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, 2017.
Summary:
- Second quarter 2017 net income of $6.4
million on total revenues of $43.9 million, compared to a net loss
of $18.9 million on total revenues of $43.4 million for the same
period in 2016.
- Operating income of $6.5 million for
the three months ended June 30, 2017, compared to an operating loss
of $15.3 million for the same period in 2016.
- Net loss and operating income for the
three months ended June 30, 2016, were impacted by an impairment
expense of $22.6 million, primarily related to the cancellation of
the Knight Warrior East Texas Eaglebine/Woodbine crude oil pipeline
project.
- Adjusted earnings before interest,
taxes, depreciation, amortization (“Adjusted EBITDA”) was $19.2
million for the three months ended June 30, 2017, as compared to
$16.2 million for the same period in 2016, an increase of
18.5%.
- Distributable cash flow was $12.7
million for the three months ended June 30, 2017, as compared to
$9.2 million for the same period in 2016, an increase of 38.0%.
Distributable cash flow for the three months ended June 30, 2016,
was impacted by $0.3 million of fees related to the Ergon
transactions. Adjusted EBITDA and distributable cash flow,
including a reconciliation of such measures to net income, are
explained in the section of this release entitled “Non-GAAP
Financial Measures.”
- Second quarter 2017 distribution
coverage ratio was 1.03.
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 and six months ended June 30, 2017, to
be filed with the SEC on August 2, 2017.
Comments from BKEP CEO Mark
Hurley:
“Our asphalt terminalling services segment continues to hit on
all cylinders in spite of wetter-than-normal conditions in many
areas of the country in which we operate facilities. Operating
margin for the segment increased $3.3 million or 28%
quarter-over-quarter before taking into consideration depreciation
and amortization. Steady customer demand and the addition of nine
terminals from Ergon in October 2016 helped drive the strong
results. As we look ahead, we anticipate an even stronger third
quarter when we traditionally see increased activity. Our strategy
to grow by expanding our terminalling footprint, particularly in
the asphalt segment, is clearly paying dividends.
“Our crude oil terminalling and storage segment performed about
as expected during the first half of the year. Our business at
Cushing remains fully contracted and inventories remain well above
the 5-year average. Our crude oil trucking and field services
segment continues to be hampered by a sustained, lower-price crude
oil environment and flatter forward curve resulting in increased
competition and lower margins for existing volumes. Our crude oil
pipeline segment results are affected by an out of service pipeline
due to the wash-out of a riverbed in 2016. However, we have a clear
path forward to restarting this line and we expect to resume
service in the 4th quarter of this year. In addition, results in
this segment for the three months ended June 30, 2016, included two
significant items - we recorded an impairment expense of $22.6
million, mostly related to the cancellation of the Knight Warrior
East Texas Eaglebine/Woodbine crude oil pipeline project, and we
recognized $1.6 million in sales of crude oil arising from
accumulated product loss allowances.
“We amended and upsized our revolving credit facility during the
second quarter. We increased commitments by $50.0 million and
extended our maturity date to May 11, 2022. The amended credit
facility gives us more flexibility to capitalize on opportunities
aimed at creating long-term value for our unitholders.
Additionally, we also closed on the divestiture of two non-core
assets - our East Texas crude oil pipeline and terminal assets and
our 30% ownership of Advantage Pipeline. We received cash proceeds
of approximately $30.1 million from the sale of these two assets
and are actively working to reinvest these proceeds in future
growth projects. The gain of $4.2 million on the divestitures of
the Advantage Pipeline and East Texas system were partially offset
by expense of $0.8 million related to the disposal and sale of
other assets during the quarter.
“During our first quarter earnings discussion, we mentioned
areas of strategic focus for 2017. I am pleased to report we are
making progress in each of these areas:
- Focus resources on the completion of
our crude oil condensate project and increase utilization of our
crude transportation assets - both pipeline and trucking. As
mentioned, we anticipate completion of our condensate project and
expect to have it in service by the end of the year. We also expect
to recapture volume along our Mid-Continent pipeline and increase
the overall efficiency and operating margin of our transportation
assets.
