Delek US Holdings Inc Stock

Hello, everyone. Thank you for joining us, and welcome to the Delek US Second Quarter 2026 Earnings Call. [Operator Instructions]

I will now hand the conference over to Robert Wright, EVP and CFO. Robert, go ahead.

Good morning, and welcome to the Delek US Second Quarter Earnings Conference Call. Participants joining me on today's call will include Avigal Soreq, President and CEO; Mohit Bhardwaj, EVP, New Energy, Strategy and Investor Relations; as well as other members of our management team.

Today's presentation materials can be found on the Investor Relations section of the Delek US website. Slide 2 contains our safe harbor statement regarding forward-looking information. As a reminder, this conference call will contain forward-looking information as defined under the federal securities laws, including statements regarding guidance and future business outlook. Any forward-looking statements made during today's call involve risks and uncertainties that may cause actual results to differ materially from today's comments. Factors that could cause actual results to differ are included in our SEC filings. The company assumes no obligation to update any forward-looking statements.

I will now turn the call over to Avigal for opening remarks. Avigal?

Thank you, Robert. Good morning, and thank you for joining us today. I'm extremely pleased with our strong execution in the second quarter. The quarter further demonstrates our enhanced execution capabilities. First, we successfully navigated the volatility in crude and product markets caused by the event in the Middle East. Second, we made further progress in increasing our free cash flow profile and reducing our overall cost structure.

This quarter reinforced the importance of discipline in maintaining safe and reliable operations and making thoughtful capital allocation decisions. This is especially important during periods of strong margins. We will continue to apply the same prudent approach across our business, capital deployment and corporate culture as we are creating sustainable long-term shareholder value. As I mentioned during the last earnings call, the events in the Middle East and East Europe has created many ripple effects in the markets. We continue to see steep liquidation, swing in crude differentials and shortage of transportation fuels.

In the current environment, we continue to believe that access to crude, high distillate yield and, most importantly, the ability to respond quickly to changing in the market conditions are critical to maintaining operational flexibility and delivering strong performance. We plan to continue navigating this environment with measured approach by, first, mitigating risk; and second, capturing the opportunities offered by the market.

Now I will cover some of our second quarter highlights and strategic initiatives in detail. Starting with refining. Our refining system operated well, demonstrated by all 4 refineries. Big Spring has been running to our expectations since its turnaround. Post turnaround, we are seeing improved reliability, higher crude slate flexibility, improvement in overall product yields and higher octane and blending capabilities. We are very pleased with this improvement and are looking at finding additional opportunities to further improve this important asset in our portfolio. With no planned turnarounds for the rest of the year, our refining system is well positioned to capture the strength in the market.

Moving to EOP. Enterprise optimization plan continue to drive significant value. As a reminder, our enterprise optimization plan target to increase our cash flow by at least $220 million on an annual run rate basis. During the second quarter of 2026, we estimate approximately $60 million of EOP contribution to our P&L. We are currently working on further advancing EOP to create an additional meaningful step change to our free cash flow profile. We'll provide more details on this in the near future.

Our Sum of the Parts initiative also continued to progress with raising strength of our midstream business. DKL today reaffirmed its 2026 EBITDA guidance of $520 million to $560 million. The tailwinds we have been seeing in DKL business continue to rise, and we are working hard to capture these opportunities. DKL is close to completing its comprehensive gathering, treatment, processing and acid gas injection solution. The sour gas solution will provide DKL the ability to fully capitalize on its growth opportunities in the Delaware Basin and maintain its best-in-class EBITDA growth and yield. In 2026, on a pro forma basis, we continue to expect DKL third-party EBITDA to exceed 80%. This level of economic separation is a cornerstone of our Sum of the Parts strategy and continue to bring us closer to our deconsolidation goal. DKL is on the right path, and we continue to work hard to write the next chapter in its growth story.

As mentioned last quarter, we are pursuing a proactive strategy to manage our obligation under the RFS. The SRE provision in the RFS served the important purpose of mitigating the impact felt on small refineries from the RFS burden. RVO costs remain elevated and the absence of SREs created a significant burden on small refineries like us. We expect the EPA to continue to provide relief to small refineries for the year of 2025 and beyond. Finally, we believe that the current administration, Senate, Congress and EPA realize the importance of small refinery exemptions, not only for the refineries which qualify under the program but also for the local communities they serve.

The final piece of our strategy is being shareholder-friendly and having a strong balance sheet. During the quarter, we paid approximately $16 million in dividend and $20 million in buybacks. Our strong balance sheet, improved reliability, EOP and confidence in our outlook continue to support disciplined approach to capital allocation through continued dividend and buybacks. We remain committed to a balanced and disciplined capital allocation strategy and look forward to continuing to reward our shareholders.

In closing, thank you for our team for their hard work and dedication. I'm immensely proud of the progress Delek has made, and I look forward to building on the momentum for the remainder of the year and beyond.

Now I will turn the call over to Robert, who will provide additional color on the quarter.

Thank you, Avigal. For the second quarter, Delek reported net income of approximately $170 million or $2.71 per share. On an adjusted basis, net income came in at approximately $344 million or $5.48 per share, with adjusted EBITDA of approximately $639 million.

Turning to Slide 4, we provide the breakout of adjusted EBITDA and adjusted EPS for the quarter. When we exclude the 50% RVO adjustment, adjusted EBITDA was approximately $490 million and adjusted EPS was approximately $3.64 per share.

Slide 5 walks through the bridge in adjusted EBITDA, excluding the 50% RVO adjustment from the first quarter to the second quarter. The breakdown shows that there were 3 main drivers for the increase in EBITDA. Quarter-over-quarter, performance was led by stronger refining margins, helped by our robust distillate yields, along with higher throughput following the successful completion of the turnaround at Big Spring. In Supply and Marketing, we saw a $60 million increase versus the prior quarter. This improvement was driven primarily by wholesale marketing, which contributed $25 million to the improved results, partially offset by a $3 million reduction in asphalt contribution with the remainder of the change coming from supply.

Our Logistics segment posted its best quarterly results in our history, delivering approximately $144 million in adjusted EBITDA as momentum continued across all 3 of our Permian Basin offerings, crude, gas and water.

Let's move to Slide 15 for a review of cash flow. Cash flow from operations was $263 million for the quarter. This reflects net income for the period adjusted for noncash items, along with $138 million net outflow from changes in working capital. Investing activities was a use of $176 million, reflecting our continued investment in growth. This includes second quarter capital purchases of $61 million at Delek Logistics, primarily for growth projects and $55 million of purchases in refining, along with a quarter-over-quarter reduction of capital accruals, primarily related to the payments on the final expenditures of the Big Spring turnaround, which we completed safely, on schedule and on budget.

Financing activities was an outflow of $82 million, which reflects the paydown associated with the successful refinancing of our term loan from $920 million down to $850 million. It also includes approximately $16 million in dividend payments and approximately $22 million in DKL distribution payments to public unitholders.

Slide 16 breaks out our net debt position between Delek and Delek Logistics. On a stand-alone basis, excluding Delek Logistics, Delek net debt declined by $72 million, driven primarily by the term loan paydown completed as part of the successful refinancing of that facility.

Now turning to Slide 17 and our outlook for the third quarter. Our throughput guidance is as follows: Tyler, 72,000 to 77,000 barrels per day; El Dorado, 78,000 to 83,000 barrels per day; Big Spring, 68,000 to 73,000 barrels per day; and Krotz Springs, 78,000 to 83,000 barrels per day. Taken together, this implies a system throughput target of 296,000 to 316,000 barrels per day for the third quarter.

In addition to the throughput guidance, for the third quarter of 2026, we expect operating expenses to be between $220 million and $230 million, G&A between $50 million and $55 million and D&A to be between $110 million and $120 million.

Additionally, beginning this quarter, we will provide interest expense guidance at both the DKL and stand-alone DK levels. This added disclosure reflects our continued focus on economic separation and capital discipline and underscores the progress we have made on both fronts. We expect net interest expense between $75 million and $85 million, with DK contributing between $28 million and $33 million and DKL contributing between $47 million and $52 million.

With that, we will now open the call for questions.

[Operator Instructions] Your first question comes from the line of Doug Leggate with Wolfe Research.

This is Ayush Gupta on behalf of Doug Leggate at Wolfe Research. He sends his apologies for not making the call today. Congrats on a great quarter. I have a few questions, and I'll start off with the SREs. So can you offer any update on the current timing of 2025? And specifically, can you clarify if SREs are awarded, what are the restrictions on value? Can you sell 2025 credits at 2026 prices? And related, you recently were awarded Krotz Springs having previously been denied. Can you share the process that led to the change in decision and implications for what it might mean across the portfolio for 2026 going forward?

Yes. First of all, thank you for joining us, and please send our regards to Doug. So let's start with a bigger discussion about small refinery exemptions. First, small refinery exemption related to 2025, it's not a Delek situation. It's an industry, it's probably impact like, I would guess, around 40 refineries across the nation and probably impact half of the industry. So it's well beyond us. The issue of small refinery exemptions, and I want you to remember one line here is disproportionate economic harm. And the idea is to maintain high-paying jobs, local communities and affordable fuels. It supports the administration energy dominance, the administration understand it very well, Senate, Congress and EPA and they all understand that it need to be resolved in a timely manner that allow us to comply as needed. And Mohit, I'll let you chime in to give more color around this.

Yes. Thanks, Avigal, and thanks, Ayush, for joining the call. Avigal is absolutely right. The SRE issue is about disproportionate economic harm. And you rightly pointed out in your question, the grant for KSR reflects that. Like our petition was strong and EPA and the DOE, they both agree that we have disproportionate economic harm because of RFS, and that's why our petition was overturned. So as far as we are concerned, we are very excited about our 2025 petitions as well in terms of the strength of them, and we are looking forward to that announcement.

Perfect. And I have a follow-up. Your refining profitability is generally higher cost versus peers and the cost allocated to DKL, can DK hedge margin spread? And what could that really look like?

Yes. Thank you for that question. Generally speaking, some of our investors sees us in getting into the refinery industry and for DK share specifically is to get exposure to crack spread. So we're going ahead and hedging, that is taking some of the teasers investment. So we are not doing it in any meaningful way, and we want to make sure that our investors are well rewarded and awarded for investing in our share, both on what we do on the capital allocation and not blocking the teasers around it. I hope it makes sense to you.

Your next question comes from Alexa Breno with Goldman Sachs.

We wanted to ask first, could you just talk a little bit more about your capital allocation strategy? You've got a good amount of tailwinds coming in from a cash perspective. So how should we think about that, whether that be buybacks, a dividend or any other M&A consideration or any other allocation considerations?

Yes, absolutely. Alexa, first of all, thank you for joining this call, and thank you for your support. So I will be very clear around that, right? We had a very clear capital allocation strategy that they're working very well for us. We maintain dividend through the cycle very well towards that. And then we have a balanced approach between taking care of our balance sheet and buyback. We need to put things in perspective. We bought around 10% of our company since the beginning of 2025, and we are one of the leading companies among our peers around returning capital to our investors. We believe that being friendly to our investor and giving a good return to their investment is cornerstone in our strategy, and we'll keep doing that going forward.

That's helpful. And then just on a follow-up, can you talk a little bit more about EOP? Any places that it's surprising to the upside? And as you kind of think about -- you always talk about it being ongoing in the next leg, like where are areas for further improvement?

Yes, absolutely. EOP, it's a big deal, very big deal in our shop. And we spoke about it many times you and I, how proud we are about the fact that the entire organization is behind it and showing a very good results. EOP, it's not a project. It's a lifestyle. That's something we do. We push the entire organization and the organization love it and come up with more and more idea initiative as we speak.

