Delek Logistics Partners LP Aktie

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

Good morning, and welcome to the Delek Logistics Partners Second Quarter Earnings Conference Call. Participants joining me on today's call will include Avigal Soreq, President and Chairman; Mark Hobbs, EVP; as well as other members of our management team. As a reminder, this conference call will contain forward-looking statements 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. Today, DKL reported $144 million in adjusted EBITDA in the second quarter, reaffirming full year EBITDA guidance of $520 million to $560 million. DKL's strong results are a reminder of our advanced position as a premier full-service provider of crude, gas and water in the Permian Basin.

As of July 1, Mark moved from his CFO position at Delek to lead role at Delek Logistics, and we recently brought on Kris Kindrick as our new SVP of Commercial. I'm highly confident that Mark, Kris and the rest of the Delek Logistics team will deliver the next chapter of growth for DKL. All 3 of our segments are doing well, and I will provide more detail on each one of these segments.

Starting with gas, we are nearing the completion of our integrated sour gas processing, treating and in-handling solution of Libby gas complex. The comprehensive system will serve our customer by further supporting long-term oil and gas production growth in the Delaware Basin.

Moving to crude. Both DPG and DGG continue to see strong performance with DGG crude gathering delivering a record quarter. We look forward to further optimizing and growing the system.

Our water business continued to perform well, and we are continuing to explore growth opportunities in this space. Our combined gas, crude and water offering in the Permian Basin has improved our competitive position and established a platform for future growth. We will continue to pursue growth opportunities in a disciplined manner while maintaining a focus on leverage and coverage. We also intend to remain a good steward of our stakeholders' capital.

Our Board of Directors has approved our 54th consecutive quarterly distribution increase, raising the distribution to $1.135 per unit. This is an extraordinary milestone, and it reflects the exceptional work of our team and the financial discipline that has brought us to this point. With the foundation we have built and the opportunities ahead, we are confident in our ability to continue delivering sustainable growth and long-term value for our unitholders.

I will now turn it over to Mark, who will provide additional detail on our operations.

Thank you, Avigal. I'm excited about the opportunity to join Delek Logistics and to work with the exceptional team that we have at DKL. I see tremendous growth potential for Delek Logistics as we are uniquely positioned to meet our customers' increasing needs for midstream services across crude, gas and water in the Permian Basin. We continue to see heightened activity by producers in securing undeveloped acreage and future drilling locations in the Northern Delaware in Lea and Eddy counties. Higher crude prices as a result of the ongoing conflict in the Middle East, combined with strengthening Waha prices as additional takeaway capacity comes online by early next year, should drive increased demand for our 3-stream service platform strategically centered in Lea County.

As Avigal mentioned, our competitive position as a 3-stream provider sets us up well for future growth. Our strong and growing third-party business continues to increase our economic separation from our sponsor, DK. In 2026, on a pro forma basis, we continue to expect approximately 80% of our run rate EBITDA will come from third parties.

Turning to our business. We operated well in the second quarter, delivering safe and reliable performance for our customers. We continue to see an increasing need for incremental sour gas gathering and processing capabilities in New Mexico to support our customers' growth plans. During the second quarter, we made great progress advancing our industry-leading sour gas solution in the Delaware Basin.

With the increased capacity at our Libby processing complex and the completion of our first AGI well, we are focusing our efforts on building out our sour gas gathering infrastructure, including compressor stations. We are aligned with our customers, and our sour solution will unlock future growth for producers in the region and demand for our services.

We achieved higher volumes in the second quarter in our gas business versus the first quarter and are expecting to see a step change in our utilization as our sour gas solution comes online later this year. We continue to evaluate options for future investments that will support further expansions of the Libby complex based on anticipated customer needs for additional sour gas processing in the region.

Moving to crude. Our Delaware crude gathering business achieved record volumes in the second quarter. Our crude gathering business in both the Delaware and the Midland are well positioned, and our combined crude and water offering continues to yield great results.

In our water business, we are seeing strong operating performance, driven by the successful integration of the H2O and Gravity acquisitions in late 2024 and early last year, respectively. Produced water handling and disposal continues to be a critical and increasing need of our customers. Our scale and capabilities across the Delaware and Midland Basins present us with unique opportunities to drive future growth in our water business. And I look forward to updating the market as we advance these solutions.

With that, I will pass it on to Robert.

Thank you, Mark. As Avigal and Mark highlighted, we are pleased to report another exceptionally strong quarter for the partnership with adjusted EBITDA reaching a quarterly record of approximately $144 million. Importantly, we are delivering this growth while staying focused and disciplined on our long-term leverage and coverage targets. We ended the quarter with a leverage ratio of 4.23x, up modestly from the first quarter. This uptick reflects capital investments we are making that are expected to generate up to $75 million of run rate EBITDA, a highly attractive return on our $180 million to $190 million growth capital program for the year.

We exited the quarter with a strong balance sheet. During the quarter, we proactively refinanced our high-yield capital structure to lower our cost of debt, issuing a new $800 million senior note due 2034, fully retiring our 2028 notes and partially redeeming our 2029 notes. Together, these transactions reduced annual interest costs and extend our maturity profile. Liquidity remains robust at approximately $1.1 billion.

Turning to our results. Adjusted EBITDA for the quarter was approximately $144 million compared to $127 million in the same period last year. Distributable cash flow as adjusted came in at approximately $81 million, and our DCF coverage ratio held steady at approximately 1.33x. We are also proud to announce our 54th consecutive distribution increase, which brings the quarterly distribution to $1.135 per unit.

As to our segment results, starting with Gathering and Processing, adjusted EBITDA for the second quarter was $104 million, up from $78 million in the second quarter of 2025. The improvement was driven primarily by higher utilization at the Libby gas complex, along with stronger realized margins in our Permian Basin crude business.

In Wholesale Marketing and Terminalling, adjusted EBITDA was approximately $13 million versus $23 million a year ago, with the decline largely attributable to the effects of the 2024 amend and extend agreement with Delek. Storage and Transportation delivered adjusted EBITDA of $16 million compared with $17 million in the prior period. The modest decrease primarily reflects the January 2026 related party transaction. And finally, our Investments in Pipeline Joint Ventures segment contributed $21 million this quarter, up from $17 million in the second quarter of 2025, led by continued strong results from the Wink-to-Webster joint venture.

