Blueknight Announces Third Quarter 2017 Results and Anticipated Acquisitions OKLAHOMA CITY
Blueknight Energy Partners, L.P. (“BKEP” or the “Partnership”) (NASDAQ:
BKEP) (NASDAQ: BKEPP) today announced its financial results for the
three and nine months ended September 30, 2017.
Summary:
-
Third quarter 2017 net income of $9.8 million on total revenues of
$47.5 million, compared to net income of $11.4 million on total
revenues of $46.9 million for the same period in 2016.
-
Operating income of $12.2 million for the three months ended September
30, 2017, compared to operating income of $13.4 million for the same
period in 2016.
-
Adjusted earnings before interest, taxes, depreciation, amortization
(“Adjusted EBITDA”) of $21.6 million for the three months ended
September 30, 2017, as compared to $22.9 million for the same period
in 2016.
-
Distributable cash flow was $16.6 million for the three months ended
September 30, 2017, as compared to $18.2 million for the same period
in 2016. 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.”
-
Third quarter 2017 distribution coverage ratio was 1.34 times.
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 nine months ended September 30, 2017, to be filed with the
SEC on November 1, 2017.
Comments from BKEP CEO Mark Hurley:
“Once again, our asphalt terminalling services segment continued its
strong performance even though wetter-than-normal conditions earlier
this year put us slightly behind our expectations. That noted, we expect
strong product throughputs in the first part of the fourth quarter and
anticipate reaching internal expectations for the year. The operating
margin for the segment increased $1.6 million or 8% quarter-over-quarter
and increased by nearly 20% when comparing the nine-month results,
before taking into consideration depreciation and amortization. The
demand for our customers’ products continues to be strong and the need
for improved infrastructure remains acute.
“We also announced today the expected addition of two asphalt terminals
- one in Muskogee, OK, and the other in Bainbridge, GA, which is
currently owned by Ergon, our General Partner. The Ergon terminal
transaction is still subject to the signing of definitive agreements,
which we expect prior to December 1. However, the terms of the deal are
finalized. Purchase price for the two terminals is expected to total
$32.5 million, consisting of $10.5 million of BKEP common units to be
issued to a subsidiary of Ergon in a private placement at a market price
and $22.0 million in cash. We expect the investments to be immediately
accretive at less than a 9.0 times EBITDA multiple and will be leverage
neutral. We remain the largest independent operator of asphalt terminals
in the United States with a growing national footprint.
“The current crude oil market has impacted our crude oil segments, both
terminalling and transportation. On the storage front, our Cushing
terminal remains fully contracted, however the flat forward curve does
impact storage rates. Plus, we have seen less movement of volume through
the terminal which impacts throughput revenue. As a result, our storage
rates and throughput revenues have decreased as compared to the prior
year. Cushing inventories, however, remain well above the 5-year average
and we see demand for storage continuing to be strong. Our crude oil
transportation margins have been impacted by the combination of a
lower-price environment, flatter forward market curve and our
out-of-service pipeline. However, with recent increases in the market
price for crude oil, we are seeing trucking volumes stabilize and have
reason to believe this positive trend will continue. With respect to our
out-of-service pipeline, we are making progress and expect to resume
service and increase transportation volumes by the second quarter of
2018.
“We continue to make progress in our strategic areas of focus for 2017:
-
Focus resources on the completion of our light crude oil pipeline
project and increase utilization of our crude transportation assets -
both pipeline and trucking. We continue to work on promising
organic opportunities with the goal of ramping up transportation
volumes on both Oklahoma pipeline systems in 2018 and our trucking
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 mentioned
previously, we expect to add two more asphalt facilities to our
terminal network. The Bainbridge, GA, terminal represents the first of
two anticipated drop-downs discussed at the time of Ergon’s
acquisition of BKEP’s General Partner in October 2016. The terminal
includes approximately 200,000 barrels of storage and a long-term
contract with a credit-worthy third-party customer. The Muskogee
terminal will include 500,000 barrels of storage and 245 acres of
property. We have entered into two long-term storage, throughput and
handling contracts for the Muskogee facility, which will become
effective upon closing. In addition, we continue to evaluate a number
of other complementary acquisitions.