You need to remember, and I'm sure you know that the whole point of EOP is to create a free cash flow at all market conditions in DK, and we helped you during the presentation we put together, we put a slide that show what happened in terms of EBITDA and free cash flow in a similar market condition and how well it position us going forward. Obviously, we started the program with around $100 million. We more than doubled that as we stand now. And I mentioned that in my prepared remarks, and I'm going to reiterate that we are not stopping here, not even closely. We are working more about the more exciting things around EOP, and you need to stay tuned and expect some more good news to come after that. Mohit, why don't you chime in?

Yes. And Alexa, I think Avigal is absolutely right. So from an upside standpoint, our confidence in our free cash flow profile on a mid-cycle basis is increasing. And we show in our slide deck around $650 million to $700 million in free cash flow, including DKL distributions, and I think our confidence in that free cash flow, which is close to like a 15% to 20% free cash flow yield at current prices is increasing. So we are very happy about EOP. As Avigal pointed out, we are very happy about the next phase of it, and we are very excited about the free cash flow situation that we have coming along for us post EOP environment.

Your next question comes from Manav Gupta with UBS.

I'll pivot a little bit to midstream. You have a very strong sour gas presence. Can you give us an update on in terms of completion of the Libby gas complex, when do you expect to get completed? And then should we expect a ramp into the fourth quarter and year-end? And how that further increases your position in the Permian sour gas opportunity?

Manav, thank you for joining us. It's a great question. We are very excited about the progress we are doing at DKL. DKL today on a pro forma basis, 80% third party. We have a clear, clean strategy of being a premier provider of crude, water and gas in the most prolific area of the Permian Basin. We have a very good growing engine, which is the gas that you just mentioned. We are very close to completing it. We see increase quarter-over-quarter on the gas reprocessing. And lately, Mark took himself that responsibility of leading DKL together with Chris, as I mentioned on my prepared remarks. So that's a very good story for us, and we are very excited about the generation. It's both showing on the DK and the DKL unit and share. So Mark, why don't you take it from here?

Yes. Thanks, Manav. Thanks for the question. Look, what I'll start with is both our plants are running well, both Libbey 1 and Libbey 2. And as you know, we've discussed in the past, we are seeing increasingly more sour gas production from our customers versus sweet, and this trend does continue. As you know, we've added not only the Libby 2 processing capacity, we've completed our AGI well and are now nearing completion of our sour gas gathering and compression offering. providing us with a much needed and unique sour gas solution in the Northern Delaware, which will help our customers continue to grow their production because we're capable of handling that. And look, we do see this driving a step change in our gas volumes as we move through the rest of the year, and it positions us very well for future growth in the region.

Perfect. My quick follow-up is a little bit on the refining macro. Given the amount of global capacity that's down, do you expect the product markets to remain tight? And if you could provide some commentary on how, given your high diesel yield, it really benefits you guys?

Yes, absolutely. And that topic, Manav, as you know, was very well discussed over many calls. And the high-level comment I will provide is we have like 5 million barrels that are off capacity all in. Obviously, we believe that once the event ends, it's going to take a few quarters probably to everything to normalize. So it's not going to end very quickly in terms of the fact that we are short of refined product across the world actually.

We obviously see a steep liquidation versus historical standard. We have wide swing in crude differentials. And we believe that the structural shortage of product is going to last a little bit longer Obviously, larger E&P are more disciplined than smaller, smaller. We show an increase in terms of production. We saw the rigs count increase by around 20 since the event started, which is also another tool in our toolbox. And we obviously saw Brent TI widening in lieu of the different country risk we see now versus beginning of the year.

So what does it mean for us? Let's bring it back on. We have a very good access to product, both Gulf Coast and Mid-Continent, which is a positive. We have the highest among our peers. We provide you a slide, distillate and jet fuel, and that's very good for us to be outside of turnaround cycle and be able to capture that. We have obviously excess of domestic crude, which doesn't put us in working capital issues or in any other supply problems. And we have a very good midstream Permian exposure that allows the holder of DK share to enjoy both. So we are very well positioned around that, and we are very happy about where we are. Mohit, do you want to chime in?

Yes. Avigal, I think you covered a lot of ground there. I just want to emphasize some of the points that you talked about specifically to us. You're absolutely right. With this macro environment that we have seen, we have seen that our producers have started at least completing their wells and production outlook has increased both in the Midland and in the Delaware Basin.

Mark talked about that, which is beneficial for our midstream business, and this is obviously very beneficial for our refining business as well because they have access to these barrels. Flexibility is the name of the game that Avigal talked about. So having high distillate yield, high jet yield, having different sourcing patterns that really helps us. And last thing I really want to talk about is that there are a lot of product pipelines being talked about, which is going to clear our markets. That's also going to have a very positive impact. It has nothing to do with the crisis, but that is some of the macro trends that we are seeing in our markets. Hopefully, that answers your question.

Your next question comes from Jason Gabelman from TD Cowen.

I wanted to go back to the SREs and specifically on crops and the recent award, how should we think about monetizing that award and the magnitude of cash you'll think you could get from that? And where is the priority in terms of where that cash goes?

Yes. First of all, Jason, thank you for joining our call. We're going to keep -- stick to our capital -- very strict capital guidance we provided about the dividend to maintain it all cycle and balanced approach between taking care of the balance sheet and buy back our shares. As Mohit alluded earlier, even in a mid-cycle basis, we are showing $600 million to $700 million free cash flow, which is 15% to 20% yield. So there is a lot of room in our share price to go up. We don't have any plan to have excess cash on our balance sheet. So I want to make it very clear on that. We are not going to hold excess cash just for the sake of holding it. So all of that coming together is pretty clear where it's going to come from this point on. Our strategy is to stay always with compliance, and I will let Mohit to finish it.

Yes. And Jason, as Avigal just pointed out, we don't have a strategy of holding excess cash on our balance sheet. So you've seen our history, we have done a lot of return to capital -- return of capital to shareholders, and that's something that will continue. As far as KSR and the petition is concerned, we are very happy with the outcomes. And this shows the point around disproportionate economic harm that I was making earlier. As far as we are concerned, that reflects well as far as our petitions for 2025 are concerned, and we are excited to see what EPA says. It's important to understand for people like us who stay in compliance, we buy RINs, and this is a return of those rents RINs to us. So it is important that it's not like somebody is giving us cash. It's the cash that we have already invested and is being returned to us.

Okay. Yes. I guess I'm wondering, is there any friction time in terms of receiving those RINs and then monetizing them? Or is that a pretty immediate event?

Yes. So Jason, I think we've gone through this rodeo based upon how this plays out last time. We have a very good strategy around this. We have a very good team who manages our RIN purchases and disposals, if any required. So we have a very good strategy around it. We are not concerned about it. But as I said, SREs is an issue around disproportionate economic harm, and we are glad that EPA took the right decision.

Okay. And then my follow-up is just on kind of near-term refining margin capture dynamics. Obviously, 2Q, you had a pretty steep backwardation. It seems like the curve has eased here in 3Q. Should we expect that to be kind of a one-to-one benefit in terms of kind of the backwardation in 2Q going to easing in 3Q flowing to your refining margin?

Yes, that's pretty much it. You got it right. So $1 in the backwardation is dollar that doesn't reflect itself into the crack and vice versa. You are absolutely right. We see a pretty flat curve now. Maybe on the front, we see like around $1.50 or something like that. So that's pretty flat versus the $6, $7, even more we have seen in Q2, and that's obviously reflected in the crack spread. So you're absolutely right.

Your next question comes from Joe Laetsch with Morgan Stanley.

So I wanted to start on the Sum of the Parts side. Could you just talk through how you're thinking about the current deconsolidation and value unlock options here? You've done a good job with bolt-ons and organic growth in the past at DKL and the currency at DKL has certainly strengthened this year. So curious about the M&A landscape as well.

Yes, absolutely. So I will start by saying the journey of Sum of the Parts. We need to remember the objective is to make sure that the value that we are creating in DKL show both in the share price and unit price. We obviously made progress with that, and there is more steps that we are doing as we speak. What we need to remember here that today, we are standing with around 80% third-party income on the DKL side on a pro forma basis. We are standing in a very, very good location, both on the Delaware side and in the Midland side, and Mark gave his remark about the gas plant, which is a very good unique opportunity.

We obviously have very good asset quality as we stand now on all aspects, DPG on DGG on the crude side, DB on the gas side and also the former H2O and Gravity that we brought in around 5 to 6x, probably the valuation now is around 10, I would guess.

Another dynamic in the market, Joe, that you're probably aware of that we have seen the recent transaction are low to mid-teens that if you're doing the intrinsic value, there is very high upside about where we are. As I said in the past, all options are on the table, and we are promoting one or more of them, either the DK asset sale, obviously, continue doing a bolt-on acquisition or do a buyback like between DK and DKL like we did in the past, which is, to remind you, a free tax exercise.

In terms of the M&A itself, the market is very good for sellers today, and you can take that comment wherever you believe to. And on the top of that, we are not going to do acquisition if it's not accretive to leverage, coverage ratio and it's going to be strategic. So we are looking at all options, and we are staying very, very tuned.

That's helpful. And then shifting to refining, just on the utilization side. So it looks like the system ran well overall across all of the refineries. And you've had some initiatives and turnarounds in recent years to improve the competitiveness of the assets. As we think about the path forward, is there more work to conduct across the system? Or is it in a place now where it's more about just operational execution?

Yes. I will tie 2 answers together. The one answer, we are obviously happy about where we are in terms of reliability and the progress we have done. We have completed the third successful turnaround on budget, on time and most importantly, safely. So we are happy about that. But now I'm going to take the other portion of the answer is enterprise optimization plan is well tied into that. And Joe, you know that we are never going to be happy about where we are with EOP. We made progress $220 million, $60 million this quarter. But the entire organization, and it's coming from all levels, are fully committed to bring -- to write the next chapter of EOP. And don't be surprised if we will come back to you quickly with another level of improvement that we see either in the gross margin, in the products we make, in the location we are selling them in the more area of the business. So stay tuned.

Your next question comes from Matthew Blair with TPH.

So for marketing and supply in the second quarter, apologies if I missed this, but do you have the breakout that includes the details on wholesale marketing, asphalt and your supply activities? And then for the third quarter, do you have any general commentary on the trends that you're seeing, for example, with crude prices moving back up, would that be a headwind to asphalt so far in Q3?

Go ahead, Mohit.

Yes, Matt, thanks for the question. So as we have talked about multiple times, our supply and marketing line item, which we call internally the DKTS is doing very well. We have new leadership in place. We have done -- as we've talked about multiple times, we have tried to improve our wholesale business, our asphalt business, trying to create more value out of it. And you saw the results in the second quarter where versus where we were in the first quarter, results improved markedly despite all the volatility that we are seeing, which is you're also referring to as far as your ask for the 3Q forecast is concerned.

Wholesale is doing very well. We are very optimistic about the improvements that we've been making, and they should continue in the third quarter as well. Asphalt, we still have to see as to how prices settle. Prices have seen a lot of volatility. But as far as even asphalt is concerned, you should have some catch-up based upon the time that has passed since the start of the conflict, but it's all going to depend upon the volatility. So overall, we are very happy with how the business is performing, both in wholesale and asphalt, and we expect improvements all along. Just cannot talk about the volatility around it.

Okay. Sounds good. And then on the SRE proceeds, could you just clarify -- so for like 2025, I think we're estimating that if you receive partial waivers at all 4 refineries, it's just about $600 million. If you receive full waivers, it would be double like $1.2 billion. Is there a tax that you would have to pay on that just because you bought RINs at a lower price and then theoretically be selling them at a higher price? So do you have any estimates on what a potential tax impact might look like?

Yes. So obviously, we are not going to give a specific guidance around that. We still need to make sure 2025 come as we expected, and we're going to follow the capital allocation strategy that we have. And let's stay tuned around that, and we are very optimistic about those sufficient. Mohit, why don't you finish?

