Delek Logistics Partners, LP (DKL) stock intrinsic value fair value estimate & owner earnings analysis

Delek Logistics Partners owns pipelines, storage terminals, and gathering and processing systems. It serves the Delek Holdings refineries in Tyler and Big Spring, Texas and El Dorado, Arkansas, and it gathers oil, gas and water in the Permian Basin. The latest annual report we reviewed covers 2025. We did not review the 2026 quarterly reports. What we measured. We start from cash from operations, then remove working-capital swings and unit-based pay, and subtract maintenance spending. The formula treats most of a year's capital spending as maintenance unless revenue grew. This matters a lot here. Capital spending rose from about $23 million in 2021 to $268 million in 2025 as the partnership built out its Permian systems. The company itself reports only about $16 million of regulatory and sustaining spending in 2025. Our formula therefore shows 2025 owner earnings of only about $11 million, or $0.20 per unit. That reflects expansion spending being charged as if it were required upkeep. It is not a collapse in the business. Cash from operations was $237 million in 2025, up from $206 million in 2024. Because the business changed shape with the Permian acquisition in late 2022 and the 2024 to 2025 transactions, we anchor on 2023 to 2025. Owner earnings in those years were about $156 million, $124 million and $11 million. We use the median, about $124 million a year, spread over 53.5 million units outstanding at the end of 2025. That is about $2.32 per unit. Between 2024 and 2025 the stored per-unit figure fell from $2.62 to $0.20. Our base case does not assume that drop reverses. It starts from the $124 million median instead of the 2025 figure. What supports the earnings. The partnership had about $537 million of contracted revenue remaining at the end of 2025 under minimum volume commitments and capacity agreements with Delek Holdings: $134 million in 2026, $134 million in 2027, $88 million in 2028, $79 million in 2029 and $102 million afterward. A substantial majority of pipeline revenue comes from agreements with Delek Holdings, so the customer is concentrated. Some Permian gathering is under dedicated-acreage contracts. Base case, $24.30 per unit. Owner earnings hold at about $124 million a year for ten years. That rests on the assets serving the refineries and the acreage already dedicated. After year ten we let earnings run off by 10% a year, because we cannot point to a contract or track record that carries them beyond that. We give no credit for growth. The 2025 expansion spending is paid for, but we have not been able to tie it to specific contracted earnings. Bear case, $11.60 per unit. The partnership carries $2.36 billion of debt. Its main bank facility matures October 13, 2027, and covenants cap total leverage at 5.25 times. Contracted minimums step down from $134 million in 2027 to $88 million in 2028. We assume owner earnings of $100 million for two years, then a 12% annual decline with no renewals. Bull case, $37.30 per unit. Spending in 2024 and 2025 (including the 15.6% interest in the Wink to Webster pipeline acquired from Delek Holdings in August 2024, and the Gravity acquisition) begins to show up in cash flow, and owner earnings reach about $190 million a year for ten years. This is below the roughly $257 million that 2025 cash flow would imply if only the reported sustaining spending were deducted. The same 10% run-off applies afterward. What could make this wrong. If most of the 2025 spending is expansion that earns full returns, the true earning power is higher than our base case and the shares are worth more. If Delek Holdings reduces volumes at its refineries beyond the contracted minimums, or the credit facility cannot be renewed on similar terms, the value is lower. Debt is not subtracted separately, because interest is already paid out of the cash flow we measure. It is reflected in the bear case.