Second Quarter Highlights
- Net income of $3.4 million, operating income of $7.2 million
and Adjusted EBITDA of $15.1 million
- Asphalt terminalling services operating margin, excluding
depreciation and amortization, of $13.8 million, negatively
impacted year-over-year by severe weather and the July 2018 asset
divestiture
- Crude oil terminalling services operating margin, excluding
depreciation and amortization, of $3.3 million driven by
significant throughput and more leased storage, higher
year-over-year by 153% and 44%, respectively
- Higher operating margin in crude oil pipeline services
primarily due to a 60% increase in volumes from prior year
- On track to achieve 2019 financial targets with distribution
coverage of 1.11 times and leverage ratio of 4.6 times for first
half 2019
Blueknight Energy Partners, L.P. (“BKEP” or the “Partnership”)
(Nasdaq: BKEP and BKEPP) today announced its financial results for
the three and six months ended June 30, 2019. Net income was $3.4
million for the second quarter of 2019, as compared to net income
of $1.8 million for the same period in 2018. Second quarter 2019
net income was impacted by a $1.1 million push-down impairment of
Cimarron Express Pipeline, LLC comprised of an updated final cost
estimate of $0.7 million and accrued interest during the quarter of
$0.4 million. Adjusted earnings before interest, taxes,
depreciation and amortization (“Adjusted EBITDA”) was $15.1 million
for the three months ended June 30, 2019, as compared to $15.4
million for the same period in 2018. The year-over-year decrease
was primarily due to the July 2018 asset divestiture of three
asphalt facilities which contributed $2.4 million of EBITDA in the
second quarter of 2018 and severe weather impacting the Blueknight
asphalt facilities in 2019, which was partially offset by strong
operations across the crude oil businesses.
“Despite experiencing heavy rainfall and flooding at several of
our asphalt facilities, we were able to minimize the impact and
still deliver strong results, which was underpinned by another
great quarter in our crude oil business. Our solid performance,
notwithstanding the harsh weather, highlights the strengths of our
geographic and asset diversity,” said Mark Hurley, Chief Executive
Officer. “I am happy to report that all six asphalt facilities
impacted by the floods this year are back in operation, and the
team did a superb job preparing for the events and acting swiftly
to minimize the financial impact, which we believe to be
approximately $1.5 million net of insurance in 2019, including $0.3
million incurred in the second quarter.
“As we reflect on our strategic priorities, we are very pleased
with our financial metrics for the first half of the year with
distribution coverage of 1.11 times and leverage ratio of 4.6
times. As we head into stronger months for our asphalt operations,
we remain confident in achieving our 2019 financial targets. With
our financial profile and underlying businesses stabilizing, we
have renewed focus on exploring growth and strategic opportunities
to unlock value within our business,” added Hurley.
SEGMENT RESULTS
Asphalt Terminalling Services. Total operating margin,
excluding depreciation and amortization, decreased $2.9 million for
the three months ended June 30, 2019, as compared to the same
period in 2018. Of the year-over-year decrease, $2.4 million was
due to the sale of three asphalt facilities in July 2018 and $0.3
million was related to the flood in 2019, net of insurance.
Crude Oil Terminalling Services. Total operating margin,
excluding depreciation and amortization, increased for the three
months ended June 30, 2019, compared to the same period in 2018 due
to an increase in rented storage capacity and throughput. Average
contracted storage capacity was 5.9 million barrels and average
throughput was 91 thousand barrels per day, an increase of 44% and
153%, respectively, versus the same period in 2018. The
year-over-year increase was driven by more demand from crude oil
blending and segregation opportunities along with executing
short-term contracts during the quarter. As of August 1, 2019,
approximately 5.8 million barrels of crude oil storage were under
service contracts.