Yes. Avigal, thanks for that. And Robert will answer the exact strategy around tax management, which is not just tied to SREs. But as far as your comments were concerned, so we have given the number out for -- total RVO obligation in 2025 was $468.4 million, and that was around a RIN price of $1 a gallon. So you can make your own assumptions beyond that. That was the 2025 pricing in that number. As far as our overall tax allocation strategy is concerned, we're not going to discuss it on the call, but Robert, do you have any comments to make on that?

No, I think Avigal addressed it right. I think we have a lot of levers that we can play to minimize our tax expense on this and obviously, the current economics and profitability that the business is seeing. So nothing to model or share right now, but tax minimization is a key strategy of ours, and we'll employ that on any SREs that were granted.

Yes. It's just a whole -- it's just not tied to the SREs, but overall tax minimization is our strategy. And for us, we are very happy about our cash flow situation and where we are in the cycle right now.

There are no further questions at this time. I will now turn the call back to Avigal Soreq, CEO, for closing remarks.

I want to thank my colleagues here around the table for another great quarter. I want to thank the Board of Directors trusting us, to thank you the investors of sticking to the story and supporting us and most importantly, to our employees who make this company, the great company we are privileged to manage. We'll talk again in the next quarter, and have a safe day.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, everyone. Thank you for joining us, and welcome to the Delek US First Quarter 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Robert Wright, EVP. Robert, please go ahead.

Good morning, and welcome to the Delek US First Quarter Earnings Conference Call. Participants joining me on today's call will include Avigal Soreq, President and CEO; Mark Hobbs; EVP, Chief Financial Officer; as well as other members of our management team.

Today's presentation material can be found on the Investor Relations section of the Delek US website. Slide 2 contains our safe harbor statement regarding forward-looking information. As a reminder, this conference call will contain forward-looking information as defined under the federal securities laws, including statements regarding guidance and future business outlook. Any forward-looking statements made during today's call involve risks and uncertainties that may cause actual results to differ materially from today's comments.

Factors that could cause actual results to differ are included in our SEC filings. The company assumes no obligation to update any forward-looking statements.

I will now turn the call over to Avigal for opening remarks. Avigal?

Thank you, Robert. Good morning, and thank you for joining us today. I'm extremely pleased with our strong execution in the first quarter. The quarter is a testament to our raising capability, as demonstrated by: one, disciplined and successful execution of Big Spring turnaround; second, continued progress on increasing our free cash flow profile through restructuring of our intermediation agreement and continued success of ERP; third, successful navigation of challenging macro events such as winter to fan and more recently, events in Iran. The events in Iran have created many ripple effects in the market. resulting in around 10 million barrels of crude production and approximately 5 million barrels per day of refining capacity remaining offline.

This has created an environment of elevated crude and product prices. This location between physical and paper gates, steep population and wide ranges of crude differentials. We believe the structural product shortage created in this event will continue to impact the market well after the conflict comes to an end.

In the meantime, under the current environment, we believe the refining companies, which will have the biggest advantage are the ones which have direct access to crude, high distillate diesel, high jet and most importantly, ability to quickly respond to changing conditions. We believe because of our access to multiple grades of domestic crude, high distillate and jet fuel and access to both golf and mid-continent product markets put us in a prime position to navigate the challenges and take advantage of the opportunities created by the ongoing disruption.

Now I will cover some of our first quarter highlights and strategic initiatives in detail, starting with the planned turnout in Big Spring. Big Spring successfully completed its planned turnout. This work was executed safely on budget, on time and refinery is running at full capacity. The primary focus of the turnaround has been to improve Big Spring reliability, cost structure and long-term margin capture.

Post the turnaround, we expect important reliability, crude slate optimization, improvement in overall product yields and finally, higher often and blending capabilities. With no further planned turnaround, we have the highest spending quarter behind us.

Our system is well positioned to capture the strong crack spread environment and respond to increasing demand as we move into the summer driving season. Moving on to PX. Enterprise optimization continued to drive significant value. We are once again raising our enterprise optimization plan target to at least $220 million on an annual run rate basis.

During the first quarter of 2026, we estimate approximately $60 million of POP contribution to our P&L. We are looking at ways to further advance the program and create another meaningful step change to our free cash flow profile. We'll provide more details on this in the future.

Our same-park initiatives continue to advance with rising strength of our midstream business. DKL today reaffirmed its 2026 EBITDA guidance of $520 million to $560 million. DKL is currently seeing meaningful tailwinds in the business, and we are working hard to capture these opportunities in a prudent fashion. DKL is taking another meaningful step in completing its industry-leading comprehensive sour gas solution. It has completed the drilling of its first acid gas injection well.

The comprehensive gathering treatment, processing and acid gas injection solution will provide DKL the ability to fully capitalize on the growth opportunities in the Delaware Basin and maintain its best-in-class EBITDA growth and yield.

In 2026, on a pro forma basis, with a continued growth in third-party cash flow, we expect DKL third party EBITDA to exceed 80%. Achieving this level of economic separation has been a cornerstone of our sum of the part strategy, and it continues to bring us closer to our deconsolidation goal. We are in the process of taking additional steps to ensure the strength of DKL third-party midstream service are fully reflected in DKL share price and DKL unit price.

As mentioned last quarter, we are pursuing a proactive strategy to manage our obligation under the RFS. SRE provision of the RFS serve the important purpose of mitigating the impact felt on small refineries from the RFS burden. We expect EPA to continue to provide a relief for 2025 to refineries after clearing the backlog of pending petitions since 2019.

We also remain actively involved in our efforts to get full value for our 2019 to 2022 [ wins ] for which we were provided in valid relief. Finally, we believe that the current administration, Senate, Congress and EPA have realized the importance of SREs not only for the refineries, which qualify under the program, but also to the local communities they serve.

The final piece of our strategy is being shareholder-friendly and having a strong balance sheet. During the quarter, we paid approximately $16 million in dividends. Our strong balance sheet, improved reliability, EOP and confident in our outlook continue to support a disciplined approach to capital allocation through continued dividends and buybacks.

We remain committed to a balanced and disciplined capital allocation strategy and look forward to continuing to reward our shareholders. In closing, thank you for our team for their hard work and dedication during the first quarter 2026. I'm proud of the progress Delek has made and look forward to continue the progress towards the remaining of the year.

Now I will turn the call over to Mark, who will provide additional color on the quarter.

Thank you, page. For the first quarter, Delek had a net loss of $201 million or $3.34 per share. Adjusted net income was approximately $5 million or $0.08 per share and adjusted EBITDA was approximately $212 million. On Slide 4, we showed the breakout of adjusted EBITDA and adjusted EPS for the first quarter. Excluding SREs, adjusted EBITDA and adjusted EPS were approximately $129 million and a loss of $0.98 per share, respectively. This removes the impact of our RVO exemption recognition for the first quarter of $82 million. .

On Slide 5, the breakdown of adjusted EBITDA, excluding SREs from the fourth quarter of 2025 to the first quarter shows that there were 2 main drivers for the decrease in EBITDA. The drivers were primarily in the refining segment, where adjusted EBITDA declined due to the Big Spring turnaround and the impacts of timing in our Supply and Marketing segment, which will reverse over time. Both impacts were partially offset by the increase in refining margins that we experienced in March after seasonally weak margins in January and February.

Supply and Marketing was a loss of approximately $61 million in the quarter. Of that amount, wholesale marketing had a loss of $27.1 million. Asphalt contributed a loss of $12.1 million, with the remaining loss coming from supply. In the Logistics segment, we delivered our best first quarter to date, generating approximately $132 million of adjusted EBITDA, which includes an approximate $10 million negative impact from Winter Storm burn.

Moving to Slide 18 to discuss cash flow. Cash flow provided by operations was $461 million in the quarter. This includes our net income for the period, adjusted for noncash items and a net inflow related to changes in working capital. Investing activities was a use of $190 million. Financing activities was a use of $273 million which includes payments on financing agreements and other activities, approximately $16 million in dividend payments and approximately $22 million in DKL distribution payments to public unitholders.

On Slide 19, we outline our first quarter capital spending with $181 million invested at Delek on a stand-alone basis, the majority of which was related to the plant-wide Big Spring turnaround. With no additional turnarounds or major capital projects planned for the remainder of the year, Big Spring and the broader system are well positioned to capture stronger margins and meet seasonal demand during the driving season.

We also invested $50 million in Delek Logistics, of which approximately $42 million was for growth projects. Our net debt position is broken out between Delek and Delek Logistics on Slide 20. Excluding Delek Logistics, our Delek stand-alone net debt remained largely in line with year-end 2025.

Moving now to Slide 21, where we cover second quarter outlook items. Our throughput guidance for the second quarter is 72,000 to 77,000 barrels per day for Tyler, 78,000 to 83,000 barrels per day at El Dorado, Big Spring will run 65,000 to 70,000 barrels per day, and lastly, Krotz Springs will run 78,000 to 83,000 barrels per day. Our applied system throughput target for the second quarter is in the 293,000 to 313,000 barrels per day range.

In addition to the throughput guidance for the second quarter of 2026, we expect operating expenses to be between $215 million and $225 million. G&A to be between $47 million and $52 million. D&A is expected to be between $105 million and $115 million and net interest expense to be between $80 million and $90 million.

With that, we will now open the call for questions.

[Operator Instructions]

Your first question comes from the line from Alexa Petrick from Goldman Sachs.

With the Big Spring turnaround complete, how should we be thinking about your capital allocation priorities? Recognized this quarter had higher spend, but as we look to the rest of the year, how are you thinking about buybacks and then use of SRE cash inflow?

Yes. Alexa, thank you for everything. So listen, first of all, we are very, very proud of our performance of capital allocation during 2025. We outperformed around 4% versus our peers. We gave more capital back to investors around 4% more than the peer group. So it's a very good outcome in our mind. And we have a very clear, crisp capital allocation program. First, we want to have a balanced approach between buyback and balance sheet that we obviously achieved. Second, we want to maintain dividend through the cycle that we obviously maintain. And third, we want to make it very, very clear. We see a lot of value in our share price and more to come. We have a very good quarter ahead of us, and we are very optimistic. .

Okay. That's helpful. And then our follow-up is just on 2Q. There's definitely a lot of moving pieces in the macro right now. So can you just talk about how we should think about captures and some of these different dynamics?

Yes. Yes. Alexa, in your permission, I will take a step back and talk about the macro in more detail just a little bit because there is a lot of moving parts, and it's a different macro environment versus regular macro environment. So I will start with the facts and then we'll take it from there.

So I think it's pretty obvious that we've seen the Strait of Hormuz closed close to 2 months now. It's a continued period of time. Then I think the consensus in the market that we are stick around 10%, maybe a bit more of crude off-line and around 5 million barrels of refined capacity remain off-line. SPR offsets the crude portion just a little bit, but not to a very meaningful way. That's on the fact side.

On the effect side, what is really happening on the markets, obviously, we see elevated crude and product by market. We see this allocation between physical and paper, which is very meaningful for some. We see steep accusation that obviously is impacting the capture rate for everyone almost and we see a wide swing in crude differentials and especially around Brent TI. So what does it really mean? On the product side, we'll start with that, we believe that the product market will outlast the event, and they will see a lingering effect on the cock spread.

We also see that the risk premium after the event between Brent and TI going to be different. The risk element of Brent, putting itself into the market now and probably going to outlast the event as well. So that's the second point. So what does it really mean? So that actually means higher coal on U.S. shale that present a lower premium risk versus Brent and that's something that we'll see more coming into effect. And being a bit more specific on the Delek side, obviously, we have a big operation on the midstream side that very correlated to what's happening in the impairment at any given point.

Obviously, we have direct access to crude, which make us coming to the market and making changes as needed very quickly. And third, we have access to product market, both on the Gulf and on the group, which give us flexibility around that.

