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, 2017.
The Partnership reported net income of $3.5 million on total revenues of
$46.3 million for the three months ended March 31, 2017, versus net
income of $0.7 million on total revenues of $41.0 million for the same
period in 2016.
BKEP's adjusted earnings before interest, taxes, depreciation and
amortization ("Adjusted EBITDA") increased 12% to $15.2 million for the
first quarter of 2017, up from $13.6 million for the same period in
2016. Adjusted EBITDA, including a reconciliation of such measure to net
income, is explained in the section of this release entitled "Non-GAAP
Financial Measures."
BKEP's distributable cash flow increased 20% to $10.3 million for the
three months ended March 31, 2017, as compared to $8.6 million for the
three months ended March 31, 2016. 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."
BKEP previously announced a first quarter 2017 cash distribution of
$0.1450 per common unit, which is equal to both the previous quarter's
distribution and the first quarter 2016 distribution. The Partnership
also announced a $0.17875 distribution per preferred unit. 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, 2017, to be filed with the Securities and
Exchange Commission on May 4, 2017.
Comments from BKEP CEO Mark Hurley:
"Our first quarter results clearly reflect the strategic investments
made in the past two years in fee-based, terminalling-focused assets as
represented by significant quarter over quarter increases in net income,
operating income, Adjusted EBITDA and distributable cash flow. Operating
income, Adjusted EBITDA and distributable cash flow for the first
quarter ended March 31, 2017, increased 31%, 12% and 20%, respectively,
when compared with results for the first quarter of 2016. Our asphalt
terminalling services segment reported strong quarter-over-quarter
performance posting a 27% increase in operating margin, before
depreciation and amortization. These solid increases result from the
acquisition of the nine Ergon asphalt terminals in October of 2016 and
the acquisition of two additional asphalt terminals in the first quarter
of 2016.
"Our crude oil terminalling and storage segment reported consistent
results in line with the prior year. This is at a time when Cushing
crude oil inventories remain at near record levels. The temporary
suspension of service on one of our Oklahoma pipelines continues to
hamper results along with rate pressure and increased competition in our
crude trucking and producer field services businesses spurred by
stabilizing business fundamentals.
"While overall 2017 is off to a good start, our strategy for 2017
remains clear and consistent: 1) focus resources on the completion of
our crude oil condensate project to resume operation of one of our
Oklahoma pipelines and increase utilization of our entire crude pipeline
system, 2) improve operating margin in our crude trucking business
through volume and efficiency gains, 3) continue to identify and execute
strategic growth projects which may include the acquisitions of
additional product terminals or synergistic crude oil pipeline assets,
and 4) continue to maintain a solid financial position and balance sheet.
"Consistent with this strategy we completed the divestiture of two
non-core assets - our East Texas crude oil pipeline and terminal assets
and our 30% ownership of Advantage Pipeline subsequent to the end of the
first quarter. We received cash proceeds of approximately $30 million
from the sale of these two assets. We used the cash to repay outstanding
amounts on our revolver and expect to reinvest in future growth capital
projects.
"We are encouraged by the recent national focus on investing in
infrastructure improvements, including roads, bridges and pipelines. Our
assets and customers are well positioned to benefit from a large-scale
national infrastructure initiative.
"Our fully diluted distribution coverage for the first quarter, which is
typically our lowest quarter due to the seasonality of our asphalt
terminalling segment, was 0.84 times versus a coverage of 0.81 times for
the same quarter in 2016. Our leverage for the first quarter of 2017 was
4.29 times, and we maintained our common unit distribution at $0.1450
for the quarter. Our year has started well as we steadily gain
operational momentum with material improvements in cash flow and we will
continue to drive incremental value for our investors and unitholders."
