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Good morning. My name is Mary and I will be your conference operator for today. At this time, I would like to welcome everyone to the Q4 Earnings Call for Delek Logistics Partners, LP. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you.
I will now turn the call over to Keith Johnson. Sir, the floor is yours.
Thank you, Mary. Good morning. I would like to thank everyone for joining us on this webcast to discuss DKL's fourth quarter 2018 and year-end financial results. Joining me on today's call will be Uzi Yemin, our General Partners' Chairman and CEO; Kevin Kremke, CFO, as well as other members of our management team.
As a reminder, this conference call may contain forward-looking statements as that term is defined under federal securities law. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words believe, anticipates, plans, expects and similar expressions are intended to identify forward-looking statements. You're cautioned that these statements may be affected by important factors set forth in our filings with the Securities and Exchange Commission and in our latest earnings release. As a result, actual operations or results may differ materially from results discussed in the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise.
In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, we report certain non-GAAP financial results. Investors are encouraged to review the reconciliation of these non-GAAP financial results to comparable GAAP results, which can be found in the press release, which is posted on the Investor Relations section of our Web site.
On today's call, Kevin will begin with a financial overview, then Uzi will offer a few closing strategic remarks.
With that, I'll turn the call over to Kevin.
Thanks, Keith. Our fourth quarter performance benefitted from the Big Spring logistics assets acquired effective March 1, 2018 that drove the fourth quarter 2018 improvement compared to the prior year period. Our distributable cash flow increased by 26% to approximately $27.6 million in the fourth quarter of 2018 compared to $21.9 million in the fourth quarter of 2017.
Our DCF coverage ratio was 1.02x for the fourth quarter, which is an increase from 0.96x in the prior year. EBITDA increased by 30.8% to $40.8 million compared to $31.2 million in the prior year period. Based on our performance, we increased our quarterly distribution to $0.81 per limited partner unit for the quarter ended December 31.
This distribution was paid on February 12 to unitholders of record as of February 4 and is a 2.5% increase from our third quarter 2018 distribution per unit. This is our 24th consecutive quarterly increase and is 11.7% higher than our fourth quarter 2017 distribution per unit.
At December 31, DKL had approximately $393 million of available capacity on our $850 million credit facility. Our total debt was approximately $700 million and the total leverage ratio of 4.1x is well within the 5.2x currently allowable under our credit facility.
For the fourth quarter of 2018, Delek Logistics reported net income attributable to all partners of $21.3 million which compares to $18.9 million in the prior year period. Limited Partners' interest in net income was $14.2 million or $0.58 per unit compared to $13.9 million or $0.57 per unit in the prior year period.
Now I will give an overview of our operating segments. In our Pipelines and Transportation segment, the fourth quarter 2018 contribution margin was $26.3 million compared to $18.7 million in the fourth quarter of 2017. This increase was primarily attributable to the Big Spring acquisition. Operating expenses increased to $10.9 million in the fourth quarter of 2018 from $8.6 million in the prior year period, again, primarily due to the Big Spring acquisition.
In our Wholesale Marketing and Terminalling segment, the contribution margin was $18.8 million in the fourth quarter of this year, which was an increase from $14 million in the prior year period. This increase was primarily due to the Big Spring acquisition. Operating expenses increased to $5 million in the fourth quarter of 2018 from $3.7 million in the prior year period, again, primarily due to the acquisition.
Our West Texas wholesale gross margin was $4.60 per barrel in the fourth quarter of 2018 compared to $5.18 in the fourth quarter of the prior year. Throughput in West Texas was just under 13,000 barrels per day compared to 14,300 barrels per day in the prior year.
During January, the gross margin in West Texas averaged right around $3.00 per barrel and volumes averaged just under 12,000 barrels per day. During the fourth quarter of 2018, our equity income from our joint venture crude oil pipelines was approximately $1.5 million compared to income of $1.9 million in the prior year.
Capital expenditures were approximately $4.1 million in the fourth quarter of 2018 and included $1.6 million of discretionary spending and $2.5 million of maintenance. During the fourth quarter of 2018, approximately $1.8 million was reimbursed by Delek US. In 2018, total CapEx was $11.6 million.
For full year 2019, our gross CapEx forecast is $17.3 million, which includes $600,000 of discretionary and $16.7 million of maintenance capital before reimbursement by Delek US. We expect approximately $2.3 million of the maintenance CapEx to be reimbursed in 2019.
