DK

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How DK rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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In 53 | Management's Discussion and Analysis addition, past financial and/or operating performance is not necessarily a reliable indicator of future performance, and you should not use our historical performance to anticipate future results or period trends.
We undertake no obligation to revise or update any forward-looking statements as a result of new information, future events or otherwise. 54 | Management's Discussion and Analysis Executive Summary: Management's View of Our Business and Strategic Overview Management's View of Our Business We are an integrated downstream energy business focused on petroleum refining and the transportation, storage and wholesale distribution of crude oil, intermediate and refined products as well as wastewater processing, disposal, and recycling.
During the year we continued to make progress on our "sum of the parts" efforts.
Our logistics segment (or "Logistics") successfully closed the Gravity Acquisition which includes integrated full-cycle water systems in the Permian Basin, in addition to produced water gathering, and transportation assets in the Bakken, and along with the H2O Midstream Acquisition acquired in the third quarter of 2024, provide a strong opportunity for integrated crude and water services to Delek Logistics customers.
These acquisitions represents another significant step in Delek Logistics' commitment of being a full suite crude, gas and water midstream services provider in the Permian Basin in addition to diversifying our logistics customer base to include more third-party customers.
Also during 2025 and 2026, we entered into additional agreements with Delek Logistics which put additional midstream commercial activities in Delek Logistics and will bring refining related activities and assets back to our refining segment (or "Refining").
These transactions increased consolidated financial availability by approximately $250 million and continue to grow Delek Logistics third-party earnings while decreasing dependence on Delek.
During 2025, the Refining segment provided higher margins than 2024 due to increased crack spreads and the impact of small refinery exemptions.
Crack spreads were higher during 2025 than 2024 but still lower than historic highs in 2023.
Our disciplined approach to cost control, coupled with a focus on our enterprise optimization plan ("EOP") margin enhancements, as well as the impact related to the small refinery exemptions granted supported earnings before interest, taxes, depreciation and amortization ("EBITDA") growth and improved cash flow, while our capital deployment remained aligned with our strategic priorities.
The domestic West Texas Intermediate ("WTI") differentials compared to Brent continued to be favorable, and the WTI Midland to Cushing differential narrowed favorably compared to 2024.
The increased refining margins compared to the 2024 continues to demonstrate that demand for refined products continues to be stable.
We will continue to execute on our priorities of running safe and reliable operations, making further progress on our "sum of the parts" and EOP efforts, and delivering shareholder value while maintaining our financial strength and flexibility.
Our refining operations continue to be impacted by requirements to comply with RFS-2.
In the third quarter of 2025, we were returned 2019-2023 RINs after being granted small refinery exemptions from the U.S.
Environmental Protection Agency (“EPA”) related to the 2019-2024 compliance periods.
While a majority of the RINs returned were expired and had no value, the small refinery exemptions allowed us to retain certain non-expired 2023 and 2024 RINs.
Additionally, the exemptions resulted in a reduction of our Consolidated Net RINs obligation related to the unsettled 2024 obligation and a reduction within cost of materials and other in 2025.
The near term economic outlook still has uncertainty due to geopolitical instability and commodity market volatility.
As a result, we continue to progress our business transformation focused on enterprise-wide opportunities to improve the efficiency of our cost structure.
We continued to advance our strategic initiatives aimed at long-term value creation.
This includes the progress made on our EOP.
The EOP includes leaner costs including lower general and administrative expenses, lower operating expenses and lower interest expense.
As of December 31, 2025, we returned $141.4 million of capital in 2025 to shareholders through dividends and share buybacks.
Our near-term focus is centered around the following: (1) operational excellence, (2) financial strength and flexibility, (3) strategic initiatives which includes unlocking the "sum of the parts" value of our existing business while identifying growth opportunities to enhance the Company's scale and diversify revenue streams, (4) continuing our EOP efforts to enhance margin and cash flow and (5) return to investors.
See further discussion on macroeconomic factors and market trends, including the impact on 2025, in the ‘Market Trends’ section below.
Other 2025 Developments Acquisition of Gravity On January 2, 2025, Delek Logistics acquired 100% of the limited liability company interests in Gravity Water Intermediate Holdings LLC from Gravity Water Holdings LLC (the "Gravity Purchase Agreement") related to water disposal and recycling operations in the Permian Basin and the Bakken for total consideration of $300.8 million, subject to customary adjustments for net working capital.