Moving now to capital expenditures. Total capital spending for the second quarter was approximately $61 million, of which $51 million was for growth capital. That spend was primarily directed towards the drilling of our first AGI well and continued build-out of new sour gas gathering infrastructure. The balance funded other growth initiatives, including work to advance reliable power solutions for the Libby gas complex.

Looking ahead to the remainder of 2026, as Avigal noted, our confidence in the earnings trajectory of the partnership remain intact, and we are reaffirming our full year 2026 adjusted EBITDA guidance range of $520 million to $560 million.

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

Your first question is from the line of Doug Irwin.

I just want to start with the Gathering and Processing segment. You called out some stronger margins on Gathering and Processing on the quarter. Just wondering if you could help unpack what drove that strength a little bit more here. Just curious how much of that is tied to the commodity environment and just generally how durable you see that margin strength being from here?

Yes. So we are very confident about the results we see in the second quarter. Obviously, we are starting the year very well. We are very confident about the guidance we are seeing. As I said in my prepared remarks, both DPG and DGG performed very well. I think the DGG had a record number around it. We are very happy about the process that we are seeing on the gas plant that increased quarter over quarter over quarter. As we said in the prepared remarks, we are very close to completing the gas treating solution on the sour side that will take us to, as Mark said, to a step change, and I'll let Mark to complete.

Yes. Thanks, Avigal. Yes, Doug, I'll just touch on the business performance. Across the board, we're performing well in the second quarter and continue to do so. We have great infrastructure, which, as you know, is strategically positioned in the right location, and we continue to see a lot of activity amongst our customers in the Northern Delaware with close proximity to our assets.

As Avigal mentioned, our Delaware crude business had a record volume in Q2 at over 157,000 barrels per day, up from around 129,000 in Q1. Our produced water volumes in both the Midland and Delaware increased as well to over 687,000 barrels a day, up from 557,000 in Q1.

As Avigal mentioned, our gas volumes continue to ramp. We were over 80 million cubic feet a day in Q2, up from around 64 million in Q1, and we continue to see that trend continue in Q3. Both Libby 1 and Libby 2 plants are running well. The volumes are increasing. And as we said in our prepared remarks, we're nearing the completion of our full sour gas solution build-out, and we do expect to see a step change in our gas volumes through the rest of the year.

Got it. That's helpful. And maybe tying into that a little bit as it relates to guidance for the rest of the year. If I were to just look at your second quarter results and extend that through the year, you're already kind of pointing towards the high end of your guidance range based on those numbers. And then you kind of pointed to an expected ramp of Libby. So just kind of curious how you're thinking about potential upside here, is kind of the midpoint of guidance potentially pretty conservative here and just kind of how you're thinking about what could potentially drive either end of the range?

Yes. And you are very -- you're correct. The math that you're doing is absolutely right, and I will give you some more context around that. We are very happy about the results we have. We are very happy about the business we have, each one of them, the strategy that we put together working extremely well, and we are very happy about the management team that we have over there. We're going to follow the same sequence that we had in the last year, that Q4 -- on Q4 call, we are submitting the guidance. And if we see a way to upgrade the guidance, we're going to -- we did it last year in Q3. So stay tight and more news to come.

Your next question is from the line of Gabe Moreen with Mizuho.

Quick question, I guess, in terms of the interplay on commodity prices. I just wonder if I could maybe put a finer point on things. Waha has clearly traded better. Crude oil prices have come up, although pulled back a bit here. So I'm just wondering your latest expectations around customer conversations and what you're seeing heading into 2027, whether you're seeing some rigs potentially being added back to some of your acreage relative to your expectations. I'm just curious. And then also whether -- again, I think you mentioned last quarter, Waha shuts didn't really impact you, but whether that's having any impact on volumes with pricing being better here?

Yes, absolutely. So you touched a very good point. Obviously, we are in close touch with our customer on a daily, weekly basis, and they are very excited about their business, which make us very excited about our business. I've seen your note earlier about the rigs in the area and the wells that we have in our acreage, and that's very good to see how detailed it become the discussion.

So we are very optimistic about where we are. We have a prime location. We have a very good producer in our acreage. You've seen the statistics about the Permian Basin as a general going from the beginning of the event to now by around 20 rigs. We see an increased forecast in our acreage as well. So we are very optimistic about where we are and who do we do business with. So stay tuned and more to come. Mohit, do you want to talk about the Waha?

Yes. Yes. I think, Avigal, you covered it very well. And Gabe, you and I have discussed this previously as well. So there are 2 positive effects happening at the same time. First is there is some strength in the commodity prices. And based on that, we have seen incremental production. And because of that, we've seen forecast for not only second half of 2026, but 2027 rise. And second is this development around Waha. Waha prices have strengthened. This is a minor positive for us just from a results standpoint, but it's a much bigger positive from a volume standpoint, and we should see that reflected.

Beyond that, we have talked about in the past that we are working on $185 million of growth CapEx, which will yield $75 million in EBITDA, $15 million in '26 and $60 million in 2027. So our setup on a go-forward basis is very, very strong. So we are very excited about the things that we are seeing.

Excellent. And then maybe if I could just follow up. Remind me on your contracting behind your water assets to what degree things are volumetric versus take-or-pay? And is there any change or shift in kind of your contracting strategy going forward?

Yes. Gabe, I can answer that. So we don't really share our contracted strategy, but we're very excited about our produced water gathering business, as Mark alluded in his prepared remarks and also as an answer to the previous question, we have scale in the business. We are seeing a 3-stream service, gas, water and crude really reaping results. And even in the Midland, where we just have 2 streams, crude and water, we are seeing incremental positive results. So we are very excited about the water business that we have. We are building upon it, and we'll share more details around this when we are ready.

Your final question is from the line of Ivan Scotto with UBS.

Congrats on the strong quarter. It's good to hear about the integrated completion on the Libby gas complex. But just wondering how you're thinking about capitalizing on sour gas treating and AGI demand over the long term, including any possible expansion. So at Libby, what would need to happen? Or what would you need to see in the market to make you comfortable kind of commissioning that?

Yes. Obviously, the king here is the rock. And we're seeing the rock going a bit sour. And the second part of that is our ability is our drilling of AGI wells and building a sour complex. So the combination of that make us very uniquely positioned that we have 3 things coming together, our location, the sour gas that we see coming out of the ground and our infrastructure all coming together very nicely that give us competitive advantage, and we are very excited about that. And I will let Mark that is very close to it, share some of his thoughts.