I want to finish with a very important point. We have a very good distillate and jet yield and part of that is due to the EOP we've done last year. I think you remember a slide I put together, we put together, not I, that present a great project that the Eldorado team conduct to basically do more jet with 0 cost capital, and that's paying us very nice dividends today. Mohit, do you want to finish your something?

Yes. Alexa, just one thing to add. I think in this current market environment, as Avigal rightly pointed out, there will be winners and losers in terms of capture rates. And you have to think about people who have access to barrels who are closer to the well and who have very high distillate and jet yield, they are going to be the winners in this environment, and we are very well positioned to capture the opportunities in front of us.

Your next question comes from the line of Manav Gupta from UBS.

I'm also going to ask a little bit of a map [indiscernible] here. So my question, sir, here is when we look at 2Q, Delek is very well positioned. There's no doubt about it. But I'm also trying to understand from the perspective of what you said, I think 2Q will be a story of haves and have nots. Haves are people like Delek who have the crude and have not are people who may have the best refining customer in the world but have no crude. And from my perspective, obviously, Delek is a winner, but do you also think the situation we are in generally, U.S. refining as such is a winner because you have the crude, you have the demand, you're not really dependent on Strait of Hormuz. So we have this dynamic playing out where relative to global peers, U.S. refiners and Delek can actually show a lot of outperformance. If you can talk a little bit about that?

Yes, absolutely, Manav, a very smart question. Mohit and I and Mark and the team speak about it all the time and Mohit there is a lot of tons of energy around the topic, so I'll let Mohit chime in. .

Yes. Thanks, Avigal. And Manav, thanks for all the good work you're doing. You're absolutely right. U.S. refining will have an advantage because U.S. is 1 of the largest crude producers in the world. U.S. has the most flexible refining system in the world. And most importantly, you see U.S. natural gas prices are very low. So from an OpEx standpoint, we are also at an advantage. But you rightly pointed out the biggest winners will be the guys who have access to barrels even within the U.S. and who have very high distillate and jet yield and which is why we like our position versus anybody else in the U.S. refining system right now.

Perfect. My second quick follow-up, Mohit, or Avigal is that when we look at the price of the RIN, that's going up, and that does impact the price of gasoline. In my opinion, there is a higher probability of SREs in 2026 that there was even in '25 and '24. If you don't issue SREs, you can cause the price of RIN to get to a point where gasoline can go to $5. Can you talk about those dynamics? Why the profitability of SREs is even higher now than what it was in '25 and '24?

Yes, absolutely. And I will take Manav with your permission, I will take a step back and give you a wider answer about the SRS. So given SRE a very bigger topic. SRE, it's not a Delek issue. And it's directly impacting close to 4 refineries, and I would say it's impacting around half of our industry, more or less. So it's a very big, big, big deal. And I want to make it very clear. The SRE, the whole point of the law is disproportionate economic harm, disproportionate economic harm. And it's for each asset and each community. It's not related to companies. And the essence of the law is to maintain high paying job to maintain local communities and affordable fuel. When we are looking at compliant costs, of small mid-cap in the last 5 years. It's 85% of the group, but it is [indiscernible] that's a little different dynamic. Risking SRE, as you smartly stated, we need to [indiscernible] pump. Very clear. It's very clear. .

And just coupling critical topic of SRE that we just mentioned with 15 is like putting square peg in a round hole. So it's very, very obvious and clear. And Mohit, please chime in. .

Yes, Manav, again, a very good question. Look, as Avigal rightly pointed out, RFS and [indiscernible] is an issue about disproportionate economic harm. So we show in our slide deck at $1.50 a gallon blended RIN price, our 2026 RVO compliance is close to $750 million. So if you think about that number, so for us, people like us who stay in compliance. It's not like you get SREs as cash. You have to stay in compliance, and then you get the money that you spend on mine reins back. So for us, this is not just an issue about how RFS is working. It's only an issue of our disproportionate economic harm. And you rightly pointed out in a lot of market participants are pointing this out that if you don't have 2026 SREs granted, based upon the current renewable volume obligations, you will have a deep deficit in 2027 RIN bank, and as Avigal pointed out, that's going to impact affordability at the pump, which is squarely against this administration's energy dominance agenda. So we definitely want -- or we definitely expect SREs to continue, but that's up to the EPA to decide. But our expectation is in line with the government's agenda, they will be granting these SREs on a go-forward basis/

Yes, I think the API put a very clear clean framework together that has all the capability in the world to fall through. And as Mohit pointed very well the administration, the administration energy dominance program together that SRE is a very important part of it. .

Your next question comes from the line of Matthew Blair from TPH.

Congrats on the strong results. Could you talk about the Big Spring refinery is running post the turnaround? Are you seeing any operational improvements? And I guess we would have thought, did the turnaround stretch into the second quarter at all? We would have thought that the Q2 throughput guidance might have been a touch higher. So could you address that?

Yes. So the price of the turnaround, which we are very happy about the turnaround was the improved reliability to improve crude optimization, higher Octane, blending options, margin and cost. We are very happy about what we see. We have a very good team over there, and we are very optimistic about the Big Spring going forward. And we leave it to that, more to come. We have a very strong guidance and more to come. .

Yes. Matthew, you rightly pointed out our guidance. But we are big spring coming out of the turnaround, we are just being a little bit more conservative. And hopefully, things will play out the way we expect them to.

Sounds good. And then could you talk about what you're seeing in the end market demand so far in the second quarter, both for gasoline as well as diesel. I guess for Jet as well, is there any evidence of demand destruction given the higher price environment? Or does demand still look pretty strong? .

Yes. In other markets, we are operated, we see strong demand, we see decent netbacks, the group dynamics improving as we speak, and that's very positive. We do not see a demand destruction, [indiscernible] and I think that it's -- the demand we see is really resilient at this junction. Please, Mohit.

Yes. Again, a good question. So if you look at Europe, we have seen some talks around people reducing capacity as far as the airlines are concerned. -- the U.S. demand remains very strong. We are seeing there's going to be potentially a very strong summer gasoline driving season. Gasoline remains the part of the barrel right now. And as people are focused on distillate and jet, we also think gasoline cracks also have a room to move higher. So we don't see any demand discussion in the U.S. just yet, but I think we do see the outlook for cracks, especially in Q3 to move higher, is very evident based upon where things are right now.

Your next question comes from the line of Jason Gabelman from Cowen. .

First, just on, I guess, regional product prices, it's looking right now like Group 3 is still a bit discounted versus the Gulf Coast. Typically, I think you'd see Group I already strengthen at this time of year. Can you just talk about your forward outlook for the relative values between those 2 markets? And if you expect normal seasonality to take hold? .

Yes, absolutely, Jason. Thank you for the great question. The way we see a group today is actually stronger coming this morning. We just checked that before the call, so that's positive. Obviously, the group has dynamic of its own. And even if you are putting your long-term view on that, you see the group dynamic in the near and midterm future going to be different. We've just seen 2 pipelines. One is coming second half of the year and the other one coming later on like 3, 4 years down the road, that's going to make move barrels from the group into PADD 4 and PADD 5.

So we are looking at the group also on a very tactical basis as today, but we have the obligation and the duty to and the opportunity to look at the group down the road. And I think the group that we remember versus going to be very different versus the group that we're going to see starting second half of this year and probably even more importantly, when the next line is going to be executing and move the product into PADD 5. So that's a very good dynamic on the short term, midterm and long term to our position.

Great. And maybe if I could go back to the small refinery exemptions, do you have a sense around timing of when you should expect to receive those? And I know you've kind of presented cases where you think you're able to get up to $400 million -- the full, I guess, amount of exemptions for all your plants. How do you square that with kind of the EPA publishing an expected amount of exemption to both [indiscernible] the next 2 years, which seems consistent with the past few years.

It's a great question. We have a tremendous amount of trust with the EPA. I think DPA put a very strong strict guidance. The EPA was able to clear a backlog of 2019 to 2022 and we are confident the EPA is going to do what it says it's going to do. It's a very reliable administration in this regard. I'm sure the administration see the correlation between small refinery exemption and the price at the pump. And we look into that. .

Your next question comes from the line of Doug Leggett from Wolf Research.

I had some connection problems. I apologize for dialing in a bit late. Guys, I know that the SREs have been fairly well flogged on the call, but I just want to make sure I understand something. The guidance you've given for '20 -- or not the guidance, but the indication you've given for 2026, what are you assuming for the RIN because it's basically doubled since the beginning of the year. And I'm trying to get a feel for if you -- I can't really -- I don't know what the scenario is where you don't get the RIN or the SRE and the duration at least for the Trump administration. So what would you -- if you were to roll forward the current RIN price into '27 and '28, basically the 4 years, I guess, of that period, the Trump administration, what would your number be?

Thank you, Doug, and thank you for joining us. It's really important for us. And I will let Mohit stay very close to the topic to take this one. .

Yes, Doug, as we've talked about in the past, the way EPAs look at a lot of these issues is trying to have a happy medium. It's a mathematical equation that they have in their minds. So looking at SREs, they're looking at RVO, they're looking at imports, and they're looking at all of these issues together and reallocation as well to come up with a price, which is -- so that affordability at the pump remains.

As far as our 2026 numbers are concerned, so we show that very clearly in our slide based upon our current estimates and $1.50 a gallon blended D4, D6, D3 RIN price, we should have a $750 million RVO obligation in 2026.

But just to be clear, the RIN Mohit isn't $1.50, it's $1.90.

Yes. Yes, Doug, you're absolutely right about that.

Yes. That's what I was confused about your previous answer to the Manav asked the question because -- so what in your mind then, if you don't mind my follow-up, what would drive -- what would cause the RIN value the RIN bank standpoint to move back significantly lower from here.

Yes. Look, Doug, from our vantage point, based upon the numbers and Jason, Avigal was talking about those numbers in the previous question, you would have a significant 2027 deficit if those are the level of SREs which are granted. So that is 1 toggle that EPA does have. And that is why I think 2026 SREs are extremely important to manage 2027 win bank. What exactly EPA will do and they're extremely smart, honest people working at the EPA, they will figure it out. But for us, we're just trying to manage our situation and highlight the fact that SREs are an issue by disproportion economic harm, and we just are trying to manage our position based upon that.

Your final question comes from the line of Joseph Laetsch from Morgan Stanley.

Absolutely. So I wanted to start on the EOP program where you've made good progress to increase the target again to over $220 million of it goes to 6 rate, if I heard you right. Could you just talk through some of the initiatives to help drive this improvement and how we should think about the potential upside and maybe potential 73s from here?

Yes, absolutely. And thank you for that question. The question I really like because EOP, first and foremost, Joe, you know that we spoke about it privately in the past, it's all about lifestyle. And when we -- it was really important for us, and we are extremely proud of the ability to push ERP to the entire organization. You see the buy and you see people talking about it in the hallway. It's not a project, it's not a spreadsheet. It's people really think how to make more of what we have. And if I'm going to refinery, I hear it in the -- between the units. If I'm going to the accounting team, I hear them speaking about that. If we are going to commercial, it's across the company.

So it's not just about cost savings. As we said in the past, is what we make, where we sell and all the value chain that we are owning A to Z. As you can -- as you probably can see very easily, Joe, it's very clear in our financial results. You can see it very, very clearly in Eldorado, in G&A, in the capture rate of the rest of the refinery. So that's very, very obvious that we can all see it. And we are always looking, I said it in my prepared remarks, we are always looking to how to make it better, what else we can do, what -- how else we can improve. And I'm very, very proud of the team here that taking the high road on that and making that part of our DNA.

I want to finish with important comment. If you look in our deck slide in our deck that we prepared, we are seeing around $600 million to $700 million on a mid-cycle environment of free cash flow. And that's around 20% to 30% of our current market price. That's a tremendous opportunity. And I want to capture this comment and the comment that I answered Alex and put those together that we see a tremendous amount of value about where we are. So thank you for that great question.

