Highlights
- Net income of $3.8 million, operating
income of $8.0 million and Adjusted EBITDA of $16.2 million
- Asphalt terminal services operating
margin, excluding depreciation and amortization, of $13.5 million,
benefiting from March 2018 asphalt acquisition and offset by July
2018 asset divestiture
- Crude oil terminalling services storage
capacity fully leased with operating margin, excluding depreciation
and amortization, of $2.6 million
- Higher operating margins from crude oil
pipeline services and crude oil trucking services driven primarily
by higher throughput across system
- Cash flow and balance sheet continue to
strengthen with distribution coverage increasing to 1.23 times and
leverage ratio decreasing to 4.6 times
- Key financial roles, Chief Financial
Officer and Chief Accounting Officer, successfully filled with
experienced finance and accounting professionals
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, 2019. Net
income was $3.8 million for the first quarter of 2019, as compared
to net income of $4.4 million for the same period in 2018. First
quarter 2019 net income was impacted by asset impairment expenses
of $0.3 million related to a flood at one of our asphalt facilities
as well as $0.8 million related to a change in estimate of the push
down impairment of Cimarron Express Pipeline, LLC. Adjusted
earnings before interest, taxes, depreciation and amortization
(“Adjusted EBITDA”) was $16.2 million for the three months ended
March 31, 2019, as compared to $16.5 million for the same period in
2018. The year-over-year decrease was due primarily to the July
2018 asset divestiture of three asphalt facilities, which was
partially offset by strong operations across our business.
“Our strong performance during the quarter was driven by higher
throughput and margins, especially within our crude oil
transportation segments,” said Mark Hurley, Chief Executive
Officer. “We continue to execute on our strategy to improve our
financial profile by completing sales of non-core assets, enhancing
the performance and efficiency of our current assets, and
generating and retaining more cash flow to pay down debt. With
distribution coverage increasing significantly to 1.23 times and
leverage ratio falling to 4.6 times, we are confident in our
ability to achieve our targets of distribution coverage greater
than 1.0 times and a leverage ratio between 4.0 times and 4.5 times
for the year.
“As we make progress on our plans to deliver greater value over
the long-term for our unitholders, we are excited about the future.
We are entering warmer months, when demand is highest for our
asphalt terminalling services. Our Cushing crude oil storage
position is fully contracted for the remainder of 2019 and we are
encouraged by our discussions with current and potential future
customers for longer-dated contracts not dependent on a contango
crude oil market. Importantly, we also filled two senior leadership
roles including a new Chief Accounting Officer with an internal
candidate well versed in our business and a new Chief Financial
Officer with strong relevant industry experience and a successful
track record of growing operations, both strategically and
organically, during his time at Andeavor,” added Hurley.
SEGMENT RESULTS
Asphalt Terminalling Services. Total operating margin,
excluding depreciation and amortization, decreased $1.8 million for
the three months ended March 31, 2019, as compared to the three
months ended March 31, 2018. The asphalt facility acquired in March
2018 resulted in an increase to operating margin of $0.6 million
and was offset by a decrease of $2.4 million due to the sale of
three asphalt facilities in July 2018.
Crude Oil Terminalling Services. Total operating margin,
excluding depreciation and amortization, decreased for the three
months ended March 31, 2019, compared to the same period in 2018
due to a decrease in market rates for storage contracts. Average
crude oil stored per month increased over 70% versus the same
period last year as there was more crude oil blending and
segregation opportunities than the same period last year. As of May
3, 2019, approximately 5.8 million barrels of crude oil storage
were under service contracts.
Crude Oil Pipeline Services. Average pipeline throughput
for the first quarter of 2019 was 37,000 barrels per day, an
increase of 61% compared to the same period in 2018. Most of the
increase in throughput was attributed to restoring our second
Oklahoma pipeline to full service in July 2018, bringing total
pipeline capacity to 50,000 barrels per day, and allowing for
higher throughput driven by our crude oil marketing business. As a
result, crude oil pipeline services operating margin, excluding
depreciation and amortization, for the first quarter of 2019 was
$1.9 million higher than the same period in the prior year.
Crude Oil Trucking Services. Average volumes increased
17% for the three months ended March 31, 2019, as compared to the
three months ended March 31, 2018. Operating margin, excluding
depreciation and amortization, increased by $0.2 million in the
first quarter 2019 compared to the same period last year. The
increase in operating margin was primarily driven by higher volumes
captured from producers to service our two Oklahoma pipelines and
the sale of the producer field services business.