With that, I'll turn the call over to Uzi for closing comments.
Thank you, Kevin, and good morning, everybody. In 2018, we increased our EBITDA to $164 million from $160 million in 2017. This growth was supported by our Permian Basin platform that consist the Big Spring logistics assets, the West Texas wholesale business and the Paline Pipeline.
We continue to explore opportunities for growth and the next step is the potential drop down of the Krotz Springs logistics assets from Delek US. These assets have the ability to generate $30 million to $34 million of annual EBITDA. We believe this transaction can be supported by our balance sheet allowing us to use debt to fund the next step in our growth plan.
We’re exploring opportunities to grow in the Permian Basin through organic and third-party opportunities as well as partnering with Delek US. We’re supporting Delek US by managing the construction and operation of Delek US Big Spring Gathering system. This system combined with Delek’s proposed interest in the PGC long-haul pipeline continues to grow the potential drop-down inventory at our pipeline.
With this strategy, we believe that we should be able to create long-term value for our unitholders. This should continue to support our annual distribution growth per limited partner unit of at least 10% through 2019, while maintaining appropriate annual distribution coverage.
With that, Mary, can you open the call for questions please?
[Operator Instructions]. Your first question is from the line of Justin Jenkins from Raymond James. Your line is now open.
Great. Thanks. Good morning, everyone. Uzi, I want to start with maybe any updated thoughts you could have on the potential for a simplification here in terms of buying any IDRs? We saw a transaction last week that seemingly was pretty well received with one of your peers and curious on your updated thoughts here?
Great. Assaf, why don’t you take that one?
Sure. It’s a great question. We’ve been looking in the last few months about the DKL structure and we are aware that the GP take of the income is over 25% which if we need to issue equity will really reduce the returns to the LP shareholders. With that being said, we do believe as we said earlier that the next drop-down could be done without any equity need, and therefore we’ll be able to continue and grow on the distribution by 10% even without touching the disruption. We probably by the end of this year will make a decision about the long-term structure of the GP and the LP.
Perfect. Thanks for that guys. And I guess that leads into the question on the drop-down side of things. Balance sheet certainly improved in 4Q. Kevin, would you be comfortable stretching the leverage target maybe towards the mid-4s or upper 4s here to complete the drop down here in mid-2019 like you guys have thought previously?
Yes, that’s the plan. We’ve got plenty of capacity on the revolver and we just upsized it to $850 million. And given our current leverage and leverage targets, we can easily fund the whole thing under the revolver. And long term we feel comfortable with leverage around 4 to 4.25, but it will spike up in the context of a drop down for a short period of time.
Perfect. And then last one for me if I could is on the G&A run rate, seemingly the step up in 4Q is related to the Big Spring Gathering project, but any more details in terms of how you can share in terms of how that reconciles through 2019 from a cost and revenue perspective?
Yes. So the G&A in Q4 was $2.7 million higher than what I would consider run rate due to a reclass from G&A to revenue related to the services agreement between DK and DKL for construction and operations of the gathering system. So in prior periods that showed up as a reduction in G&A. But we reclassed it in Q4 that essentially increased G&A by $2.7 million that had a corresponding increase to revenue of $2.7 million. So run rate should be that $2.7 million lower.
Perfect. I’ll leave it there. Thanks, guys.
Your next question is from the line of Ned Baramov from Wells Fargo. Your line is now open.
Hi. Good morning. Thanks for taking the question. I just had one and it relates to your thoughts on distribution growth after 2019. We have a 10% objective for the current year but just wondering how you think about distribution growth in the outer years. Thanks.
That’s a great question. First of all, let me be clear. We believe that we need to continue to grow the distribution. That decision is based on how the development of the Big Spring Gathering system is going to progress. We’re very pleased with what we see at the DK level and timing of that drop down and the magnitude of the deal will impact that growth initiative. I want to be clear. Some people cut their dividend or distribution, some people cut their growth. We don’t see any reason why we won’t continue to grow. We just need to decide on the magnitude and we usually do it towards the end of the year.
Thank you.
[Operator Instructions]. There are no further questions presenters. I’ll turn the call back over to you.
Thank you, Mary. I’d like to thank my colleagues around the table. I’d like to thank the Board of Directors for their great support with our company. But mainly I’d like to thank you investors and our employees for making this company what it is. Thank you for your trust. We’ll talk to you soon. Have a great day.
This concludes today’s conference call. Thank you all for joining. You may now disconnect.