Delek US Holdings Inc Aktie

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.

Thank you for standing by. My name is Jewel, and I will be your conference operator today. At this time, I would like to welcome everyone to the Delek U.S. second quarter earnings call. [Operator Instructions]

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

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; Joseph Israel, EVP, Operations; and Mark Hobbs, EVP and Chief Financial Officer.

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

Slide 2 contains our safe harbor statement regarding forward-looking comments. Any forward-looking information shared 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 here as well as within 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. Delek continued on its transformational journey during the second quarter by making progress on several key strategic initiatives. We have made excellent progress on our enterprise optimization plan. Given the progress we have made so far, we are increasing our guidance on EOP to $130 million to $170 million on a run rate basis. Sum of the Parts effort also continues to progress well.

During the quarter, we completed our intercompany agreement, worked on raising liquidity at DKL and made great progress in increasing the economic separation between DK and DKL. As I always do, I will give an update on our key long-term priorities in more detail.

First, safe and reliable operations. We have made further progress in improving the operations throughout our company and reported record throughput in the quarter. The Big Spring refinery had a strong quarter with a strong overall throughput and operational performance. We have continued to make reliability investments that will serve us well in the future. Tyler, El Dorado, and KS also had strong operations during the quarter. El Dorado has showed additional benefit from EOP improvements.

With most of our capital projects complete in the first half of the year, we look forward to capture the advantage of our operational EOP and strategic progress during the remainder of the year and beyond.

Now I would like to discuss the progress we have made on our EOP efforts. As a reminder, we started EOP with an aim to improve DK cash flow by $80 million to $120 million starting the second half of 2025, with focus on improving overall free cash flow generation through this cycle.

The basis of this EOP improvement was further cost reduction, but more importantly, by making structural changes in the way we run our company. These structural changes are tied to our cost base, the way we run our refineries, the way we buy our crude, and the way we sell our products.

During the quarter, we estimate approximately $30 million of this EOP cash flow improvement have flowed through our P&L. As you can see, we have already achieved our prior target of $120 million of run rate EOP benefits 1 quarter ahead of schedule.

Today, we are further increasing our range of EOP improvement to $130 million to $170 million on a run rate basis, starting the second half of this year. I'm extremely proud of the team for adopting a culture of continuous improvement.

While there is still more work ahead, I like the direction we are heading. We also continue to make progress towards our Sum of the Parts goals. With the commissioning of DKL Libby 2 plant and the completion of intercompany agreements, we are making great progress in making DK and DKL economically independent. During the quarter, we increased the financial liquidity at DKL through a very successful high-yield offering.

Both our intercompany agreements and the latest high-yield offering with over $1 billion of liquidity at DKL. This financial flexibility will allow DKL to continue on its growth journey and complete the economic separation from DK.

As I've highlighted in the past, DKL has a strong runway of growth in both Midland and Delaware Basins. DKL is making great progress in developing its sour gas gathering and acid gas injection capabilities. These capabilities will provide DKL the ability to fully capitalize on all of its growth opportunities in the Delaware Basin. DKL is also having a lot of success increasing its crude gathering business, both in the Midland and Delaware Basins.

During the third quarter, we see a material increase in volumes in both Midland and Delaware systems. Delek Logistics is on track to meet its 2025 EBITDA guidance of $480 million to $520 million. We continue to work on additional steps to unlock the value of approximately $400 million in third-party EBITDA at DKL such that it's fully reflected in DK share price and DKL unit price. We'll complete the DK Sum of the Parts in methodical manner that will create value for both DK shareholders and DKL unitholders.

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 and bought back approximately $13 million of our shares. Our strong balance sheet, improved reliability, and confidence in EOP has allowed us to continue the countercyclical buyback in 2025. We remain committed to a disciplined and balanced approach to capital allocation.

Now I would like to make a comment about small refinery exemptions. As you know, SRE petition are an important focus area for Delek as our pending petition are worth more than our current market cap. The Supreme Court and the D.C. Circuit Court have made it clear that the EPA must thoughtfully address this problem. We believe the EPA understands the issues small refiners like Delek face in the absence of clear policy around SRE.