Perfect. That's helpful. And then I wanted to just ask on the sum of the parts side. Can you talk through latest thinking about current deconsolidation, value unlock options from here as well. You've done a good job with bolt-ons and organic growth at DKL. So just any thoughts on the path forward here would be helpful.

Yes, absolutely. So you're absolutely right. deconsolidation is our ultimate goal, and we're going to do it on the right price, on the right condition. We see tremendous amount of value in our DKL story pro forma basis, 80% third party. It's unheard of versus what we used to be. We have done -- as you said, 2 very acquisition that we are extremely pleased. We've built a gas plant that we are extremely pleased. We have a very clear, clean strategy of being a premier provider of crude, gas and water in the most prolific area of the [indiscernible] basin, and we have created something here very, very, very beautiful that we are very proud of. .

We see that the current value based upon the intrinsic asset set in DKL needs to have a 7 handle on this unit. So for the right price, we will reward -- deconsolidate and reward investors going forward. We need to make sure that there's great value creation that was created in the midstream business vis-a-vis the 80% pro forma third party is fully reflected both on the DKL share price and unit and DKL unit price. So we're going to do 1 of 4 ways that as we are doing, we are doing 1 or more of 4 ways, keep doing bolt-on acquisition, deconsolidation because people see the value in the DKL unit, 3 consecutive increase in distribution, it's pretty much unheard of and our ability to reward investors.

Second, if a price for the right price might be selling assets. for the right price, DKL has the ability to buy on its unit from DK. And we can always sell DKL for the right price. As I mentioned, we see the intrinsic value of 700 on the unit price. So we are extremely aggressive and disciplined around this opportunity and more to come.

There are no further questions at this time, and we have reached the end of the Q&A session. I will now turn the call back to Avigal Soreq, CEO, for closing remarks.

Thank you for everyone who joined the call. Thank you for my colleagues here did a great job thank you for the investors that sticking with the story and like what we are doing. I want to thank the Board of Directors and most importantly, our great employees that make this company what it is. .

This concludes today's call. Thank you for attending. You may now disconnect.

Thank you for standing by. My name is Jayle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Delek US Fourth Quarter Earnings Call.

[Operator Instructions]

I would now like to turn the conference over to Robert Wright, EVP, Delek. You may begin.

Good morning, and welcome to the Delek US Fourth Quarter Earnings Conference Call. Participants joining me on today's call will include Avigal Soreq, President and CEO; Mark Hobbs, EVP, Chief Financial Officer; as well as other members of our management team.

Today's presentation material can be found on the Investor Relations section of the Delek US website. Slide 2 contains our safe harbor statement regarding forward-looking information. As a reminder, this conference call will contain forward-looking information as defined under the federal securities laws, including statements regarding guidance and future business outlook. Any forward-looking statements made during today's call will involve risks and uncertainties that may cause actual results to differ materially from today's comments. Factors that could cause actual results to differ are included in our SEC filings. The company assumes no obligation to update any forward-looking statements.

I will now turn the call over to Avigal for opening remarks. Avigal?

Thank you, Robert. Good morning, and thank you for joining us today. 2025 was a transformational year for Delek. We have made progress on all fronts, including improving the free cash flow profile of the company and increasing the economic separation between DK and DKL. The year also concluded with a strong fourth quarter results. In Q4 2025, excluding SRE, Delek reported an adjusted EPS of $0.44 and adjusted EBITDA of approximately $226 million. These results highlight the accelerating momentum at Delek and the stability of our strategy.

Now I will cover some of the achievements in 2025 in detail. Starting with EOP, I'm proud of how we have created a culture of continuous improvement through our enterprise optimization plan. EOP drove substantial value throughout the year with a strong execution and measurable progress across all business units. As a result of continued success, we are once again raising our enterprise optimization plan target to at least $200 million on an annual run rate basis.

Our sum of the parts initiatives continue to advance. 2026 is expected to have highest economic separation between DK and DKL. 2025 was a record year for DKL with approximately $536 million in adjusted EBITDA. DKL continued to build on its premier position in the Permian Basin through its full suite of service and strong organic growth. Continuing the momentum, DKL today announced its 2026 EBITDA guidance to be in the range of $520 million to $560 million. DKL is close to the finish line on its industry-leading comprehensive sour gas solution, including gathering, treatment, processing and acid gas injection, providing market access for residue gas and NGLs. These capabilities will provide DKL the ability to fully capitalize on its growth opportunity in the Delaware Basin and maintain its best-in-class EBITDA growth and yield.

In 2026, on a pro forma basis, with continued growth in third-party cash flow, we expected DKL third-party EBITDA to exceed 80%. Achieving this level of economic separation has been cornerstone of our sum-of-the-parts strategy. We are taking additional action to ensure the strength of DKL third-party midstream service are fully reflected in the share price and unit price.

As I always do, I will now give an update on our key long-term priorities. First, safe and reliable operations. We had a strong operational quarter in our refining system with solid performance from our 4 refineries. At Big Spring, our first quarter 2026 planned turnaround is progressing well and remains on track. The focus of this turnaround is to further enhance reliability and operational flexibility, positioning the refinery for improved cost structure and margin capture. We expect this enhancement to drive meaningful performance improvement once the refinery returns to full operations. This is our only planned turnaround in 2026, which sets our refining system up well for the remainder of the year.

Second, I would like to add a little more context on our Enterprise Optimization Plan. As a reminder, we started EOP with an aim to improve DK cash flow by $80 million to $120 million on a run rate basis, starting in the second half of 2025. As a result of the strong buy-in from the organization, we have been able to continue to increase our EOP range. We are again increasing our expectation for EOP-related cash flow improvement to at least $200 million annually.

During the fourth quarter of 2025, we estimate approximately $50 million of EOP contribution in our P&L. The success of EOP is clearly visible in the performance of El Dorado refinery supply and marketing results and G&A. This improvements are here to stay and have set us up for long-term success. I'm confident that EOP will remain a core strength well into the future. As mentioned last quarter, we pursued a proactive strategy to monetize the 2023 and 2024 RINs granted after the EPA cleared the backlog of pending 2019 to 2024 SRE petitions. I'm pleased to announce that we were able to monetize a large portion of our '23 and '24 RINs faster versus our original plan and have been able to use the proceeds to reduce our inventory intermediation agreement. The restructuring of the IIA will improve our free cash flow generation on the top of EOP by at least $40 million on a yearly basis.

We remain actively involved in our effort to get full value for the 2019 to 2022 RINs for which we were provided invalid relief. Finally, we believe that the current administration, Senate, Congress and EPA realize the importance of SREs, not only for the refineries which qualify under the program but also to the local communities they serve. We believe SREs will remain a core part of the current administration energy policy as it advance its energy dominance agenda.

The final piece of our strategy is being shareholder-friendly and having a strong balance sheet. During the quarter, we paid approximately $15 million in dividend and bought back approximately $20 million of our shares. Our strong balance sheet, improved reliability and confidence in EOP enable us to do countercyclical buyback in 2025. I'm proud to continue our strong shareholder return, dividend and buyback through the cycle. We remain committed to a disciplined and balanced approach to capital allocation and look forward to continue rewarding our shareholders.

In closing, thank you for our team for their hard work and dedication through 2025. I'm proud of the progress in Delek over the last year and look forward to continue this progress in 2026.

Now I will turn the call over to Mark, who will provide additional color on the quarter.

Thank you, Avigal. For the fourth quarter, Delek had net income of $78 million or $1.26 per share. Adjusted net income was $143 million or $2.31 per share, and adjusted EBITDA was approximately $375 million.

Moving to Slide 5. We show the breakout of adjusted EBITDA and adjusted EPS for the fourth quarter. Excluding SREs, adjusted EBITDA and adjusted EPS were approximately $226 million and $0.44 per share, respectively. This removes the reduction in cost of materials of $75 million associated with prior year SREs and the impact of our RVO exemption recognition for the fourth quarter of $74 million. For the full year 2025, excluding SREs, our adjusted EBITDA was approximately $763 million.

On Slide 19, the breakdown of adjusted EBITDA, excluding SREs from the third quarter of 2025 to the fourth quarter shows that there was one main driver for the decrease in EBITDA. The primary driver was in the refining segment, where adjusted EBITDA declined by $91 million, largely due to seasonality. Excluding SREs, supply and marketing contributed approximately $23 million in the quarter. Of that amount, approximately $35 million was generated by wholesale marketing. Asphalt contributed a loss of $4.2 million with the remaining contribution coming from supply. In the logistics segment, we continue to have another strong quarter, delivering approximately $142 million in adjusted EBITDA.

Moving to Slide 20 to discuss cash flow. Cash flow provided by operations in the fourth quarter was $503 million. This includes our net income for the period adjusted for noncash items, monetization of SREs and a net inflow related to changes in working capital of $26 million. When adjusting for working capital and SREs, cash flow from operations was $119 million. This was an improvement of $211 million when compared to the fourth quarter of last year. This improvement was driven by an increase in net margin in the quarter versus last year and the continued success we are having with our enterprise optimization plan.

Investing activities of $117 million in the quarter includes approximately $26 million for growth projects primarily at DKL. Financing activities of $391 million includes approximately $380 million related to the paydown of our inventory intermediation agreement and associated inventory financing, which will result in at least a $40 million reduction in annual interest expense. $20 million in share repurchases, approximately $15 million in dividend payments and approximately $22 million in DKL distribution payments to public unitholders.

On Slide 21, we outline our fourth quarter capital spending with $82 million invested at Delek stand-alone and $31 million at DKL, largely for growth projects. Our net debt position is broken out between Delek and Delek Logistics on Slide 22. Excluding Delek Logistics, our Delek stand-alone net debt remained largely in line with prior quarters.

Moving now to Slide 23, where we cover first quarter outlook items. Our throughput guidance for the first quarter of 2026 is 70,000 to 74,000 barrels per day at Tyler, 66,000 to 71,000 barrels per day at El Dorado, due to the planned turnaround Big Spring will run 22,000 to 28,000 barrels per day, and lastly, Krotz Springs will run 82,000 to 86,000 barrels per day. Our implied system throughput target for the first quarter in the 240,000 to 259,000 barrels per day range.

In addition to throughput guidance for the first quarter, we expect operating expenses to be between $210 million and $220 million. Our guidance for the first quarter incorporates increased operating expenses associated with preparing for winter storm Fern. G&A to be between $47 million and $52 million. D&A is expected to be between $100 million and $110 million and net interest expense to be between $75 million and $85 million.

With that, we will now open the call for questions.

[Operator Instructions] Your first question comes from the line of Doug Leggate of Wolfe Research.

I won't if -- it's great to see these SREs showing up. But I wonder if I could just ask a couple of questions relating to what you've already booked. So I guess I'm really looking for the cash inflow and what's remaining still to be recognized for the SREs that you've already been awarded. And maybe you could address how you -- what the path is to get the pre-2023 SREs recognized. That's my first question.

My second question is on the go-forward SRE value because it's obviously massive. And there's a lot of other things we could talk about like the EOP and so on today. But the dominant issue, we think, is the value of the '25 through '28 RINs and any risks from legislative changes that you see there. So could you maybe offer any insight you can on why you continue to risk the 2025 RINs specifically?

Yes, absolutely, Doug. And with your permission, I will try to start with the future. And again, this is one person opinion about what the situation exactly. But when we are talking about the future, first of all, we need to understand it's not a Delek topic. It's a way broader topic than that. It's directly impacting close to 40 refineries and indirectly impact to the breadth, half of our industry. So it's a huge, huge topic. And I want to make it even more clear than that. The whole point of SRE is disproportionate economic harm, disproportionate economic harm. And that's -- and the essence of the law behind it is to maintain high-paying jobs, local -- to support local communities and to be able to have affordable fuel for those communities. So it's very, very, very important.

