Delek Logistics Partners, LP (“Delek Logistics” or “DKL”) announced the development of permitted acid gas injection “AGI” capabilities at its under-construction Libby 2 gas processing plant.
“We are committed to executing our strategy of being the preferred oil, gas and water midstream services provider in the Permian Basin. Delek Logistics continues to provide the best combination of yield and growth in the midstream sector. We are determined to showcase the value DKL has created in the Permian Basin and are confident that our strategy will continue to yield benefits for the stakeholders of Delek Logistics. The announcements today are a testament to the high-quality growth opportunities we are seeing in and around our existing assets. Pro-forma for the announcements DKL will be approaching greater than 70% of its EBITDA coming from third-party sources. DKL’s current liquidity of over $700 million allows DKL to pursue these opportunities without the need for incremental external capital while prudently managing our leverage and distribution coverage,” said Avigal Soreq, President at Delek Logistics.
Delek Logistics continues to enhance its "full suite" strategy with the addition of AGI capabilities at the Libby 2 gas processing plant, positioning DKL as a leading logistics provider in the Northern Delaware Basin. The sour natural gas treating and acid gas injection capability is enabled by our two existing AGI well permits and amine unit currently under construction. Drilling activity in this area has generally been restricted due to the lack of sour natural gas treating and acid gas injection capacity as well as the lengthy permitting process for AGI wells. This project will allow our new and existing customers to fully access all six benches of the Delaware Basin without the liability of hydrogen sulfide and carbon dioxide. This expansion not only lays the groundwork for further Libby complex expansion but also adds significant standalone economic value to the original project lowering the overall build multiple. We expect to have the AGI capabilities in the second half of 2025.
Additionally, DKL announced the acquisition of Gravity Water Midstream for a total consideration of $285 million (comprised of $200 million in cash and $85 million in DKL units). The acquisition is synergistic to DKL’s recent acquisition of H2O Midstream and supplements DKL's integrated crude and produced water gathering and disposal offering in the Midland Basin. The company is being acquired at an EBITDA multiple below 5.5x excluding synergies and is immediately accretive to DKL’s free cash flow, EBITDA and leverage. The acquisition also presents substantial synergy opportunities reinforcing DKL's commitment to driving long-term value for its customers in the Midland Basin. DKL expects the transaction to close in 1Q’2025.
DKL also secured an additional ~34,000 acreage dedication incremental to the previously announced ~50,000 acreage dedication in the Midland Basin. The additional acreage dedication improves the overall economics and opens the possibility of a cross commodity offering in the future. This takes total acreage dedication to DKL in the Midland Basin to ~400,000 acres. This acreage dedication is supported by DKL’s Delek Permian Gathering System (DPG) located in West Texas.