As a reminder, since 2019, while our SRE petition has been pending, Delek has remained in full compliance. We are confident in a favorable outcome on our petitions based upon the principle laid in the RFS law, ruling from the D.C. Circuit Court, and the EPA understanding of the issues involved.

In closing, I would like to thank our entire team for their hard work and dedication. We are optimistic about DK trajectory in the second half of 2025 and beyond with a strong momentum and promising opportunities on the horizon.

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

Thank you, Avigal. Second quarter operations performance was strong from safety, reliability, and optimization standpoint.

Starting with reliability, record throughput results were set in Big Spring, Krotz Springs and for the entire system. With regards to optimization, our refining teams have been successful in debottlenecking, improving liquid yield recovery, maximizing production value, and optimizing sulfur and benzene balances. Process efficiency improvement is well reflected in our numbers.

Our realized refining margins increased by $0.96 per barrel compared to the second quarter of 2024, despite an $0.18 per barrel decline in the benchmark net margin. Our commercial team has reworked contracts and optimized our new logistics to expand market optionality. Overall, we made good progress operationally, and we are well positioned to meet or exceed our European goals.

Starting with Tyler. Total throughput in the second quarter was 74,000 barrels per day. Our production margin was $9.95 per barrel and operating expenses were $4.58 per barrel. For the third quarter, our estimated total throughput in Tyler is in the 73,000 to 77,000 barrels per day range.

In El Dorado, total throughput in the second quarter was approximately 81,000 barrels per day. Our production margin was $5.21 per barrel and operating expenses were $4.38 per barrel. The El Dorado system is one of our top operational EOP priorities. In the second quarter, our estimated EOP impact on gross margin is $1.45 per barrel, which is in line with our approximately $2 per barrel run rate target. Plant throughput for the third quarter is in the 79,000 to 83,000 barrels per day range.

In Big Spring, total throughput in the second quarter was approximately 76,000 barrels per day, reflecting our progress with people, process, and equipment. Our production margin was $9.65 per barrel and operating expenses were $6.67 per barrel. In the third quarter, the estimated throughput is in the 69,000 to 72,000 barrels per day range.

In Krotz Springs, we continue to demonstrate improved capacity capabilities since the major turnaround. Total throughput in the second quarter was approximately 85,000 barrels per day. Our production margin was $7.59 per barrel and operating expenses in the quarter were $5.13 per barrel. Our plant throughput for the third quarter is in the 81,000 to 85,000 barrels per day range. Our implied system throughput target for the third quarter is in the 302,000 to 317,000 barrels per day range.

Moving on to the commercial front. In the second quarter, supply and marketing contributed a gain of $26 million. Of that, approximately $19 million was generated by wholesale marketing. Asphalt contributed a gain of approximately $200,000. Both were positively impacted by seasonal trends and structural EOP improvements in our business. Approximately $7 million gain was attributed to supply.

In summary, we delivered strong performance in the second quarter, driven by our operational excellence and strategic execution. We are well positioned to further enhance efficiency, while upholding our commitment to safe and reliable operations.

Mark will now address the financial variance.

Thank you, Joseph.

Referring to Slide 16. For the second quarter, Delek had a net loss of $106 million or negative $1.76 per share. Adjusted net loss was $33 million or negative $0.56 per share and adjusted EBITDA was $170.2 million.

On Slide 18, the waterfall of adjusted EBITDA from the first quarter of 2025 to the second quarter shows that there were 2 main drivers for the increase in EBITDA. First, a $141 million increase in refining was primarily driven by a higher margin environment in the second quarter relative to the first quarter, along with sequentially higher throughputs.

Second, in the Logistics segment, we continue to have another strong quarter, delivering approximately $120 million in adjusted EBITDA, about a $4 million increase over our previous record of quarterly adjusted EBITDA achieved in the first quarter. These improvements were mitigated by slightly higher costs in the Corporate segment of $1 million compared to the prior period.

Moving to Slide 19, to discuss cash flow. Cash flow provided by operations was $51 million. This includes our net loss for the period in addition to an inflow of approximately $51 million of timing-related working capital movements, which includes the impact of our inventory intermediation agreement as well as an outflow of $30 million of restructuring and other onetime charges.