SRE and small refineries are critical to meet the energy dominance policy of energy, critical in our mind and are here to stay. About the 2019 to 2022, you asked that as well. I want to say something that relief and eligibility are coming together. So we are obviously eligible for those SREs but we got invalid RINs. There is an acronym for those RINs lately, it's a zombie RINs. That's what the people just called them. And since those twins of relief and eligibility coming together, we believe in our case around that, and we believe that we'll get full value for what we already pay.

So Mark, why don't you touch the proceeds?

Yes, yes, sure, Avigal. And Doug, I appreciate the question. And as Avigal mentioned in his prepared remarks, look, we're extremely excited and proud of the progress we made during the quarter. We saw an opportunity during the quarter to restructure and pay down our inventory intermediation agreement, and our team did a great job, and they were actually able to monetize a vast majority of the RINs from our prior year SREs from 2023, 2024, that $400 million that we mentioned on last quarter's call, much earlier than our original estimate of 6 to 9 months, raising approximately $360 million during the fourth quarter. And at the end of the quarter, near the very end, we used these proceeds and available cash to pay down approximately $380 million under the IIA and associated inventory financing, which was a large portion of what we actually had outstanding under the program. And these activities are going to reduce our annual interest expense associated with the IIA by at least $40 million.

This further enhances our free cash flow generation. And as Avigal also mentioned in his prepared remarks, this is on top of and beyond everything that we've discussed to date with regards to our EOP initiatives.

And Doug, just to Doug, one more thing -- yes, I just wanted to add to what Mark and Avigal just talked about. And I think you were mentioning and you're trying to touch upon this point about whether some of this value is reflected in our stock price or not. But if you look at just on a mid-cycle basis, preinventory intermediation agreement restructuring, we would have made $150 million of free cash flow. And Mark just talked about another $40 million on top of that. If you take that $190 million of value at 10% free cash flow, that's $32 a share. And if you look at our value of DKL, that's another $32 a share. So that's at least $65 a share that's missing. And that's got nothing to do with SREs at all. So we definitely agree with you that there's a lot of value that's still not reflected in our shares.

And to answer one last piece of your question, yes, there's some more left beyond the monetization that we have done for 2023 and 2024 RINs, still left to be -- which we expect to be monetizing in the first half of 2026, most likely in the first quarter.

Guys, I don't want to hog the question here but I want to make sure you understood my question about the forward. Slide 18, you're showing a range of 50% to 100%, $468 million on a 100% basis. But you're also giving us guidance that all 4 refineries are going to be under 75,000 barrels a day. So why should we risk that number in '25 or for that matter, '26 through '28?

Yes. I think, Doug, again, a very good question. And I just want to make sure that this point about disproportionate economic harm comes across. Like you're absolutely right. So these RINs are not a windfall, right? So we -- the way if you are a refiner like us who stays in compliance, you pay for these RINs and then these RINs -- the cost of these RINs are returned to you a year later. So we cannot decide for the EPA. The EPA will decide how they will rule upon these petitions. But so far, all we can say is that EPA has done a good job in clearing the backlog that was created from 2019 to 2024. And they have been very good in creating a forward-looking guidance as well.

So we just expect them to continue with this good work, and we'll see what happens as far as our 2025 petitions are concerned on a go-forward basis. For us, we just wanted you to have the $468.4 million RVO obligation on a 2025 basis, and that's what we have provided. What percentage of that is approved, that's in EPA's hands.

Your next question comes from the line of Paul Cheng of Scotiabank.

Yes, very good quarter. Avigal, just curious, what's left in the consolidation of the DKL and in terms of time line? And also ultimately, then what is the ownership that you think you need or you want to have in DKL?

And second question is that in the Big Spring refinery, you're going to have a full plant turnaround currently going. So what initiative other than the normal turnaround that you are taking that will lead to the improvement of the performance going forward? What other than, say, the normal full plant turnaround that you typically would do every 4 or 5 years? What else are you doing in this turnaround?

Yes. Thank you. Paul, with your permission, I would start with a bigger discussion about sum-of-the-parts and deconsolidation and all of that topic. So I want to make sure that the point is coming across very, very clearly. The whole point of sum-of-the-parts is to make sure that the value of our business, the midstream business that we are building is fully reflected in the unit price and share price. That's the objective. Obviously, we have done a tremendous amount of work in the last 18 months around that. It's very visible to the market. We have sold retail in the past you liked. We have done 2 acquisitions of a midstream company before the market realized what the value is. We probably bought it around half of the market versus what it is today. We have done -- build a gas plant in a very, very good location with very good capabilities and develop those business very, very nicely, and we are very proud of that. Obviously, we reduced our ownership from close to 80% to around 60% now while doing that increase the distribution. So we checked many, many boxes around creating value for both unitholders and shareholders.

At that junction, we are working extensively on 4 paths and maybe some of them we are working together. One is sell the entire asset for the right value. And when I'm saying the entire value, if you're looking on the intrinsic value of each business unit in DKL, you get to a 7 handle number on the DKL unit. We can always monetize one of the assets of DKL for the right price. We have the free tax between DK and DKL to allow DKL to buy units back from DK, and we always can do M&A and reduce our ownership like we have done so far. So we are working many angles. I think that there is a tremendous amount of activity that's visible to the market. And you need to remember that the lack of announcement is not lack of work or lack of progress. Stay tuned.

Around the Big Spring, you had another question. So around the Big Spring, we are very happy with the team over there. The team -- it's also visible in the Q4 numbers. They made a very good progress. And I would focus the Big Spring after the turnaround in 4 areas, right? One, improve reliability; second, improve our crude slate and optimization; and third, improve the product slate. So we are very excited to see how Big Spring is going to perform after turnaround, and let's all stay tuned.

Avigal, for Big Spring, is there any new technology being introduced or new unit being at or anything that we should be aware in this full plan turnaround?

No. It's a cycle turnaround. The last turnaround we've done in Big Spring was 2020. So that's on the cycle. We are not doing any huge capital projects but we are making sure that those 3 boxes that I've said are being very clear, the operational reliability, the crude slate and the product mix after that.

And Mohit, you want to chime in, please?

No, Avigal, I just want to add to what you just said. And Paul, you're asking the right question. For us, the most important piece about Big Spring is to improve its reliability. And once we improve the reliability, our cost structure is going to improve, and it has been -- we've been making great progress in improving its cost structure, and we expect after turnaround that cost structure will improve even more. And if you look at the product side, that will help with the margin capture as well. So I think we are very excited about this turnaround, as Avigal just mentioned, and we look forward to updating you about this at our next earnings call.

Your next question comes from the line of Alexa Petrick of Goldman Sachs.

We wanted to ask a follow-up on the cash flow profile. Can you unpack the drivers of the raised cash flow guidance? And then how do we think about potential upside from that number, just given you've raised it a few times?

Yes. So Alexa, that's a very nice question. I will make a step back, and I will give a broader context because I think that the real discussion is EOP because EOP is all about free cash flow. That's the essence of the program, and that's what we got the organization laser-focused on. And I want to make it very clear. It's not just projects. It's a lifestyle. It's a language that the organization speak and everyone in this company speak that language, and it's bubbling from bottom up. So it's very exciting and pleasant to see how it's becoming part of our culture, and it's a cornerstone in our culture, and I'm very proud of that. So -- and if you think about it, where we started 1.5 years ago around BOP, we started with a guidance of around $100 million. Now we are saying it's at least $200 million. So we more than doubled that. And if you look at the rest of it, it's very rare that the company is able to increase time over time over time.

But I want to tell another thing that you're probably going to be happy to hear that we are not stopping here. We are not stopping here. And we have a big plan about the future EOP, and more to come, and it's going to be in the gross margin, in the G&A, in supply and marketing in many other -- in many areas of the business that we are very excited for. So still more to come.

Okay. That's helpful. And then a follow-up on that. You've got EOP, SREs and IIA. As we think about the implications of incremental free cash flow, how should we think about the capital allocation priorities? Should we expect you to maybe lean more into buybacks? Or any thoughts there would be helpful.

Yes. So that's a great question. Thank you for asking that question. We are very proud of our capital allocation strategy. We said that we're going to maintain dividend through the cycle. We can check the box around that. We said that we're going to do a balanced approach between balance sheet and buyback. We can definitely check the box around that. We did in 2025, countercyclical buyback. And actually, our total return to shareholders is higher by 4% than the average of our refining peers. So our philosophy of capital allocation did not change. And we are very consistent about that. We communicate to investors very clearly, and we always take opportunity to reward investors. So that's the goal we have, and we'll keep doing it.

Your next question comes from the line of Jason Gabelman of TD Cowen.

I wanted to ask on the supply line because it's now been 2 consecutive quarters where that supply and other part of the supply line has been above $50 million. And I know it includes kind of a grab bag of items. So you could just talk about kind of what drove the strength in 4Q? How much of it was EOP versus any onetime benefits? And how we should think about that subline item within the overall supply line moving forward?

Yes, absolutely, and thank you for joining our call this morning. We appreciate you. In reality, as I said in my prepared remarks and you probably listened, it's very visible that the EOP progress in the supply and marketing. We see that very, very clearly. We see that in other places. We've seen that in the G&A, basically cutting the cost by close to half versus what it used to be. You've seen that in El Dorado that we were able to increase -- to improve our capture by $2 a barrel on the top of the crack. So a great team over there, very proud of the progress. We still see more opportunities over there.

And I will let Mohit touch the specific question about DKTS?

Jason, good to hear from you. As far as supply and marketing is concerned, I think I talked about this last quarter as well. So the 2 specific businesses which are part of the supply and marketing are wholesale and asphalt, and we're making great progress in both. Especially as it comes to wholesale, we have been improving the business in 3 phases. The first phase was to have the right products available to supply the markets that we are serving. And second has been contract renegotiations and increased logistics, which has allowed us to access these markets. Currently, we are in Phase II where we are optimizing the markets we are participating in. So some markets, we are trying to put more product in and other markets, we are exiting. So that's the main reason why we are seeing reduced seasonality in the supply and marketing line item. This will not avoid the seasonality completely but we are trying to reduce the impact of that seasonality.

And then market is going to help us as well. So if you look at what's happening later this year, Magellan is going to bring its pipeline online, which is going to clear -- start clearing the group and put more products into PADD 4. And once these West Coast pipelines come online, those West Coast barrels will be supplied by the group and the Mid-Continent. So the market is also helping us -- is going to help us, not helping us currently but it's going to help us as these pipelines come online. So we are very excited about the steps we are taking, and we'll take -- if the market also starts to help us, we'll definitely take that too.

Yes. I appreciate the detail. The question was more about not the wholesale or asphalt but the third part of that supply and marketing business, which has been, I think, above $50 million for a couple of consecutive quarters. And I was wondering if you think that's a good rate moving forward or you expect it to be kind of volatile quarter-to-quarter?

Yes, Jason. So we did call out a $43 million onetime impact for the last quarter. That's for 3Q. This quarter, that line item is more in line with what we expect. But there would be some volatility in that line item but that's not a reflection of the core business. So I just wanted to focus on what our core business is and where most of the improvements are coming. And if you want to talk more about it, we can take it offline.

All right. Great. My follow-up is on DKL and the transactions you announced this morning, which were, I think, about $85 million. Wondering what the EBITDA contribution is going to be from those, the structure of the deal between cash and perhaps units and why the second part of the deal is closing in October 2027.

Absolutely. Robert, do you want to take it?

Yes, sure. Thanks. Great question. What we really completed here was furthering the economic separation of the 2 public companies. DKL now has 82% of their EBITDA on a third-party basis. But what really got accomplished here was DK materially is complete with putting the right assets under the right roof. And really, at a high level, these transactions from an EBITDA perspective are not material. And so I think -- and I guess the other piece of your question was the timing, and we've kind of laid out the 2 timing. That's really the phasing the cash flows between the 2 parties.

Your next question comes from the line of Ryan Todd of Piper Sandler.

