main plant and associated tank farms adjacent to the refinery sit on approximately 330 acres. It is the closest refinery to Midland, which allows the company to efficiently source West Texas Sour (WTS) and WTI Midland crude. Additionally, the Big Spring refinery has the ability to source locally-trucked crude, as well as crude locally gathered from the company’s own developing gathering system, which enables it to better control quality and eliminate the cost of transporting the crude supply from Midland. The Big Spring refinery is designed to process a variety of crude, ranging from light sweet to medium sour, with the flexibility to convert its production to one or the other based on market pricing conditions. The company’s Big Spring refinery receives WTS and WTI crude by truck from local gathering systems and regional common carrier pipelines. Other feedstocks, including butane, isobutane and asphalt blending components, are delivered by truck and railcar. A majority of the natural gas the company uses to run the refinery is delivered by a pipeline in which it owns a majority interest. Major processes at the company’s Big Spring refinery include crude distillation, vacuum distillation, naphtha reforming, naphtha and diesel hydrotreating, aromatic extraction, propane de-asphalting, fluid catalytic cracking, and alkylation. The Big Spring refinery primarily produces two grades of gasoline (premium CBOB and CBOB (motor gasoline blending components intended for blending with oxygenates, such as ethanol, to produce finished conventional motor gasoline)). Diesel and jet fuel products produced at the Big Spring refinery include military specification jet fuel, commercial jet fuel and ultra-low sulfur diesel. The company also produces propane, propylene, certain aromatics, specialty solvents and benzene for use as petrochemical feedstocks, and asphalt along with other by-products, such as sulfur and carbon black oil. The Big Spring refinery produces both low-sulfur gasoline and ultra-low sulfur diesel fuel, both on-road and off-road, pursuant to EPA clean fuels standards, and certain boutique fuels supplied to the El Paso, Texas, and Phoenix, Arizona, markets. The company’s Big Spring refinery sells products in both the wholesale rack and bulk markets. The company sells motor fuels under both the Alon brand and on an unbranded basis through various terminals to supply numerous locations, including the convenience stores in its retail segment. The company sells transportation fuel production in excess of its branded and unbranded marketing needs through bulk sales and exchange channels entered into with various oil companies and trading companies which are transported through a product pipeline network or truck deliveries, depending on location, and through terminals located in Texas (Abilene, Wichita Falls, and El Paso), Arizona (Tucson and Phoenix), and New Mexico (Albuquerque and Moriarty). Krotz Springs Refinery The company’s Krotz Springs refinery (Krotz Springs, Louisiana Refinery) has a nameplate crude throughput capacity of 74,000 bpd, and is located on 381 acres of land that it owns on the Atchafalaya River in central Louisiana. The main plant and associated tank farms adjacent to the refinery sit on approximately 250 acres. This location provides access to crude from barge, pipeline, railcar and truck. This combination of logistics assets provides the company with diversified access to locally-sourced, domestic and foreign crude. The Krotz Springs refinery is designed mainly to process light sweet crude oil. The company is capable of receiving WTI Midland, Louisiana Light Sweet (LLS), Heavy Louisiana Sweet (HLS) and foreign crude from the EMPCo Northline System (the Northline System) and the Crimson Pipeline. The Northline System delivers LLS, HLS and foreign crude oil from the St. James, Louisiana, crude oil terminalling complex. The Crimson Pipeline connects the Krotz Springs refinery to the Baton Rouge, Louisiana area. Additionally, the Krotz Springs refinery has the ability to receive crude oil sourced from West Texas. WTI crude oil is transported through the Energy Transfer Amdel pipeline to the Nederland terminal located near the Gulf Coast and from there is transported to the Krotz Springs refinery by barge via the Intracoastal Canal and the Atchafalaya River. The Krotz Springs refinery also receives approximately 20% of its crude by barge and truck from inland Louisiana and Mississippi and other locations. Major processes at the Krotz Springs refinery include crude distillation, vacuum distillation, naphtha hydrotreating, naphtha isomerization and reforming, and gas oil/residual catalytic cracking to minimize low quality black oil production and to produce higher light product yields. The Krotz Springs refinery has a Complexity Index of 8.8. Additionally, in April 2019, the Krotz Springs refinery completed construction of an alkylation unit with approximately 6,000-bpd capacity that is designed to combine isobutane and butylene into alkylate and enable multiple grades of gasoline to be produced, including premium octane gasoline. The Krotz Springs refinery produces CBOB 84 grade gasoline, as well as high sulfur diesel (HSD), light cycle oil, jet fuel, petrochemical feedstocks, LPG (liquefied petroleum gas), slurry oil and alkylate. The Krotz Springs refinery produces low-sulfur gasoline, pursuant to the EPA clean fuels standards. The Krotz Springs refinery markets transportation fuel substantially through bulk sales and exchange channels. These bulk sales and exchange arrangements are entered into with various oil companies and trading companies and are transported to markets on the Mississippi River and the Atchafalaya River, as well as to the Colonial Pipeline. Logistics segment The company’s Logistics segment consists of Delek Logistics Partners, LP (Delek Logistics), a publicly-traded master limited partnership, and its subsidiaries. As of December 31, 2022, the company owned a 78.8% limited partner interest in Delek Logistics, consisting of 34,311,278 common limited partner units, and the non-economic general partner interest. Delek Logistics is a variable interest entity as defined under U.S. generally accepted accounting principles (GAAP). The company’s Logistics segment generates revenue by charging