Results of Operations
The following table summarizes the financial results for the three
months ended March 31, 2016 and 2017 (in thousands, except per unit
data):
|
| Three Months ended March 31, |
| | 2016 |
| 2017 |
| |
(unaudited)
|
|
Service revenue:
| | | | |
|
Third party revenue
| |
$
|
30,255
| | |
$
|
28,663
| |
|
Related party revenue
| |
7,009
| | |
13,642
| |
|
Product sales revenue:
| | | | |
|
Third party revenue
| |
3,745
|
| |
4,035
|
|
|
Total revenue
| |
41,009
|
| |
46,340
|
|
|
Costs and expenses:
| | | | |
|
Operating
| |
27,760
| | |
31,906
| |
|
Cost of product sales
| |
3,187
| | |
3,139
| |
|
General and administrative
| |
4,745
| | |
4,585
| |
|
Asset impairment expense
| |
271
|
| |
28
|
|
|
Total costs and expenses
| |
35,963
|
| |
39,658
|
|
|
Loss on sale of assets
| |
(33
|
)
| |
(125
|
)
|
|
Operating income
| |
5,013
|
| |
6,557
|
|
|
Other income (expense):
| | | | |
|
Equity earnings in unconsolidated affiliate
| |
624
| | |
61
| |
|
Interest expense (net of capitalized interest of $34 and $2,
respectively)
| |
(4,870
|
)
| |
(3,030
|
)
|
|
Income before income taxes
| |
767
|
| |
3,588
|
|
|
Provision for income taxes
| |
41
|
| |
46
|
|
|
Net income
| |
$
|
726
|
| |
$
|
3,542
|
|
| | | |
|
|
Allocation of net income for calculation of earnings per unit:
| | | | |
|
General partner interest in net income
| |
$
|
144
| | |
$
|
209
| |
|
Preferred interest in net income
| |
$
|
5,391
| | |
$
|
6,279
| |
|
Loss available to limited partners
| |
$
|
(4,809
|
)
| |
$
|
(2,946
|
)
|
| | | |
|
|
Basic and diluted net loss per common unit
| |
$
|
(0.14
|
)
| |
$
|
(0.08
|
)
|
| | | |
|
|
Weighted average common units outstanding - basic and diluted
| |
33,176
| | |
38,146
| |
| | | | | |
|
The table below summarizes our financial results by operating segment
margin for the three months ended March 31, 2016 and 2017 (in thousands):
|
| Three Months ended
March 31, |
| Favorable/ (Unfavorable) |
|
| Operating Results | | 2016 |
| 2017 | | $ |
| % |
|
Operating margin, excluding depreciation and amortization
| | | | | | | | |
|
Asphalt terminalling services operating margin
| |
$
|
11,173
| | |
$
|
14,236
| | |
3,063
| | |
27
|
%
|
|
Crude oil terminalling and storage operating margin
| |
5,162
| | |
5,114
| | |
(48
|
)
| |
(1
|
)%
|
|
Crude oil pipeline services operating margin
| |
640
| | |
14
| | |
(626
|
)
| |
(98
|
)%
|
|
Crude oil trucking and producer field services operating margin
| |
222
|
| |
(3
|
)
| |
(225
|
)
| |
(101
|
)%
|
|
Total operating margin, excluding depreciation and amortization
| |
$
|
17,197
|
| |
$
|
19,361
|
| |
2,164
|
| |
13
|
%
|
| | | | | | | | | | | | | |
|
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, and asset impairment charges. Distributable
cash flow is defined as Adjusted EBITDA, 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, |
| | 2016 |
| 2017 |
|
Net income
| |
$
|
726
| | |
$
|
3,542
| |
|
Interest expense
| |
4,870
| | |
3,030
| |
|
Income taxes
| |
41
| | |
46
| |
|
Depreciation and amortization
| |
7,135
| | |
8,066
| |
|
Non-cash equity-based compensation
| |
545
| | |
500
| |
|
Asset impairment charge
| |
271
|
| |
28
|
|
|
Adjusted EBITDA
| |
$
|
13,588
| | |
$
|
15,212
| |
|
Cash paid for interest
| |
(2,738
|
)
| |
(3,563
|
)
|
|
Cash paid for income taxes
| |
(12
|
)
| |
-
| |
|
Maintenance capital expenditures, net of reimbursable expenditures
| |
(2,225
|
)
| |
(1,318
|
)
|
|
Distributable cash flow
| |
$
|
8,613
|
| |
$
|
10,331
|
|
| | | |
|
|
Distribution declared (1) | |
$
|
10,657
| | |
$
|
12,299
| |
|
Distribution coverage ratio
| |
0.81
| | |
0.84
| |
______________
(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 ended
March 31, |
| Favorable/ (Unfavorable) |
|
| Operating Results | | 2016 |
| 2017 | | $ |
| % |
|
Total operating margin, excluding depreciation and amortization
| |
$
|
17,197
| | |
$
|
19,361
| | |
2,164
| | |
13
|
%
|
|
Depreciation and amortization
| |
(7,135
|
)
| |
(8,066
|
)
| |
(931
|
)
| |
(13
|
)%
|
|
General and administrative expense
| |
(4,745
|
)
| |
(4,585
|
)
| |
160
| | |
3
|
%
|
|
Asset impairment expense
| |
(271
|
)
| |
(28
|
)
| |
243
| | |
90
|
%
|
|
Loss on sale of assets
| |
(33
|
)
| |
(125
|
)
| |
(92
|
)
| |
(279
|
)%
|
|
Operating income
| |
$
|
5,013
|
| |
$
|
6,557
|
| |
1,544
|
| |
31
|
%
|
| | | | | | | | | | | | | |
|
Investor Conference Call
The Partnership will discuss first quarter 2017 results during a
conference call on Thursday, May 4, 2017 at 10:00 a.m. CDT (11:00 a.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, 7.2 million barrels of crude oil storage located
in Oklahoma and Texas, 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/20170503006439/en/
BKEP Investor Relations, 918-237-4032
investor@bkep.com
or
BKEP
Media Contact:
Brent Gooden, 405-715-3232 or 405-818-1900