Yes. Thanks, Avigal. Look, as we've mentioned in the past, we are seeing increasingly more sour gas production from our customers moving from sweet to sour. And as you rightfully said, we're seeing that trend continue. And we've added a lot of capacity in preparation to handle that. As you know, adding Libby 2, completing the AGI well, as Avigal mentioned.

And we're now near completion of our sour gas gathering and adding compression, and it is going to provide us with a much needed sort of unique sour gas solution in the Northern Delaware, which will support our customers' future production growth plans. And not only will we see a step change in our gas volumes because of this capability, but like it positions us extremely well for future growth in the region.

Got it. That makes sense. And then just turning to leverage and coverage targets. Anything to note on how you're working toward achieving these long-term targets? I know you hit 1.3x coverage this quarter, but curious if there were any initiatives that you want to highlight that helped you achieve that? Or just any general comments on how you're working toward achieving these targets would be great.

Yes. So obviously, we are very disciplined around our capital deployment. As you can see, we are very disciplined around what we did with M&A, right? We did both water and a bolt-on acquisition around 5x to 6x, where they traded now around probably 9x to 10x. So we are not going to do something which is not accretive to leverage ratio, coverage ratio, free cash flow and not supported by our strategy. So the combined answer is a combination of extremely disciplined on one side, but on the other side, extremely aggressive of getting the company towards the right direction and very disciplined around capital allocation. And I will let Robert to chime in.

Yes. Thanks, Avigal. Yes, Ivan, great question. We continue to remain comfortable in our long-term leverage target of 3.5x. We're seeing significant growth opportunities. And similar to what we've said in the past, because of that, we will manage our leverage ratio around that 4x as we grow. As we said in the prepared remarks, our leverage ratio right now does sit around the 4.23x. And that's largely due to a lot of the growth spend that Mohit talked about.

We expect return up to $75 million in EBITDA on spend of around $180 million to $190 million. So very low multiple there. And considering this, we expect to manage our leverage ratio down as we start to realize this EBITDA in our results. It's probably also just important to note that despite all this recent growth spending, we've maintained a strong balance sheet. We have over $1 billion of availability, which will facilitate our continued growth trajectory into the future.

Your next question is from the line of Gabe Daoud with Truist.

I just wanted to maybe follow up a little bit on the comments around what you're seeing on the ground as you progress through 2026. Obviously, some pretty big outperformance in the quarter and just kind of looking at third-party data suggests that you've already tied in on the gas side a decent amount of wells, especially relative to what you did last year. So could you maybe just comment on that? And how should we think about like well connects on the gas side as you progress through the year? And I guess, similarly, how should we expect Libby 2 to ramp in the back half?

Yes, absolutely. I will start and let Mark chime in. So obviously, the connection that we are seeing on the ground are going very well, both on the compressor side and on the plant itself. We have a very good close relationship with our producers, and we are committed to give the best service we can on time, on budget and making sure it's all ties together with the right offering between sweet and sour. We have seen increase, as we mentioned earlier, between Q1 to Q2 and between Q2 to Q3, and we'll see more progression around that once we are completing our sour gas offering. But why don't you chime in, Mark?

Sure, Avigal. Yes. Look, I think Avigal said it well, Gabe. Look, we're seeing this shift from sweet to sour. And so we've seen our gas kind of ramp up as we built out our capabilities. We're optimizing our system around compression and look forward to, like I said, a step change in our volumes as we move through some of that completion here in the third quarter as we move into the fourth quarter. So I think we're on a great trajectory to really increase the utilization of our plants as we move through the year.

Got it. Got it. Okay. That's great color. And then just a quick follow-up. What are you seeing on the inorganic opportunity front? Is that something that would still be attractive to you? Or do you think you have enough organic opportunities to keep you busy over the next couple of years?

Yes. So obviously, we have all the time our eyes open around inorganic opportunities. As I said in the past, in order for something to get to the finish line, it needs to be accretive to leverage ratio, coverage ratio and free cash flow so that we are extremely disciplined around that. When we saw those opportunities coming our way, we were not -- we didn't hesitate. We act on that very quickly and aggressively as needed. But the inorganic, it's not -- that's not the objective. The objective is to grow the company in a measured, disciplined, smart way.

On the other side, we can be very happy if you're putting on the intrinsic value that we see on our asset, we bought something around 5x to 6x, probably now it's around 10x. And we have seen lately the gas deal that was in the market was mid-low to mid-teens, which if you are doing the intrinsic value of each one of our assets as it stands now and with including the development that we are now doing, you will get to a very high unit price. So there is a tremendous amount of value that we created versus where the market is now.

And our commitment to the market is still to create additional more value. We grew that company 15% year-over-year in the last few years, and we increased distribution 54 quarters in a row. All of that probably the best combination between growth and yield to our investors. So we are very proud of what we do, and we'll keep doing it.

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

Thank you. So I want -- I would like to thank my colleagues around the table for the hard work and dedication. I would like to thank to our Board for their trust and support. I would like to thank you, the investor, of seeing that a nice, huge transformation in DKL. And most importantly, I would like to thank the entire employees of making this company as good as we possibly can every day. Thank you.

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 Logistics Partners First Quarter 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Robert Wright, EVP and Chief Financial Officer. Robert, please go ahead.

Good morning, and welcome to the Delek Logistics Partners' First Quarter Earnings Conference Call. Participants joining me on today's call will include Avigal Soreq, President and Chairman; Reuven Spiegel, EVP; as well as other members of our management team. As a reminder, this conference call will contain forward-looking statements 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. DKL reported $132 million in adjusted EBITDA in the quarter, and we are very confident about achieving full year EBITDA guidance of $520 million to $560 million. DKL saw a strong execution in the first quarter despite some challenges associated with winter storm fern. These results are a reflection of strength in all segments, advancing our position as a premier full-service provider of crude, gas and water in the Permian Basin.

Now let me talk about each one of the business in detail. Starting with gas. We have successfully completed the drilling of our first AGI well, taking additional step towards completing our industry-leading comprehensive sour gas solution. We are very excited about providing a comprehensive capability to our customer, further supporting long-term oil, gas production growth in the Delaware Basin. Moving to crude. Both DPG and DDG crude gathering operations continue to see strength despite some challenges tied to well shut-in related to winter storm fern.

We have increased our overall gathering capacity and look forward to further optimizing and growing the business over the rest of the year. Our Water business continued to perform strongly, and we are exploring additional opportunities in this space. Reuven will share further insight on these developments. The combined gas, crude and water offering in the Permian Basin has increased our competitive position and built a strong platform for growth.

