Blueknight Announces Fourth Quarter and Full Year 2017 Results
OKLAHOMA CITY–(BUSINESS WIRE)–Blueknight Energy Partners, L.P. (“BKEP” or the “Partnership”) (Nasdaq:
BKEP) (Nasdaq: BKEPP) today announced its financial results for the
three and twelve months ended December 31, 2017.
Summary:
Results for the Quarter:
-
Net income of $0.4 million for the three months ended December 31,
2017, as compared to $2.0 million for the same period in 2016. Net
income for the fourth quarter ended December 31, 2017, was impacted by
a $2.4 million asset impairment charge related to the crude oil
trucking and producer field services business segment. -
Operating income of $3.6 million for the three months ended December
31, 2017, as compared to $3.4 million for the same period in 2016. -
Adjusted earnings before interest, taxes, depreciation and
amortization (“Adjusted EBITDA”) of $14.1 million for the fourth
quarter ended December 31, 2017, as compared to $17.1 million for the
same period in 2016. -
Distributable cash flow of $8.6 million for the quarter ended December
31, 2017, as compared to $10.5 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.”
Results for the Year:
-
Net income of $20.0 million for the twelve months ended December 31,
2017, as compared to a net loss of $4.8 million for the same period in
2016. Net income for the twelve months ended December 31, 2017, was
impacted by a $2.4 million asset impairment charge related to the
crude oil trucking and producer field services business segment. Net
income for the twelve months ended December 31, 2016, was impacted by
a $25.8 million asset impairment charge primarily associated with the
cancellation of the Knight Warrior pipeline project. -
Operating income of $28.8 million for the twelve months ended December
31, 2017, as compared to $6.5 million for the same period in 2016. -
Adjusted EBITDA of $70.1 million for the twelve months ended December
31, 2017, as compared to $69.8 million for the same period in 2016. -
Distributable cash flow of $48.2 million for the twelve months ended
December 31, 2017, as compared to $46.6 million for the same period in
2016. -
Distribution coverage ratio for the twelve months ended December 31,
2017, was approximately 1.0 times.
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, 2017, to be filed with the SEC on March 8, 2018.
Comments from BKEP CEO Mark Hurley:
“Highlighting our 2017 results is the 14% operating margin increase in
our asphalt terminalling services segment. This increase, while impacted
during the year by wetter-than-normal weather conditions, was achieved
by solid throughput at our facilities and the full-year results of the
nine terminals we acquired from Ergon in October 2016. Also, on December
1, 2017, we completed the acquisition of the Bainbridge, Georgia,
terminal, which was the first drop-down from Ergon. The previously
announced Muskogee, Oklahoma, asphalt terminal acquisition, while
anticipated to close in 2017, closed earlier today after obtaining final
regulatory approval. We are very pleased about the addition of the
Muskogee facility to our terminal network as it will provide meaningful
cash flow to our asphalt segment.
“In the crude oil terminalling services segment, while our Cushing
terminal remained fully contracted throughout the year, a flat forward
curve negatively impacted our storage rates as we renewed contracts
during the year. As a result, terminalling services revenues and
operating margin narrowed as compared to the prior year.
“Our crude oil pipeline business was impacted in 2017 by our
out-of-service pipeline in Oklahoma, which limited our volumes. However,
at year-end, I am pleased to report we secured an alternative route for
our pipeline and construction has started with a return to service
anticipated by the end of the second quarter of 2018. Once complete, we
will nearly double our Oklahoma pipeline capacity and will be able to
transport multiple grades of crude oil from the active producing regions
of Oklahoma to our terminal in Cushing. The increased capacity comes at
a time when increases in crude oil prices have bolstered producer and
marketer confidence. Given the more favorable economics, we anticipate
volumes to move higher in 2018. We also see trucking volumes increasing
as we move into the first quarter of 2018. We expect both our pipeline
and truck transportation businesses to see significant improvement in
2018, particularly in the second half of the year after restoration of
service on our Oklahoma pipeline.
