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Form 8-K Blueknight Energy Partne For: Aug 05

August 5, 2015 4:50 PM


 
                        
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934


Date of report (date of earliest event reported): August 5, 2015


BLUEKNIGHT ENERGY PARTNERS, L.P.
(Exact name of Registrant as specified in its charter)

DELAWARE
001-33503
20-8536826
(State of incorporation
or organization)
(Commission file number)
(I.R.S. employer identification number)

201 NW 10th, Suite 200
Oklahoma City, Oklahoma
73103
(Address of principal executive offices)
(Zip code)

Registrant's telephone number, including area code: (405) 278-6400


(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 





Item 2.02.    Results of Operations and Financial Condition.
On August 5, 2015, Blueknight Energy Partners, L.P. issued a press release announcing its financial results for the quarter and year ended June 30, 2015. A copy of the press release is furnished as Exhibit 99.1 to this Current Report and is incorporated herein in its entirety by reference. In accordance with General Instruction B.2 of Form 8-K, the information set forth herein and in the press release is deemed to be “furnished” and shall not be deemed to be “filed” for purposes of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Item 9.01.
Financial Statements and Exhibits.

(d)    Exhibits

In accordance with General Instruction B.2 of Form 8-K, the information set forth in the attached Exhibit 99.1 is deemed to be “furnished” and shall not be deemed to be “filed” for purposes of the Exchange Act.    
EXHIBIT NUMBER
 
DESCRIPTION
 
 
 
99.1
—
Press release, dated August 5, 2015.




































2





SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

                    

 
 
BLUEKNIGHT ENERGY PARTNERS, L.P.
 
 
 
 
 
 
By:
Blueknight Energy Partners G.P., L.L.C
 
 
 
its General Partner
 
 
 
 
Date:
August 5, 2015
By:
/s/ Alex G. Stallings
 
 
 
Alex G. Stallings
 
 
 
Chief Financial Officer and Secretary






    
INDEX TO EXHIBITS

EXHIBIT NUMBER
 
DESCRIPTION
 
 
 
99.1
—
Press release, dated August 5, 2015.






Exhibit 99.1

Blueknight Reports 23.9 Percent Increase in Distributable Cash Flow and
16.2 Percent Increase in Adjusted EBITDA in the Second Quarter

OKLAHOMA CITY - August 5, 2015 - Blueknight Energy Partners, L.P.  (“BKEP” or the “Partnership”) (NASDAQ: BKEP and BKEPP), a midstream energy company providing integrated services for companies engaged in the production, distribution and marketing of crude oil, asphalt and other petroleum products, today announced distributable cash flow of $13.3 million for the three months ended June 30, 2015, compared to $10.7 million for the three months ended June 30, 2014, an increase of 23.9%. Distributable cash flow for the six months ended June 30, 2015, was $24.3 million versus $20.7 million for the same period in 2014, an increase of 17.5%. 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’s adjusted EBITDA was $17.2 million for the second quarter of 2015, compared to $14.8 million for the same period in 2014, an increase of 16.2%. Adjusted EBITDA was $30.1 million for the six months ended June 30, 2015, compared to $28.2 million for the same period in 2014, an increase of 6.6%. Adjusted EBITDA, including a reconciliation of such measure to net income, is explained in the section of this release entitled “Non-GAAP Financial Measures.”

The Partnership reported net income of $7.7 million on total revenues of $46.6 million for the three months ended June 30, 2015, versus net income of $3.6 million on total revenues of $45.8 million for the same period in 2014. BKEP recorded net income of $9.3 million on total revenues of $88.9 million for the six months ended June 30, 2015, compared to net income of $7.5 million on total revenues of $92.2 million for first half of 2014.

BKEP previously announced a second quarter 2015 cash distribution of $0.1425 per common unit, a 2.2% increase over the previous quarter’s distribution and a 7.5% increase over the second quarter 2014 distribution. The Partnership also announced a $0.17875 distribution per preferred unit payable on August 14, 2015. Distributions will be paid on all outstanding common and preferred units to unitholders of record as of the close of business on August 4, 2015. 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 June 30, 2015, to be filed with the Securities and Exchange Commission on August 6, 2015.