-
Continue to maintain a solid financial position and balance sheet.
As you know, the MLP market continues to be very challenged. We
continue to stress the uniqueness of our asset portfolio and believe
it will continue to perform well and we will be able to maintain a
reasonable balance between growth and overall financial strength.
“Our fully diluted distribution coverage for the third quarter of 2017
was 1.34 times versus a coverage of 1.49 times for the same quarter in
2016. Our leverage ratio for the third quarter of 2017 was 4.38 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
nine months ended September 30, 2016 and 2017 (in thousands except per
unit data):
|
|
|
|
|
|
|
|
|
|
|
|
Three Months ended September 30,
|
|
|
Nine Months ended September 30,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
|
|
(unaudited)
|
Service revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third party revenue
|
|
|
|
$
|
35,600
|
|
|
|
$
|
30,635
|
|
|
|
$
|
96,711
|
|
|
|
$
|
87,443
|
|
Related party revenue
|
|
|
|
|
5,734
|
|
|
|
|
14,464
|
|
|
|
|
18,605
|
|
|
|
|
41,611
|
|
Product sales revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third party revenue
|
|
|
|
|
5,605
|
|
|
|
|
2,375
|
|
|
|
|
16,058
|
|
|
|
|
8,637
|
|
Total revenue
|
|
|
|
|
46,939
|
|
|
|
|
47,474
|
|
|
|
|
131,374
|
|
|
|
|
137,691
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
|
|
25,267
|
|
|
|
|
29,380
|
|
|
|
|
80,314
|
|
|
|
|
91,896
|
|
Cost of product sales
|
|
|
|
|
3,513
|
|
|
|
|
1,675
|
|
|
|
|
10,789
|
|
|
|
|
6,483
|
|
General and administrative
|
|
|
|
|
4,865
|
|
|
|
|
4,093
|
|
|
|
|
14,447
|
|
|
|
|
13,000
|
|
Asset impairment expense
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
22,845
|
|
|
|
|
45
|
|
Total costs and expenses
|
|
|
|
|
33,645
|
|
|
|
|
35,148
|
|
|
|
|
128,395
|
|
|
|
|
111,424
|
|
Gain (loss) on sale of assets
|
|
|
|
|
104
|
|
|
|
|
(107
|
)
|
|
|
|
85
|
|
|
|
|
(986
|
)
|
Operating income
|
|
|
|
|
13,398
|
|
|
|
|
12,219
|
|
|
|
|
3,064
|
|
|
|
|
25,281
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity earnings in unconsolidated affiliate
|
|
|
|
|
305
|
|
|
|
|
—
|
|
|
|
|
1,086
|
|
|
|
|
61
|
|
Gain on sale of unconsolidated affiliate
|
|
|
|
|
—
|
|
|
|
|
1,112
|
|
|
|
|
—
|
|
|
|
|
5,284
|
|
Interest expense (net of capitalized interest of $0, $1, $41 and $6,
respectively
|
|
|
|
|
(2,175
|
)
|
|
|
|
(3,500
|
)
|
|
|
|
(10,742
|
)
|
|
|
|
(10,795
|
)
|
Income (loss) before income taxes
|
|
|
|
|
11,528
|
|
|
|
|
9,831
|
|
|
|
|
(6,592
|
)
|
|
|
|
19,831
|
|
Provision for income taxes
|
|
|
|
|
109
|
|
|
|
|
60
|
|
|
|
|
199
|
|
|
|
|
147
|
|
Net income (loss)
|
|
|
|
$
|
11,419
|
|
|
|
$
|
9,771
|
|
|
|
$
|
(6,791
|
)
|
|
|
$
|
19,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of net income (loss) for calculation of earnings per unit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General partner interest in net income