We will continue to capture the growth opportunities in a disciplined manner, managing leverage and coverage. We also intend to remain good stewards to our stakeholders' capital. Our Board of Directors have approved our 53rd consecutive quarterly distribution increase, raising the distribution to $1.13 per unit. This is an extraordinary achievement, and we are extremely proud of our team and the financial prudence that brought us here. Delek Logistics is firmly positioned as a strong independent full suite midstream service provider. With the foundation we have built and the opportunities ahead, we are confident in our ability to continue delivering sustainable growth and long-term value for our unitholders.

I will now hand it over to Reuven, who will provide more details on our operations.

Thank you, Avigal. As Avigal mentioned, we are excited about DKL's future and recent rally in crude prices, along with the strength of our 3 service platform is presenting incremental opportunities to further increase our advantaged Permian position. The strength in third-party business continues to increase our economic separation from our sponsor, DK. In 2026, on a pro forma basis, we expect approximately 80% of our run rate EBITDA will come from third parties.

Turning to our business. We continue to work hard to bring an industry-leading sour gas solution in the Delaware Basin. The first step in the process was to complete our processing capacity expansion. As Avigal mentioned, we have completed the drilling of our first AGI well, and currently, we're in the process of completing the build-out of the sour gas gathering infrastructure such as compressor stations before transferring the system to operations. We are in sync with our producer customers and the system is expected to be in line with the producer needs.

As we have mentioned in the past, while our ramp-up has been slower versus our initial expectation, post our sour gas system build-out, we expect to see a step change in our utilization. The step change in utilization is likely to bring forward the need for additional processing capacity. We are looking at our options and continue to explore innovative ways to add capacity along with making selected investments that will support future expansion of the Libby Complex.

Our Delaware crude gathering volumes were impacted by well shut-ins because of winter storm fern and the colder-than-normal temperature during the quarter. We have seen these volumes recover in the second quarter and expect Delaware crude gathering volumes to continue to increase over the rest of the year. Our crude gathering business is in a very strong place, and our combined crude and water offering is yielding great results.

Moving to our Water business. I'm very pleased with the start we have had in our produced water-gathering business. Our larger water footprint in the Permian Basin post our acquisition of Gravity and H2O Midstream, along with the rising water cuts in the basin, accentuating the need for increased innovation to meet customer needs.

We believe produced water gathering and disposal will require a platform approach as permitting for new SWDs remain limited and producer activity shifts across the basin. We look forward to updating the market as we bring forward these solutions.

With that, I will pass it on to Robert.

Thank you, Reuven. As Avigal and Reuven noted, we began 2026 with strong momentum, continuing to advance the Delek Logistics growth story. While we are delivering meaningful financial and operational progress across the partnership, we remain equally focused on achieving our long-term leverage and coverage targets. Despite approximately $10 million in headwinds from winter storm fern, we outperformed expectations in our growth trajectory, and we're able to achieve our best first quarter results to date. This performance reinforces our confidence in the outlook for the balance of the year.

We continue to make solid progress on our planned growth capital spend of $180 million to $190 million, which we expect will yield approximately $75 million in incremental EBITDA on a run rate basis. From a balance sheet perspective, we exited the first quarter in a position of strength, having upsized and extended our revolving credit facilities to $1.3 billion, now maturing in 2031. This increased available liquidity to approximately $1.1 billion.

We ended the quarter with an adjusted leverage ratio of 4.05x, providing meaningful financial flexibility to execute on our growth agenda while maintaining a disciplined capital structure. Turning to our results. Adjusted EBITDA for the quarter was approximately $132 million compared to $123 million in the same period last year.

Distributable cash flow as adjusted totaled $72 million, and our DCF coverage ratio remained stable at approximately 1.2x. We are also pleased to announce our 53rd consecutive distribution increase, bringing the quarterly distribution to $1.13 per unit. In the Gathering and Processing segment, adjusted EBITDA for the quarter was $83 million compared to $81 million in the first quarter of 2025. The increase was primarily due to increased margins recognized within the segment.

Wholesale Marketing and Terminalling adjusted EBITDA was $14 million compared to $18 million in the prior year. The decrease was primarily due to the impacts of the 2024 amend and extend agreement with Delek. Storage and Transportation adjusted EBITDA in the first quarter was $25 million compared with $14 million in the first quarter of 2025. The increase primarily reflects the impacts of the January 2026 related party transaction.

Finally, the investments in Pipeline Joint Venture segment contributed $18 million this quarter in adjusted EBITDA compared with $17 million in the first quarter of 2025, driven by strong performance from the Wink to Webster joint venture. Moving now to capital expenditures. Total capital spending for the first quarter was approximately $50 million. Of this amount, $42 million was growth capital, primarily related to the drilling of our first AGI well in addition to the build-out of new sour gas gathering infrastructure.

The remainder of the spend was directed towards other growth projects, including advancing new connections across our crude gathering systems. Looking ahead to 2026, as Avigal mentioned, we remain confident in our earnings trajectory and are reaffirming our full year 2026 EBITDA guidance to a range of $520 million to $560 million.

With that, we can open the call for questions.

[Operator Instructions] Your first question comes from the line of Doug Irwin from Citi.

I just want to start with the guidance -- first question, I just wanted to start with the guidance range and how you're thinking about it in today's macro environment. Does the low end of that range look like an easier lift today than when you gave it kind of earlier in the year? I'm just curious what you're hearing from producers on your acreage as well as if you might have any pockets of direct commodity or spread exposure you might be able to take advantage of in the current environment?

Yes. Doug, you nailed it, right? So our optimism around our guidance is being driven from 2 things, right? One is the macro environment, and I will talk about it in a second. And second is our execution, our strategy. So on the macro side, obviously, the premium risk that you have between [ Brent-WTI ] is going to change. It's very obvious that the premium risk that we had last year on [ Brent ] is not the premium risk we see today.

And the second, obviously, is that we see a lingering effect for the macro even after the kinetic event is over, which will emphasize probably the shale -- the U.S. shale as a safe harbor for crude supply around the globe. So that's put us in a very good position, both in the Midland area and on the Delaware area. Our combined offering of gas, crude and water is a unique offering that give our customer offering that not many does, and that's positioned us very well. And also the development we see around our Gas business with giving a comprehensive solution is also we are seeing a very encouragement development.

With that, I will leave it to Reuven to give his insights.