Congrats on the result. Maybe just a question. I know you've touched on this in some of the things already but obviously, margin capture was very strong across multiple regions. I know some of that you've highlighted to some degree in terms of EOP drivers. But can you talk about what has gone well, what -- and how you see that sustainably going forward in terms of what may have been structural drivers versus what may have been some transient impacts and what you see in terms of margin capture going forward?

Yes. So I think that what you see is our strategy coming into a reflection in the results. That's the essence of that. And our strategy, there is a big component for a safe and reliable operation and EOP. So in order to have the right capture, you need 3 legs, right? You need a safe and reliable operation. You need very strong commercial activity led by our Chief Commercial Officer, Israel, that is here with us today, and you need a strong EOP. The combination of those 3 together improve capture over time. We are very proud of the results. You can see both in Tyler and KSR, post turnaround -- you see a meaningful improvement in capture, and that's something that we are very proud of post turnaround improvement before plan.

Mohit, do you want to chime in?

Yes. And Avigal, you rightly pointed out EOP as the reason for it. And because of EOP, we have been able to produce more high octane products and sell them all year round. So that is helping as well. We also have a very high distillate deal, which helped -- and we have increased our total liquid volume yield, which is also part of our enterprise optimization plan, and that is showing results in our capture.

With no further questions, I'd like to pass it back to Avigal for closing remarks.

Yes. So I want to just say thank you for the team here that did a very good job to our Board of Directors that help and guide us and lead us to our investors that like the story and stay with the story and most importantly, to our great employees that make the company that great company. Thank you, and we'll talk again next quarter.

This concludes today's conference call. You may now disconnect.

Thank you for standing by. My name is Jayle, and I'll be your conference operator today. I'd now like to pass the call off to Robert. Please go ahead.

Good morning, and welcome to the Delek US third quarter earnings conference call. Participants joining me on today's call will include Avigal Soreq, President and CEO; Joseph Israel, EVP, Operations; and Mark Hobbs, EVP, Chief Financial Officer.

Today's presentation material can be found on the Investor Relations section of the Delek US website.

Slide 2 contains our safe harbor statement regarding forward-looking information. Any forward-looking information shared during today's call will include risks and uncertainties that may cause actual results to differ materially from today's comments. Factors that could cause actual results to differ are included here as well as within our SEC filings. The company assumes no obligation to update any forward-looking information.

I will now turn the call over to Avigal for opening remarks. Avigal?

Thank you, Robert. Good morning, and thank you for joining us today. In the third quarter, excluding SREs, Delek reported strong adjusted EPS of $1.52 and adjusted EBITDA of approximately $319 million. These results are a reflection of Delek's strong momentum.

We had excellent contribution from our enterprise optimization plan with a notable progress from all business units. As a result, we are again increasing our EOP guidance to at least $180 million on an annual run rate basis.

During the third quarter, EPA approved several of our pending 2019 to 2024 SRE petition, and we expect to receive proceeds of approximately $400 million for monetization of the granted RINs. We are also encouraged by the guidance EPA has issued about SREs for future RVO.

From everything we see today, we continue to expect appropriate action on SREs in the future. Some of the part efforts also continue to progress well.

DKL continued to make progress in improving its premier position in the Permian Basin. As a result of the strong progress DKL has made this year, we are increasing DKL's full year EBITDA guidance to between $500 million and $520 million.

As I always do, I will now give an update on our key long-term priorities in more detail. First, safe and reliable operations. We had a strong operational quarter in our refining system. SRE had a record throughput quarter, and it's continuing its strong momentum since its turnaround last year. Congratulations across Tyler, El Dorado, and Big Spring also had strong operations.

Now I would like to discuss our EOP progress. As a reminder, we started EOP with an aim to improve DK cash flow by $80 million to $120 million on a run rate basis, starting in the second half of 2025. The structural changes we are making in the way we run our company are delivering meaningful results across all business units.

In the third quarter, supply and marketing had a strong contribution, driven by structural improvement in our wholesale business. We are very proud of the way the commercial team is looking in the entire wholesale value chain to serve our customers.

During the third quarter, we estimate approximately $60 million of EOP contribution to our P&L. Based upon these strong results, we are once again increasing our target of an annual run rate EOP improvement from the midpoint of $150 million to at least $180 million.

I'm proud of how EOP has become a cornerstone of Delek continuous improvement culture, and I'm confident EOP will remain a core strength well into Delek future.

As I mentioned before, during the third quarter, the EPA cleared the backlog of pending SRE petition from 2019 to 2024. We see this announcement as a critical part of the current administration and EPA energy policy.

This SRE announcement have 3 important implications for our business. First, for the grant years of 2023 and 2024, we have followed a proactive strategy to monetize the granted RINs. We expect to receive approximately $400 million in proceeds from this monetization over the next 6 to 9 months. We intend to prudently use this cash flow in line with our consistent capital allocation framework.

For years 2019 to 2022, while we appreciate EPA granting our petition, EPA remedy is invalid and encourage the strategy followed by our peers who chose not to comply.

We are making efforts to get full value from these grants in line with the intention of the RFS law. I'm confident EPA will continue its methodical approach to SRE grants, furthering energy dominance and supporting high-paying jobs in the heart of rural America.

I'm also proud of the progress DKL is making. With commissioning of DKL Libby 2 plant, and the completion of intercompany agreements, we are making great progress in making DK and DKL economically independent.

We are working in an industry-leading comprehensive sour gas solution, including gathering, treatment, acid gas injection acid gas injection, and processing along with providing market access for residue gas and NGLs. This capability will provide DKL the ability to fully capitalize on all of its growth opportunity in the Delaware Basin and maintain its best-in-class EBITDA growth and distribution yield.

Based on the progress Delek Logistics has made, we are increasing DKL full year 2025 EBITDA guidance to between $500 million and $520 million.

This final piece of our strategy is being shareholder-friendly and having a strong balance sheet. During the quarter, we paid approximately $15 million in dividend and bought back approximately $15 million of our shares.

Our strong balance sheet, improved reliability, and confidence in EOP has enabled us to continue countercyclical buyback in 2025. I'm proud to say that over the last 12 months, Delek had the highest total return yield, buyback plus dividend among all of its refining peers.

We remain committed to a disciplined and balanced approach to capital allocation and look forward to continue rewarding our shareholders.

In closing, thank you to our team for their dedication. We are optimistic about finishing 2025 strong, and building on this momentum into the future.

Now I will turn the call over to Joseph, who will provide additional color on our operations.

Thank you, Avigal. Operations reliability in the third quarter was consistent with our guidance with the third consecutive record high throughput set in Krotz Springs. Our refining system continues to implement EOP initiatives at all sites.

We have been successful in debottlenecking, improving liquid yield recovery, maximizing production value, and optimizing sulfur and benzene balances. At the same time, the commercial team has reworked contracts and optimized our new logistics to expand market optionality.

Starting with Tyler, total throughput in the third quarter was 76,000 barrels per day. Our production margin was $11.32 per barrel and operating expenses were $4.93 per barrel. For the fourth quarter, our estimated total throughput in Tyler is in the 70,000 to 78,000 barrels per day range.

In El Dorado, total throughput in the third quarter was approximately 83,000 barrels per day. Our production margin was $7.43 per barrel and operating expenses were $4.50 per barrel. EOP implementation is well reflected in our margin realization as we continue to trend toward our $2 per barrel of incremental capture in our El Dorado system. Our planned throughput for the fourth quarter is in the 67,000 to 75,000 barrels per day range, considering seasonal trends.

In Big Spring, total throughput in the third quarter was approximately 70,000 barrels per day. Our production margin was $10.99 per barrel and operating expenses were $7.20 per barrel. In the fourth quarter, the estimated throughput is in the 62,000 to 70,000 barrels per day range.

In Krotz Springs, total throughput in the third quarter was approximately 85,000 barrels per day. Our production margin was $9.01 per barrel and operating expenses in the quarter were $5.35 per barrel. Our planned throughput for the fourth quarter is in the 72,000 to 80,000 barrels per day range. Our implied system throughput target for the fourth quarter is in the 271,000 to 303,000 barrels per day range. This late outlook for the fourth quarter is strong as we are pushing our 42% distillate capability system accordingly.

Moving on to the commercial front. Excluding SREs, supply and marketing contributed approximately $130 million in the quarter. Of that, approximately $70 million was generated by wholesale marketing. Asphalt contributed a gain of approximately $6 million with the remaining contribution coming from supply.

In summary, the third quarter marked another successful execution of our operating plans. The focus on the fundamentals has allowed us to focus on capture improvements through EOP.

Mark will now address the financial variance.

Thank you, Joseph.

Referring to Slide 5, we show the breakout of adjusted EBITDA and adjusted EPS, approximately $319 million and $1.52 per share, respectively, excluding SREs. This breakout removes the impact of historical SREs of $281 million and the impact of 50% RVO exemption recognition for the first 9 months of 2025 of approximately $160 million.

Moving to Slide 16. For the third quarter, Delek had net income of $178 million or $2.93 per share. Adjusted net income was $434 million or $7.13 per share, and adjusted EBITDA was approximately $760 million.

On Slide 18, the waterfall of adjusted EBITDA from the second quarter of 2025 to the third quarter shows that there were 3 main drivers for the increase in EBITDA. First, a $583 million increase in refining, reflects improved refining margins as well as an increase of $281 million due to our recognition of historical SREs, the $160 million impact of our 50% RVO exemption recognition and improvement in our overall business that continues to be positively impacted by our EOP initiatives.

Second, in the Logistics segment, we continue to have another strong quarter, delivering approximately $132 million in adjusted EBITDA, about an $11 million increase over our previous record of quarterly adjusted EBITDA achieved in the second quarter. These improvements were mitigated by slightly higher cost in the Corporate segment of $5.2 million compared to the prior period.

Moving to Slide 19 to discuss cash flow. Cash flow provided by operations was $44 million. This includes our net income for the period, adjusted for noncash items and a net outflow related to changes in working capital of $106 million. The working capital movements include the timing impact related to SREs granted in the third quarter as we expect monetization of the grants to occur over the next 6 to 9 months.

When adjusting for working capital, cash flow from operations was $150 million. This was an improvement of $202 million when compared to the third quarter of last year. Investing activities of $103 million includes approximately $44 million for growth projects, primarily at DKL.

Financing activities of $75 million includes $15 million in share repurchases, approximately $15 million in dividend payments, and approximately $22 million in DKL distribution payments to public unitholders.

On Slide 20, we show our actual progress under the 2025 capital program. Third quarter capital expenditures were $91 million. Approximately $50 million of this spend was in the Logistics segment, where we had $44 million in growth capital at DKL, primarily related to our crude and natural gas G&P initiatives. All of the remaining capital spend during the quarter was in the Refining segment, addressing planned sustaining capital initiatives.

Our net debt position is broken out between Delek and Delek Logistics on Slide 21. Excluding Delek Logistics, we spent approximately $71 million on cash return to shareholders and capital expenditures in the third quarter, while our Delek stand-alone net debt decreased slightly to $265 million at the end of the quarter.

Moving now to Slide 22, where we cover fourth quarter outlook items. In addition to the guidance Joseph provided, for the fourth quarter of 2025, we expect operating expenses to be between $205 million and $220 million.

Our guidance for the fourth quarter incorporates increased operating expenses associated with the ramp-up of our new Libby 2 plant at DKL. G&A to be between $52 million and $57 million. D&A is expected to be between $100 million and $110 million. And net interest expense to be between $85 million and $95 million.

With that, we will now open the call for questions.

[Operator Instructions] Your first question comes from the line of Doug Leggate of Wolfe Research.

Hopefully, I'll make this relatively easy. I've got 2 questions related to the SREs. Obviously, tremendous update from you guys this morning. But my question is on the refining throughput guidance, because you've given an RVO risk number, it looks like, for 2025. But it looks like all 4 of your refineries are basically going to be at or below the SRE threshold. So my question is, if that's the case, why should we not risk the RVO at 100%, in other words, you get 100% of the number? And then I guess, how should we think about that going forward? That's my first question.