|
|
|
|
$
|
341
|
|
|
|
$
|
312
|
|
|
|
$
|
291
|
|
|
|
$
|
777
|
|
Preferred interest in net income
|
|
|
|
$
|
6,279
|
|
|
|
$
|
6,279
|
|
|
|
$
|
17,058
|
|
|
|
$
|
18,837
|
|
Net income (loss) available to limited partners
|
|
|
|
$
|
4,799
|
|
|
|
$
|
3,180
|
|
|
|
$
|
(24,140
|
)
|
|
|
$
|
70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income (loss) per common unit
|
|
|
|
$
|
0.13
|
|
|
|
$
|
0.08
|
|
|
|
$
|
(0.69
|
)
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common units outstanding - basic and diluted
|
|
|
|
|
36,036
|
|
|
|
|
38,189
|
|
|
|
|
34,139
|
|
|
|
|
38,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below summarizes our financial results by segment operating
margin, excluding depreciation and amortization, for the three and nine
months ended September 30, 2016 and 2017 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Operating Results
|
|
|
|
Three Months ended September 30,
|
|
|
Nine Months ended September 30,
|
|
|
Favorable/(Unfavorable)
|
|
|
|
|
|
|
|
Three Months
|
|
|
Nine Months
|
(in thousands)
|
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
Operating margin, excluding depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asphalt services operating margin
|
|
|
|
$
|
18,992
|
|
|
$
|
20,546
|
|
|
|
$
|
41,719
|
|
|
$
|
49,609
|
|
|
|
1,554
|
|
|
|
8
|
%
|
|
|
7,890
|
|
|
|
19
|
%
|
Crude oil terminalling and storage operating margin
|
|
|
|
|
5,012
|
|
|
|
4,168
|
|
|
|
|
15,307
|
|
|
|
14,017
|
|
|
|
(844
|
)
|
|
|
(17
|
)%
|
|
|
(1,290
|
)
|
|
|
(8
|
)%
|
Crude oil pipeline services operating margin
|
|
|
|
|
1,318
|
|
|
|
(387
|
)
|
|
|
|
3,894
|
|
|
|
(309
|
)
|
|
|
(1,705
|
)
|
|
|
(129
|
)%
|
|
|
(4,203
|
)
|
|
|
(108
|
)%
|
Crude oil trucking and producer field services operating margin
|
|
|
|
|
461
|
|
|
|
(228
|
)
|
|
|
|
1,798
|
|
|
|
(419
|
)
|
|
|
(689
|
)
|
|
|
(149
|
)%
|
|
|
(2,217
|
)
|
|
|
(123
|
)%
|
Total operating margin, excluding depreciation and amortization
|
|
|
|
$
|
25,783
|
|
|
$
|
24,099
|
|
|
|
$
|
62,718
|
|
|
$
|
62,898
|
|
|
|
(1,684
|
)
|
|
|
(7
|
)%
|
|
|
180
|
|
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Months ended September 30,
|
|
|
Nine Months ended September 30,
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
Net income (loss)
|
|
|
|
$
|
11,419
|
|
|
|
$
|
9,771
|
|
|
|
$
|
(6,791
|
)
|
|
|
$
|
19,684
|
|
Interest expense
|
|
|
|
|
2,175
|
|
|
|
|
3,500
|
|
|
|
|
10,742
|
|
|
|
|
10,795
|
|
Income taxes
|
|
|
|
|
109
|
|
|
|
|
60
|
|
|
|
|
199
|
|
|
|
|
147
|
|
Depreciation and amortization
|
|
|
|
|
7,624
|
|
|
|
|
7,680
|
|
|
|
|
22,447
|
|
|
|
|
23,586
|
|
Non-cash equity-based compensation
|
|
|
|
|
651
|
|
|
|
|
607
|
|
|
|
|
1,839
|
|
|
|
|
1,734
|
|
Asset impairment charge
