Blueknight Energy Partners, L.P. (“Blueknight” or the
“Partnership”) (Nasdaq: BKEP and BKEPP) today reported its
financial results for the first quarter ended March 31,
2022. Income from continuing operations was $6.6 million
in the first quarter of 2022, compared to
$6.1 million for the same period in 2021. Adjusted
earnings before interest, taxes, depreciation and amortization
(“Adjusted EBITDA”) from continuing operations
was $11.5 million in the first quarter of
2022 compared to $11.4 million for the same period
in 2021. The year-over-year increase was due to higher asphalt
terminalling services operating margin, excluding depreciation and
amortization, and continued improvements in general and
administrative expense after excluding non-recurring legal and
professional fees.
“I am very pleased with another solid quarter across our
business as we remained steadfast in our commitment to excellence
as we continued to execute our strategy and drive value,” commented
Andrew Woodward, Chief Executive Officer. “As we prepare for a
potential merger with Ergon, I want to both recognize and highlight
the collective efforts of our employees and their relentless
pursuit of the best version of Blueknight. I’m incredibly proud and
grateful for this team.”
QUARTERLY PERFORMANCE
Asphalt terminalling services total operating margin, excluding
depreciation and amortization, in the first quarter
of 2022 was $14.3 million, in-line with the same
period in 2021. Total revenue increased to $28.5 million, with
over 99% categorized as fixed-fee, take-or-pay revenue after
excluding variable cost recovery revenue.
Total operating expenses, excluding depreciation and
amortization, increased 10% to $14.2 million primarily
due to higher utility costs, which are passed-through and have no
impact on total operating margin.
General and administrative expense in the first quarter of
2022 of $3.4 million improved 7% compared to
the same period in 2021, after excluding non-cash equity-based
compensation and non-recurring professional and legal
fees.
CASH FLOW AND BALANCE SHEET
Distributable Cash Flow from continuing operations
was $9.3 million in the first quarter of 2022 compared
to $9.0 million for the same period in 2021. The
2% increase was attributable to improved business
performance and lower cash interest expense, which offset
the timing of higher maintenance capital. The coverage ratio
on all distributions was 1.14 times for
the first quarter of
2022 versus 1.13 times for the same period in
2021. The coverage ratio on common unit distributions
was 1.60 times for the first quarter of
2022 versus 1.59 times for the same period in 2021.
As previously announced in January 2022, the Partnership increased
the quarterly cash distribution rate to $0.0425 per common unit, or
$0.17 per common unit on an annualized basis.
Capital expenditures in the first quarter
of 2022 included $8.0 million of expansion capital
related to the growth projects previously announced in December
2021 and $1.6 million of net maintenance capital.
As of March 31, 2022, total debt was $115.0 million, and the
total leverage ratio was 2.17 times, compared to 2.12 times as of
March 31, 2021. Total availability under the credit facility was
$184.4 million at quarter end, subject to covenant restrictions. As
of April 29, 2022, total debt was $110.0 million and total cash was
$0.4 million.
ERGON MERGER AGREEMENT
On April 21, 2022, Blueknight entered into a definitive
agreement with an affiliate of Ergon, Inc. (“Ergon”), pursuant to
which Ergon would acquire all of the outstanding common and
preferred units of the Partnership not already owned by Ergon and
its affiliates.
The transaction is expected to close in mid-2022, subject to
customary approvals. Ergon has committed to vote its units to
approve the transaction.
QUARTERLY REPORT ON FORM 10-Q
Additional information regarding the Partnership’s results of
operations will be provided in the Blueknight’s Quarterly Report on
Form 10-Q for the quarter ended March 31, 2022, to be
filed with the Securities and Exchange Commission on May 5,
2022.
RESULTS OF OPERATIONS
The following table summarizes the Partnership’s financial
results for the three months ended March 31, 2022
and 2021 (in thousands, except per unit data):
|
|
Three Months Ended March 31, |
|
|
|
2021 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
Fixed fee revenue |
|
$ |
24,371 |
|
|
$ |
25,157 |
|
Variable cost recovery revenue |
|
|
2,584 |
|
|
|
3,194 |
|
Variable throughput and other revenue |
|
|
120 |
|
|
|
109 |
|
Total revenue |
|
|
27,075 |
|
|
|
28,460 |
|
Operating expenses, excluding depreciation and amortization |
|
|
(12,847 |
) |
|
|
(14,179 |
) |
Total operating margin,
excluding depreciation and amortization |
|
|
14,228 |
|
|
|
14,281 |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
3,033 |
|
|
|
3,397 |
|
General and administrative expense |
|
|
3,982 |
|
|
|
3,371 |
|
Loss on disposal of assets |
|
|
- |
|
|
|
24 |
|
Operating income |
|
|
7,213 |
|
|
|
7,489 |
|
|
|
|
|
|
|
|
|
|
Other income (expenses): |
|
|
|
|
|
|
|
|
Other income |
|
|
233 |
|
|
|
127 |
|
Interest expense |
|
|
(1,333 |
) |
|
|
(964 |
) |
Provision for income taxes |
|
|
(10 |
) |
|
|
(10 |
) |
Income from continuing
operations |
|
|
6,103 |
|
|
|
6,642 |
|
Income from discontinued operations(1) |
|
|
75,550 |
|
|
|
- |
|
Net income |
