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Blueknight Announces Fourth Quarter and Full Year 2020 Results; Provides Outlook as Pure-Play Infrastructure Terminalling Company

3/9/21

Highlights

  • Completed transition to pure-play infrastructure terminalling company with $164 million sale and exit of crude oil business
  • Fourth quarter and full year 2020 net loss of $29.2 million and $13.5 million, respectively, primarily due to crude oil pipeline impairment
  • Fourth quarter 2020 Adjusted EBITDA of $17.8 million and distribution coverage of 1.64 times
  • Exceeded 2020 financial targets with full year Adjusted EBITDA of $67.5 million, distribution coverage of 1.53 times, and leverage ratio of 3.83 times

  • Full year 2020 Adjusted EBITDA from continuing operations of $49.7 million, which excludes any expected synergies from the crude oil business sale

  • 2021 outlook underpinned by stable cash flows, solid distribution coverage, improved balance sheet and liquidity profile, with pro forma leverage ratio of approximately 2.0 times

TULSA, Okla.--(BUSINESS WIRE)-- Blueknight Energy Partners, L.P. (“Blueknight” or the “Partnership”) (Nasdaq: BKEP and BKEPP) today reported its financial results for the fourth quarter and full year ended December 31, 2020. Net loss was $29.2 million in fourth quarter 2020, compared to net income of $4.3 million for the same period in 2019, primarily due to a $39.1 million impairment of its crude oil pipeline and trucking assets included in discontinued operations.

Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) was $17.8 million in fourth quarter 2020 compared to $16.0 million for the same period in 2019. Adjusted EBITDA in fourth quarter 2020 excluded $0.7 million in transaction fees and severance costs related to the sale of the crude oil business.

“We ended 2020 with strong performance in our asphalt terminalling segment to cap off one of our best years despite challenges brought on by COVID-19, a testament to the stability and strength of our core businesses and solid execution by our team. Most importantly, we delivered on our top strategic priority, transforming Blueknight into a pure-play infrastructure terminalling business with greater financial flexibility,” commented Andrew Woodward, Chief Executive Officer.

“With the sale of our crude oil businesses, we significantly reduced the volatility and risk profile of our business, and now have a sharper strategic focus and improved growth trajectory. As we look forward to the remainder of 2021 and beyond, our team is optimistic about the long-term investment trends in infrastructure and is turning its full attention to growth and expansion of our core terminalling competencies, while maintaining our key financial metrics and a disciplined capital allocation strategy,” added Woodward.

SEGMENT PERFORMANCE

Asphalt Terminalling Services. Total operating margin, excluding depreciation and amortization, in fourth quarter 2020 was $16.5 million, up 4% compared to the same period in 2019 primarily due to higher variable throughput revenue. Full year 2020 total operating margin, excluding depreciation and amortization, was $60.8 million, slightly higher year-over-year. After excluding cost recovery revenue, approximately 95% of Blueknight’s full year 2020 total revenue was considered take-or-pay, which included $91.9 million of fixed fee revenue and $5.7 million of variable throughput and other revenue.

DISCONTINUED OPERATIONS

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 (collectively the “Crude Oil Transaction”). As such, these segments are presented as discontinued operations in the Partnership’s financial reporting statements.

BALANCE SHEET AND CASH FLOW

Fourth quarter 2020 distributable cash flow was $13.3 million compared to $11.0 million for the same period in 2019. The 21% increase was attributable to improved business performance and lower cash interest expense. The calculated coverage ratio on all distributions was 1.64 times for fourth quarter 2020 versus 1.36 times for the same period in 2019.

Full year 2020 distributable cash flow was $49.6 million compared to $39.3 million in 2019, representing a $10.3 million, or 26% increase year-over-year. The calculated coverage ratio on all distributions was 1.53 times for full year 2020 versus 1.22 times in 2019.

At December 31, 2020, total debt was $252.6 million. Blueknight’s leverage ratio, which included $1.7 million in outstanding letters of credit, was 3.83 times versus 4.05 times for the same period in 2019.

As of March 4, 2021, total debt was $99.9 million following repayment of cash proceeds from the Crude Oil Transaction, representing a pro-forma leverage ratio of approximately 2.0 times.