Investing activities of $163 million includes approximately $115 million for growth projects, primarily at DKL. Financing activities of $103 million reflects $13 million in share repurchases, approximately $16 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. Second quarter capital expenditures were $164 million. Approximately $119 million of this spend was in the Logistics segment. This includes the $115 million in growth capital at DKL, of which $48 million was associated with completing the Libby 2 gas plant.

Primarily all of the remaining capital spend during the quarter was in the Refining segment, addressing plant sustaining capital initiatives. Our DK Refining and Corporate Capital spending outlook for 2025 remains consistent with prior guidance.

Our net debt position is broken out between Delek and Delek Logistics on Slide 21. Excluding Delek Logistics, we spent approximately $74 million on cash return to shareholders and capital expenditures in the second quarter, while our Delek standalone net debt remained relatively flat, around $275 million at the end of the quarter.

Moving now to Slide 22, where we cover third quarter outlook items. In addition to the guidance Joseph provided, for the third quarter of 2025, we expect operating expenses to be between $210 million and $225 million. Our operating expense guidance for the third quarter incorporates both higher expected throughput across our Refining segment as well as 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.

Its Keith Stanley, first player, on for Doug Leggate this morning. His schedule is outside the time. So our first question is going to start with the SRE. You guys have definitely expressed some confidence around what looks to be a favorable outcome. I want to know if you're kind of -- if your confidence has kind of picked up and increases as we get closer to a final decision?

And along with that, should you be granted the exemption, I guess, I was trying to form or understand what do you see as the best use of proceeds? And how could that allow DK to improve structurally on an operational level?

Yes, absolutely, Doug. Thank you for the question. Listen, we are very optimistic about the small refinery exemption. The law is in our side. The D.C. Circuit Court is in our side. We are the only public refiners that all of our assets can apply to small refinery exemption. We stay in full compliance during the last 6 years that our petition are pending. And as you can easily calculate, it's bigger than our market cap. So it's very clear around the economical harm that we're having because of that pending lingering issue. EPA understand the issue and we are confident in favorite outcome.

With one comment about the last part of your question about what is the proceed. I'm not going to comment around that. But I'm sure the EPA understands that we cannot compensate someone that stay in compliance, and we were in compliance. So I hope that, that comment makes a lot of sense to you.

And my follow-up is going to be around EOP. Of course, you kind of talked about this last quarter and it looked like there was some definitely opportunity to revise to the upside, and that definitely tended to be the case in this quarter.

So my question is, I mean, I guess, I'll ask again, is there any continued room to the upside and some opportunities there? What were the drivers that you guys were able to identify that moved the guide forward? And the last part of that question is whether you see sustaining capital for refining now at the -- should you be able to execute on this target of between $130 million and $170 million?

Yes, Doug, that's very nice of you to ask that question because we are extremely, extremely proud of the EOP focus and the momentum we have here in our shop. EOP is not a project. It's a lifestyle. And when I'm saying it's a lifestyle, we have a weekly meeting about that. We have an [indiscernible] project.

We have -- we are auditing that, internal audit, external audit, and have accounting look over that. So it's a very tight process that allows everyone to take a part and they are contributing for that. The whole essence of EOP is free cash flow, and below mid-cycle and reduce our breakeven. And we are very proud of that.

As you probably saw on our press release and also on my prepared remark, we increased the guidance of EOP from $120 million prior to this call to $130 million to $170 million. And the reason that we were 1 quarter ahead of time, and we see more projects coming in the queues for the EOP. So we are extremely optimistic and see a lot of value in it. Mohit, do you want to chime in?

Yes. Thanks, Avigal. So all I would say on EOP, as Avigal just mentioned, it's a free cash flow improvement exercise for the company. If you look at the second quarter, $30 million flowed through our financials, and that allows us to have a $120 million run rate. And I just want to remind everybody that we started with the $80 million to $120 million guidance.

Now to your specific question around where is this improvement or higher confidence and then the higher rate is coming from? So if you remember, the $120 million had 2 components to it. One was cost and the other one was margin. And our confidence in our margin improvement is increasing, and that is where most of the increase has come from. So if you look at the $150 million at the midpoint of the enhanced increased guidance that we have provided today.