- Continue to identify and execute
strategic growth projects including potential future acquisitions
of additional product terminals or synergistic crude oil pipeline
assets. As we continue to evaluate a number of complimentary
acquisitions, we are optimistic we will be successful on one or
more of the projects during the second half of the year.
- Continue to maintain a solid
financial position and balance sheet. The current uncertain
geopolitical environment and the overall MLP equity market
continues to be quite challenging; however, we believe we are
positioned to navigate through the market and sustain a reasonable
balance between growth and overall financial strength.
“As we focus on these strategic areas, we know our top priority
as a management team is to increase long-term value for our
unitholders regardless of the prevailing market conditions. That is
our goal and it is what drives our decisions. Our fully diluted
distribution coverage for the second quarter of 2017 was 1.03 times
versus a coverage of 0.82 times for the same quarter in 2016. Our
leverage ratio for the second quarter of 2017 was 4.17 times, and
we maintained our common unit distribution at $0.1450 for the
quarter.”
Results of Operations
The following table summarizes the financial results for the
three and six months ended June 30, 2016 and 2017 (in thousands
except per unit data):
Three Months Six Months ended
ended June 30, June 30, 2016
2017 2016
2017 (unaudited) Service revenue: Third
party revenue $ 30,854 $ 28,145 $ 61,110 $ 56,808 Related party
revenue 5,862 13,505 12,871 27,147 Product sales revenue: Third
party revenue 6,709 2,227 10,454
6,262 Total revenue 43,425
43,877 84,435 90,217
Costs and expenses: Operating 27,290 30,610 55,050 62,516 Cost of
product sales 4,089 1,669 7,276 4,808 General and administrative
4,834 4,322 9,579 8,907 Asset impairment expense 22,574
17 22,845 45 Total
costs and expenses 58,787 36,618
94,750 76,276 Gain (loss) on sale of assets
14 (754 ) (19 ) (879 ) Operating
income (loss) (15,348 ) 6,505 (10,334 )
13,062 Other income (expense): Equity earnings in
unconsolidated affiliate 157 — 781 61 Gain on sale of
unconsolidated affiliate — 4,172 — 4,172 Interest expense (net of
capitalized interest of $7, $3, $41 and $5, respectively)
(3,697 ) (4,265 ) (8,567 ) (7,295 ) Income
(loss) before income taxes (18,888 ) 6,412
(18,120 ) 10,000 Provision for income taxes
48 41 90 87
Net income (loss) $ (18,936 ) $ 6,371 $ (18,210 ) $ 9,913
Allocation of net income (loss) for calculation of
earnings per unit: General partner interest in net income (loss) $
(195 ) $ 256 $ (51 ) $ 465 Preferred interest in net income $ 5,389
$ 6,279 $ 10,780 $ 12,558 Income (loss) available to limited
partners $ (24,130 ) $ (164 ) $ (28,939 ) $ (3,110 ) Basic
and diluted net loss per common unit $ (0.71 ) $ — $ (0.85 ) $
(0.08 ) Weighted average common units outstanding - basic
and diluted 33,206 38,155 33,191 38,151
The table below summarizes our financial results by segment
operating margin, excluding depreciation and amortization, for the
three and six months ended June 30, 2016 and 2017 (in
thousands):
Operating Results
Three MonthsendedJune
30,
Six MonthsendedJune
30,
Favorable/(Unfavorable) Three Months Six
Months (in thousands) 2016
2017 2016
2017 $ % $
% Operating margin, excluding
depreciation and amortization Asphalt services operating margin $
11,549 $ 14,829 $ 22,725 $ 29,064 3,280 28 % 6,339 28 % Crude oil
terminalling and storage operating margin 5,137 4,734 10,296 9,848
(403 ) (8 )% (448 ) (4 )% Crude oil pipeline services operating
margin 1,935 62 2,577 76 (1,873 ) (97 )% (2,501 ) (97 )% Crude oil
trucking and producer field services operating margin 1,113
(188 ) 1,334 (190 ) (1,301 ) (117 )% (1,524 )
(114 )% Total operating margin, excluding depreciation and
amortization $ 19,734 $ 19,437 $ 36,932 $ 38,798 (297
) (2 )% 1,866 5 %
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,
amortization, non-cash equity-based compensation, asset impairment
charges, and fees related to the Ergon transactions. Distributable
cash flow is defined as Adjusted EBITDA, minus cash paid for
interest, maintenance capital expenditures, cash paid for taxes,
and cash paid for fees related to the Ergon transactions. 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 total 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 total 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.