“In 2017, we took the opportunity to sell two non-strategic assets. We
sold our 30% ownership in Advantage Pipeline and recorded a cash gain on
the sale of $5.3 million in 2017. In January of 2018 we received a final
payment of $2.2 million related to the sale. We also sold the East Texas
pipeline system, receiving cash proceeds of approximately $4.8 million
and recognizing a small gain on the transaction.
“While 2017 presented challenges in our crude oil businesses, we are
optimistic for 2018. We intend to integrate our three crude oil business
segments during the year which should increase utilization of our
assets. The restoration of service on our Oklahoma pipeline will allow
our customers to transport multiple grades of crude oil to Cushing,
where they will be able to take advantage of our crude terminalling
service offerings. We also expect to expand our crude oil marketing
footprint to better utilize the capacity of our systems. The integration
of our trucking fleet with our overall crude oil business in 2018 will
also drive cost efficiencies. Over the past couple of years, we
right-sized our fleet to better serve our Oklahoma pipeline assets and
Kansas customers. As a result, we have successfully secured additional
Oklahoma business as crude oil prices have improved. Some of this
incremental Oklahoma business has been in the SCOOP and STACK areas,
which overlaps with the pipeline we are putting back into service this
year. We also continue to work on a substantial pipeline project in the
STACK, and we expect both our trucking and storage businesses will
benefit from the completion of this project. We expect both
transportation businesses to return to positive cash flow in 2018.
“In addition to growth projects within the crude oil business and the
acquisition of the Muskogee terminal, we have opportunities in front of
us to acquire and/or construct additional product terminals. These
transactions fit both our size and return profile. We anticipate
capitalizing on one or more of these opportunities in 2018.
“Our fully-diluted distribution coverage ratio for 2017 and 2016 was 1.0
times. Our leverage ratio for the fourth quarter of 2017 was 4.6 times,
and we maintained our common unit distribution at $0.1450 for the
quarter.
“As we move into 2018, we are anticipating earnings growth over 2017.
Excluding any additional projects, we anticipate asphalt operating
margin in the $67.0 million to $70.0 million range in 2018, increasing
from $64.6 million in 2017. We expect our crude oil businesses to exit
2018 on an annual operating margin run-rate of $18.0 million to $20.0
million, increasing to approximately $22.0 million to $24.0 million in
2019 based on stabilization of the crude oil storage market and
increasing volumes on our Oklahoma pipeline systems.”
Results of Operations
The following table summarizes the Partnership’s financial results for
the three and twelve months ended December 31, 2016 and 2017 (in
thousands, except per unit data):
|
Three Months ended December 31, |
Twelve Months ended December 31, |
|||||||||||
| 2016 | 2017 | 2016 | 2017 | |||||||||
| (unaudited) | ||||||||||||
| Service revenue: | ||||||||||||
| Third-party revenue | $ | 29,505 | $ | 26,329 | $ | 126,215 | $ | 113,772 | ||||
| Related-party revenue | 11,606 | 15,077 | 30,211 | 56,688 | ||||||||
| Product sales revenue: | ||||||||||||
| Third-party revenue | 4,910 | 2,842 | 20,968 | 11,479 | ||||||||
| Total revenue | 46,021 | 44,248 | 177,394 | 181,939 | ||||||||
| Costs and expenses: | ||||||||||||
| Operating expense | 30,779 | 31,909 | 111,091 | 123,805 | ||||||||
| Cost of product sales | 3,341 | 2,324 | 14,130 | 8,807 | ||||||||
| General and administrative expense | 5,580 | 4,112 | 20,029 | 17,112 | ||||||||