The purchase price was comprised of $209.3 million in cash and 2,175,209 of Delek Logistics’ common units. 55 | Management's Discussion and Analysis Inventory Intermediation Agreement Amendment On February 21, 2025, DK Trading & Supply, LLC ("DKTS") amended the inventory intermediation agreement ("Inventory Intermediation Agreement") with Citigroup Energy Inc.
("Citi") to among other things, (i) extend the term of the Inventory Intermediation Agreement from January 31, 2026 to January 31, 2027 and (ii) include a mechanism for DKTS to nominate each month whether to include volumes related to the Krotz Springs refinery for funding under the Inventory Intermediation Agreement.
On December 18, 2025, DKTS amended the Inventory Intermediation Agreement to, among other things, (i) extend the term of the Inventory Intermediation Agreement from January 31, 2027 to January 31, 2028, (ii) reduce certain commitment fees, and (iii) include a mechanism for DKTS to nominate each month whether to include volumes related to the El Dorado and Big Spring refineries for funding under the Inventory Intermediation Agreement.
This amendment further reduces interest expense and other associated fees while increasing our flexibility on liquidity and inventory financing options for all refineries associated with the Inventory Intermediation Agreement.
Delek Logistics On May 1, 2025, we transferred the Delek Permian Gathering purchasing and blending activities to Delek Logistics (the "DPG Dropdown”).
In connection with the DPG Dropdown, Delek Logistics will assume all of the rights and obligations to purchase crude oil under certain contracts associated with Delek Logistics’ existing Midland Gathering System.
Total consideration included the cancellation of $ 58.8 million in payables owed to Delek Logistics.
On May 1, 2025, we entered into a termination agreement with Delek Logistics to terminate, in its entirety, the East Texas Marketing Agreement effective as of January 1, 2026.
On May 1, 2025, in connection with the DPG Dropdown, we amended and restated a throughput agreement with Delek Logistics for the El Dorado rail facility (the “Throughput Agreement”), which includes a minimum volume commitment for refined products until the termination of the Throughput Agreement, which will occur at the closing of the El Dorado Purchase (as defined below).
Additionally, on May 1, 2025, in connection with the DPG Dropdown, we entered into an asset purchase agreement with Delek Logistics (the “El Dorado Purchase Agreement”), where we will purchase the related El Dorado rail facility assets from Delek Logistics for cash consideration of $ 25.0 million (the “El Dorado Purchase”).
The El Dorado Purchase is currently set to close January 1, 2026, subject to certain closing conditions as set forth in the El Dorado Purchase Agreement.
We also entered into an amended and restated Omnibus Agreement with Delek Logistics that provides for an increase in the Administrative Fee (as defined therein) which will be phased in over two years beginning July 1, 2025 and a binding obligation for both parties to enter into transition services agreements in the event of a change in control.
On January 30, 2026, we entered into asset purchase agreements with Delek Logistics, (collectively referred to as “the Intercompany Agreements”), pursuant to which we agreed to acquire a Tyler refinery tank for total consideration of $19.0 million (the “Tyler Tank Purchase”) and El Dorado tank and terminal assets for total consideration of $66.0 million (the “El Dorado Terminal Purchase”).

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In addition, past financial and/or operating performance is not necessarily a reliable indicator of future performance, and you should not use our 55 | Management's Discussion and Analysis historical performance to anticipate future results or period trends.
We undertake no obligation to revise or update any forward-looking statements as a result of new information, future events or otherwise. 56 | Management's Discussion and Analysis Executive Summary: Management's View of Our Business and Strategic Overview Management's View of Our Business We are an integrated downstream energy business focused on petroleum refining and the transportation, storage and wholesale distribution of crude oil, intermediate and refined products as well as wastewater processing and disposal.
During 2024, we made steady progress on our "sum of the parts" efforts.
We completed the sale of our Retail Stores during the third quarter 2024 for proceeds of $390.2 million and also entered into a 10 year fuel supply agreement whereby Delek will sell to FEMSA certain motor fuel products for use at the Retail Stores.
The completion of the Retail Transaction was an important step in our value creation journey and strengthened our balance sheet.
Our logistics segment (or "Logistics") successfully closed the H2O Midstream Acquisition which expands our gathering footprint in the Midland sub-basin of the Permian, and extended our product offering of wastewater processing and disposal.
In addition, in January 2025, the Logistics segment successfully closed the Gravity Acquisition which includes integrated full-cycle water systems in the Permian Basin, in addition to produced water gathering, and transportation assets in the Bakken, and along with the H2O Midstream Acquisition, provide a strong opportunity for integrated crude and water services to Delek Logistics customers.