2021 OUTLOOK

For 2021, Blueknight expects infrastructure and highway construction demand for its asphalt terminalling business to be comparable with the prior year with a more favorable outlook beyond 2021 over the medium and long-term driven by the expectation of a more comprehensive infrastructure funding bill. As a result, Blueknight expects its Adjusted EBITDA from continuing operations to be in-line with 2020, excluding any expected corporate synergies of $1.5 million to $2.5 million related to the Crude Oil Transaction. These earnings are supported by:

  • Geographically-diverse and industry-leading asphalt terminalling portfolio
  • 95% take-or-pay fixed fee revenue
  • Predominately investment-grade customer base
  • Weighted average remaining contract term of approximately six years

Total maintenance capital expenditures in 2021 are expected to be between $5.5 million and $6.5 million. Blueknight expects to use internally generated cash flow to fund 2021 distributions and is targeting a full year coverage ratio of 1.2 times or greater on all distributions.

CONFERENCE CALL DETAILS, NEW WEBSITE LAUNCH, AND ANNUAL REPORT ON FORM 10-K

The Partnership will discuss fourth quarter and full year 2020 results during a conference call tomorrow, Wednesday, March 10, 2021, at 10:00 a.m. CST (11:00 a.m. EST). 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. Participants are requested to dial in five to ten minutes before the scheduled start time. An audio replay will be available through the “Investors” section of the Partnership’s website.

Blueknight is pleased to announce that it has launched a new website, consistent with our strategy and core operations as a terminalling solutions provider focused on infrastructure and transportation end markets. The Partnership’s new website will be updated on a regular basis and visitors are encouraged to explore and learn more at www.bkep.com. The Partnership will upload a new investor presentation to the Investor section of its website at http://investor.bkep.com detailing Blueknight’s investment highlights and long-term strategy on Wednesday, March 10, 2021.

Additional information regarding the Partnership’s results of operations will be provided in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2020, to be filed with the SEC on March 10, 2021.

RESULTS OF OPERATIONS

The following table summarizes the Partnership’s financial results for the three and twelve months ended December 31, 2019 and 2020 (in thousands, except per unit data):

 

 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

 

 

2019

 

2020

 

2019

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed fee revenue

 

$

21,957

 

 

$

24,056

 

 

$

87,218

 

 

$

91,879

 

Cost recovery revenue

 

 

3,344

 

 

 

2,928

 

 

 

14,312

 

 

 

12,664

 

Variable throughput and other revenue

 

 

1,894

 

 

 

2,825

 

 

 

4,988

 

 

 

5,702

 

Total revenue

 

 

27,195

 

 

 

29,809

 

 

 

106,518

 

 

 

110,245

 

Operating expenses, excluding depreciation and amortization

 

 

(11,318

)

 

 

(13,261

)

 

 

(46,367

)

 

 

(49,396

)

Total operating margin, excluding depreciation and amortization

 

 

15,877

 

 

 

16,548

 

 

 

60,151

 

 

 

60,849

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

3,761

 

 

 

3,091

 

 

 

15,196

 

 

 

13,416

 

General and administrative expense

 

 

3,403

 

 

 

3,681

 

 

 

13,388

 

 

 

14,182

 

Asset impairment expense

 

 

160

 

 

 

-

 

 

 

2,476

 

 

 

-

 

Loss on sale of assets

 

 

60

 

 

 

316

 

 

 

131

 

 

 

67

 

Operating income

 

 

8,493

 

 

 

9,460

 

 

 

28,960

 

 

 

33,184

 

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income

 

 

54

 

 

 

199

 

 

 

530

 

 

 

1,169

 

Interest expense

 

 

(1,678

)

 

 

(1,248

)

 

 

(7,447

)

 

 

(5,665

)

Provision for income taxes

 

 

(16

)

 

 

6

 

 

 

(44

)

 

 

7

 

Income from continuing operations

 

 

6,853

 

 

 

8,417

 

 

 

21,999

 

 

 

28,695

 

Loss on discontinued operations, net

 

 

(2,513

)

 

$

(37,642

)

 

 

(3,587

)

 

 

(42,175

)

Net income(loss)

 

$

4,340

 

 

$

(29,225

)

 

$

18,412

 

 

$

(13,480

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allocation of net income(loss) for calculation of earnings per unit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General partner interest in net income(loss)

 

$

69

 

 

$

(462

)

 

$

337

 

 

$

(213

)

Preferred interest in net income

 

$

6,279

 

 

$

6,279

 

 

$

25,115

 

 

$

25,115

 

Net loss available to limited partners

 

$

(2,008

)

 

$

(35,042

)

 

$

(7,040

)

 

$

(38,382

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss from discontinued operations per common unit

 

$

(0.06

)

 