Crude Oil Pipeline Services. Average pipeline throughput
for the second quarter of 2019 was 32 thousand barrels per day, an
increase of 60% compared to the same period in 2018. Most of the
increase in throughput was due to restoring a second Oklahoma
pipeline to full service in July 2018, bringing total pipeline
capacity to 50 thousand barrels per day. As a result, crude oil
pipeline services operating margin, excluding depreciation and
amortization, for the three months ended June 30, 2019 was $0.9
million higher than the same period in the prior year.
Crude Oil Trucking Services. Average volumes increased 4%
for the three months ended June 30, 2019, as compared to the three
months ended June 30, 2018. Operating margin, excluding
depreciation and amortization, increased by $0.3 million in the
second quarter of 2019 compared to the same period last year. The
increase in operating margin was driven by higher volumes from
producers to service our two Oklahoma pipelines.
BALANCE SHEET AND CASH FLOW
For the three months ended June 30, 2019, distributable cash
flow was $8.1 million, as compared to $8.0 million for the same
period in 2018. Based on the Partnership’s most recent distribution
announcement, distribution coverage was 1.00 times for the second
quarter of 2019 versus 0.82 times for the same period in 2018. Net
capital expenditures for the second quarter of 2019 were $3.4
million, which included $3.1 million of net maintenance capital.
The Partnership ended the second quarter of 2019 with total debt of
$261.6 million, which resulted in a leverage ratio of 4.6 times,
and $1.5 million of cash.
RECENT DEVELOPMENT
On August 5, 2019, Ergon publicly announced that it submitted to
the Board a non-binding proposal pursuant to which Ergon would
acquire all common units and preferred units of the Partnership
that Ergon and its affiliates do not already own in exchange for
$1.35 per common unit and $5.67 per preferred unit. The
transaction, as proposed, is subject to a number of contingencies,
including the approval of the Conflicts Committee of the Board, the
approval by the Partnership’s unitholders, and the satisfaction of
any conditions to the consummation of a transaction set forth in
any definitive agreement concerning the transaction. There can be
no assurance that definitive agreement will be executed or that any
transaction will materialize.
CONFERENCE CALL
The Partnership will discuss second quarter 2019 results during
a conference call tomorrow, Thursday, August 8, 2019, at 10:00 a.m.
CDT (11:00 a.m. EDT). The conference call will be accessible by
telephone at 1-888-347-8968. International participants will be
able to access the conference call at 1-412-902-4231. An audio
replay will be available through the Investors section of the
Partnership’s website at http://investor.bkep.com for 30 days.
Additional information regarding the Partnership’s results of
operations will be provided in the Partnership’s Quarterly Report
on Form 10-Q for the three months ended June 30, 2019, to be filed
with the SEC on August 8, 2019.
Results of Operations
The following table summarizes the Partnership’s financial
results for the three and six months ended June 30, 2018 and 2019
(in thousands, except per unit data):
BLUEKNIGHT ENERGY PARTNERS,
L.P.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands, except per unit
data)
Three Months ended June
30,
Six Months ended June
30,
2018
2019
2018
2019
Service revenue:
Third-party revenue
$
14,103
$
15,727
$
31,421
$
31,613
Related-party revenue
6,063
4,082
12,384
8,301
Lease revenue:
Third-party revenue
10,237
9,819
20,041
19,582
Related-party revenue
7,475
4,812
15,178
9,752
Product sales revenue:
Third-party revenue
45,615
59,636
49,129
118,560
Total revenue
83,493
94,076
128,153
187,808
Costs and expenses:
Operating expense
28,988
25,915
60,123
53,158
Cost of product sales
20,041
20,510
22,678
45,097
Cost of product sales from related
party
23,747
36,421
23,747
67,195
General and administrative expense
4,486
2,962
8,707
6,655
Asset impairment expense
—
1,114
616
2,233
Total costs and expenses
77,262
86,922
115,871
174,338
Gain on sale of assets
599
81
363
1,805
Operating income
6,830
7,235
12,645
15,275
Other income (expenses):
Other income
—
268
—
268
Gain on sale of unconsolidated
affiliate
—
—
2,225
—
Interest expense
(5,024
)
(4,134
)
(8,593
)
(8,405
)
Income before income taxes
1,806
3,369
6,277
7,138
Provision for income taxes
21
13
50
25
Net income
$
1,785
$
3,356
$
6,227
$
7,113
Allocation of net income for calculation
of earnings per unit:
General partner interest in net income
$
28
$
53
$
259
$
158
Preferred interest in net income
$
6,279
$
6,279
$
12,557
$
12,558
Net loss available to limited partners
$
(4,522
)
$
(2,976
)
$
(6,589
)
$
(5,603
)
Basic and diluted net loss per common
unit
$
(0.11
)
$
(0.07
)
$
(0.16
)
$
(0.13
)
Weighted average common units outstanding
- basic and diluted
40,324
40,715
40,306
40,696
The table below summarizes the Partnership’s financial results
by segment operating margin, excluding depreciation and
amortization for the three and six months ended June 30, 2018 and
2019 (dollars in thousands):
Operating Results
Three Months ended June
30,
Six Months ended June
30,
Favorable/(Unfavorable)
Three Months
Six Months
(dollars in thousands)
2018
2019
2018
2019
$
%
$
%
Operating margin, excluding depreciation
and amortization:
Asphalt terminalling services
$
16,718
$
13,792
$
31,996
$
27,308
$
(2,926
)
(18
)%
$
(4,688
)
(15
)%
Crude oil terminalling services
2,179
3,281
5,505
5,871
1,102
51
%
366
7
%
Crude oil pipeline services
(570
)
325
(632
)
2,139
895
157
%
2,771
438
%
Crude oil trucking services
(197
)
69
(485
)
11
266
135
%
496
102
%
Total operating margin, excluding
depreciation and amortization
$
18,130
$
17,467
$
36,384
$
35,329
$
(663
)
(4
)%
$
(1,055
)
(3
)%
Non-GAAP Financial Measures
This press release contains the non-GAAP financial measures of
Adjusted EBITDA, distributable cash flow and total operating
margin, excluding depreciation and amortization. Adjusted EBITDA is
defined as earnings before interest, income taxes, depreciation and
amortization, non-cash equity-based compensation, asset impairment
charges, and fees related to asset sale transaction. Distributable
cash flow is defined as Adjusted EBITDA minus cash paid for
interest, maintenance capital expenditures, cash paid for taxes and
fees related to asset sale transaction. Operating margin, excluding
depreciation and amortization is defined as revenues from related
parties and external customers less operating expenses, excluding
depreciation and amortization. The use of Adjusted EBITDA,
distributable cash flow and operating margin, excluding
depreciation and amortization should not be considered as
alternatives to GAAP measures such as operating income, net income
or cash flows from operating activities. Adjusted EBITDA,
distributable cash flow and operating margin, excluding
depreciation and amortization are presented because the Partnership
believes they provide additional information with respect to its
business activities and are used as supplemental financial measures
by management and external users of the Partnership’s financial
statements, such as investors, commercial banks and others to
assess, among other things, the Partnership’s operating performance
and return on capital as compared to those of other companies in
the midstream energy sector, without regard to financing or capital
structure. Reconciliations of these measures to their most directly
comparable GAAP measures are included in the following tables.
