BlueKnight Energy Partners (BKEP) Misses Q4 EPS by 4c, Revenues Miss

BlueKnight Energy Partners (NASDAQ: BKEP) reported Q4 EPS of ($0.05), $0.04 worse than the analyst estimate of ($0.01). Revenue for the quarter came in at $91.51 million versus the consensus estimate of $92.8 million.

“I am proud to say the business performed well throughout the year and we accomplished many of our objectives in 2019. Our solid performance and capital discipline improved our financial profile considerably, resulting in decreasing leverage a full turn to 4.05 times, positive free cash flow after distributions and capital investments and solid distribution coverage of approximately 1.20 times for the full year,” said Mark Hurley, Chief Executive Officer.

“We are uniquely positioned for 2020 and beyond with our enhanced financial position, the recent increase in crude oil storage demand in Cushing and the fact that over 90% of our revenues in terminalling services, which represent 95% of our total operating margin, are supported by take-or-pay contractual agreements. In addition, the other key differentiating factor for us relative to traditional oil and gas midstream entities is that approximately 80% of our total operating margin is derived from our asphalt terminalling services segment which is linked to infrastructure and highway construction activity and not dependent on regional upstream activities. We believe this current market environment is an opportunity for Blueknight to showcase the stability and strength of its business and portfolio to existing and potential new investors.

“Looking forward, we are focusing efforts and our new long-term strategy on our core strengths and leading terminalling platform while reviewing strategic options for our crude oil pipeline and trucking businesses, including a potential joint venture or sale. The objective of any strategic actions taken would be to further reduce our leverage, maintain or improve distribution coverage and strengthen our focus on our core terminalling capability,” added Hurley.

2020 OUTLOOK

For 2020, Blueknight expects to showcase and develop its unique strength and core competencies within the terminalling business, leveraging positive infrastructure and highway construction activity trends within the asphalt terminalling services segment and the current favorable contango WTI market structure for the crude oil terminalling services segment. Blueknight holds minimal direct commodity exposure and dependence on U.S. upstream drilling activity and production.

The Partnership expects to generate stable Adjusted EBITDA in-line with 2019 and positive free cash flow, underpinned by predominately take-or-pay fixed fee contracts with a weighted average remaining contract term of approximately 5 years and over 50% of revenues related to investment-grade companies. Blueknight expects to use internally generated cash flow to fully fund 2020 distribution payments and total expected capital expenditures of $9.5 million to $10.5 million, including maintenance capital expenditures of $7.5 million to $8.0 million. At the midpoint of the range, total expected capital expenditures for the year are approximately 20% lower than 2019. The Partnership also expects to end 2020 with a leverage ratio of 4.0 to 4.25 times and distribution coverage of 1.2 times or greater.

Successful execution of strategic options for the Partnership’s crude oil pipeline and trucking businesses could result in improved financial positioning and more liquidity to pursue risk-adjusted investments. Blueknight also intends to leverage its existing asset footprint of over 53 sites to continue to develop advanced, customized logistics terminalling solutions for infrastructure and transportation end markets and focus on growing its terminalling business in new, specialty niche markets.

For earnings history and earnings-related data on BlueKnight Energy Partners (BKEP) click here.

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