Shares of Delek US Holdings, Inc.’s DK have dropped 6.1% since the third-quarter 2021 earnings announcement on Nov 4.

– Zacks

This downward stock movement could possibly be triggered by a huge debt burden in the third quarter, increase in operating expenses and a lack of contribution from DK’s retail segment.  

Behind the Earnings Headlines

Delek’s third-quarter 2021 results recently reported adjusted earnings of 13 cents a share. The Zacks Consensus Estimate was of a loss of 34 cents. The bottom line reversed the year-ago quarter’s loss of $1.01, attributable to a stronger-than-expected contribution from its refining segment. Margin from the Refining unit was $91.4 million, outpacing the Zacks Consensus Estimate of $66 million.

Quarterly revenues of $2.96 billion compared favorably with the year-ago sales of $2.06 billion and surpassed the Zacks Consensus Estimate of $2.55 billion.

Segmental Performances

Refining:  DK reported a positive margin of $91.4 million for this segment against the negative $17.8 million in the year-ago quarter. Moreover, adjusted margins of $91.8 million rebounded from -$21.2 million in the year-ago period. Results improved from increased crack spreads as the rising frequency of vaccination and a worldwide economic recovery buoyed demand.

Logistics:  This unit represents Delek’s majority interest in Delek Logistics Partners, L.P. (DKL), a publicly-traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets. The Logistics unit’s margin of $67.2 million was in line with the year-ago period’s figure, led by higher refinery utilization and demand that was partially offset by operating expenditures associated with pipeline integrity work.

Retail: Margin for the unit, which was formed from the acquisition of Alon USA Energy in 2017, fell 2.2% to $17.9 million from the year-earlier quarter’s level of $18.3 million on lower Retail fuel sales. Delek’s merchandise sales of $81.7 million with a margin of 33.7%, on average, compared unfavorably with $86.8 million sales, carrying a margin of 31.6%, on average, in the prior year. Its retail fuel gallons sale totaled $41.9 million in the September quarter of 2021, the average margin being 33 cents per gallon. This compared unfavorably with $45.1 million sale, the average margin being 31 cents per gallon in third-quarter 2020.

Financials

Total operating expenses incurred in the quarter increased 36.1% from the prior-year period’s level to $2,910.7 million.

In the reported quarter, Delek spent $28.9 million on capital programs (50.2% on the Refining segment). As of Sep 30, 2021, DK had cash and cash equivalents worth $830.6 million and long-term debt of $2,158.8 million, with the total debt to total capital of 68.8%.

Guidance

Delek projects fourth-quarter 2021 total operating expenses in the 150-$160 million band while total crude throughput is estimated in the 280,000-290,000 barrels per day range.

DK anticipates its 2021 capital expenses at around $205-$210 million, on a gross basis.

Zacks Rank & Key Picks

Delek currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy  space are EOG Resources EOG, Diamondback Energy FANG and ConocoPhillips COP, each presently flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

EOG Resources reported third-quarter 2021 adjusted earnings per share of $2.16, beating the Zacks Consensus Estimate of $2.01. Strong earnings were driven by increased production volumes and a higher realization of commodity prices.

EOG announced a quarterly dividend of 75 cents per share, indicating an 82% increase from the previous level. The dividend will be paid out on Jan 28, 2022, to its shareholders of record as of Jan 14, 2022. EOG Resources also declared a special dividend of $2 per share. Moreover, the board of directors updated its share repurchase authorization to $5 billion.

Diamondback Energy reported third-quarter 2021 adjusted earnings of $2.94 per share, which surpassed the Zacks Consensus Estimate of $2.81 and the year-ago quarter’s earnings of 62 cents. FANG’s bottom line was aided by better-than-expected production.

The board of directors declared a dividend of 50 cents per share for the third quarter, accounting for an 11.1% hike in Diamondback Energy’s quarterly payout from the previous level of 45 cents. The amount will be paid out on Nov 18, 2021, to its shareholders of record as of Nov 11. FANG also generated a free cash flow of $740 million in the third quarter.

ConocoPhillips reported third-quarter 2021 adjusted earnings per share of $1.77, comfortably beating the Zacks Consensus Estimate of $1.53. This outperformance is led by increased production volumes owing to the Concho acquisition and the rising realized commodity prices.

Based in Houston, TX, this one of the world’s largest independent oil and gas producers’ capital expenditures and investments totaled $1.3 billion, and dividend payments grossed $579 million. ConocoPhillips’ net cash provided by operating activities was recorded at $4.8 billion, up from the year-ago figure of $868 million. COP generated a free cash flow of $2.8 billion in the third quarter.

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