Blueknight Energy Partners, L.P. (“BKEP” or the “Partnership”)
(NASDAQ: BKEP) (NASDAQ: BKEPP) today announced its financial
results for the three months ended March 31, 2018.
Summary:
Results for the Quarter:
- Net income of $4.4 million on total
revenues of $44.7 million for the three months ended March 31,
2018, versus net income of $3.5 million on total revenues of $46.3
million for the same period in 2017.
- Operating income of $5.8 million for
the three months ended March 31, 2018, as compared to operating
income of $6.6 million for the same period in 2017.
- Adjusted earnings before interest,
taxes, depreciation and amortization (“Adjusted EBITDA”) of $16.5
million for the first quarter of 2018, versus $15.2 million for the
same period in 2017. Adjusted EBITDA, including a reconciliation of
such measure to net income, is explained in the section of this
release entitled “Non-GAAP Financial Measures.”
- Distributable cash flow of $11.3
million for the three months ended March 31, 2018, as compared to
$10.3 million for the three months ended March 31, 2017.
Distributable cash flow, including a reconciliation of such measure
to net income, is explained in the section of this release entitled
“Non-GAAP Financial Measures.”
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 March 31, 2018, to be filed
with the Securities and Exchange Commission on May 10, 2018.
Comments from BKEP CEO Mark
Hurley:
“Our first quarter results were highlighted by another
year-over-year increase in operating margin on our asphalt
terminalling services segment. Operating margin, excluding
depreciation and amortization increased 7.3% for the quarter ended
March 31, 2018, as compared to the same period in 2017. The
recently closed acquisitions of the Bainbridge, Georgia terminal
from Ergon in December 2017 and the Muskogee, Oklahoma terminal in
March 2018 helped drive the increase in operating margin. We remain
optimistic for our asphalt business in 2018. In addition, both
Adjusted EBITDA and distributable cash flow increased 8.6% and 9.0%
year-over-year, respectively, furthered by $2.2 million of cash
received from the final installment of the Advantage Pipeline
investment sale.”
“Cushing crude oil inventory is currently 34% below its
five-year average and 46% below last year’s inventory level, which
created soft demand for storage and lower overall storage rates.
While we remained close to fully contracted during the first
quarter of 2018, we anticipate a relatively weak recontracting
market in the near-term, which will impact the profitability of
this segment.”
“Our crude oil pipeline business continued to be impacted by our
out-of-service pipeline in Oklahoma, which limited our volumes.
However, this pipeline is anticipated to resume service by the end
of the second quarter, doubling our total pipeline transportation
capacity. The pipeline will transport lighter crudes to Cushing
that are dominant in the south-central part of Oklahoma, which
includes the active SCOOP region. The increased capacity comes at a
time when increases in crude oil prices have bolstered producer and
marketer activity. Given the more favorable economics, we
anticipate volumes to increase during the second half of 2018.
Also, we saw a slight year-over-year increase in our trucking
volumes. We expect a more significant uptick in our trucking
volumes as we move through the second quarter and into the second
half of the year once service is restored on our pipeline.”
“Our fully-diluted distribution coverage for the first quarter
of 2018 was 0.89 times versus a coverage of 0.84 times for the same
period in 2017. Our leverage for the first quarter of 2018 was 4.90
times, and we maintained our common unit distribution at $0.1450
for the quarter. Because of the current anticipated weakness in the
Cushing crude oil storage market and potential impact on overall
cash flows, we are considering options to enhance our financial
flexibility and fund our operations and growth projects. These
options include a potential sale of certain assets and an
approximate 30% reduction in the cash distributions to be paid to
the Partnership’s common unitholders. We believe these steps are
prudent considering the extremely weak equity markets and relative
disconnect in common unit yields. Once executed, this plan is
expected to help significantly decrease leverage and enhance our
financial flexibility and enable us to manage through the
challenging Cushing storage environment.”
“This morning, Kingfisher Midstream, LLC (“Kingfisher
Midstream”), a wholly-owned subsidiary of Alta Mesa Resources, Inc.
(“Alta Mesa”), together with affiliates of Ergon, Inc. (“Ergon”)
and BKEP announced the execution of definitive agreements to form
Cimarron Express Pipeline, LLC (“Cimarron Express”). The venture
will construct a new 16-inch diameter, 65-mile crude oil pipeline
from northeastern Kingfisher County, Oklahoma to BKEP’s Cushing,
Oklahoma crude oil terminal. Kingfisher Midstream and Ergon will
each own 50% of Cimarron Express. Ergon, owner of the General
Partner of BKEP, will hold its ownership in Cimarron Express
through a newly created, wholly-owned subsidiary, ERGON - OKLAHOMA
PIPELINE, LLC (“Devco”). Ergon and BKEP also entered into an
agreement that gives each party rights concerning the purchase or
sale of Devco, subject to certain terms and conditions. In
addition, Alta Mesa executed a long-term acreage dedication and
transportation agreement with Cimarron Express, which incorporates
approximately 120,000 net acres in Kingfisher and Garfield
counties. BKEP will manage the construction of the pipeline under a
Construction Management Agreement and will also operate the
pipeline on behalf of Cimarron Express. This is a project we have
been working on for some time and we are pleased to be entering
into it with Ergon and Alta Mesa. The pipeline will provide direct
market access at Cushing for producers and will have an initial
capacity of 90,000 barrels per day, expandable to over 175,000
barrels per day. The new pipeline is expected to be completed in
mid-2019.”