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

I wanted to ask, there's been great progress in EOP free cash flow generation. How do we then think about the allocation of that cash? Can you remind us of your strategy there, how you're balancing between capital returns and balance sheet efforts?

Yes, absolutely, Alexa. Thank you for that question. We are very consistent with our capital allocation program. You can see that, first of all, we said that we're going to maintain dividend throughout the cycle. We can definitely check that box very nicely. Then we said that we have a balanced approach between balance sheet and buyback. We have done that as well. So we are very consistent and confident around those abilities. We have done buyback in Q1 countercyclical. We have done buyback Q2. We have done a buyback Q3. As we see -- you can see, in the last 12 months, we have more of around $150 million of total return to shareholders, and we are #1 versus in our peers around return to investors in terms of capital return to investors. So we are very proud and consistent about the way we look at capital, and we plan to maintain it. So thank you for that question.

And then maybe just as a follow-up, I know it's a bit early, but how is Q3 shaping up? What demand trends are you seeing? What's your view for crude differentials going forward? Any thoughts around the quarter ahead would be great.

Yes, absolutely. We just seen a DOE, I think, like 54 minutes ago, and we see still a positive trend in terms of diesel. Diesel, it's in 5 years low, and we see a decent demand on diesel and gasoline. Gasoline had a [ drop ] of 1.2, you saw that as well. So in terms of inventory, we're in a good shape.

In terms of supply, we've seen more closures than we actually expected even in the last couple of weeks, shaking out to around 900 during 2025, which balance the openings that we have seen, but doesn't compensate for increase in demand. So when we are putting all of that together, we see a pretty structural, constructive market ahead of us in the short-term and also in the midterm, all the way probably until the end of the decade. We do not see the demand of gasoline and diesel coming off as people first fear.

Mohit, do you want to chime in?

Yes, Avigal. I just want to add, Alexa, if you look at where PADD II specific inventories are. We've seen PADD distillate inventories are way below their 5-year averages, which is a very relevant metric for us. And if you look at the utilization in PADD II has been very, very high. So despite very high utilization, we see inventories remaining low, and we expect demand to pick up as the Ag season starts, and you would also see some turnarounds going forward. So as far as PADD II specific inventories are concerned, I think the outlook remains very optimistic, especially on the diesel side.

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

You mentioned some of the positive drivers in supply and marketing in Q2. I think the wholesale side, in particular was quite strong. Could you talk about how supply and marketing is trending so far in the third quarter? And do you think a positive EBITDA contribution is likely in Q3?

Thank you, Matt. Thank you for that question. Obviously, the line of supply and marketing is part of the EOP effort. We have improved that with a better logistics around it. We got to gain market access to new market, and we made a long-term contract that allow us to over time make that line better and better. So we're obviously enjoying that. We have some seasonal helping us in Q2, and we are extremely optimistic about the way the markets are positioning.

And I don't know, Mohit, if you want to chime in and give some more color specifically.

No, I think, Avigal, you're right. And Matt, if you look at our overall commercial strategy, DKTS or what we call DK Trading & Supply, which is the line item that you're talking about. Our commercial strategy is flowing through. But during the quarter, as you know, Q2 and Q3 are also seasonally stronger. So we did get some help from the market.

But Avigal rightly described what our strategy is as far as our commercial operations are concerned. As we have said in the past, this has 3 components to it. First is wholesale, second is asphalt, and third is supply. And we are making sure all 3 businesses, the ones that we can control, the parts of these 3 businesses that we can control are doing better through contract renegotiations to improved markets to enhanced market access and through our refineries making new products that we can sell in these markets through this refined and enhanced market access. And these results are showing through, and we look forward to continue doing -- improving this business going forward.

Sounds good. And then just on the Sum of the Parts monetization, Slide 12 lists some various avenues and options for you. What do you think are like the more likely options? And what are the less likely options? And then as far as timing, do you think investors can expect or hope for an economic separation of DKL by the end of 2025? Or is that looking more likely 2026 or even later?