Thank you, Avigal. If we look at our -- at the segments, water is performing above our expectations and the combined water and crude option is opening opportunities for continued growth. Crude is solid, and we are seeing opportunities in our Delaware business. And in addition, we enjoy some tailwind from the Iran conflict. And finally, gas will ramp up in the second half of the year. So with that said, we feel very comfortable at our guidance range.

Great. And maybe just following up on the gas ramp in the second half of the year. Could you maybe just provide a little more detail around kind of what's left to do on the gathering side and what that timing might look like? And then just curious how soon after Libby 2 ramps, you might be positioned to be able to announce the next expansion and just what that build cycle might look like, just given that you've already spent some of that early CapEx on future expansions?

Yes. Thank you for the question. We actually made a lot of progress this quarter, as we mentioned in the prepared remarks, it has been a multistep process. One of the critical path was drilling the AGI well, which we completed successfully. And now we're focusing on completing all the associated infrastructure like the compressor stations. We do expect our gas utilization to reach capacity in the next 3 to 6 months. In addition, as you mentioned, we have already made some selective investments, and we're looking at different ways to make additional processing capacity available in the most cost-effective manner.

Your next question comes from the line of Gabe Moreen from Mizuho.

You tantalized a little bit with some, I think, growing in water comments. So can you maybe just talk about what you're seeing? Is there some systems, whether it's private equity, producer backed, what you might be seeing out there size-wise, materiality? Just curious on those comments.

Yes, absolutely. I will give some higher view around that and Mohit -- some energy around the topic, he will chime in. So obviously, we are not going to be specific about deals and size until we are fully ready to say it. But the combination of crude, water and gas in the area we are operating in a meaningful and sizable way is giving us a tailwind. We are very happy about that. We have a very good strategic discussion. And I think that the strategies and location and execution, that's the combination we are trying to achieve, and we're very happy about that. Reuven, do you want to chime in?

Yes. Thank you, Avigal. We are likely to see continued growing need for water with each barrel of produced oil. Water is already produced on a very large scale and the demand keeps growing. So we believe there is a need for effective treatment, a more comprehensive approach for gathering, treatment and disposal, in particular, with the length of time and complexities that needed to get permits today. So we're looking at ways to come up with creative solution around this, and we'll probably give more color and updates when we are ready in the near future.

And then you mentioned, I think, the impacts on volumes from some of the winter storms that I think they're recovered at this point. I'm just curious also, Waha, seems to be a fairly big factor based on where natural gas is pricing in the basin. Are you seeing any shut-ins that are Waha related or producer timing delays because of pricing in the basin?

Yes. So you are right, your observation. It was an event that was -- it was a close event. It was not a lingering event. But it was -- when it happened, it was meaningful and then it came back to normalcy. But Robert here, our CFO, will chime in and give you more color around it.

Yes. Thanks, Avigal. Primary impacts were on crude, both in the Midland and Delaware Basins and also a little bit on the gas processing side. As we stated in our remarks, very limited impact, if any, to our Water business overall, but it did have an approximate $10 million headwind to our results for the period. That said, as you saw, we did have very strong performance throughout the partnership for the first quarter, and our outlook for the remainder of the year remains strong with fern behind us. But I'll pass to Mohit as well to talk about the Waha question.

Gabe, so we've discussed this in the past. Waha is an important piece of the Permian story, and you covered this very well. And you know that a lot of residue gas pipelines are going to start coming up in the second half of this year which is going to relieve a lot of pressure that some of our producer customers are facing in terms of takeaway capacity on the natural gas side.

Overall, these 2 developments, as Avigal mentioned at the beginning of this call, higher call on shale crude as a result of the Iran conflict and the Waha gas prices and finding a floor based upon incremental residue gas takeaway capacity that's going to come online is a very positive development for DKL because we are in the right neighborhood. And as all the producers have capacity to put this gas into the right market, you will see more production come in. And all 3 of our businesses, gas, water and crude will benefit from that. So we are excited about how this year plays out as far as the residue gas takeaway capacity is concerned.

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, President and Chairman, for closing remarks.

Thank you. I want to thank my colleagues around the table. I want to thank the investors that join us today and believe in us and sticking to the stories -- to the story. And I want to thank our Board of Directors and most importantly, our employees that does nights and days to make our company the best we can. Thank you, guys.

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

Thank you for standing by. My name is Jael, and I will be your conference operator today. At this time, I would like to welcome everyone to the Delek Logistics Partners' Fourth Quarter 2025 Earnings Call.

[Operator Instructions]

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

Good morning, and welcome to the Delek Logistics Partners' Fourth Quarter Earnings Conference Call.

Participants joining me on today's call will include Avigal Soreq, President; Reuven Spiegel, EVP as well as other members of our management team.

As a reminder, this conference call will contain forward-looking statements 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 our 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. 2025 was an exceptional year for Delek Logistics, highlighted by the achievement of a record adjusted EBITDA of $536 million. These results are a reflection of a strong execution across our businesses and the addition of high-quality business such as H2O and Gravity, but most importantly, because of our hard work of our great employees. During the year, we continued to advance our key initiatives across our natural gas, crude and water businesses, increasing our position as a premier full service provider in the Permian Basin.

Now let me talk about each one of those businesses in detail. Starting with natural gas. During the year, we successfully commissioned the new Libby 2 processing plant, increasing the capacity of the Complex to around 160 million scf per day. The expansion in the processing capacity is being enhanced by the comprehensive acid gas injection and sour gas handling solution we are building. We are very excited about providing this comprehensive capability to our customers, further supporting long-term oil and gas production growth in the Delaware Basin.

Moving to crude. Both DPG and DDG crude gathering operations delivered strong performance during the year. We have increased our overall gathering capacity and look forward to further optimize and grow the business in 2026. Our water business is also doing very well. We have largely completed the integration of H2O and Gravity into our operation. The combined gas, crude and water offering in the Permian Basin has increased our competitive position and build a strong platform of growth.

With strategic foundation, strong operation and record results in 2025, we are well positioned for 2026. Today, we announced a 2026 EBITDA guidance range of $520 million to $560 million. This reflects the growth opportunity we have while managing leverage and coverage. We also intend to remain good stewards of our stakeholder capital. Our Board of Directors have approved our 52nd consecutive quarterly distribution increase, raising the distribution to $1.125 per unit, marking 13 consecutive years of distribution growth. This is an extraordinary achievement, and we are extremely proud of our team and financial prudence that brought us in.