“As we move forward, we will focus on creating value for our
unitholders by maintaining discipline as we execute our financial
and operational plans to expand margins and increase utilization of
our assets across our business segments.”
Results of Operations
The following table summarizes the financial results for the
three months ended March 31, 2017 and 2018 (in thousands, except
per unit data):
Three Months
ended
March 31,
2017 2018 (unaudited) Service revenue:
Third-party revenue $ 28,663 $ 17,318 Related-party revenue 13,642
6,321 Lease revenue: Third-party revenue — 9,804 Related-party
revenue — 7,703 Product sales revenue: Third-party revenue
4,035 3,514 Total revenue 46,340
44,660 Costs and expenses: Operating expense 31,906
31,135 Cost of product sales 3,139 2,637 General and administrative
expense 4,585 4,221 Asset impairment expense 28
616 Total costs and expenses 39,658
38,609 Loss on sale of assets (125 )
(236 ) Operating income 6,557 5,815
Other income (expenses): Equity earnings in unconsolidated
affiliate 61 — Gain on sale of unconsolidated affiliate — 2,225
Interest expense (net of capitalized interest of $2 and $28,
respectively) (3,030 ) (3,569 ) Income before income
taxes 3,588 4,471 Provision for income
taxes 46 29 Net income $ 3,542 $
4,442 Allocation of net income for calculation of
earnings per unit: General partner interest in net income $ 209 $
231 Preferred interest in net income $ 6,279 $ 6,278 Net loss
available to limited partners $ (2,946 ) $ (2,067 ) Basic
and diluted net loss per common unit $ (0.08 ) $ (0.05 )
Weighted average common units outstanding - basic and diluted
38,146 40,289
The table below summarizes our financial results by operating
segment margin for the three months ended March 31, 2017 and 2018
(in thousands):
Three Months endedMarch 31,
Favorable/
(Unfavorable)
Operating Results 2017 2018 $
% Operating margin, excluding depreciation and
amortization Asphalt terminalling services operating margin $
14,236 $ 15,280 1,044 7 % Crude oil terminalling operating margin
5,114 3,325 (1,789 ) (35 )% Crude oil pipeline services operating
margin 14 (60 ) (74 ) (529 )% Crude oil trucking and producer field
services operating margin (3 ) (290 ) (287 ) (9,567 )% Total
operating margin, excluding depreciation and amortization $ 19,361
$ 18,255 (1,106 ) (6 )%
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, and asset
impairment charges. Distributable cash flow is defined as Adjusted
EBITDA, less cash paid for interest, maintenance capital
expenditures, and cash paid for taxes. 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 months ended
March 31,
2017 2018 Net income $ 3,542 $ 4,442 Interest
expense 3,030 3,569 Income taxes 46 29 Depreciation and
amortization 8,066 7,367 Non-cash equity-based compensation 500 501
Asset impairment expense 28 616
Adjusted EBITDA $ 15,212 $ 16,524 Cash paid for interest (3,563 )
(3,673 ) Cash paid for income taxes — — Maintenance capital
expenditures, net of reimbursable expenditures (1,318 )
(1,593 ) Distributable cash flow $ 10,331 $ 11,258
Distribution declared (1) $ 12,229 $ 12,652
Distribution coverage ratio 0.84 0.89
______________
(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):
Three Months endedMarch 31,
Favorable/
(Unfavorable)
Operating Results 2017 2018 $
% Total operating margin, excluding depreciation and
amortization $ 19,361 $ 18,255 (1,106 ) (6 )% Depreciation and
amortization (8,066 ) (7,367 ) 699 9 % General and administrative
expense (4,585 ) (4,221 ) 364 8 % Asset impairment expense (28 )
(616 ) (588 ) (2,100 )% Loss on sale of assets (125 ) (236 ) (111 )
(89 )% Operating income $ 6,557 $ 5,815 (742 ) (11 )%
Investor Conference Call
The Partnership will discuss first quarter 2018 results during a
conference call on Thursday, May 10, 2018 at 1:00 p.m. CDT (2:00
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:
- 10.4 million barrels of liquid asphalt
storage located at 56 terminals in 26 states;
- 6.9 million barrels of above-ground
crude oil storage capacity, approximately 6.6 million barrels of
which are located at the Cushing Interchange terminalling facility
in Cushing, Oklahoma;
- 655 miles of crude oil pipeline located
primarily in Oklahoma; and
- 65 crude oil transportation vehicles
deployed in Kansas, Oklahoma 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 Oklahoma City, Oklahoma. For more information,
visit the Partnership’s web site at www.bkep.com.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180510005610/en/
Blueknight Energy Partners, L.P.Investor Relations,
918-237-4032investor@bkep.comorMedia:Brent Gooden, 405-715-3232 or
405-818-1900
Blueknight Energy Partners (NASDAQ:BKEP)
Historical Stock Chart
From Mar 2024 to Apr 2024
Blueknight Energy Partners (NASDAQ:BKEP)
Historical Stock Chart
From Apr 2023 to Apr 2024