| Asset impairment expense | 2,916 | 2,355 | 25,761 | 2,400 | ||||||||
| Total costs and expenses | 42,616 | 40,700 | 171,011 | 152,124 | ||||||||
| Gain (loss) on sale of assets | 23 | 11 | 108 | (975 | ) | |||||||
| Operating income | 3,428 | 3,559 | 6,491 | 28,840 | ||||||||
| Other income (expense): | ||||||||||||
| Equity earnings in unconsolidated affiliate | 397 | — | 1,483 | 61 | ||||||||
| Gain on sale of unconsolidated affiliate | — | 53 | — | 5,337 | ||||||||
|
Interest expense (net of capitalized interest of $0, $11, $41 and $18, respectively) |
(1,813 | ) | (3,232 | ) | (12,554 | ) | (14,027 | ) | ||||
| Income (loss) before income taxes | 2,012 | 380 | (4,580 | ) | 20,211 | |||||||
| Provision for income taxes | (61 | ) | (19 | ) | (260 | ) | (166 | ) | ||||
| Net income (loss) | $ | 1,951 | $ | 361 | $ | (4,840 | ) | $ | 20,045 | |||
| Allocation of net income (loss) for calculation of earnings per unit: | ||||||||||||
| General partner interest in net income | $ | 142 | $ | 167 | $ | 433 | $ | 944 | ||||
| Preferred interest in net income | $ | 8,766 | $ | 6,278 | $ | 25,824 | $ | 25,115 | ||||
| Net loss available to limited partners | $ | (6,957 | ) | $ | (6,084 | ) | $ | (31,097 | ) | $ | (6,014 | ) |
| Basic and diluted net loss per common unit | $ | (0.18 | ) | $ | (0.15 | ) | $ | (0.87 | ) | $ | (0.15 | ) |
| Weighted average common units outstanding – basic and diluted | 37,955 | 38,878 | 35,093 | 38,342 | ||||||||
The table below summarizes the Partnership’s financial results by
segment operating margin, excluding depreciation and amortization for
the three and twelve months ended December 31, 2016 and 2017 (dollars in
thousands):
| Operating Results |
Three Months ended December 31, |
Twelve Months ended December 31, |
Favorable/(Unfavorable) | |||||||||||||||
| Three Months | Twelve Months | |||||||||||||||||
| (in thousands) | 2016 | 2017 | 2016 | 2017 | $ | % | $ | % | ||||||||||
| Operating margin, excluding depreciation and amortization | ||||||||||||||||||
| Asphalt terminalling services operating margin | $ | 15,050 | $ | 15,013 | $ | 56,769 | $ | 64,623 | $ | (37 | ) | — | % | $ | 7,854 | 14 | % | |
| Crude oil terminalling services operating margin | 4,741 | 3,961 | 20,048 | 17,977 | (780 | ) | (16 | )% | (2,071 | ) | (10 | )% | ||||||
| Crude oil pipeline services operating margin | 453 | (1,388 | ) | 4,347 | (1,700 | ) | (1,841 | ) | (406 | )% | (6,047 | ) | (139 | )% | ||||
| Crude oil trucking and producer field services operating margin | 29 | (17 | ) | 1,829 | (434 | ) | (46 | ) | (159 | )% | (2,263 | ) | (124 | )% | ||||
| Total operating margin, excluding depreciation and amortization | $ | 20,273 | $ | 17,569 | $ | 82,993 | $ | 80,466 | $ | (2,704 | ) | (13 | )% | $ | (2,527 | ) | (3 | )% |
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 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. Reconciliations of these measures to
their most directly comparable GAAP measures are included in the
following tables. Where references are pro forma, forward-looking,
preliminary or prospective in nature, and not based on historical fact,
the tables do not provide a reconciliation. The Partnership could not
provide such reconciliation without undue hardship because such Adjusted
EBITDA, distributable cash flow and total operating margin, excluding
depreciation and amortization amounts are estimations, approximations
and/or ranges. In addition, it would be difficult for the Partnership to
present a detailed reconciliation on account of many unknown variables
for the items including depreciation, non-cash equity-based
compensation, income taxes, impairment expense and gain or loss on sale
