v3.25.1
Fair Value Measurements
 3 Months Ended
Mar. 31, 2025
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
Our assets and liabilities that are measured at fair value include commodity derivatives, investment commodities, environmental credits obligations, and our Inventory Intermediation Agreement. ASC 820, Fair Value Measurements ("ASC 820") requires disclosures that categorize assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included within Level 1 for the asset or liability, either directly or indirectly through market-corroborated inputs. Level 3 inputs are unobservable inputs for the asset or liability reflecting our assumptions about pricing by market participants.
Our commodity derivative contracts, which consist of commodity swaps, exchange-traded futures, options and physical commodity forward purchase and sale contracts (that do not qualify for the NPNS exception under ASC 815), are valued based on exchange pricing and/or price index developers such as Platts or Argus and are, therefore, classified as Level 2.
Our RINs commitment contracts are future commitments to purchase or sell RINs at fixed prices and quantities, which are used to manage the costs associated with our "Consolidated Net RINs Obligation" which is the sum of our individual obligated parties’ Net RINs Obligations as well as RINs held by our non-obligated parties which meet our recognition criteria. These RINs commitment contracts (which are forward contracts accounted for as derivatives – see Note 11) are categorized as Level 2, and are measured at fair value based on quoted prices from an independent pricing service.
Our interest rate swap is valued based on discounted cash flow models that incorporate the cash flows of the derivatives, as well as the current SOFR rate and a forward SOFR curve, along with other observable market inputs and are, therefore, classified as Level 2.
Our environmental credits obligation includes the Consolidated Net RINs Obligation, as well as other environmental credit obligation positions subject to fair value accounting pursuant to our accounting policy. The environmental credits obligation is categorized as Level 2, if measured at fair value either directly through observable inputs or indirectly through market-corroborated inputs, and gains (losses) related to changes in fair value are recorded as a component of cost of materials and other in the condensed consolidated statements of income. With respect to our Consolidated Net RINs Obligation, we recognized losses of $(1.1) million on changes in fair value for the three months ended March 31, 2025, primarily attributable to changes in the market prices of the underlying credits that occurred at the end of the quarter. There were no changes in fair value for the three months ended March 31, 2024.
We elected to account for our Inventory Intermediation step-out liability at fair value in accordance with ASC 825, as it pertains to the fair value option. This standard permits the election to carry financial instruments and certain other items similar to financial instruments at fair value on the balance sheet, with all changes in fair value reported in earnings. With respect to the Inventory Intermediation Agreement, we apply fair value measurement as follows: (1) we determine fair value for our amended variable step-out liability based on changes in fair value related to market volatility based on a floating commodity-index price, and for our amended fixed step-out liability based on changes to interest rates and the timing and amount of expected future cash settlements where such obligation is categorized as Level 2. Gains (losses) related to changes in fair value due to commodity-index price are recorded as a component of cost of materials and other, and changes in fair value due to interest rate risk are recorded as a component of interest expense in the condensed consolidated statements of income; and (2) we determine fair value of the commodity-indexed revolving over/short inventory financing liability based on the market prices for the consigned crude oil and refined products collateralizing the financing/funding where such obligation is categorized as Level 2 and is presented in the current portion of the obligation under Inventory Intermediation Agreement on our condensed consolidated balance sheets. Gains (losses) related to the change in fair value are recorded as a component of cost of materials and other in the condensed consolidated statements of income. See Note 9 for discussion of gains and losses recognized from changes in fair value.
The fair value of the Delek Logistics 2028 Notes is measured based on quoted market prices in an active market, defined as Level 1 in the fair value hierarchy. The carrying value (excluding unamortized debt issuance costs) and estimated fair value of these notes was $400.0 million and $400.2 million, respectively, as of March 31, 2025, and $400.0 million and $399.1 million, respectively, at December 31, 2024.
Also, the fair value of the Delek Logistics 2029 Notes is measured based on quoted market prices in an active market, defined as Level 1 in the fair value hierarchy. The carrying value (excluding unamortized debt issuance costs) and estimated fair value of these notes was $1,050.0 million and $1,088.7 million, respectively, as of March 31, 2025, and $1,050.0 million and $1,086.9 million, respectively, at December 31, 2024.
The fair value approximates the historical or amortized cost basis comprising our carrying value for all other financial instruments and therefore are not included in the table below. The fair value hierarchy for our financial assets and liabilities accounted for at fair value on a recurring basis was as follows (in millions):
 As of March 31, 2025
 Level 1Level 2Level 3Total
Assets    
Commodity derivatives$— $24.2 $— $24.2 
Interest rate swap derivatives— 3.1 — 3.1 
RINs commitment contracts— 1.3 — 1.3 
Total assets— 28.6 — 28.6 
Liabilities    
Commodity derivatives— (25.3)— (25.3)
Interest rate swap derivatives— (3.3)— (3.3)
RINs commitment contracts— (0.1)— (0.1)
Environmental credits obligation deficit— (61.6)— (61.6)
Inventory Intermediation Agreement obligation— (433.6)— (433.6)
Total liabilities— (523.9)— (523.9)
Net liabilities$— $(495.3)$— $(495.3)
 
As of December 31, 2024
 Level 1Level 2Level 3Total
Assets
Commodity derivatives$— $24.9 $— $24.9 
Interest rate swap derivatives— 8.3 — 8.3 
RINs commitment contracts— 0.3 — 0.3 
Total assets— 33.5 — 33.5 
Liabilities    
Commodity derivatives— (27.4)— (27.4)
Interest rate derivatives— (5.1)— (5.1)
RINs commitment contracts— (5.6)— (5.6)
Environmental credits obligation deficit— (30.6)— (30.6)
Inventory Intermediation Agreement obligation— (408.7)— (408.7)
Total liabilities— (477.4)— (477.4)
Net liabilities$— $(443.9)$— $(443.9)
The derivative values above are based on analysis of each contract as the fundamental unit of account as required by ASC 820. In the table above, derivative assets and liabilities with the same counterparty are not netted where the legal right of offset exists. This differs from the presentation in the financial statements which reflects our policy, wherein we have elected to offset the fair value amounts recognized for multiple derivative instruments executed with the same counterparty and where the legal right of offset exists. As of March 31, 2025 and December 31, 2024, $0.8 million and $7.5 million, respectively, of cash collateral was held by counterparty brokerage firms and has been netted with the net derivative positions with each counterparty. See Note 11 for further information regarding derivative instruments.
Non-Recurring Fair Value Measurements
The Gravity Acquisition was accounted for as a business combination using the acquisition method of accounting, with the assets acquired and liabilities assumed at their respective acquisition date fair values at the closing date. The fair value measurements were based on a combination of valuation methods including discounted cash flows, the market approach and obsolescence adjusted replacement costs, all of which are Level 3 inputs.