Yes. So Matt, that's another great question for us. We are working on steps of Sum of the Parts as we speak. So we are not standing still even for 1 second, and more to come. And I will leave it to that. With that said, I can -- we can just take one step back and say what we did in the last 12 months, right? The last 12 months, we saw retail allow us to maintain strong balance sheet and to do countercyclical buyback.

On the midstream side, we are making DKL economically independent, grew the EBITDA from below $400 million to $500 million of EBITDA 2025 guidance midpoint, increased third-party business from 40% to 80%, which is a huge achievement. I don't think that many companies like us have done that in the past. Increase -- and while we are doing all of that, we reduced our ownership from 79% to the low 60%, but increased the distribution DK gets. So that's another thing we are very, very proud of.

In the end of the day, we see that there is not many midsized midstream company left, which give a lot of merit for DKL, and we see the opportunities flowing to us as we speak. On the intrinsic value, another very important point to watch is what is the intrinsic value of the assets in DKL. We have just seen the Medallion system sold in a very good multiply. It's a sister system to our DPG that what we mentioned, we see volume going up in the prepared remarks.

And we have just seen last week, Northwind sold for also a very nice multiply as well, and that's a sister system to our DPG. So going forward, we've said many, many times in the past, the 4 outlets that we have to complete Sum of the Parts. We are doing that as we speak and more to come. Thank you for that question.

Your next question comes from the line of Joe Laetsch of Morgan Stanley.

So I wanted to ask a couple on the refining side. And Big Spring, you mentioned it had record throughputs and capture rates also look like they're pretty strong there as well. Could you talk to what you're seeing from that asset post the turnaround in the first quarter? And then as part of that, could you also talk to the path to achieving the -- I think it was $5.50 per barrel OpEx goal at that refinery?

Yes, absolutely. So thank you for the question. I'm extremely proud of the Big Spring progress we have done throughput and margin, and I will let Joseph that is very close to it, take the credit here.

Yes. Big Spring has been on a very positive journey, as you all know. We focused first on the risk mitigation and reliability with very good results. Going from '23 to 2024, to remind you, throughput increased by 10% and the favorable trends continue in '25 with a record high throughput here in the second quarter.

So safe and reliable operations really allow us to focus now on process efficiency and commercial optimization. And to be more specific, maximizing liquid yield recovery and product value in Big Spring, really mainly going after the high octane, Arizona specs type of gasoline and improving asphalt grades. We also optimize benzene and sulfur balances. All of that is very visible in our gross margin improvement. So considering the leadership team, capabilities, and execution thus far, we are very bullish about the plant forward outlook.

And then shifting to El Dorado. It had a nice step up quarter-over-quarter in capture rates from a throughput margin perspective, but still lags some of the other refineries within the system. Could you expand a bit on Slide 9, which shows margin improvements? And then between logistics, cost improvements, and product yield, where are you in that improvement process? And is there more to go there?

It's very similar to the Big Spring story as far as EOP and structural improvements. It's all about liquid yield recovery and product value. In El Dorado, we are going after jet fuel, which is a new product over there, high octane gasoline component after replacing a couple of units catalyst and really premium asphalt is a big deal for El Dorado. So we are expecting the trends to continue, and we like the outlook of the plant.

Your next question comes from the line of Jean Ann Salisbury of Bank of America.

I wanted to ask about the net crack metric that I think is new here and how it's constructed and if that's a metric that you'll continue to track yourselves against.

Yes, absolutely. Mohit, do you want to take it?

Yes, Jean Ann, thanks for the question. So the way we define a net crack, and we can obviously talk offline as well, but the way we define a net crack is take Gulf Coast 532 on a WTI basis, and we take out RVO and we take out backwardation, the CMA impact on it, and we also take out Midland Cushing to get to our net margin number, which is the right way to look at our business because we are a completely inland refiner, and we are run mostly TI-exposed crudes.

And then I kind of wanted to go back to a comment that was made earlier. But do you think that the recent sale of Northwind is a good read across to your assets, especially the AGI capability that you're building? And I guess on that, do you think that once you have the AGI capability up and running, that's kind of what it takes to make it attractive for sale?

