Delek Logistics Partners, LP Announces Closing of H2O Midstream Acquisition

Rhea-AI Summary

Delek Logistics Partners, LP (NYSE: DKL) has closed the acquisition of H2O Midstream, a portfolio company of EIV Capital, , for a total consideration of $230 million. The deal includes $160 million in cash and $70 million of convertible preferred redeemable equity. H2O Midstream provides water-related services in the Midland Basin, Texas, including gathering, transportation, recycling, storage, and disposal.

This acquisition aligns with Delek Logistics' strategy to offer comprehensive midstream solutions in the Permian Basin. The company expects to leverage synergies through cost optimization and cross-product sales, as H2O Midstream's operations significantly overlap with Delek's existing Midland, Texas operations.

Positive

• Acquisition expands Delek Logistics' service offerings in the Permian Basin
• Potential for significant synergies through cost optimization and cross-product sales
• Addition of water-related services complements existing operations in Midland, Texas

Negative

• Substantial cash outlay of $160 million for the acquisition
• Increased debt to fund the transaction

Financial Analyst

The $230 million acquisition of H2O Midstream by Delek Logistics Partners is a strategic move that strengthens DKL's position in the Permian Basin. The deal structure, with $160 million in cash and $70 million in convertible preferred equity, allows for financial flexibility. This acquisition is likely to be accretive to DKL's earnings in the short term, given the potential for immediate cost synergies and cross-selling opportunities. The expansion of water management services complements DKL's existing midstream operations, potentially leading to improved margins and increased cash flow. However, investors should monitor the impact on DKL's debt levels and the integration process to ensure the realization of projected synergies.

Energy Sector Analyst

This acquisition marks a significant expansion of Delek Logistics' water management capabilities in the Midland Basin, a important area of the Permian. The move is timely, as water management has become increasingly critical in hydraulic fracturing operations. By integrating H2O Midstream's assets, DKL can offer a more comprehensive midstream solution, potentially increasing its market share and customer base. The overlap with existing operations suggests efficient integration and possible economies of scale. This strategic move could position DKL as a more competitive player in the Permian Basin's midstream sector, potentially leading to long-term growth in revenue and profitability. However, the success will depend on effective integration and management of the expanded water services portfolio.

Environmental Compliance Expert

The acquisition of H2O Midstream aligns with the growing emphasis on sustainable water management in oil and gas operations. By expanding its water recycling and disposal services, Delek Logistics is positioning itself to meet stricter environmental regulations and growing demand for responsible water management in fracking operations. This move could enhance DKL's ESG profile, potentially attracting environmentally conscious investors. However, it also exposes the company to increased regulatory scrutiny and potential environmental liabilities. The success of this acquisition will partly depend on DKL's ability to maintain high environmental standards and adapt to evolving regulations in water management for oil and gas operations.

BRENTWOOD, Tenn.--(BUSINESS WIRE)-- Delek Logistics Partners, LP (NYSE: DKL) (“Delek Logistics”) announced today the closing of the previously announced acquisition of H2O Midstream, a portfolio company of EIV Capital, LLC. The H2O Midstream operations include water gathering, transportation, recycling, storage and disposal services in the Midland Basin in Texas. Total consideration of $230 million consists of $160 million in cash at closing (excluding customary closing adjustments) and $70 million of convertible preferred redeemable equity. The transaction is being funded with cash and debt financing.

The acquisition of H2O Midstream supports our core strategy of providing a full midstream service solution to our existing and third-party customers in the prolific Permian Basin. H2O Midstream operations have significant overlap with our existing Midland, Texas operations. The acquisition also presents an opportunity to extract significant synergies through cost optimization and cross product sales.

About Delek Logistics Partners, LP

Delek Logistics Partners, LP is a midstream energy master limited partnership headquartered in Brentwood, Tennessee. Through its owned assets and joint ventures located primarily in and around the Permian Basin, the Delaware Basin and other select areas in the Gulf Coast region and giving effect to the H20 Midstream acquisition, Delek Logistics provides gathering, transportation, recycling, storage, water disposal and recycling services. Delek US Holdings, Inc. (NYSE: DK) (“Delek US”) owns the general partner interest as well as a majority limited partner interest in Delek Logistics Partners, LP, and is also a significant customer.

Safe Harbor Provisions Regarding Forward-Looking Statements

This press release contains forward-looking statements that are based upon current expectations and involve a number of risks and uncertainties. Statements concerning current estimates, expectations and projections about future results, performance, prospects, opportunities, plans, actions and events and other statements, concerns, or matters that are not historical facts are “forward-looking statements,” as that term is defined under the federal securities laws. Investors are cautioned that important factors may affect these forward-looking statements, as described in Delek US’s and Delek Logistics’ filings with the SEC, including risks disclosed in their respective Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and other filings and reports with the SEC.

Forward-looking statements should not be read as a guarantee of future performance or results and will not be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking information is based on information available at the time and/or management's good faith belief with respect to future events, and is subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements. Neither Delek US nor Delek Logistics undertakes any obligation to update or revise any such forward-looking statements to reflect events or circumstances that occur, or which they become aware of, after the date hereof, except as required by applicable law or regulation.

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Investor Relations and Media/Public Affairs Contact:

investor.relations@delekus.com

Source: Delek Logistics Partners, LP

FAQ

What company did Delek Logistics Partners (DKL) acquire?

Delek Logistics Partners (DKL) acquired H2O Midstream, a portfolio company of EIV Capital,

How much did Delek Logistics Partners (DKL) pay for the H2O Midstream acquisition?

Delek Logistics Partners (DKL) paid a total of $230 million for H2O Midstream, consisting of $160 million in cash and $70 million in convertible preferred redeemable equity.

What services does H2O Midstream provide in the Midland Basin?

H2O Midstream provides water gathering, transportation, recycling, storage, and disposal services in the Midland Basin, Texas.

How does the H2O Midstream acquisition align with Delek Logistics Partners' (DKL) strategy?

The acquisition supports Delek Logistics Partners' (DKL) core strategy of providing a full midstream service solution to existing and third-party customers in the Permian Basin.