As we close the books on 2025 and begin 2026, Delek Logistics firmly positioned as a strong independent full suite midstream service provider. With the foundation we have built and the opportunities ahead, we are confident in our ability to continue delivering sustainable growth and long-term value for our unitholders.

I will now hand it over to Reuven, who will provide more details on our operations.

Thank you, Avigal. As Avigal mentioned, we are very excited about DKL's future and are working to increase our advantaged Permian position. Most significantly, I'm very pleased with the rising economic separation we have with our sponsor, DK. In 2026, we expect approximately 80% of our run rate EBITDA will come from third parties. This is an extraordinary achievement for the partnership and its increased independence will allow us to be more nimble in advancing the strong growth path we have been navigating.

Turning to our business. We continue to work hard to bring an industry-leading sour gas solution in the Delaware Basin. The first step in the process was to complete our processing capacity expansion. Currently, we're working on completing the first AGI well and building the sour gas gathering infrastructure to fully optimize our capacity. As we have mentioned in the past, while our ramp-up has been slower versus our initial expectations, the need for sour gas solution is urgent, and we expect to see a step change in our utilization once our AGI and sour gas gathering infrastructure is fully complete.

We also believe that the step change in utilization is likely to bring forward the need for additional processing capacity. We are looking at our options and have made selected investments that will support future expansions of the Libby Complex. We continue to believe that our expanded gas processing and sour gas handling capabilities provide a unique offering to our customers and provides us with a long runway for growth in the Delaware Basin.

Our crude gathering volumes had a record fourth quarter. We are growing our crude infrastructure to provide our customers a more comprehensive solution. Our crude gathering business is in a very strong place, and our combined crude and water offering is yielding great results.

Moving to our water business. The integration of 2 water gathering systems from H2O and Gravity has gone well. We are very excited about the opportunities our larger water footprint is bringing to us. We believe produced water gathering and disposal will require more innovation and different approaches as producer water cuts increase throughout the basin. We look forward to updating the market as we bring forward these solutions.

With that, I will pass it on to Robert.

Thank you, Reuven. As Avigal and Reuven highlighted, we continue to make strong progress advancing the Delek Logistics growth story. While we are driving meaningful financial and operational growth across the partnership, we remain equally focused on achieving our long-term leverage and coverage objectives. 2025 was a significant year for the partnership. We successfully closed the acquisition of Gravity Water Midstream, which, together with the 2024 acquisition of H2O Midstream, were well timed from a purchase multiple perspective.

In addition, we completed construction of the Libby 2 gas plant and are now in the process of converting operations to support sour gas treating, handling and processing capabilities. Our focus now shifts to fully capturing the value of these investments by optimizing synergies and executing our strategic priorities. At the Libby Complex, this includes completing the sour gas conversion and realizing the associated EBITDA uplift over time.

From a balance sheet perspective, we ended 2025 in a strong financial position with approximately $940 million available liquidity under our credit facilities. This provides us with significant flexibility to continue executing our growth agenda while maintaining financial discipline.

Turning to our fourth quarter results. Adjusted EBITDA for the quarter was a record at approximately $142 million, up from $114 million in the same period last year and $6 million higher than the previous record set in the third quarter of this year. Distributable cash flow as adjusted totaled $73 million, and our DCF coverage ratio as adjusted was approximately 1.22x.

In the Gathering and Processing segment, adjusted EBITDA for the quarter was $71 million compared to $66 million in the fourth quarter of 2024. The increase was primarily due to the acquisitions of H2O and Gravity. Wholesale Marketing and Terminalling adjusted EBITDA was $21 million compared to $21 million in the prior year. Storage and Transportation adjusted EBITDA in the quarter was $35 million compared with $18 million in the fourth quarter of 2024. The increase primarily reflects the impacts of the sale of certain assets to DK as agreed to under the May 2025 intercompany transaction. Finally, the Investments in Pipeline Joint Venture segment contributed $26 million this quarter compared with $18 million in the fourth quarter of 2024, driven by strong performance from the Wink to Webster joint venture.

Turning to capital expenditures. Total capital spending for the fourth quarter was approximately $32 million. Of this amount, $26 million was growth capital, primarily relating to initiating sour gas capabilities at the Libby Complex. The remainder of the spend was directed towards other growth projects, including advancing new connections across our Midland and Delaware gathering systems. Looking ahead to 2026, as Avigal mentioned, we remain confident in our earnings trajectory and are initiating our full year 2026 EBITDA guidance to a range of $520 million to $560 million.

With that, we'll open the call for questions.

[Operator Instructions] Your first question comes from the line of Doug Irwin of Citi.

I just want to start on guidance and maybe more specifically on growth expectations for the G&P segment. Could you maybe just help quantify how much of the variance within the high and low end of the guidance range is dependent on G&P performance and your ability to ramp up sour gas later this year? And then just with regard to the multiyear growth benchmark that you put out there, how should we be thinking about the ramp to that $70 million of incremental EBITDA over the next couple of years?

Doug, thank you for the question. I think it's a great question. But I will touch exactly what you asked, but I would like to start from a big picture standpoint. We defined a very clear concise strategy of crude, gas and water in the most prolific area of the Permian Basin. And if I want to highlight one number in the guidance we gave is the return on the investment that we see with the capital we invest now. You see it around 1 to 3x on the investment we see, which is very good. It's good to our coverage ratio. It's good to leverage ratio and very accretive to EBITDA. You see that over the course of more than 1 year. On a run rate basis, it's a very accretive number. And the main outcome of that is the results of our strategy.

Second point I want to highlight is the growth and yield combination that we are seeing, that's probably best-in-class, if not best-in-class, probably among other best-in-class, but very, very good. We are on a very, very good trajectory in pattern. So we are very happy about that.

The last point I want to make sure coming across, and then I will hand it to Reuven will be more specific around the sour is the fact that if you are taking the intrinsic value of each asset that we either build or bought, we need to get 7 handle on our unit price. So there is way -- much more room to go. We are very consistent with rewarding our investors. We have a very clear target for leverage ratio and coverage ratio, and we are prudently moving to those targets.

Reuven, do you want to talk about sour gas just a little bit?

Yes. Thank you, Avigal. We're actually very excited about the growth opportunity that gas will provide us. We mentioned in previous calls that gas in the region is turning to be more sour than originally anticipated, which made us accelerate our sour projects time line. Presently, we are drilling the AGI well and constructing our associated sour gas gathering and compression system.