$

(0.87

)

 

$

(0.08

)

 

$

(0.98

)

Basic and diluted net income(loss) from continuing operations per common unit

 

$

0.01

 

 

$

0.05

 

 

$

(0.09

)

 

$

0.07

 

Basic and diluted net loss per common unit

 

$

(0.05

)

 

$

(0.82

)

 

$

(0.17

)

 

$

(0.91

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common units outstanding - basic and diluted

 

 

40,816

 

 

 

41,199

 

 

 

40,755

 

 

 

41,104

 

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, asset impairment charges, gains and losses on asset sales, and other select items which management feels decreases the comparability of results among periods. 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. Reconciliation of operating margin, excluding depreciation and amortization to its most directly comparable GAAP measure is included in the results of operations table above. Reconciliation of Adjusted EBITDA and distributable cash flow to their most directly comparable GAAP measures are included in the following table.

The following table presents a reconciliation of Adjusted EBITDA and distributable cash flow to income from continuing operations and loss on discontinued operations for the periods shown (in thousands, except ratios):

 

 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

 

 

2019

 

2020

 

2019

 

2020

Income from continuing operations

 

$

6,853

 

 

$

8,417

 

 

$

21,999

 

 

$

28,695

 

Interest expense

 

 

1,678

 

 

 

1,248

 

 

 

7,447

 

 

 

5,665

 

Income taxes

 

 

16

 

 

 

(6

)

 

 

44

 

 

 

(7

)

Depreciation and amortization

 

 

3,761

 

 

 

3,091

 

 

 

15,196

 

 

 

13,416

 

Non-cash equity-based compensation

 

 

244

 

 

 

150

 

 

 

955

 

 

 

801

 

Asset impairment expense

 

 

160

 

 

 

-

 

 

 

2,476

 

 

 

-

 

Loss on sale of assets

 

 

60

 

 

 

316

 

 

 

131

 

 

 

67

 

Other

 

 

-

 

 

 

356

 

 

 

443

 

 

 

1,053

 

Adjusted EBITDA from continuing operations

 

$

12,772

 

 

$

13,572

 

 

$

48,691

 

 

$

49,690

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on discontinued operations, net

 

$

(2,513

)

 

$

(37,642

)

 

$

(3,587

)

 

$

(42,175

)

Interest expense

 

 

1,903

 

 

 

1,151

 

 

 

8,527

 

 

 

5,319

 

Income taxes

 

 

7

 

 

 

(8

)

 

 

19

 

 

 

1

 

Depreciation and amortization

 

 

2,560

 

 

 

2,278

 

 

 

10,336

 

 

 

9,652

 

Non-cash equity-based compensation

 

 

60

 

 

 

22

 

 

 

228

 

 

 

120

 

Asset impairment expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6,417

 

(Gain) loss on sale of assets

 

 

1,252

 

 

 

(1,013

)

 

 

(584

)

 

 

(1,190

)

Loss on classification as held for sale

 

 

-

 

 

 

39,096

 

 

 

-

 

 

 

39,096

 

Other

 

 

-

 

 

 

366

 

 

 

-

 

 

 

564

 

Adjusted EBITDA from discontinued operations

 

$

3,269

 

 

$

4,250

 

 

$

14,939

 

 

$

17,804

 

Total Adjusted EBITDA

 

$

16,041

 

 

$

17,822

 

 

$

63,630

 

 

$

67,494

 

Cash paid for interest

 

 

(3,333

)

 

 

(2,192

)

 

 

(15,150

)

 

 

(10,009

)

Cash paid for income taxes

 

 

(7

)

 

 

25

 

 

 

(227

)

 

 

(30

)

Maintenance capital expenditures, net of reimbursable expenditures

 

 

(1,676

)

 

 

(2,378

)

 

 

(8,932

)

 

 

(7,894

)

Distributable cash flow

 

$

11,025

 

 

$

13,277

 

 

$

39,321

 

 

$

49,561

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions declared(1)

 

 

8,082

 

 

 

8,106

 

 

 

32,330

 

 

 

32,432

 

Distribution coverage ratio

 

 

1.36

 

 

 

1.64

 

 

 

1.22

 

 

 

1.53

 

 

(1) Inclusive of preferred and common unit declared cash distributions.

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 8.7 million barrels of liquid asphalt storage capacity across 53 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.

Blueknight Investor Relations
Chase Jacobson, (918) 237-4032
investor@bkep.com

Source: Blueknight Energy Partners, L.P.

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