Yes. So as we said many times in the past, all options are on the table, and we are very much committed to make sure that our unitholders and shareholders get the full value of what they have. Obviously, we are working very hard in order to complete all of that and maximizing the value over there. But that just show the investor the full potential in our asset.

So it's having always your neighbor selling a high price, it's a good thing if you are living next door, and we were very happy about it. Mohit, do you want to chime in?

Yes, Jean Ann, and I know that you understand the midstream business well. So I'll just say this that as far as Northwind is concerned, Northwind is primarily a treating operation. We have a much more comprehensive operation in our DKL, which includes gathering, treating, processing. So we have a much more comprehensive full suite product over there as far as gas is concerned. So we think it's a very good benchmark, but we also have a better business.

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

I wanted to first go back to the EOP program. And I'm just trying to understand a couple of things. One, how much was actually reflected in 2Q results? I know you kind of referenced a run rate exiting the quarter, but wondering how much on a gross basis was kind of realized in 2Q? And then how should we think about the amount of the margin capture uplift that's captured in the supply line versus the site unit margins that you referenced? Or should we think about that kind of moving back and forth depending on how the environment shapes up?

Yes. Thank you. That's a very nice question of you. Obviously, EOP, we said it very clearly in order to make it easier for everyone, the $30 million benchmark, and we are very proud of the progress we are doing.

As you well know, Jason, that pretty much agnostic to market, the $30 million we outlined it. We obviously had one slide to make it easier for everyone to calculate on a similar market environment. You can easily see that in our presentation. So that's even make it easier to calculate how that flows through, and that's a very, very simple way on a very similar market environment to see the improvement on the capture rate and on trading and supply. And obviously, the other part of the business. Other part of the business is very easy to see, is the G&A. You see that we are in the low 50s versus low 60s in Q2 of 2024. I think that answered most of the question. But if you have anything, Mohit, do you want to chime in, so please.

Yes. I think, Avigal, I'll just reiterate what you said. So Jason, for the second quarter, $30 million were actually included in our financials. So the entire $30 million flowed through it, through second quarter financials. And as Joseph mentioned, $10 million of that was at El Dorado and rest was distributed between our DKTS, the trading and supply line item and the cost improvements that we have made.

And then my follow-up is hopefully a quick one, just on financing cash flows, which were a benefit in the quarter. You referenced a number of outflows from that bucket, but wondering what contributed to the net inflow from the financing cash flow line item?

Yes. So Jason, in reality, what the story here is very simple. EOP is all about improving the free cash flow. And that's a very, very important part in our equation, and I will let Mark chime in.

Yes, yes. Thanks, Avigal. Jason, I want to step back and talk about just because you're focusing in on kind of EOP and kind of where you can see that in our results. And so I want to be very clear that, as Avigal mentioned, that we're seeing this already show up in our results. I want to be pretty specific around this.

And so despite a slightly lower margin environment versus the second quarter of last year, our EBITDA has increased to over $170 million this quarter versus only $107 million last quarter, and our cash flow from operation was approximately $100 million higher than what we generated in the second quarter of last year. And keep in mind that of the $164 million of CapEx in the second quarter, about $115 million of that was growth CapEx, largely a DKL for high return projects like Libby 2, which will benefit us going forward. And so, and as Avigal mentioned in his prepared remarks, this year, our CapEx in 2025 is very much first half weighted. And so as we go through the year with lower CapEx and even more EOP benefits coming through, we feel very good about how we're positioned as we move through the remainder of the year.

And as you talk about the financing on the cash flow statement, keep in mind, we've done some things to improve our balance sheet on a consolidated basis. We had a successful high yield offering at DKL, which allowed us to pay down our revolver because we made the Gravity acquisition. We've been investing $100 million in the Libby 2 gas plant thus far in the first half of the year.

And so we added critical liquidity to the balance sheet by doing a very successful oversubscribed high yield offering at a very good rate, and it was an 8-year piece of paper. So we're very happy with that.

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

Yes. So I want to thank my friends around the table, our Board of Directors, our investors, and most importantly, our employees that make our company unique and great as it is. And we'll talk again in the next quarter. Thank you.

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