As we mentioned in the prepared remarks, we expect to see increased utilization as these projects are completed throughout the year. Even with the completion of this project, we still anticipate incremental processing capacity needed in our area. This is a long answer, but the short answer is we expect to be completed over the next few months. And the Delaware gas business will be one of our growth engines for years to come.

Got it. And maybe as a follow-up on an item from the DK release, you called out a transaction with DK for some assets that as the Tyler and El Dorado facilities. Just curious if you could talk about the EBITDA impact to DKL from those transactions and the use of proceeds. And then just looking forward, are there more opportunities like this that you could potentially do between the 2 companies?

Yes, absolutely, I will let Robert take that question.

Yes. Thanks, Avigal. Yes, these transactions really just helped us further the economic separation of the 2 entities. You'll see in our slides that DKL now has 82% of their EBITDA is now from third-party businesses as a result of this transaction. With this, our view is that we're materially complete with the inside Defense assets being sold to DK. We kind of have the right assets under the right roof now. And from an EBITDA perspective, it's really not material to either entity.

Your next question comes from the line of Gabriel Moreen of Mizuho.

I just going to ask in terms of maybe just pressing you guys a little bit on what the next steps would be on the Libby processing expansion. How big you would think the next chunk of processing addition would be and what would need to happen and when to make that come to fruition?

Yes. So I will tell you 2 things. First, you probably remember that we said a few quarters ago about the investment we already put for future expansion for Libby. You remember $15 million. So we will not try to take advantage around that. That's the first nugget I'm going to give you. The other one that I'm going to tell you that we are looking very, very carefully, and it's all public information, what our customer and producers are doing in the area. And in our area looks very good, and which means 2 things, which means more sour and which means more volume, both on the crude and gas. So I'm not going to commit to a time line that you asked, but you didn't expect me to fall into this stress. But I'm going to tell you that we are looking very good in all the macro that we are seeing and also the micro from our customers. So stay tuned.

We do. And of course, I have to ask you, there's been a lot of, what I would say, sour gas midstream M&A over the last couple of months. So I'm just curious what your thoughts are on that, what you're seeing potentially out there in terms of packages on gas or water that they may or may not be out there?

Yes. So the cheapest company in the area, it's called DKL. We still don't see -- we are still not close to the valuation versus our peers. Obviously, you probably were very happy about the 2 midstream acquisition that we did, both H2O and Gravity. We do it both on the right timing on the right valuation. We are not shy of doing that, but we are not going to force ourselves into a deal that it's too expensive. So more to come. Every deal that we do needs to be accretive to free cash flow, leverage ratio and coverage ratio, and we are not going to shy from those principles in the future. And I will leave it to that.

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

Yes. Thank you. Thank you. I just want to thank the great team in this room. Thank you to our great Board of Directors that support with the great support for the DKL journey to the investors and to the -- and mostly the great employees we have, I'm really proud of the progress we are doing and more to come. Thank you.

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

Thank you for standing by. My name is Joe, and I will be your conference operator today.

I would now like to turn the conference over to Robert, Chief Financial Officer. You may begin.

Good morning, and welcome to the Delek Logistics Partners Third Quarter Earnings Conference Call. Participants joining me on today's call will include Avigal Soreq, President; and Reuven Spiegel, EVP.

As a reminder, this conference call will contain forward-looking statements 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 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 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. Delek Logistics Partners had another record quarter. We reported approximately $136 million in quarterly adjusted EBITDA. Due to the strong progress year-to-date, DKL has increased its full year EBITDA midpoint guidance of $500 million to the upper end of the range between $500 million and $520 million.

Delek Logistics continue to advance its key initiatives in natural gas, crude and water businesses, further improving its position as a premier full service provider in the Permian Basin. After successfully completing the commissioning of the new Libby 2 plant in the third quarter, DKL advanced its ongoing effort on acid gas injection and sour gas handling capabilities. The AGI and sour gas handling capabilities are enabling DKL to fill the plant to capacity and paving the way for further processing capacity expansions.

We are also seeing solid operations in our crude and water gathering segments. Both VPG and DTG crude gathering operations had a strong third quarter with record volume for DTG. This strength has continued in the fourth quarter.

Between our two water acquisitions in increasing dedication, our competitive position in both Midland and Delaware basins is increasing, and we expect to continue to build on these strengths. Our well-timed and cost-effective acquisition of 3 Bear, H2O Midstream and Gravity Water Midstream have supplemented our organic growth and enable DKL transition to full suite service provider. We will remain consistent with our strategy of growing the partnership through a prudent management of leverage and coverage.

Along with seizing the growth of opportunity we see in our business, we intend to remain good stewards of our stakeholder capital. With that, I'm pleased to announce that the Board of Directors has approved the 51th consecutive increase in the quarterly distribution to $1.12 per unit. This is an extraordinary achievement, and we're extremely proud of our team and the financial prudence that has gotten us in.

To conclude, Delek Logistics is making great progress in becoming a strong independent full suite midstream service provider and expect to continue on our value creation path well into the future.

I will now hand it over to Reuven, who will provide more details on our operations.

Thank you, Avigal. As Avigal mentioned, we are very excited about DKL's future and are working to increase our advantaged Permian position. I am very pleased with the commissioning and operation of our Libby 2 gas plant. The plant is performing according to expectations, and we are completing the associated sour gas AGI infrastructure to fill the plant in the most efficient manner. The planned CapEx for Libby 2 included investments that will support future expansion of the Libby complex, and our confidence in these expansion opportunity is increasing as we progress our AGI infrastructure.

We continue to believe that our expanded gas processing and sour gas handling capabilities provide a unique offering to our customers and provide us with a long runway of growth in the Delaware Basin. Our crude gathering volumes had a record third quarter, and we expect to continue to see this trend going forward as we close out the year.

On the Midland side, the integration of the two water gathering systems from H2O and gravity is progressing well, and we expect to use our larger footprint to enhance our combined crude and water offering in the Howard, Martin and Glasgow counties.

Finally, we continue to look for opportunities to make our operations more efficient and robust and are looking for ways to increase our margin profile throughout our operations.

With that, I will pass it on to Robert.

Thank you, Reuven. As both Avigal and Reuven highlighted, we continue to make meaningful progress in advancing the Delek Logistics growth story. While we drive forward expansion across the partnership, we remain equally focused on achieving our long-term leverage and coverage targets.