Comments from BKEP CEO Mark Hurley:

“For the quarter, distributable cash flow and adjusted EBITDA jumped 24% and 16% respectively, representing strong results in a challenging market environment. Our balanced asset portfolio and high proportion of contracted cash flows provides consistency and enables us to navigate the volatility in commodity prices. These results were accented by an increase in our asphalt services operating margin, which was supported, in part, by the acquisition of the Cheyenne, Wyo., asphalt terminal in the second quarter. The Cheyenne acquisition marks our 43rd owned terminal and adds Wyoming to the list of states served by BKEP. We also realized a quarter over quarter increase of 23% in our crude oil pipeline services operating margin and an increase of 10% in our crude oil terminalling and services operating margin. Growth in these segments resulted in an overall increase of 12% in operating margin quarter over quarter. Our only segment not experiencing quarter-over-quarter growth was our trucking and producer field services segment, which faced challenges due to decreased crude oil drilling, increased volume of pipeline-connected barrels and much wetter than normal weather in the areas we serve. Our crude oil terminalling storage rates continue to strengthen as producers opt to store their crude in anticipation of increased future demand. Additionally, our crude oil pipeline volumes remain steady, particularly on our Oklahoma mainline and West Texas Pecos River systems. Our strong performance even in these tough market conditions gives us options to consider growth opportunities including additional acquisitions in our crude oil and asphalt terminalling businesses.”

“Progress continues on our 160-mile, 16-inch diameter Knight Warrior pipeline, which will serve the growing Eaglebine/Woodbine crude oil production play in East Texas. We have begun construction at our three station sites, Midway, North Zulch and Roans Prairie, and we have awarded contracts for long-lead equipment. Engineering, environmental, and permitting work is well underway and we expect to begin purchasing right of way during the third quarter. With startup operations anticipated to begin in the second quarter 2016, the Knight Warrior pipeline will provide customers a way to safely, securely and reliably transport product at an economic price to Houston area refineries and storage facilities.”





“We are very pleased that we were able to increase our common unit distribution to $0.1425 for the quarter, marking the twelfth consecutive quarterly increase for the Partnership and representing an increase of 7.5% over the second quarter of 2014, which is at the high end of our previous guidance. The increase in distribution reflects our commitment to maximize value for unitholders.”

Results of Operations
The following table summarizes the financial results for the three and six months ended June 30, 2014 and 2015 (in thousands except per unit data):
 
 
Three Months
ended
June 30,
 
Six Months
ended
June 30,
 
 
2014
 
2015
 
2014
 
2015
 
 
(unaudited)
Service revenue:
 
 
 
 
 
 
 
 
Third party revenue
 
$
35,197

 
$
36,389

 
$
69,433

 
$
68,512

Related party revenue
 
10,600

 
10,185

 
22,806

 
20,418

Total revenue
 
45,797

 
46,574

 
92,239

 
88,930

Expense:
 
 
 
 
 
 
 
 
Operating
 
34,475

 
33,383

 
69,976

 
65,768

General and administrative
 
4,371

 
4,667

 
8,857

 
9,644

Total expense
 
38,846

 
38,050

 
78,833

 
75,412

Gain (loss) on sale of assets
 
575

 
(40
)
 
972

 
264

Operating income
 
7,526

 
8,484

 
14,378

 
13,782

Other income (expense):
 
 
 
 
 
 
 
 
Equity earnings in unconsolidated affiliate
 
258

 
1,283

 
54

 
1,939

Interest expense (net of capitalized interest of $80, $50, $160 and $73, respectively)
 
(4,031
)
 
(1,951
)
 
(6,686
)
 
(6,234
)
Income before income taxes
 
3,753

 
7,816

 
7,746

 
9,487

Provision for income taxes
 
134

 
106

 
234

 
198

Net income
 
$
3,619

 
$
7,710

 
$
7,512

 
$
9,289

 
 
 
 
 
 
 
 
 
Allocation of net income for calculation of earnings per unit:
 
 
 
 
 
 
 
 
General partner interest in net income
 
$
96

 
$
241

 
$
189

 
$
344

Preferred interest in net income
 
$
5,391

 
$
5,391

 
$
10,782

 
$
10,782

Income (loss) available to limited partners
 
$
(1,868
)
 
$
2,078

 
$
(3,459
)
 
$
(1,837
)
 
 
 
 
 
 
 
 
 
Basic and diluted net income (loss) per common unit
 
$
(0.08
)
 
$
0.06

 
$
(0.15
)
 
$
(0.05
)
 
 
 
 
 
 
 
 
 
Weighted average common units outstanding - basic and diluted
 
22,925

 
32,915

 
22,910

 
32,905






The table below summarizes our financial results by operating segment margin for the three and six months ended June 30, 2014 and 2015 (dollars in thousands):
Operating Results
Three Months ended
June 30,
 
Six Months
 ended
June 30,
 
Favorable/(Unfavorable)
 
 
Three Months
 
Six Months
(in thousands)
2014
 
2015
 
2014
 
2015
 
$
 
%
 
$
 
%
Operating margin, excluding depreciation and amortization
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asphalt services operating margin
$
10,101

 
$
12,662

 
$
17,953

 
$
21,275

 
$
2,561

 
25
 %
 
$
3,322

 
19
 %
Crude oil terminalling and storage operating margin
4,431

 
4,882

 
10,816

 
8,950

 
451

 
10
 %
 
(1,866
)
 