fees for gathering, transporting, offloading and storing crude oil and natural gas; for storing intermediate products and feedstocks; for marketing, distributing, transporting and storing refined products; and disposing and recycling water. A majority of Logistics' existing assets are both integral to and dependent on the successful operation of Refining's assets, as the company’s Logistics segment gathers, transports and stores crude oil, and markets, distributes, transports and stores refined products in select regions of the southeastern United States and East Texas primarily in the support of the Tyler and El Dorado refineries, and in Central and West Texas and New Mexico, primarily in the support of the Big Spring refinery (Big Spring, Texas refinery). In addition, the Logistics segment provides crude oil, intermediate and refined products transportation services for, terminalling and marketing services to, and disposing and recycling water to, third parties primarily in Texas, New Mexico, Tennessee and Arkansas. Wholesale Marketing and Terminalling The Logistics segment's wholesale marketing and terminalling business provides wholesale marketing and terminalling services to the refining segment and to independent third parties from whom it receives fees for marketing, transporting, storing and terminalling refined products and to whom it wholesale markets refined products. It generates revenue by providing marketing services for the refined products output of the Tyler and Big Spring refineries, engaging in wholesale activity at owned terminals in Abilene and San Angelo, Texas, as well as at terminals owned by third parties in Texas, whereby it purchases light products for sale and exchange to third parties and providing terminalling services to independent third parties and the Refining segment. Three terminals, located in El Dorado, Arkansas, Memphis, Tennessee and North Little Rock, Arkansas, throughput refined product produced at the El Dorado refinery. Three terminals, located in Tyler, Big Sandy and Mount Pleasant Texas, throughput refined product produced at the Tyler refinery. Gathering and Processing The Logistics segment's gathering and processing business owns or leases capacity on approximately 400 miles of operable crude oil transportation pipelines, approximately 450 miles of refined product pipelines, an approximately 1,120-mile crude oil gathering system and associated crude oil storage tanks with an aggregate of approximately 10.3 million barrels of active shell capacity. Storage and Transportation The Logistics segment's storage and transportation business include trucks and ancillary assets that provide crude oil, intermediate and refined products transportation and storage services primarily in the support of the Tyler, El Dorado and Big Spring refineries, as well as to third parties. In addition to these operating systems, the Transportation segment owns or leases approximately 264 tractors and 353 trailers used to haul primarily crude oil and other products for related and third parties. Joint Ventures The Logistics segment owns a portion of three joint ventures (accounted for as equity method investments) that have logistics assets, which serve third parties and the refining segment. These assets include the following: RIO Pipeline: The company owns 33% interest. Joint venture operates a 109-mile crude oil pipeline with a capacity of 145,000 barrels bpd, that originates in north Loving County, Texas near the Texas-New Mexico border and terminates in Midland, Texas (RIO Pipeline). Caddo Pipeline: The company owns 50% interest. Joint venture operates an 80-mile crude oil pipeline with a capacity of 80,000 bpd that originates in Longview, Texas, with destinations in the Shreveport, Louisiana area (Caddo Pipeline). Red River Pipeline Company LLC (Red River): The company owns 33% interest. Joint venture operates a 16-inch crude oil pipeline between Cushing, Oklahoma and Longview, Texas with prior capacity of 150,000 bpd and increased capacity of 235,000 bpd after completion of the expansion project in October 2020 (Red River Pipeline). Supply Agreement Delek Logistics is constructing a connection to a Magellan Midstream Partners, L.P. (Magellan) pipeline that will allow Magellan to supply its Abilene and San Angelo terminals with product transported from the Gulf Coast. Delek Logistics also has active connections to the Magellan Orion Pipeline that enable the company to ship product to its terminals and to acquire product from other shippers. Operating Agreements Delek Logistics has a number of long-term, fee-based commercial agreements with the company and its subsidiaries that, among other things, establish fees for certain administrative and operational services provided by the company and its subsidiaries to Delek Logistics, provide certain indemnification obligations and establish terms for fee-based commercial agreements for Delek Logistics to provide certain pipeline transportation, terminal throughput, finished product marketing and storage services to the company. Most of these agreements have an initial term ranging from five to ten years, which may be extended for various renewal terms at the option of the company. The terms for agreements effective in November 2012 extend through March 2024. In the case of the marketing agreement with the company, the initial term has been extended through 2026. Delek Logistics also entered into an agreement to manage the construction of the 250-mile gathering system in the Permian Basin connecting to the company’s Big Spring, Texas terminal and to operate the gathering system as it is completed. That agreement extends through December 2023. Customers In addition to certain of the company’s subsidiaries, its Logistics segment has various types of customers, including major oil companies, independent refiners and marketers, jobbers (retail stations owned by third parties that sell products purchased from or through it), distributors, utility and transportation companies and independent retail fuel operators. Seasonality The volume and throughput of crude oil and refined products transported through the company’s pipelines and sold through its terminals and to third parties is directly affected by the level of supply and demand for all of such products in the markets served directly or indirectly by its assets. Supply and demand for such products fluctuates during the calendar year. 