Delek US Defends Its Performance Track Record Against Shareholder Push

BRENTWOOD, Tenn. — As Delek US Holdings Inc. continues to face some pushback from CVR Energy Inc., the company outlined some of its performance highlights to its shareholders.

CVR Energy is majority-owned subsidiary of Icahn Enterprises LP and holds approximately 15 percent of the outstanding common stock of Delek US. In January, it sent a letter to Delek US Chairman Uzi Yemin urging the Brentwood-based company to make several changes, including selling its convenience stores, and ceasing operations at the Krotz Springs and El Dorado refineries and converting them to terminals, renewable diesel production or for other purposes, as Convenience Store News previously reported.

Earlier this week, CVR Energy renewed its push against Delek by requesting access to Delek's books and records related to Yemin's payments, as Seeking Alpha reported.

"[Delek's] board of directors and management team are committed to delivering value for shareholders. Over the last year, we have taken decisive action to further strengthen our operations and position the business to deliver significantly enhanced cash flow in 2021 and beyond," the company wrote in an open letter to shareholders on March 3.

According to Delek, the Brentwood-based company "has built an integrated portfolio of assets located in strategically important geographies, which provide significant value for shareholders, customers and partners. We have strengthened our competitive position and laid the groundwork for continued future growth."

The strategy has deliver a five-year total shareholder return of 79 percent compared to 27 percent for the average of its peers over the same period, it added.

Recent performance highlights, according to Delek, include:

• Since the completion of its merger with Alon USA Energy Inc. in 2017, Delek has divested non-core assets with high operating expenses, and divested or did not renew leases for underperforming retail sites as part of a continuous evaluation process to optimize its portfolio. These efforts have resulted in cash inflows of $278 million, and reductions in ongoing annual expenses of $77 million.
• Delek's midstream investments yielded benefits in 2020, including the drop down of the Big Spring gathering system to Delek Logistics Partners LP.

In addition, actions taken by Delek's board and management team took last year are expected to improve 2021 cost structure by more than $225 million vs. 2019, and capital spending by approximately $275 million vs. 2019. Those actions included:

• Achieving a reduction in 2020 operating expense structure relative to 2019 of more than $120 million, with a further $70-million decrease in controllable costs budgeted for 2021 (assuming reduced Krotz operations).
• Achieving a reduction in 2020 general and administrative expenses relative to 2019 of more than $25 million, with a further $10-million decrease budgeted for 2021.
• Achieving a reduction in planned capital expenditures of $189 million, or 44 percent, relative to 2019, with a further $85-million, or 35-percent, reduction, expected in 2021, resulting in a new capital spending range of $150 to $160 million for this year.

"Through the implementation of innovative new technologies and systems, we expect to achieve further reductions going forward, as well as significant operational efficiencies," Delek wrote.

To read the company's letter to shareholders, click here.