|
$ |
81,653 |
|
|
$ |
6,642 |
|
|
|
|
|
|
|
|
|
|
Allocation of net income for
calculation of earnings per unit: |
|
|
|
|
|
|
|
|
General partner interest in net income |
|
$ |
1,292 |
|
|
$ |
105 |
|
Preferred interest in net income |
|
$ |
6,341 |
|
|
$ |
6,150 |
|
Net income available to limited partners |
|
$ |
74,020 |
|
|
$ |
387 |
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income
from discontinued operations per common unit |
|
$ |
1.75 |
|
|
$ |
- |
|
Basic and diluted net income
(loss) from continuing operations per common unit |
|
|
(0.01 |
) |
|
|
0.01 |
|
Basic and diluted net income
per common unit |
|
$ |
1.74 |
|
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
|
Weighted average common units
outstanding - basic and diluted |
|
|
41,430 |
|
|
|
41,817 |
|
(1) |
|
On December 21,
2020, Blueknight announced it had entered into multiple
definitive agreements to sell its (i) crude oil terminalling, (ii)
crude oil pipeline, and (iii) crude oil trucking segments. The
sales of these segments closed in the first quarter of 2021. As
such, these segments are presented as discontinued operations in
the Partnership’s financial statements. |
Non-GAAP Financial Measures
This press release contains the non-GAAP financial measures of
Adjusted EBITDA from continuing operations, Distributable Cash Flow
from continuing operations, and total operating margin, excluding
depreciation and amortization. Adjusted EBITDA from continuing
operations is defined as earnings before interest, income taxes,
depreciation and amortization, non-cash equity-based compensation,
asset impairment charges, gains and losses on asset disposals, and
other select items which management feels decreases the
comparability of results among periods. Distributable Cash Flow
from continuing operations is defined as Adjusted EBITDA from
continuing operations minus cash paid for interest, cash paid for
taxes, and maintenance capital expenditures. 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
from continuing operations, Distributable Cash Flow from continuing
operations 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 from continuing operations,
Distributable Cash Flow from continuing operations 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 operating margin, excluding depreciation and
amortization to its most directly comparable GAAP measure is
included in the results of operations table above. Where references
are pro forma, forward-looking, preliminary, or prospective in
nature, and not based on historical fact, this press release
does not provide a reconciliation. The Partnership could not
provide such a reconciliation without unreasonable efforts because
such Adjusted EBITDA numbers are estimations, approximations,
and/or ranges. In addition, it would be difficult for the
Partnership to present a detailed reconciliation due to many
unknown variables possibly affecting the reconciliation. For the
same reasons, the Partnership is unable to address the probable
significance of the unavailable information, which could be
material to future results.
The following table presents a reconciliation of Adjusted EBITDA
from continuing operations and Distributable Cash Flow from
continuing operations to income from continuing operations for
the periods shown (in thousands, except ratios):
|
|
Three Months Ended March 31, |
|
|
|
2021 |
|
|
2022 |
|
Income from continuing operations |
|
$ |
6,103 |
|
|
$ |
6,642 |
|
Interest expense |
|
|
1,333 |
|
|
|
964 |
|
Income taxes |
|
|
10 |
|
|
|
10 |
|
Depreciation and non-cash amortization |
|
|
3,033 |
|
|
|
3,394 |
|
Non-cash equity-based compensation |
|
|
129 |
|
|
|
243 |
|
Loss on disposal of assets |
|
|
- |
|
|
|
24 |
|
Other |
|
|
763 |
|
|
|
267 |
|
Adjusted EBITDA from
continuing operations |
|
$ |
11,371 |
|
|
$ |
11,544 |
|
Cash paid for interest |
|
|
(948 |
) |
|
|
(713 |
) |
Cash paid for income taxes |
|
|
- |
|
|
|
- |
|
Maintenance capital expenditures, net of reimbursable
expenditures |
|
|
(1,389 |
) |
|
|
(1,572 |
) |
Distributable cash flow from
continuing operations |
|
$ |
9,034 |
|
|
$ |
9,259 |
|
Less: Distributions declared on preferred units |
|
|
(6,255 |
) |
|
|
(6,249 |
) |
Distributable cash flow
available for common unit distributions |
|
$ |
2,779 |
|
|
$ |
3,010 |
|
|
|
|
|
|
|
|
|
|
Distributions declared on common units |
|
$ |
1,748 |
|
|
$ |
1,880 |
|
Distributions declared on preferred units |
|
|
6,255 |
|
|
|
6,249 |
|
Total Distributions
declared |
|
$ |
8,003 |
|
|
$ |
8,129 |
|
|
|
|
|
|
|
|
|
|
Coverage ratio - common unit
distributions |
|
|
1.59 |
|
|
|
1.60 |
|
Coverage ratio - all
distributions |
|
|
1.13 |
|
|
|
1.14 |
|
|
|
|
|
|
|
|
|
|
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
Blueknight (Nasdaq: BKEP and BKEPP) is a publicly traded master
limited partnership that owns the largest independent asphalt
terminalling network in the country. Operations include 9.0 million
barrels of liquid asphalt storage capacity across 54 terminals and
26 states throughout the U.S. Blueknight is focused on providing
integrated terminalling solutions for tomorrow’s infrastructure and
transportation end markets. More information is available at
www.bkep.com.
Investor Relations Contact:
Matthew Lewis, Chief Financial Officer(918)
237-4032investor@bkep.com
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