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. Varying vapor pressure requirements between the summer and winter months also tighten summer gasoline supply. In addition, the company’s Refining segment often performs planned maintenance during the winter, when demand for their products is lower. Retail segment As of December 31, 2022, this segment included the operations of 249 owned and leased convenience store sites located primarily in West Texas and New Mexico. The company’s convenience stores typically offer various grades of gasoline and diesel under the DK or Alon brand name and food products, food service, tobacco products, non-alcoholic and alcoholic beverages, general merchandise, as well as money orders to the public, primarily under the 7-Eleven and DK or Alon brand names pursuant to a license agreement with 7-Eleven, Inc. In 2018, the company terminated the license agreement with 7-Eleven, Inc. and the terms of such termination and subsequent amendments require the removal of all 7-Eleven branding on a store-by-store basis by December 31, 2023. Merchandise at the company’s convenience store sites will continue to be sold under the 7-Eleven brand name until 7-Eleven branding is removed pursuant to the termination. As of December 31, 2022, the company had removed the 7-Eleven brand name at 106 of its store locations. Substantially all of the motor fuel sold through its Retail segment is supplied by the company’s Big Spring refinery, which is transferred to the Retail segment at prices substantially determined by reference to published commodity pricing information. In connection with the company’s Retail strategic initiatives, it closed or sold 52 under-performing or non-strategic store locations since the fourth quarter of 2018. The company’s retail strategy employs localized marketing tactics that account for the unique demographic characteristics of each region that it serves. The company introduces customized product offerings and promotional strategies to address the unique tastes and preferences of its customers on a market-by-market basis. In some locations, the company has implemented the option of a cashless check-out system. Furthermore, the company is actively implementing strategic initiatives to optimize its performance across its retail stores and reduce its reliance on external brand recognition, while developing and optimizing the use of its own brands and evaluating retail opportunities in current and emerging geographic and strategic markets. Fuel Operations Substantially all of the motor fuel sold through the company’s Retail segment is supplied by its Big Spring refinery, which is transferred to the retail segment. Seasonality Demand for gasoline and convenience merchandise is generally higher during the summer months than during the winter months due to seasonal increases in motor vehicle traffic. As a result, the operating results of the company’s Retail segment are generally lower for the first quarter of the calendar year. Weather conditions in the company’s operating area also have a significant effect on its operating results. Customers are more likely to purchase higher profit margin items at the company’s retail fuel and convenience stores, such as fast foods, fountain drinks and other beverages, as well as additional gasoline, during the spring and summer months. Competition The company’s major retail competitors include Chevron, Murphy USA, Sunoco LP (Stripes brand), Alimentation Couche-Tard Inc. (Circle K brand and CST brand), Marathon Petroleum and various other independent operators. Governmental Regulation and Environmental Matters The rates and terms and conditions of service on certain of the company’s pipelines are subject to regulation by Federal Energy Regulatory Commission (FERC), under the Interstate Commerce Act (the ICA) and by the state regulatory commissions in the states in which it transports crude oil, intermediate and refined products. 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 EPA, the U.S. Department of Transportation (the DOT), and the Occupational Safety and Health Administration (OSHA), as well as numerous state, regional and local environmental, safety and pipeline agencies. The company’s operations are subject to certain requirements of the Federal Clean Air Act (CAA), as well as related state and local laws and regulations governing air emission. The company’s operations are also subject to the Federal Clean Water Act (CWA), the Oil Pollution Act of 1990 (OPA-90), and comparable state and local requirements. The Pipeline and Hazardous Materials Safety Administration (PHMSA) of the DOT regulates the design, construction, testing, operation, maintenance, reporting and emergency response of crude oil, petroleum product and other hazardous liquids pipelines and other facilities, including certain tank facilities used in the transportation of such liquids. The Federal Motor Carrier Safety Administration (FMCSA) of the DOT regulates safety standards and monitors drivers and equipment of commercial motor carrier fleets. The operations of the company’s fleet of crude oil and finished products truck transports are substantially in compliance with these regulations and safety requirements. Strategy The company’s business strategy focuses on capitalizing on and growing its integrated business model in ways that allow it to participate in all phases of the downstream production process, from transporting crude oil to its refineries for processing into refined products to selling fuel to retail customers at the pump. The company’s strategy also includes (and continues to include) evaluating certain under-performing and non-core business lines and assets and divesting of those when doing so helps it achieve its strategic objectives. History Delek US Holdings, Inc. was founded in 2001. The company was incorporated in 2016.

Country
Industry:
Petroleum refining
Founded:
2001
IPO Date:
05/04/2006
ISIN Number:
I_US24665A1034
Address:
310 Seven Springs Way, Suite 400 and 500, Brentwood, Tennessee, 37027 United States
Phone Number
615 771 6701

Key Executives

CEO:
Soreq, Avigal
CFO
Spiegel, Reuven
COO:
Israel, Joseph