Delek Logistics Partners (NYSE:DKL) highlighted a “record” year in 2025 and issued 2026 EBITDA guidance during its fourth-quarter earnings call, pointing to continued progress expanding its Permian Basin footprint across natural gas, crude, and water services.
Record 2025 results and 2026 outlook
President Avigal Soreq said 2025 was “an exceptional year,” driven by “strong execution across our businesses” and the addition of “high-quality business such as H2O and Gravity.” The partnership reported record full-year Adjusted EBITDA of $536 million.
Distribution increase extends multi-year streak
Management also announced another quarterly distribution hike. Soreq said the board approved the partnership’s 52nd consecutive quarterly distribution increase, raising the distribution to $1.125 per unit. He noted this marked 13 consecutive years of distribution growth.
Operational updates: Libby expansion, crude performance, and water integration
In natural gas, Soreq said the partnership commissioned the Libby 2 processing plant during 2025, bringing the Libby complex’s capacity to about 160 million scf per day. He added that the expansion is expected to be enhanced by an “acid gas injection and sour gas handling solution” under development, which management described as supporting long-term growth in the Delaware Basin.
EVP Reuven Spiegel provided additional detail, emphasizing the company’s push to offer an “industry-leading sour gas solution” in the Delaware Basin. Spiegel said the ramp-up has been slower than initially expected, but called the need for sour gas solutions “urgent” and said the company expects “a step change” in utilization once the acid gas injection (AGI) and sour gas gathering infrastructure are fully complete. He also said that higher utilization could bring forward the need for additional processing capacity, and that the partnership has made “selected investment” to support potential future Libby expansions.
In crude, Spiegel said crude gathering volumes reached a record fourth quarter and that the partnership is growing infrastructure to provide a more comprehensive offering. Soreq added that both DPG and DDG crude gathering operations delivered strong performance in 2025, with expectations to further optimize and grow the business in 2026.
In water, management said integration of H2O and Gravity has largely been completed. Spiegel said integration of the two water gathering systems “has gone well” and that the expanded footprint is creating additional opportunities. He also noted the partnership expects produced water gathering and disposal to require “more innovation and different approaches” as water cuts increase across the basin.
Financial details: fourth-quarter performance and liquidity
Chief Financial Officer Robert Wright said fourth-quarter Adjusted EBITDA was a record approximately $142 million, compared with $114 million in the prior-year period and $6 million higher than the third quarter’s prior record. Wright reported distributable cash flow (as adjusted) of $73 million and a DCF coverage ratio (as adjusted) of approximately 1.22x.
Wright broke out segment performance for the quarter:
- Gathering & Processing Adjusted EBITDA: $71 million vs. $66 million in 4Q 2024, with the increase “primarily due” to the acquisitions of H2O and Gravity.
- Wholesale marketing and terminalling Adjusted EBITDA: $21 million, flat versus the prior-year quarter.
- Storage and transportation Adjusted EBITDA: $35 million vs. $18 million in 4Q 2024, which Wright said primarily reflected impacts tied to the sale of certain assets to Delek US under a May 2025 intercompany transaction.
- Pipeline joint venture contributions: $26 million vs. $18 million in 4Q 2024, driven by “strong performance” from the Wink to Webster joint venture.
On the balance sheet, Wright said the partnership ended 2025 with about $940 million of available liquidity under its credit facilities, which he said provides flexibility to pursue growth while maintaining financial discipline.
Capital spending and the sour gas buildout
Wright said fourth-quarter capital spending totaled about $32 million, including $26 million of growth capital primarily tied to initiating sour gas capabilities at the Libby complex. The remaining spending was directed to other growth projects, including new connections across Midland and Delaware gathering systems.
During the Q&A, Citi’s Doug Irwin asked about guidance variability and the ramp in gas-related performance. Soreq emphasized the partnership’s strategy across crude, gas, and water in the Permian and pointed to the expected returns on capital invested, describing a “1x–3x” return on investment profile and calling the growth-and-yield combination “very, very good.” Spiegel added that the partnership is drilling the AGI well and building associated sour gas gathering and compression, and he said he expects completion “over the next few months,” positioning the Delaware gas business as “one of our growth engines for years to come.”
Irwin also asked about asset transactions with Delek US involving facilities including Tyler and El Dorado. Wright said the transactions were meant to further “economic separation” and noted that DKL now has 82% of EBITDA from third parties “as a result of this transaction.” He added that the partnership views itself as “materially complete” with inside-the-fence asset sales to Delek US and said the EBITDA impact was “not material to either entity.”
Mizuho’s Gabriel Moreen pressed management on potential next steps for additional Libby processing expansion. Soreq referenced prior comments about a $15 million investment made for future expansion and said the partnership is watching customer and producer activity in the area, which he said implies “more sour” gas and more volume, but he did not commit to a timeline.
Moreen also asked about sour gas-related midstream M&A. Soreq said the partnership was pleased with the timing and valuation of the H2O and Gravity acquisitions and reiterated that the company is not “shy” about acquisitions but will not pursue deals that are “too expensive.” He added that future transactions must be accretive to free cash flow, leverage ratio, and coverage ratio.
About Delek Logistics Partners (NYSE:DKL)
Delek Logistics Partners L.P. (NYSE: DKL) is a master limited partnership formed in 2011 through contributions of pipeline, terminal and crude oil gathering assets by its sponsor, Delek US Holdings, Inc Headquartered in Brentwood, Tennessee, the partnership is managed by Delek Logistics GP, LLC, an affiliate of Delek US. Delek Logistics Partners owns and operates an integrated network of petroleum pipelines and terminals that support the movement, storage and throughput of crude oil and refined products.
The partnership’s core operations include crude oil gathering and processing systems, long-haul pipeline transportation and storage terminal services.