of assets. For the same reason we are 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 and
distributable cash flow to net income (loss) for the periods shown (in
thousands, except ratios):
|
Three Months ended December 31, |
Twelve Months ended December 31, |
||||||||
| 2016 | 2017 | 2016 | 2017 | ||||||
| Net income (loss) | $ | 1,951 | $ | 361 | $ | (4,840 | ) | $ | 20,045 |
| Interest expense | 1,813 | 3,232 | 12,554 | 14,027 | |||||
| Income taxes | 61 | 19 | 260 | 166 | |||||
| Depreciation and amortization | 8,372 | 7,554 | 30,820 | 31,139 | |||||
| Non-cash equity-based compensation | 1,578 | 547 | 3,417 | 2,280 | |||||
| Asset impairment expense | 2,916 | 2,355 | 25,761 | 2,400 | |||||
| Fees related to the Ergon transactions | 394 | — | 1,783 | — | |||||
| Adjusted EBITDA | $ | 17,085 | $ | 14,068 | $ | 69,755 | $ | 70,057 | |
| Cash paid for interest | (3,326 | ) | (3,573 | ) | (12,404 | ) | (13,732 | ) | |
| Cash paid for income taxes | (23 | ) | 14 | (282 | ) | (158 | ) | ||
| Maintenance capital expenditures, net of reimbursable expenditures | (2,862 | ) | (1,860 | ) | (8,724 | ) | (7,936 | ) | |
| Cash paid for fees related to the Ergon transactions | (394 | ) | — | (1,783 | ) | — | |||
| Distributable cash flow | $ | 10,480 | $ | 8,649 | $ | 46,562 | $ | 48,231 | |
| Distributions declared (1) | $ | 12,250 | $ | 12,586 | $ | 46,390 | $ | 49,499 | |
| Distribution coverage ratio | 0.9 | 0.7 | 1.0 | 1.0 | |||||
(1) Inclusive of preferred and common unit declared cash distributions.
Distributions declared in the three- and twelve-month periods ended
December 31, 2016, exclude $2.4 million of distributions paid to Vitol
and Charlesbank in conjunction with the Partnership’s repurchase of 13.3
million Series A Preferred Units from Vitol and Charlesbank; these
distributions were reimbursed to the Partnership in the form of a
capital contribution from Ergon.
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 ended December 31, |
Twelve Months ended December 31, |
Favorable/(Unfavorable) | |||||||||||||||
| Three Months | Twelve Months | |||||||||||||||||
| (in thousands) | 2016 | 2017 | 2016 | 2017 | $ | % | $ | % | ||||||||||
| Total operating margin, excluding depreciation and amortization | $ | 20,273 | $ | 17,569 | $ | 82,993 | $ | 80,466 | $ | (2,704 | ) | (13 | )% | $ | (2,527 | ) | (3 | )% |
| Depreciation and amortization | (8,372 | ) | (7,554 | ) | (30,820 | ) | (31,139 | ) | 818 | 10 | % | (319 | ) | (1 | )% | |||
| General and administrative expense | (5,580 | ) | (4,112 | ) | (20,029 | ) | (17,112 | ) | 1,468 | 26 | % | 2,917 | 15 | % | ||||
| Asset impairment expense | (2,916 | ) | (2,355 | ) | (25,761 | ) | (2,400 | ) | 561 | 19 | % | 23,361 | 91 | % | ||||
| Gain (loss) on sale of assets | 23 | 11 | 108 | (975 | ) | (12 | ) | (52 | )% | (1,083 | ) | (1,003 | )% | |||||
| Operating income | $ | 3,428 | $ | 3,559 | $ | 6,491 | $ | 28,840 | $ | 131 | 4 | % | $ | 22,349 | 344 | % | ||
Investor Conference Call
The Partnership will discuss fourth quarter and full year 2017 results
during a conference call on Thursday, March 8, 2018, at 11:00 a.m. CST
(12:00 p.m. EST). 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 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:
-
10.3 million barrels of liquid asphalt storage located at 56 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; -
655 miles of crude oil pipeline located primarily in Oklahoma and
Texas; and -
150 crude oil transportation and oilfield services vehicles deployed
in Kansas, Oklahoma 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.
Contacts
BKEP
Investor Relations, 918-237-4032
[email protected]
or
Media
Contact:
Brent Gooden, 405-715-3232 or 405-818-1900
.jpg)