Over the past 12 months, we've successfully closed two acquisitions, H2O Midstream and Gravity Water Midstream, which were well-timed from a purchase multiple perspective. And we also completed the construction of the Libby 2 gas plant. Our focus now shifts to capturing the full value of these investments by optimizing synergies and realizing the associated EBITDA uplift as we move toward our strategic goals. Importantly, we maintain a strong financial position with approximately $1 billion of availability on our credit facilities, giving us flexibility to continue executing our growth agenda.

Moving on to our third quarter results. Adjusted EBITDA for the quarter was approximately $136 million, up from $107 million in the same period last year. Distributable cash flow as adjusted totaled $74 million and the DCF coverage ratio as adjusted was approximately 1.24x. We expect this ratio to continue to strengthen through the remainder of the year as our recent growth projects, including the Libby 2 gas plant begin to make a more meaningful contribution to our financial performance.

For the Gathering and Processing segment, adjusted EBITDA for the quarter was $83 million compared to $55 million in the third quarter of 2024. The increase was primarily due to the acquisition of H2O and gravity.

Wholesale Marketing and Terminalling adjusted EBITDA was $21 million compared to $25 million in the prior year. The decrease was primarily due to the impact of last summer's amend and extend agreements with DK.

Storage and Transportation adjusted EBITDA in the quarter was $19 million compared with $19 million in the third quarter of 2024.

And lastly, investments in pipeline joint venture segment contributed $22 million this quarter compared with $16 million in the third quarter of 2024. The increase was primarily due to the contribution from the Wink to Webster drop down in August of last year, in addition to stronger performance by the venture in the current period.

Moving on to capital expenditures. The capital program for the third quarter was approximately $50 million. $44 million of this capital spend relates to growth CapEx, which included spend to optimize the Libby 2 gas processing plant. The remainder of the capital spend for the period was other growth projects, namely advancing new connections in the Midland and Delaware gathering systems.

Looking ahead to the remainder of the year, as Avigal mentioned, we remain confident in our earnings trajectory and are raising our full year EBITDA guidance to the upper end of our range, now expected between $500 million and $520 million.

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

[Operator Instructions] Your first question comes from the line of Doug Irwin of Citi.

I was wondering if you could maybe expand on the comments in the press release around producers increasing activity on your acreage ahead of Libby 2 coming online. Just curious how you're thinking about the treating capacity ramp at the year-end as well as maybe some of the benefits you might be seeing across your broader gathering system just as you bring that sour gas offering to your customers?

Yes, absolutely. So why don't I take a minute or two to give you a bit broader overview. As you saw on our numbers, crude and water are extremely strong, and we are very happy about that. And I think we also can be proud of the strategy we set to be a premier crude gas and water provider in the heart of the Permian basin. I think that we were pretty much the first one to put that strategy together, and it's starting to give us a very nice yield. That's part of the reasoning that we are increasing our forecast, our guidance for the year, and we are very proud of the timely manner acquisition and build we did.

We saw a record crude. We do not see any material change in the drilling activity in our acreage. And with the discussion we have with our producer and we are seeing more and more synergies between the different streams that we are actively managing.

And with that, I will let Reuven comment more about the sour progress we are seeing.

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

Got it. That's helpful. And maybe as a follow-up on CapEx. You talked about potentially already having expansion opportunities, but also kind of spend some CapEx this year on Libby 2. I guess where do you see '26 trending in general now that you have Libby 2 online? And I guess, to the extent that it's trending lower next year, how are you thinking about just your flexibility to make you pay down some debt or maybe even buy back some more units from DK next year?

Yes, that's a very nice question, Doug. While the macro and the strategy going very well, we still have some tactics to finish for planning for next year and budgeting and we plan to give you another guidance on the next earnings call like we did this year. So we have something to look looking forward. So we'll leave it to that.

Your next question comes from the line of Gabriel Moreen of Mizuho.

I just want to ask on the equity income line. I think Robert mentioned some, I mean, better performance or improving performance. Clearly, that was equity investment line. That was clearly a very strong point in the quarter. Can you just talk about that a little bit? And is this current run rate something that's maybe sustainable going forward?

Yes. Thanks for the question. Yes, as I mentioned in the prepared remarks, most of that line item was impacted by strong performance in the quarter by Wink to Webster. I think when you look at our JV results on an annualized basis, like year-to-date, I think that's a good run rate of what to expect going forward. I think we're pretty happy with our JV results overall.

Great. I appreciate it. Can you maybe also talk a little bit about the water landscape overall? I think Reuven and Avigal, you both mentioned others trying to emulate your 3-stream strategy here. As far as you see with the landscape, are you seeing new competitors, new opportunities? Just curious kind of with some mergers happening and IPO happening, whether anything has shifted in your view?

Yes. So that's a very good question. And we should see very important trends that you can see is the gas and oil ratio and the water and crude ratio. Both of them are working extremely well from our position standpoint. And if you go one year back, Gabriel, and you think about the timing that we did the both H2O and Gravity acquisition, we brought that pretty much at half price versus what we've seen the market trending today. So we are very happy about the timing and the trend in the market. Obviously, as you can see in the Delaware Basin, it's almost impossible to get SWDs permitted in a timely manner. So we were very fortunate to have the position we are at, and it's going very well to our expectations.

And if I could just squeeze one more in relative to Reuven's comments about Libby 3 earlier than expectations. I'm just wondering if you'd be able to define what that would mean from a timing standpoint? And then also on the AGI disposal front as well, whether what you've done here to handle the sour gas at Libby 2, whether that gives you really the runway or whatever volumes you're going to need to handle at Libby 3 when the expansion comes on, hopefully.

Yes. Obviously, the market is telling us that it needs our sour capabilities and the market tell us that it needs our gas treating and the market tell us that it needs our water treating. All of that are detailed question. Obviously, once we finish the planning session, we will come to you with a very detailed and the execution plan like we did in the past, all the time in the past, we'll do that again this time. And -- but the very good news here that we are on the right timing. And I would say, with the right product basket to give to our customers. Mohit, do you want to add anything?

Yes. Gabe, thanks for your question. Just to answer your specific question, we are very happy with our permitted capacity on the asset gas side, and we don't see any near-term restrictions on that.

With no further questions, that concludes our Q&A session. I will now turn the conference back over to Avigal for closing remarks.

Thank you, everyone. Thank you to my colleagues around the table. Thank you for our Board of Directors for trusting us. Thank you for the unitholder. We're enjoying a very good return and growth story. And most importantly, thank you for our employees for making that partnership as good as it is. Thank you, guys. We'll talk again.

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