Profile: Delek US Holdings Inc (DK)

Delek US Holdings, Inc. (Delek), incorporated in April 2001, is a diversified energy business focused on petroleum refining, wholesale sales of refined products and retail marketing. The Company’s business consists of three operating segments: refining, marketing and retail. The refining segment operates 60,000 barrels per day (bpd) independent refinery in Tyler, Texas. The marketing segment sells refined products on a wholesale basis in west Texas through Company-owned and third-party operated terminals. The retail segment markets gasoline, diesel, other refined petroleum products and convenience merchandise through a network of 482 Company-operated retail fuel and convenience stores located in Alabama, Arkansas, Georgia, Kentucky, Louisiana, Mississippi, Tennessee and Virginia. As of December 31, 2008, of these 482 locations, the 24 stores located in Virginia are classified as held for sale.

The Company owns a 34.6% minority equity interest in Lion Oil Company, which owns and operates a moderate conversion, independent refinery with a design crude distillation capacity of 75,000 barrels per day, and other pipeline and product terminals in Memphis and Nashville, Tennessee. The refinery is located in El Dorado, Arkansas. Delek is the sole shareholder of MAPCO Express, Inc. (Express), MAPCO Fleet, Inc. (Fleet), Delek Refining, Inc. (Refining), Delek Finance, Inc. (Finance) and Delek Marketing & Supply, Inc. (Marketing).

Refining Segment

The Tyler refinery is situated on approximately 100 out of a total of approximately 600 contiguous acres of land (excluding pipelines) that the Company owns in Tyler and adjacent areas. The Tyler refinery includes a fluid catalytic cracking (FCC) unit and a delayed coker, enabling Delek to produce approximately 91% light products, including primarily a range of gasoline, diesel, jet fuels, liquefied petroleum gas (LPG) and natural gas liquids (NGLs) and has a Nelson complexity of 9.5. During the year ended December 31, 2008, gasoline accounted for approximately 54.4%, and diesel and jet fuels accounted for approximately 37.4% of the Tyler refinery production.

The Tyler refinery has a crude oil processing unit with a 60,000 bpd atmospheric column and an 18,000 bpd vacuum tower. The other major process units at the Tyler refinery include a 20,200 bpd fluid catalytic cracking unit, a 6,500 bpd delayed coking unit, a 21,000 bpd naphtha hydrotreating unit, a 13,000 bpd gasoline hydrotreating unit, a 22,000 bpd distillate hydrotreating unit, a 17,500 bpd continuous regeneration reforming unit, a 5,000 bpd isomerization unit, and a sulfuric alkylation unit with a capacity of 4,700 bpd. Upon delivery to the Tyler refinery, crude oil is sent to a distillation unit, where complex hydrocarbon molecules are separated into distinct boiling ranges. The processed crude oil is then treated in specific units of the refinery, and the resulting distilled and treated fuels are pumped to blending units to create the desired finished fuel products.

The Company’s 10 largest customers accounted for 59.4%, of net sales for the refining segment in 2008. Its customers include ExxonMobil, Valero Marketing and Supply, Murphy Oil USA, Truman Arnold and Chevron, among others.

Marketing Segment

Delek sells refined products on a wholesale basis in west Texas through Company-owned and third-party operated terminals. The Company’s marketing segment generates net sales through five integrated activities: transportation of petroleum products through pipelines and Company-owned truck loading terminals in Abilene and San Angelo, Texas; direct sales of petroleum products to third parties through truck racks in San Angelo, Abilene, Aledo, Odessa and Big Springs, Texas and other terminals throughout the Magellan Orion pipeline system; supplying product to exchange partners at the Abilene, San Angelo and Aledo, Texas terminals; marketing services provided to the Company’s Tyler refinery for both wholesale marketing and contract sales; supplying ethanol to Express for blending with conventional gasoline using its newly constructed 30,000 barrel tanks located at a third-party owned terminal in Nashville, Tennessee, and a margin-sharing arrangement with its Tyler refinery of 50% of wholesale margins above a contractually defined threshold.

The marketing segment markets its products through three Company-owned terminals in San Angelo, Abilene and Tyler, Texas and third-party terminal operations in Aledo, Odessa and Big Springs, Texas. Delek owns seven product pipelines of approximately 114 miles between its refined product terminals in Abilene and San Angelo, Texas, which includes a line connecting its facility to Dyess Air Force Base. These refined product pipelines are eight-inch pipeline from Magellan Pipeline Company, L.P. custody transfer point at Tye Station to the Abilene terminal; 13.5 mile, four-inch pipeline from the Abilene terminal to the Magellan tie-in; 76.5 mile, six-inch pipeline system from the Magellan tie-in to San Angelo, and three other local product pipelines.

The Company has various types of customers, including major oil companies, such as ExxonMobil, independent refiners and marketers, such as Murphy Oil, jobbers, distributors, utility and transportation companies, and independent retail fuel operators. In general, marketing customers typically come from within a 100-mile radius of the Company’s terminal operations. Its customers include, among others, Murphy Oil, ExxonMobil, and Susser Petroleum.

Retail Segment

As of December 31, 2008, Delek operated retail fuel and convenience stores primarily under the MAPCO Express, MAPCO Mart, Discount Food Mart, Fast Food and Fuel, East Coast and Favorite Markets brands. The MAPCO Mart store with GrilleMarx is designed to offers amenities and products, such as a made-to-order food program with bi-lingual touch-screen order machines, seating, expanded coffee and hot drink bars, an expanded cold and frozen drink area where customers can customize their drink flavors, a walk-in beer cave and an expanded import and micro brew beer section. In 2008, the Company continued the expansion of its MAPCO Mart concept with one store built from the ground up, two additional raze and rebuilds and 51 re-image/retrofit sites. One raze and rebuild in 2008, was introduced to its Memphis market and another was introduced to its Chattanooga market.

The Company’s retail fuel and convenience stores typically offer tobacco products and immediately consumable items, such as beer, non-alcoholic beverages and a variety of snacks and prepackaged items. A significant number of the sites also offer state sanctioned lottery games, automated teller machines (ATM) services and money orders. While several of its stores include national branded quick service food chains, such as Subway and Quiznos. Effective January 1, 2008, the Company initiated blending of ethanol in its finished gasoline products, allowing customers access to E-10 products.

During 2008, the Company’s net fuel sales were 78.8%, of total net sales for its retail segment. For 2008, Delek’s merchandise sales were 21.2%, of total net sales for its retail segment. The Company’s retail segment also includes a wholesale fuel distribution network that supplies more than 55 dealer-operated retail locations. In 2008, Delek’s dealer net sales were approximately 5.5% of net sales for its retail segment.

The Company competes with Texas Gulf Coast refiners and Calumet Lubricants.