BALANCE SHEET AND CASH FLOW
For the three months ended March 31, 2019, distributable cash
flow was $10.0 million, as compared to $11.3 million for the same
period in 2018. Based on the Partnership’s most recent distribution
announcement, distribution coverage was 1.23 times for the first
quarter 2019 versus 0.89 times for the same period in 2018. Net
capital expenditures for the first quarter 2019 were $2.8 million,
which included $2.0 million of net maintenance capital. The
Partnership ended the first quarter of 2019 with total debt of
$252.6 million, which resulted in a leverage ratio of 4.6 times,
and $1.2 million of cash.
CONFERENCE CALL
The Partnership will discuss first quarter 2019 results during a
conference call tomorrow, Thursday, May 9, 2019, at 10:00 a.m. CDT
(11:00 a.m. EDT). The conference call will be accessible by
telephone at 1-855-327-6837. International participants will be
able to access the conference call at 1-631-891-4304. 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 March 31, 2019, to be filed
with the SEC on May 9, 2019.
Results of Operations
The following table summarizes the Partnership’s financial
results for the three months ended March 31, 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 endedMarch 31,
2018 2019 (unaudited) Service revenue:
Third-party revenue $ 17,318 $ 15,886 Related-party revenue 6,321
4,219 Lease revenue: Third-party revenue 9,804 9,763 Related-party
revenue 7,703 4,940 Product sales revenue: Third-party revenue
3,514 58,924 Total revenue
44,660 93,732 Costs and expenses: Operating
expense 31,135 27,243 Cost of product sales 2,637 24,587 Cost of
product sales from related party — 30,774 General and
administrative expense 4,221 3,693 Asset impairment expense
616 1,119 Total costs and expenses
38,609 87,416 Gain (loss) on sale of assets
(236 ) 1,724 Operating income 5,815
8,040 Other income (expenses): Gain on sale of
unconsolidated affiliate 2,225 — Interest expense (3,569 )
(4,271 ) Income before income taxes 4,471
3,769 Provision for income taxes 29
12 Net income $ 4,442 $ 3,757
Allocation of net income for calculation of earnings per unit:
General partner interest in net income $ 231 $ 105 Preferred
interest in net income $ 6,278 $ 6,279 Net loss available to
limited partners $ (2,067 ) $ (2,627 ) Basic and diluted net
loss per common unit $ (0.05 ) $ (0.06 ) Weighted average
common units outstanding - basic and diluted 40,289 40,678
The table below summarizes the Partnership’s financial results
by segment operating margin, excluding depreciation and
amortization for the three months ended March 31, 2018 and 2019
(dollars in thousands):
Operating Results
Three Months endedMarch
31,
Favorable/(Unfavorable) Three
Months (in thousands) 2018
2019 $ % Operating margin,
excluding depreciation and amortization Asphalt terminalling
services operating margin $ 15,280 $ 13,518 $ (1,762 ) (12 )% Crude
oil terminalling services operating margin 3,325 2,589 (736 ) (22
)% Crude oil pipeline services operating margin (60 ) 1,813 1,873
3,122 % Crude oil trucking and producer field services operating
margin (290 ) (58 ) 232 80 % Total
operating margin, excluding depreciation and amortization $ 18,255
$ 17,862 $ (393 ) (2 )%
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 minus 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 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 endedMarch
31,
2018 2019 Net income (loss) $ 4,442 $
3,757 Interest expense 3,569 4,271 Income taxes 29 12 Depreciation
and amortization 7,367 6,734 Non-cash equity-based compensation 501
309 Asset impairment expense 616 1,119
Adjusted EBITDA $ 16,524 $ 16,202 Cash paid for
interest (3,673 ) (4,189 ) Cash paid for income taxes — —
Maintenance capital expenditures, net of reimbursable expenditures
(1,593 ) (2,050 ) Distributable cash flow $ 11,258
$ 9,963 Distributions declared (1) $ 12,652 $
8,080 Distribution coverage ratio 0.89 1.23
(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 endedMarch
31,
Favorable/(Unfavorable) Three
Months (in thousands) 2018
2019 $ % Total operating
margin, excluding depreciation and amortization $ 18,255 $ 17,862 $
(393 ) (2 )% Depreciation and amortization (7,367 ) (6,734 ) 633 9
% General and administrative expense (4,221 ) (3,693 ) 528 13 %
Asset impairment expense (616 ) (1,119 ) (503 ) (82 )% Gain (loss)
on sale of assets (236 ) 1,724 1,960
831 % Operating income $ 5,815 $ 8,040 $ 2,225
38 %
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 Oklahoma City, Oklahoma. For more information,
visit the Partnership’s web site at www.bkep.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20190508005812/en/
BKEP Investor Relations, (918) 237-4032investor@bkep.comorBKEP
Media Contact:Brent Gooden, (405) 715-3232 or (405) 818-1900
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