The following table presents a reconciliation of Adjusted EBITDA
and distributable cash flow to net income for the periods shown (in
thousands, except ratios):
Three Months ended June
30,
Six Months ended June
30,
2018
2019
2018
2019
Net income
$
1,785
$
3,356
$
6,227
$
7,113
Interest expense
5,024
4,134
8,593
8,405
Income taxes
21
13
50
25
Depreciation and amortization
7,413
6,237
14,779
12,971
Non-cash equity-based compensation
634
284
1,136
593
Asset impairment expense
—
1,114
616
2,233
Fees related to asset sale transaction
555
—
555
—
Adjusted EBITDA
$
15,432
$
15,138
$
31,956
$
31,340
Cash paid for interest
(4,474
)
(3,784
)
(8,147
)
(7,973
)
Cash paid for income taxes
(144
)
(218
)
(144
)
(218
)
Maintenance capital expenditures, net of
reimbursable expenditures
(2,243
)
(3,079
)
(3,835
)
(5,129
)
Fees related to asset sale transaction
(555
)
—
(555
)
—
Distributable cash flow
$
8,016
$
8,057
$
19,275
$
18,020
Distributions declared (1)
$
9,756
$
8,085
$
22,408
$
16,165
Distribution coverage ratio
0.82
1.00
0.86
1.11
(1) Inclusive of preferred and common unit
declared cash distributions.
The following table presents a reconciliation of total operating
margin, excluding depreciation and amortization to operating income
for the periods shown (dollars in thousands):
Operating Results
Three Months ended June
30,
Six Months ended June
30,
Favorable/(Unfavorable)
Three Months
Six Months
(in thousands)
2018
2019
2018
2019
$
%
$
%
Total operating margin, excluding
depreciation and amortization
$
18,130
$
17,467
$
36,384
$
35,329
$
(663
)
(4
)%
$
(1,055
)
(3
)%
Depreciation and amortization
(7,413
)
(6,237
)
(14,779
)
(12,971
)
1,176
16
%
1,808
12
%
General and administrative expense
(4,486
)
(2,962
)
(8,707
)
(6,655
)
1,524
34
%
2,052
24
%
Asset impairment expense
—
(1,114
)
(616
)
(2,233
)
(1,114
)
N/A
(1,617
)
(263
)%
Gain (loss) on sale of assets
599
81
363
1,805
(518
)
(86
)%
1,442
397
%
Operating income
$
6,830
$
7,235
$
12,645
$
15,275
$
405
6
%
$
2,630
21
%
Forward-Looking Statements
This release includes forward-looking statements. Statements
included in this release that are not historical facts (including,
without limitation, any statements about future financial and
operating results, guidance, projected or forecasted financial
results, objectives, project timing, expectations and intentions
and other statements that are not historical facts) are
forward-looking statements. Such forward-looking statements are
subject to various risks and uncertainties. These risks and
uncertainties include, among other things, uncertainties relating
to the Partnership’s debt levels and restrictions in its credit
agreement, its exposure to the credit risk of our third-party
customers, the Partnership’s future cash flows and operations,
future market conditions, current and future governmental
regulation, future taxation and other factors discussed in the
Partnership’s filings with the Securities and Exchange Commission.
If any of these risks or uncertainties materializes, or should
underlying assumptions prove incorrect, actual results or outcomes
may vary materially from those expected. The Partnership undertakes
no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or
otherwise.
About Blueknight Energy Partners, L.P.
BKEP owns and operates a diversified portfolio of complementary
midstream energy assets consisting of:
- 8.8 million barrels of liquid asphalt storage located at 53
terminals in 26 states;
- 6.9 million barrels of above-ground crude oil terminalling
facilities located primarily in Oklahoma, approximately 6.6 million
barrels of which are located at the Cushing Interchange in Cushing,
Oklahoma;
- 646 miles of crude oil pipeline located primarily in Oklahoma
and Texas; and
- 60 crude oil transportation vehicles deployed in Oklahoma,
Kansas and Texas.
BKEP provides integrated terminalling, gathering and
transportation services for companies engaged in the production,
distribution and marketing of liquid asphalt and crude oil. BKEP is
headquartered in Tulsa, Oklahoma. For more information, visit the
Partnership’s website at www.bkep.com.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190807005705/en/
BKEP Investor Relations, (918) 237-4032 investor@bkep.com or
BKEP Media Contact: Brent Gooden, (405) 715-3232 or (405)
818-1900
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