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
| Twelve Months Ended
| |||||||||||||||
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
| Twelve Months Ended
| |||||||||||||||
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.
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Contacts:
Chase Jacobson, (918) 237-4032
investor@bkep.com