My second question is really more -- is kind of hypothetical, I guess, because we've got a Trump EPA currently. So presumably, because you've gained the SREs under the Trump administration, the minimum we should probably assume is you get the Trump EPA duration, which I guess is 4 years. My question is, what is your view on whether the rulemaking, the legal case and so on could transcend administrations? In other words, this becomes a perpetual SRE exemption for Delek.

Doug, thank you for the great question. And I will start, with your permission, obviously, with giving a bit overview on SRE and looking that on the big picture, and then Mohit will finish the technical part of the question, if you're okay with it.

So listen, we said it very clear on our financials that we have $200 million impact on Q3 earnings, right? And we also -- I said on my prepared remarks that we have $400 million of cash coming at us in the next 6 to 9 months. And I want to make another point very, very clear, right? We're going to use this cash prudently with -- in line with our overall capital allocation guidance we gave many times. So we are not going to deviate from that.

So I wanted to take a moment or 2 to talk about the 2019 and 2022 RINs. While we really appreciate EPA clearing the backlog, obviously, EPA remedy is invalid. We all understand it, right? It's very clear. But we believe that the relief and eligibility are not discretionary items. That's a very, very 2 words that I just -- very important 2 words I just said. And we are committed and confident to give to our shareholders and company full value of those pending petition from 2019 to 2022, both the court and the law are behind us, and we're going to follow through and make it happen.

We have seen the precedence in the past around that, and we are confident we'll get it as well. Our throughput is completely normal with regular seasonal, so we can check that box. And I will let Mohit finish.

Yes. Thanks, Doug. Thanks for the question. As far as the 50% piece is concerned for 2025, that is not our expectation. Our expectation is 100% of our refining capacity qualifies for SREs, and we expect to get 100% of SREs for 2025 as we go forward. If you look at your other question about sustainability of these SREs beyond the current administration, we believe we are a country of law where the law is followed, and the law is clearly on our side. The courts, their decision is on our side, and we are very optimistic that this will transcend beyond the current administration.

Your next question comes from the line of Manav Gupta of UBS.

Congrats on a great quarter, guys. I just have a quick clarification question. The $688.6 million reported in total adjusted refining margin for the quarter, does it include the SRE benefits? Or does that exclude it?

And similar -- and on similar line, the Slide 17, the margins that you have reported gross margin, it doesn't look like they have any SRE benefits. But could you clarify because some of your peers are reporting these gross margins with the benefits included. So if you could clarify on those things.

Yes, it's easy, $688 million includes and the margin that we reported do not include. So it's very, very easy to answer. I don't know, Mohit or Mark, if you have anything to add.

Yes. Manav, I'll just make one more point. So the reported gross margins for the refineries actually also have the RVO obligation in it. So the RVO obligation that we have flows through our gross margin. So they are post that obligation. That's what we are reporting.

And one quick question more. I understand it's more on the midstream side. But look, Permian Sour Gas opportunity just continues to expand. You guys were there before many others. Help us understand what it means for, obviously, your midstream business, and then obviously, how DK benefits just because DKL benefits from this growing Permian Sour Gas opportunity?

Yes. Manav, thank you for the great question. And the sour gas opportunity in the Delaware Basin is something that we are all very excited of. We see that opportunity. We were ahead of the curve with the 3B -- 3Bear acquisition, and also ahead of the curve with the [ 2 Water ] acquisition. You see they multiple today, nothing that you can buy those assets today. [ Reuven ], here next to me, is going to give more extended discussion about the sour gas. That's a very big deal for us, and we were on the right timing with the right permits, and we are very happy about that.

Thank you, Avigal. The construction and the start-up of Libby 2 has been above our expectation, on time, on budget. Originally, and based on producers' forecast when we started Libby 2, we anticipated to fill the plant with sweet gas, but the landscape has changed and producer needs solution and rapid solution for sour gas. As a result, we accelerated our sour programs to provide solution in a more rapid time line. We have very, very high confidence in not only filling up Libby 2 with sour gas, but because of the full sweet, sour gas, crude and water solution that we provide, we will need to expand processing capacity earlier than our previous expectation around sour.

Your next question comes from the line of Vikram Bagri of Citi.

I wanted to ask about SRE cash. When does it hit the balance sheet? I was wondering if you've done the RIN sales with deferred delivery already or you're going to sell RINs in open market and liquidity will be there?

Yes. So Vikram, thank you for joining us today. We'll stick to the answer we gave in the prepared remarks that we expect to see the cash in the 6 to 9 months, and we leave the technical of trading outside of this call. And we are very happy about the improving of the position and very optimistic about SRE in general, and we'll leave it to that.

And as a follow-up, you've raised the guidance. It has been raised multiple times, the EOP cash savings guidance. Can you talk about what the drivers of the most recent increase were? What initiatives you've taken? If there has been any change in underlying assumptions that drove the increase or you've seen opportunities and where those opportunities are?

Yes. Thank you for asking that question. That's really something I'm very proud and love to talk about. I have a lot of energy around the topic. Listen, first of all, EOP, it's not a project, it's a lifestyle. And it's a lifestyle across the organization. And we see how well it runs across our company and how confident we are with that, right? It's not just cost, it's cost and margin. We've seen a very nice improvement in margin this quarter. And we have 73 initiatives we are running on a weekly and a daily basis to make that happen. It's very clear in our earnings, very clear in our EBITDA, very clear in our cash flow. So all of that has cleared very, very well for us.

A majority of those projects are in margin, but they are not related for the most part for market conditions. So that's another point of strength in our program. As you said correctly, this is the fourth time we are increasing the guidance. We started from a midpoint of $100 million, and now we are saying over $180 million, and that's going very well for us. So more to come.

I do want to make another important comment. We started Q4 very well, and we see more upside on that going into this quarter.

Your next question comes from the line of Alexa Petrick of Goldman Sachs.

We wanted to ask, it looks like the wholesale side was particularly strong this quarter. I think you mentioned some structural improvements, and we know it's also been part of the EOP initiative. So can you unpack that a little, talk about some of the progress there?

Yes, absolutely. The bottom line is that's a bigger portion of the EOP progress we are doing. And I will let Mohit, that was very close to that, answer the rest of it.

Yes. I think wholesale is a great enterprise optimization plan story, and we have been improving the business in 3 phases. The first phase started by with our refining operations, and we started producing a lot of different kinds of products that we can sell in the market. We improved our logistics to get access to different kinds of markets, and that has helped our Wholesale business over the last 12 months or so.

In the second phase, we started renegotiating our contracts. So these contracts have been renegotiated, and they are getting us the full value that our products deserve, based upon the markets that we serve.

And the last phase, the Phase 3 in which we are, hopefully, it's not the last phase, but it's the Phase 3 in which we are. We are exiting some of the markets which are not as profitable for us, and we are entering new markets which are more profitable for us.

And a combination of this strength is shown in our numbers. And as Avigal mentioned, that this strength has continued in the fourth quarter, and we expect to keep delivering these results on a go-forward basis.

And just a follow-up, recognize we're still early into 4Q, but we're seeing cracks hold in pretty well. Anything we should keep in mind quarter-over-quarter on captures? Or what are you seeing through your refiners?

Yes, absolutely. So we are focusing on what we can control and what we can control is EOP. And as I said earlier a few minutes ago, Q4 on an EOP basis started very well for us, and we are very optimistic about how Q4 is shaping out.

Mohit, why don't you finish?

Yes. And Alexa, Joseph mentioned in his prepared remarks as well that distillate is a big piece of what we produce. We have a very high distillate yield. Distillate cracks are showing strength. So we are very optimistic about how the fourth quarter is panning out.

Your next question comes from the line of Paul Cheng of Scotiabank.

The third quarter, I mean, wholesale at $70 million and the supply at, say, $50 million to $60 million. Can you help us to understand that how much is related to your EOP and how much is being given to you from the market? In other words, that what is, say, core repeatable within that -- those 2 numbers? That's the first question.

Okay. So I think we have a slide on that in our deck that emphasize, if memory serves me right, around $40 million or so for market condition and the rest you can allocate to EOP. And as I said earlier, Paul, and you probably heard it loud and clear that Q4 looks very good from EOP standpoint. And the $60 million of EOP is something that we are very proud of.

So Avigal, so let me make sure I understand. So out of that $120 million that on the supply and the wholesale, $40 million is from the EOP -- $40 million is from the EOP, and then, say, $80 million is from the market?

Yes. So Paul, you got those numbers wrong. Let me just try to clarify it for you very quickly. The $40 million is the market impact. And as I said in the last -- answer to the last question, wholesale is the one which is driving it. We are seeing a lot of structural strength in the business. We have seen this trend continue in the fourth quarter. And we have clearly highlighted what the market impact was. There's obviously seasonality in it, because second quarter and third quarter are stronger than the fourth quarter and first quarter, but we've seen the fourth quarter strength continued from the third quarter this year. And as far as the specific division is concerned, I can take that offline with you post the call.

And just curious that with the SRE, is that going to impact in your how you run El Dorado and Krotz Springs? I suppose that you want -- you probably want to keep your crude throughput for those 2 facilities to be below 75, even when the margin is very high. Is that how you're going to run it or that you're going to look at them somewhat differently? Because if the margin is really good, it may be better off for you not to get the SRE and still get a better margin. So I want to understand that how is the decision-making tree is going to look like?

Yes, Paul, thanks for that question. I'll try to answer this question as well. So we've seen -- you've seen our history. We have stayed in full compliance with the law, and we intend to stay in full compliance with the 2025 RINs obligation, RVO obligations as well. As far as the throughputs are concerned, our throughput guidance is very clear, and it is based upon the usual fourth quarter seasonality that we experience.

And your last question comes from the line of Jason Gabelman of TD Cowen.

I just wanted to go back to the supply and trading results, because, I guess, it's still kind of not completely clear how much is structural in nature. And historically, you've talked about some of the wholesale and supply strength related to Group 3 pricing over the Gulf Coast. So how much of the 3Q result and going forward is sensitive to that spread versus other improvements that you've made?

Jason, thanks for the question. So as I've mentioned in the previous answer, our whole idea of enterprise optimization plan is to reduce our dependence upon things like that, the one that you just described, like dependence -- excessive dependence upon Group 3 market or any specific market. Once you reduce that dependence, these changes become extremely structural, and that is what we are seeing. So the $70 million that you saw, obviously, it has helped from the seasonal benefit as far as wholesale is concerned. But as far as structural part is concerned, we are very, very confident, and that's why we are seeing the strength continue in the fourth quarter.

And as far as if you have more questions in terms of divisions, and how much is flowing through the numbers, I can take that with you offline as well.

And sorry, I may have missed this earlier, because I didn't completely hear the question. But in terms of the monetization of that $400 million, can you talk about kind of upside and downside risks to hitting that $400 million number?

No. I think $400 million is a good number to model, and we'll leave it to that. Obviously, we're going to keep, as I said in my prepared remarks, we're going to keep the capital allocation policy we have, a very strict dividend throughout the cycle, balanced approach to dividend -- to buyback and balance sheet.

And I think the market knows by now that we had a very, very good quarter, a very, very good year in terms of return to investors. We are very proud of being the first one among all of our peers, and we are very committed to keep rewarding our shareholders.

That concludes our Q&A session. I will now turn the conference back over to Avigal for closing remarks.

Thank you. I want to thank my colleagues around the table for a great quarter. I want to thank our Board of Directors of trusting on us. I want to thank our investors in this call of keeping up with the story, and enjoy the fruits of it. And I want to mainly thank our entire employees that make this company as good as it is.

We'll talk again in the next quarter. Thank you.

This concludes today's conference call. You may now disconnect.