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
22,845
|
|
|
|
|
45
|
|
Fees related to the Ergon transactions
|
|
|
|
|
878
|
|
|
|
|
—
|
|
|
|
|
1,389
|
|
|
|
|
—
|
|
Adjusted EBITDA
|
|
|
|
$
|
22,856
|
|
|
|
$
|
21,618
|
|
|
|
$
|
52,670
|
|
|
|
$
|
55,991
|
|
Cash paid for interest
|
|
|
|
|
(3,142
|
)
|
|
|
|
(3,506
|
)
|
|
|
|
(9,078
|
)
|
|
|
|
(10,160
|
)
|
Cash paid for income taxes
|
|
|
|
|
(5
|
)
|
|
|
|
—
|
|
|
|
|
(259
|
)
|
|
|
|
(171
|
)
|
Maintenance capital expenditures, net of reimbursable expenditures
|
|
|
|
|
(350
|
)
|
|
|
|
(1,554
|
)
|
|
|
|
(5,862
|
)
|
|
|
|
(6,075
|
)
|
Cash paid for fees related to the Ergon transactions
|
|
|
|
|
(1,115
|
)
|
|
|
|
—
|
|
|
|
|
(1,389
|
)
|
|
|
|
—
|
|
Distributable cash flow
|
|
|
|
$
|
18,244
|
|
|
|
$
|
16,558
|
|
|
|
$
|
36,082
|
|
|
|
$
|
39,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution declared (1)
|
|
|
|
$
|
12,259
|
|
|
|
$
|
12,311
|
|
|
|
$
|
34,139
|
|
|
|
$
|
36,913
|
|
Distribution coverage ratio
|
|
|
|
|
1.49
|
|
|
|
|
1.34
|
|
|
|
|
1.06
|
|
|
|
|
1.07
|
|
(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 Months ended September 30,
|
|
|
Nine Months ended September 30,
|
|
|
Favorable/(Unfavorable)
|
|
|
|
|
|
|
|
Three Months
|
|
Nine Months
|
(in thousands)
|
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
$
|
|
|
%
|
|
$
|
|
|
%
|
Total operating margin, excluding depreciation and amortization
|
|
|
|
$
|
25,783
|
|
|
|
$
|
24,099
|
|
|
|
$
|
62,718
|
|
|
|
$
|
62,898
|
|
|
|
(1,684
|
)
|
|
|
(7
|
)%
|
|
180
|
|
|
|
—
|
%
|
Depreciation and amortization
|
|
|
|
|
(7,624
|
)
|
|
|
|
(7,680
|
)
|
|
|
|
(22,447
|
)
|
|
|
|
(23,586
|
)
|
|
|
(57
|
)
|
|
|
(1
|
)%
|
|
(1,139
|
)
|
|
|
(5
|
)%
|
General and administrative expense
|
|
|
|
|
(4,865
|
)
|
|
|
|
(4,093
|
)
|
|
|
|
(14,447
|
)
|
|
|
|
(13,000
|
)
|
|
|
772
|
|
|
|
16
|
%
|
|
1,447
|
|
|
|
10
|
%
|
Asset impairment expense
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(22,845
|
)
|
|
|
|
(45
|
)
|
|
|
—
|
|
|
|
—
|
%
|
|
22,800
|
|
|
|
100
|
%
|
Gain (loss) on sale of assets
|
|
|
|
|
104
|
|
|
|
|
(107
|
)
|
|
|
|
85
|
|
|
|
|
(986
|
)
|
|
|
(211
|
)
|
|
|
(203
|
)%
|
|
(1,071
|
)
|
|
|
(1,260
|
)%
|
Operating income
|
|
|
|
$
|
13,398
|
|
|
|
$
|
12,219
|
|
|
|
$
|
3,064
|
|
|
|
$
|
25,281
|
|
|
|
$
|
(1,180
|
)
|
|
|
(9
|
)%
|
|
22,217
|
|
|
|
725
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor Conference Call
The Partnership will discuss third quarter 2017 results during a
conference call on Wednesday, November 1, 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.
View source version on businesswire.com: http://www.businesswire.com/news/home/20171031006555/en/ Copyright Business Wire 2017
Source: Business Wire
(October 31, 2017 - 5:00 PM EDT)
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