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BRENTWOOD, Tenn. - Delek Logistics Partners, LP (NYSE: NYSE:DKL), a midstream energy partnership, has initiated a public offering of $150 million in common units, with the possibility of an additional $22.5 million if underwriters exercise their option. The company plans to use the proceeds to redeem convertible preferred units and repay debt under its credit facility.
The offering, which is contingent on market conditions, will be conducted under an effective shelf registration statement with the SEC. A preliminary prospectus supplement will also be filed. While the completion and terms of the offering are not guaranteed, executives of the company, including President and CEO Avigal Soreq, have expressed interest in purchasing up to $300,000 of the units, although this is not a binding commitment.
Joint book-running managers for the offering include BofA Securities, Barclays, and RBC Capital Markets. Prospective investors can obtain a copy of the preliminary prospectus supplement from any of these underwriters or from the SEC's website.
Delek Logistics, headquartered in Brentwood, Tennessee, operates primarily in the Permian and Delaware Basins and the Gulf Coast region, providing services such as gathering, pipeline, transportation, and storage for crude oil, intermediates, refined products, and natural gas.
Delek Holdings (NYSE: DK), which owns the general partner interest and a majority limited partner interest in Delek Logistics, is also a significant customer of the partnership.
This announcement is based on a press release statement and does not serve as an offer to sell or a solicitation of an offer to buy any securities. The offering is made only by means of a prospectus and related prospectus supplement as required by the Securities Act of 1933.
In other recent news, Delek US Holdings (NYSE:DK), Inc. has been the subject of several noteworthy developments. The company's strategic reinvestments have led JPMorgan to upgrade Delek's stock from Underweight to Neutral, raising the price target to $26.00. The firm acknowledges the potential upside from the market valuing the consolidated operations more favorably, although this is not currently factored into their models.
In addition, Delek US has announced a significant expansion of its share repurchase program, with an additional $400 million approved by the Board of Directors. This move underscores the company's commitment to enhancing shareholder value. Concurrently, Delek Logistics Partners, LP has announced its intention to offer an additional $100 million in senior notes, maturing in 2029, to reduce the debt from its revolving credit facility.
However, TD Cowen revised Delek US's stock forecast, adjusting the price target to $18.00 from $19.00, while maintaining a Sell rating. This revision followed the company's recent strategic transactions, which sparked concerns over the company's financial strategy and future cash flow generation.
Despite achieving record throughput and advancing strategic initiatives, Delek US reported a net loss of $37 million and negative cash flow for its second quarter. The company also announced significant transactions, including the sale of its retail business for $385 million and interests in assets to enhance its midstream partner DKL's position. These are among the recent developments for Delek US Holdings, Inc. and Delek Logistics Partners, LP.
InvestingPro Insights
Delek Logistics Partners' (DKL) recent public offering announcement comes at a time when the company faces some financial challenges, as revealed by InvestingPro data. The partnership's revenue growth has been negative, with a 13.82% decline in the last twelve months as of Q2 2024. This aligns with an InvestingPro Tip indicating that analysts anticipate a sales decline in the current year.
Despite these headwinds, DKL maintains a notable dividend yield of 5.04%, with dividend growth of 10.87% over the last twelve months. This could be an attractive feature for income-focused investors considering the offering. However, potential investors should note that the company's profitability is under pressure. An InvestingPro Tip highlights that DKL has not been profitable over the last twelve months, with a negative P/E ratio of -9.72.
The company's market capitalization stands at $1.27 billion, and its stock has shown a significant return of 7.66% over the last week. This recent positive performance contrasts with the longer-term trend, as the stock is currently trading at 58.45% of its 52-week high.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights. There are 8 more InvestingPro Tips available for Delek Logistics Partners, which could provide valuable context for the company's financial position and market outlook.
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