The following table presents a reconciliation of adjusted EBITDA
and distributable cash flow to net income for the periods shown (in
thousands):
Three Monthsended June 30,
Six Monthsended June 30, 2016
2017 2016
2017 Net income (loss) $ (18,936 ) $
6,371 $ (18,210 ) $ 9,913 Interest expense 3,697 4,265 8,567 7,295
Income taxes 48 41 90 87 Depreciation and amortization 7,688 7,839
14,823 15,905 Non-cash equity-based compensation 643 627 1,188
1,127 Asset impairment charge 22,574 17 22,845 45 Fees related to
the Ergon transactions 511 — 511
— Adjusted EBITDA $ 16,225 $ 19,160
$ 29,814 $ 34,372 Cash paid for interest
(3,198 ) (3,092 ) (5,906 ) (6,654 ) Cash paid for income taxes (242
) (171 ) (254 ) (171 ) Maintenance capital expenditures, net of
reimbursable expenditures (3,288 ) (3,203 ) (5,512 ) (4,521 ) Cash
paid for fees related to the Ergon transactions (274 )
— (274 ) — Distributable cash
flow $ 9,223 $ 12,694 $ 17,868 $ 23,026
Distribution declared (1) $ 11,223 $ 12,303 $ 21,880 $
24,602 Distribution coverage ratio 0.82 1.03 0.82 0.94 (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 (in thousands):
Operating Results Three
Monthsended June 30, Six
Monthsended June 30,
Favorable/(Unfavorable) Three Months Six
Months (in thousands) 2016
2017 2016
2017 $ %
$ % Total operating margin,
excluding depreciation and amortization $ 19,734 $ 19,437 $ 36,932
$ 38,798 (297 ) (2 )% 1,866 5 % Depreciation and amortization
(7,688 ) (7,839 ) (14,823 ) (15,905 ) (151 ) (2 )% (1,082 ) (7 )%
General and administrative expense (4,834 ) (4,322 ) (9,579 )
(8,907 ) 512 11 % 672 7 % Asset impairment expense (22,574 ) (17 )
(22,845 ) (45 ) 22,557 100 % 22,800 100 % Gain (loss) on sale of
assets 14 (754 ) (19 ) (879 )
(768 ) (5,486 )% (860 ) (4,526 )% Operating income (loss) $ (15,348
) $ 6,505 $ (10,334 ) $ 13,062 21,853 142 %
23,396 226 %
Investor Conference Call
The Partnership will discuss second quarter 2017 results during
a conference call on Wednesday, August 2, 2017 at 1:30 p.m. CDT
(2:30 p.m. EDT). The conference call will be accessible by
telephone at 1-888-347-8968. International participants will be
able to connect to the conference by calling 1-412-902-4231.
Participants should dial in five to ten minutes prior to the
scheduled start time. An audio replay will be available through the
investors section of the Partnership’s website for 30 days.
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
facility, 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 approximately 9.6 million
barrels of combined asphalt product and residual fuel oil storage
located at 54 terminals in 26 states, 7.0 million barrels of crude
oil storage located primarily in Oklahoma, approximately 6.6
million barrels of which are located at the Cushing, Oklahoma
Interchange, approximately 670 miles of crude oil pipeline located
primarily in Oklahoma and Texas and approximately 200 crude oil
transportation and oilfield services vehicles deployed in Kansas,
Oklahoma and Texas. BKEP provides integrated services for companies
engaged in the production, distribution and marketing of crude oil,
asphalt and other petroleum products. BKEP is headquartered in
Oklahoma City, Oklahoma. For more information, visit the
Partnership’s web site at www.bkep.com.
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version on businesswire.com: http://www.businesswire.com/news/home/20170801006733/en/
Blueknight Energy Partners, L.P.BKEP Investor Relations,
918-237-4032investor@bkep.comorBKEP Media Contact:Brent Gooden,
405-715-3232 or 405-818-1900
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