These acquisitions represent another significant step in Delek Logistics' commitment of being a full suite crude, gas and water midstream services provider in the Permian Basin in addition to diversifying our logistics customer base to include more third-party customers.
We expect that these acquisitions will be immediately accretive, delivering incremental contribution margin and cash flows.
We also completed strategic transactions with Delek Logistics including the dropdown of W2W Holdings LLC ("HoldCo") which includes our 15.6% indirect interest in the Wink to Webster Pipeline LLC joint venture as well as amended and extended certain commercial agreements.
These transactions are expected to make both Delek and Delek Logistics stronger companies.
During 2024, the Refining segment navigated a complex landscape characterized by strong U.S. utilization, volatile crude oil prices, resilient demand and fluctuating inventories.
We had a safe and reliable 2024 from an operational perspective; however, the current refining margin environment is challenging as crack spreads narrowed in 2024.
The domestic West Texas Intermediate ("WTI") differentials compared to Brent continued to be favorable, and the WTI Midland to Cushing differential narrowed favorably during 2023.
Though refining margins softened, demand for refined products continues to be strong.
Logistics continued to contribute strong results driven by increased volumes from the Delaware Basin and rate increases.
Additionally, Logistics also continues to benefit from strong performance amongst our pipeline joint venture investments.
We will continue to execute on our priorities of running safe and reliable operations, making further progress on our "sum of the parts" efforts, and delivering shareholder value while maintaining our financial strength and flexibility.
The near term economic outlook still has some uncertainty with geopolitical instability and commodity market volatility, and as a result we continue to progress our business transformation focused on enterprise-wide opportunities to improve the efficiency of our cost structure.
During 2024, we implemented additional cost reduction measures across the organization, including reducing contract services and reducing or eliminating non-critical travel.
We completed our zero based budget action plans and announced a new enterprise optimization plan ("EOP") which includes initiatives that are focused on improving our financial health and ability to generate cash flows.
The EOP includes leaner costs including lower general and administrative expenses, lower operating expenses specifically at the Big Spring Refinery and Krotz Springs Refinery and lowering interest expense.
The EOP also includes stronger margins including accretive minimal capital projects in our Refining segment and commercial improvements including market optionality, improved product slate and optimization.
By executing on our initiatives to optimize our cost structure, we are positioning the Company in the event of lower crack spreads and volatility in the commodity markets.
Our focus on reduction of GHG is a key objective as we strive to be a leader in the transition to a carbon neutral future.
Gulf coast industries should be well positioned for growth, particularly if global trade becomes tied to environmental attributes.
Following the enactment of the Inflation Reduction Act ("IRA"), Delek is investing in carbon capture technology.
We were selected by the Department of Energy's ("DOE") Office of Clean Energy Demonstrations to negotiate a cost-sharing agreement in support of a carbon capture pilot project at the Big Spring, Texas refinery.
The DOE Carbon Capture Large-Scale Pilot Project program provides 70% cost-share for up to $95 million of federal funding to support project development.
The project will deploy carbon capture technology at the Big Spring refinery's Fluid Catalytic Cracking unit, while maintaining existing production capabilities and turnaround schedule.
Expectations for the project are to capture 145,000 metric tons of carbon dioxide per year, as well as reduce health-harming pollutants, such as sulfur oxide and particulate matter.
Carbon dioxide is expected to be transported by existing pipelines for permanent storage or utilization.
In 2024, we returned $105.7 million of capital to shareholders through dividends and share buybacks.
Our near-term focus is centered around the following: (1) operations excellence, (2) financial strength and flexibility and (3) strategic initiatives which includes unlocking the "sum of the parts" value of our existing business while identifying growth opportunities to enhance the Company's scale and diversify revenue streams.
In 2024, we took steps to refinance the Delek Logistics long term debt, ending with a more attractive maturity profile.
Delek Logistics also completed two public equity offerings of its common units in March and October 2024.
These steps allowed 57 | Management's Discussion and Analysis us to further execute on our "sum of the parts" plan by facilitating Delek Logistics' acquisition of H2O Midstream and Gravity, dropdown of the Wink to Webster Pipeline joint venture and planned expansion of its natural gas processing plant.
These Delek Logistics transactions will enhance Delek Logistics position as a full service (crude, natural gas and water) provider in the most prolific areas of the Permian basin while increasing third party revenue.
In addition, the Retail Transaction will allow us to strengthen our balance sheet.
We believe each of these steps is consistent with our focus on strategic initiatives which includes unlocking the "sum of the parts".

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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