(17
)%
Crude oil pipeline services operating margin
1,648

 
2,020

 
2,252

 
4,770

 
372

 
23
 %
 
2,518

 
112
 %
Crude oil trucking and producer field services operating margin
1,596

 
365

 
4,013

 
1,551

 
(1,231
)
 
(77
)%
 
(2,462
)
 
(61
)%
Total operating margin, excluding depreciation and amortization
$
17,776

 
$
19,929

 
$
35,034

 
$
36,546

 
$
2,153

 
12
 %
 
$
1,512

 
4
 %

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 gains related to investments. Distributable cash flow is defined as adjusted EBITDA, plus or minus cash proceeds from sale of investments, cash paid for interest, maintenance capital expenditures, and cash paid for taxes. 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 (dollars in thousands):
 
Three months
ended
June 30,
 
Six months
ended
June 30,
 
2014
 
2015
 
2014
 
2015
Net income
$
3,619

 
$
7,710

 
$
7,512

 
$
9,289

Interest expense
4,031

 
1,951

 
6,686

 
6,234

Gain related to investments
—

 
—

 
—

 
(267
)
Income taxes
134

 
106

 
234

 
198

Depreciation and amortization
6,454

 
6,738

 
12,771

 
13,384

Non-cash equity-based compensation
584

 
722

 
1,043

 
1,275

Adjusted EBITDA
$
14,822

 
$
17,227

 
$
28,246

 
$
30,113

Cash proceeds from sale of investments
—

 
—

 
—

 
2,346

Cash paid for interest
(2,191
)
 
(2,530
)
 
(4,535
)
 
(4,825
)
Cash paid for taxes
(433
)
 
(384
)
 
(513
)
 
(384
)
Maintenance capital expenditures, net of reimbursable expenditures
(1,466
)
 
(1,020
)
 
(2,490
)
 
(2,926
)
Distributable cash flow
$
10,732

 
$
13,293

 
$
20,708

 
$
24,324

 
 
 
 
 
 
 
 
Distribution declared (1)
$
8,728

 
$
10,477

 
$
17,386

 
$
20,821

Distribution coverage ratio
1.23

 
1.27

 
1.19

 
1.17

______________
(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 (dollars in thousands):
Operating Results
Three Months
 ended
June 30,
 
Six Months
ended
June 30,
 
Favorable/(Unfavorable)
 
 
Three Months
 
Six Months
(in thousands)
2014
 
2015
 
2014
 
2015
 
$
 
%
 
$
 
%
Total operating margin, excluding depreciation and amortization
$
17,776

 
$
19,929

 
$
35,034

 
$
36,546

 
$
2,153

 
12
 %
 
$
1,512

 
4
 %
Depreciation and amortization
(6,454
)
 
(6,738
)
 
(12,771
)
 
(13,384
)
 
(284
)
 
4
 %
 
(613
)
 
5
 %
General and administrative expense
(4,371
)
 
(4,667
)
 
(8,857
)
 
(9,644
)
 
(296
)
 
7
 %
 
(787
)
 
9
 %
Gain (loss) on sale of assets
575

 
(40
)
 
972

 
264

 
(615
)
 
(107
)%
 
(708
)
 
(73
)%
Operating income
$
7,526

 
$
8,484

 
$
14,378

 
$
13,782

 
$
958

 
13
 %
 
$
(596
)
 
(4
)%

Investor Conference Call

The Partnership will discuss second quarter 2015 results during a conference call on Thursday, August 6, 2015 at 2:00 p.m. CDT (3:00 p.m. EDT). The conference call will be accessible through the Investors Section of the Partnership’s Website at http://investor.bkep.com/presentations or by telephone at 1-877-300-8521. International participants will be able to connect to the conference by calling 1-412-317-6026.

Participants should dial in five to ten minutes prior to the scheduled start time. An audio replay will be available on the Website for 20 days, and a recording will be available by phone for 30 days. The replay will be available by calling 1-877-870-5176 in the U.S. or 1-858-384-5517 from international locations. The passcode for both is 10070268.





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 our credit facility, our 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 7.7 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 900 miles of crude oil pipeline located primarily in Oklahoma and Texas, approximately 250 crude oil transportation and oilfield services vehicles deployed in Kansas, Colorado, New Mexico, Oklahoma and Texas and approximately 7.3 million barrels of combined asphalt product and residual fuel oil storage located at 43 terminals in 22 states. 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.

Contact:

BKEP Investor Relations, (918) 237-4032
[email protected]

or

BKEP Media Contact:
Brent Gooden, (405) 715-3232 or (405) 818-1900
 




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